According to an ADB report, the public sector was overextended with nearly one million employees. There are about 862,000 official positions in education, health, police, irrigation, and agriculture.
The administrative structure is centralised and does not allow for flexibility in responding to needs, in particular in those areas where services are delivered at the local level.
Most employees are at lower salary grades, including 20 percent at grade 1, which is essentially unskilled staff, and 40 percent at low-skilled grades 2-5. As a result, the bureaucracy has become unmanageable, with considerable duplication of functions.
Efforts by the Punjab government to address these shortcomings, as well as the development of a civil service reform strategy, will be supported by ADB under the second phase of Punjab Resource Management Programme.
The report said the weak performance of public institutions was largely a reflection of inadequate human resources policies and management, and lack of accountability. In many cases, staff does not have the skills to perform the functions they are assigned to carry out.
This is partly because of frequent rotations of staff, despite the recently announced minimum tenure policy by the cabinet, as well as appointments made under political pressure. Punjab has recently issued a revised appointment policy and increased the number of services that are contracted to the private sector, a trend that needs to be continued.
However, promotion policy and guidelines are not clear, and, in the absence of clear accountability, rules, and performance monitoring systems, upward mobility of staff is still based more on seniority than on performance.
Punjab has a large human resources pool to tap into, and improvements in human resources policy, combined with greater outsourcing to the private sector (using clearly defined performance criteria) could yield considerable efficiency gains.
Another serious challenge for the Punjab government since the devolution of powers in 2001 was the streamlining of the provincial civil service. Currently, most of the local government technical and administrative staff is recruited and managed by the provincial government, which distorts accountabilities at the local level.
This has serious implications for local government human resources management and public service delivery. Under the revised legal framework, government is mandated to create and support a district civil service in order to remove these distortions.
ADB will also help Punjab in preparing workable and efficient human resources policy with a medium- to long-term vision. The CMU to be established in the second phase of Punjab Resource Management Programme will also play a role in rationalising and reforming the civil service at the provincial and local levels.
Furthermore, ADB report mentioned that the rent seeking took place when uncompensated value was extracted from others by manipulating the economic environment. Rent-seeking opportunities exist in all societies and come in different forms (from creating economic distortions through favouritism to share value manipulation). In Pakistan, because of the low salaries and lack of accountability, public servants indulge in rent-seeking activities that have a direct impact on the poor by reducing their disposable income after rents have been extracted from the system.
Another major cause of rent seeking in the public sector is low budgets for the operational costs of running public services. These low budgets encourage rent-seeking behaviour so that operational costs can be funded.
ADB suggested that to improve the coverage and quality of services, water supply, sanitation, road construction, and maintenance could be partially provided by the private sector. The potential for public-private partnerships is being explored.
The second phase of Punjab Resource Management Programme will help the government to work more closely with the private sector by facilitating governance structures in specific sectors, amending rules and laws governing such activities, and establishing institutional arrangements to improve links with institutions such as the Punjab Health Foundation.
PRMP will work with the provincial government to further reduce direct public sector involvement, especially through an action plan to restructure public sector organisations owned by provincial government.
Although, the Punjab Local Governance Ordinance (LGO) was promulgated in 2001, putting administrative and institutional changes in place would take time.
Local governments had been empowered to take over a number of important functions, especially those related to provision of local public services. Significant changes are still needed in the administration, institutional structure, and in rules, regulations, and laws related to local administration.