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Some Lessons Learned from Malaysia's National Transformation

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Some Lessons Learned from Malaysia's National Transformation Doing, Learning, Being: Some Lessons Learned from Malaysia’s National Transformation Program Charles Sabel Luke Jordan January 2015 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This volume was commissioned by staff of the World Bank Group and funded by the Competitive Industries and Innovation Program (CIIP). The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. About the Competitive Industries and Innovation Program (CIIP) The CIIP partnership was created to enhance country growth and employment prospects by supporting public policies and investments that promote competitiveness and innovation within and across industries. The partnership’s resources are focused on supporting governments’ efforts to develop transformational economic development projects and to aggregate cutting-edge knowledge that can be implemented as part of targeted pro-growth initiatives. As the Trustee and Administrator for CIIP, the World Bank Group is responsible for program development, implementation, and monitoring and evaluation. For more information, visit www.theciip.org. 3 TABLE OF CONTENTS EXECUTIVE SUMMARY ............................................................................................................... 5 I. INTRODUCTION ......................................................................................................................... 7 A. Implementation and Industrial Policy ................................................................................. 7 B. Two Models of Delivering Delivery ................................................................................... 8 C. The Recursive Model in Context: Neither Top Down Nor Bottom Up ............................. 10 D. The Familiar Problems of Preconditions and Attribution .................................................. 12 E. Three Domains of Problem Solving .................................................................................. 14 II. THE STRUCTURE AND OPERATION OF THE TRANSFORMATION PROGRAM ......... 16 A. Founding Context .............................................................................................................. 16 B. Goal-Setting: NKEAs, SRIs, Labs and KPIs ..................................................................... 18 C. KPIs and Their Limits ....................................................................................................... 20 III. RECURSIVE IMPLEMENTATION: BUMP UPS AND PENALTY DEFAULTS ............... 23 A. Personnel: Numbers, Recruitment and Training ............................................................... 23 B. Nested Cycles of Monitoring............................................................................................. 25 C. Bumping Up Coordination Failures .................................................................................. 25 D. The “70/30” Rule: Revision and Its Limits ........................................................................ 28 E. Mini Labs and the Revision of KPIs ................................................................................. 30 F. Discovering Over-Looked Possibilities ............................................................................. 31 IV. THREE DOMAINS OF PROBLEM SOLVING ...................................................................... 33 A. The Unconventional Demands of Conventional Policy Changes and Programs .............. 33 B. Large Investment Projects ................................................................................................. 35 C. Inducing New Capacities ................................................................................................... 36 V. PEMANDU, THE MINISTRIES AND THE PUBLIC SECTOR ............................................ 42 A. “Changing Being by Doing” .............................................................................................. 42 B. Avoiding Disempowerment (“That’s Not My Decision”) .................................................. 43 C. Risks, Caveats and Indications of Broader Change ........................................................... 44 Doing, Learning, Being: Some Lessons Learned from Malaysia 4 VI. POTENTIAL IMPROVEMENTS AND EXTENSIONS ........................................................ 46 A. Internal Information Flows and Examination .................................................................... 46 B. Pursuing New, Harder Opportunities ................................................................................ 48 C. Presentation ....................................................................................................................... 49 D. Applications Abroad.......................................................................................................... 49 VII. CONCLUSION ....................................................................................................................... 52 A. Lessons for Delivery ......................................................................................................... 52 B. Lessons for Industrial Policy ............................................................................................. 53 C. A Question for Economic Development ........................................................................... 55 BIBLIOGRAPHY ........................................................................................................................... 58 ANNEX A: INTERVIEWS AND METHODOLOGY ................................................................... 62 ANNEX B: CURRENT STATUS OF KPIS .................................................................................. 67 ANNEX C: THE “BIG RESULTS FAST” METHODOLOGY...................................................... 68 Doing, Learning, Being: Some Lessons Learned from Malaysia 5 EXECUTIVE SUMMARY1 This study examines an institutional innovation, the Performance Management and Delivery Unit (PEMANDU), for making, monitoring and revising ambitious plans for reform involving coordination between public and private actors and among government entities. These capacities are key to implementing new industrial policies and improving government performance in both developing and advanced countries. For both tasks even the most thorough and inclusive designs for change are likely to be incomplete or faulty, and success depends on institutionalizing a process for adjusting them to unforeseen circumstances, while holding decision makers accountable. PEMANDU originated in Malaysia and has been adopted in various forms in countries as different as Tanzania, India, and South Africa as a possible means to renovate governance and deliver growth. PEMANDU has developed a regime of procedures and tools: . Initial goals and provisional but detailed action plans to achieve them are fixed in lengthy (6- to 9-week) workshops (“Labs”) that include the key public and private stakeholders in a specific domain, such as the palm-oil industry or the national railway system. The goals are translated into key performance indicators (KPIs). The plans are also “stress-tested” against resource viability and must be approved by a steering committee of decision-makers from relevant stakeholders. Progress is monitored in a regular cycle of meetings and committees across departments, agencies and (at times) entities from the private sector or civil society. This monitoring reveals coordination problems or flaws in the initial goals, diagnoses their causes and focuses efforts on solutions. If participants hoard information or reach a deadlock, disputes are “bumped up” to successively higher review bodies. If the deadlock continues, control of the situation passes to superior authorities, with results that may well make all of the participants worse off – inflicting what we call a “penalty default”. When new information casts doubt on the viability of initial goals, a set of tools and governance processes – including procedures for reconvening Labs or more focused “mini” variants of them – allows for the efficient but accountable revision of projects, plans and targets. In routinizing the adjustment and revision of its goals, PEMANDU has adapted – indeed, transformed – the UK “delivery unit” idea on which it was patterned. In the original, linear design of a delivery unit, the principal or senior official is presumed to know what needs to be done, and the chief organizational problem is incentivizing subordinate agents to execute the plan. In PEMANDU’s variant, the various goals and plans are provisional, and governance mechanisms provide explicitly for their revision in light of information revealed by the efforts of local actors to implement them. Whereas KPIs in a linear delivery unit become in effect ends in themselves— the project fails if the KPIs are not met—KPIs in the PEMANDU variant are used both to maintain pressure
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