Crafting a Modern Policy Management System, Latvia, 2000 - 2006

MOVING BEYOND CENTRAL PLANNING: CRAFTING A MODERN POLICY MANAGEMENT SYSTEM, LATVIA, 2000 - 2006

SYNOPSIS In 2000, Latvia’s newly appointed state chancellor, Gunta Veismane, took on a daunting task. Since Latvia’s independence from the Soviet Union in 1991, the new government had functioned without a clearly organized policy-planning process. Ministries produced policy papers that lacked input from stakeholders or essential information about costs and objectives, leaving decision makers in the dark when trying to set a course for Latvia’s future. Veismane’s job was to ensure that top officials had the information and analysis they needed to make informed policy decisions. She tapped Una Klapkalne, an experienced government official, to lead an elite unit in the State Chancellery to design and implement a new policy-making system. Between 2000 and 2006, Veismane and Klapkalne introduced rules and procedures that improved the quality of decision making and enhanced coordination across government. The World Bank lauded the system they created as a model for the region.

Jonathan Friedman drafted this case study on the basis of interviews conducted in Riga, Latvia, during February 2012. Case published May 2012.

INTRODUCTION where ministries deposited their proposals for “No one had ever done anything like this Cabinet discussions, rather than an active before in Latvia,” recalled Una Klapkalne, who manager and coordinator of the government’s took over the nascent Policy Coordination agenda. “There was a hole at the center of Department in Latvia’s State Chancellery in government,” Mountfield concluded.1 Klapkalne September 2000. Earlier that year, Sir Robin was determined to fill it. Mountfield, former head of the United Latvians had just weathered a turbulent Kingdom’s Cabinet Office, had laid bare the sad decade. Following independence from the Soviet state of Latvia’s public administration. Ministries Union in 1991, the country had built a multiparty were “independent and defensive,” setting their democracy and endorsed market-oriented own policies according to their own priorities, economic policies. Exposed to new competitors, Mountfield concluded in an assessment Latvia’s industrial and agricultural sectors commissioned by the World Bank. The State collapsed and GDP halved between 1990 and Chancellery, designed to support the prime 1993, according to the Economist Intelligence minister, acted like the government’s “mailbox,” Unit. A banking crisis caused renewed growth to

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Jonathan Friedman Innovations for Successful Societies stall in 1995, and Russia’s default on its loans in In April 2000, Šķēle appointed a new state 1998 caused a drop in exports that further chancellor, Gunta Veismane, to lead the reform undermined recovery. effort. Veismane, an economist by training, had Latvia’s politics were even less stable than its served as the first director of Latvia’s School of uneven economic performance. Governing Public Administration, the government’s training coalitions fell apart with greater frequency than in program for civil servants, where she had any other European country—once a year on developed a reputation as a change agent. She average—as the country’s many small political had trained state secretaries (the ministries’ top parties struggled to build and maintain coalitions. civil servants) and understood well the dynamics Opaque privatization deals and allegations of and problems at Latvia’s center of government. fraud surrounding the banking crisis undermined Less than two weeks after her appointment, Šķēle Latvians’ confidence in their political leaders. resigned as prime minister amid a wave of Despite the frequent turnover of governments, scandals. Andris Bērziņš, the mayor of Riga and Latvia’s major political parties managed to agree member of the conservative Latvian Way political on the country’s basic policy goals, which included party, succeeded Šķēle and endorsed the reform membership in the European Union and NATO. effort. Between 2000 and 2006, Veismane and Mountfield’s report generated momentum to her deputy Klapkalne transformed the State reform the policy planning system. His Chancellery into an active coordinator of recommendations were broadly inspired by New government activities and created a policy Public Management (NPM), a set of principles planning system that the World Bank ranked that emphasized the merits of decentralization among the region’s best. and managerial autonomy for inducing better performance within government institutions. THE CHALLENGE Prime Minister Andris Šķēle, a wealthy The Mountfield report revealed what entrepreneur in the agricultural sector, was an Veismane, Klapkalne and other Latvian insiders adherent of such principles and had supported already knew: Latvia had no effective policy- piecemeal NPM-inspired reforms during his making system. During the Soviet era, Latvian previous term as prime minister from 1995 to line ministries had implemented directives from 1997. central planners in Moscow. After the fall of the Additionally, the European Commission, the Soviet Union, the Latvian government lacked EU’s executive body, informed Latvia in 2000 that procedures for developing and coordinating although the country ranked near the top of policies across line ministries. As a result, policy candidate nations in terms of political and proposals proliferated, and Cabinet members economic reforms, the pace of administrative spent their time plowing through documents that reforms would have to quicken in order to satisfy had little substance. accession criteria. Mountfield’s report echoed the There were few rules and procedures that point. “The institutional framework at the heart stipulated when and how ministries could submit of Latvia’s government is seriously inadequate to policy proposals and what information about costs plan the profound changes needed for EU and impacts they had to provide. Confusion accession and the other ambitious objectives abounded regarding the purpose and thrust of the shared by the government coalition parties and by proposals, which had no standard format. Many the main opposition parties, and most especially proposals were too long yet offered only general to ensure their delivery,” he wrote.2 background on policy issues. There was no ! © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies requirement for independent research, analysis or overlapped or contradicted each other, creating financial feasibility studies. Because few proposals confusion about the government’s aims in certain specified the goals or results to be achieved, areas. Klapkalne described the perfunctory decision makers struggled to understand the Soviet-era coordination process that characterized merits and assess the impact and utility of Latvia’s government at the time: “Somebody government projects. walked around ministries to get signatures from Reflecting the chaotic process, the Cabinets state secretaries or deputy state secretaries. of various coalition governments had passed 450 Nobody saw the last version before the Cabinet policy documents between 1993 and 2000. When meeting.” Veismane and Klapkalne began their work, it was Critically, ministries developed policies and not clear which of the 450 documents were still plans separately from the budget process, active and which had expired, or what the disconnecting intended activities from available relationship was between documents produced by resources. As a result, the Cabinet approved plans successive governments within the same sector. without a sense of financial feasibility, and the Another problem was that there was no unit Ministry of Finance approved budgets without or mechanism to focus policy planning across knowing what ministries intended to achieve. government. Although the Cabinet had Overrun with low-priority policy documents conducted a priority-setting exercise in an attempt that lacked essential information necessary for to coordinate planning and focus ministries on key proper analysis, Cabinet meetings were tedious goals, the process was flawed. In the most recent and unproductive. The World Bank survey found exercise, the Cabinet had identified 19 policy that in two Cabinet meetings in 2000, the areas and 300 related activities that supported Cabinet spent 40% of its discussion time on non- priority goals. In turn, ministries identified a total priority issues that represented 61% of the total of 1,700 activities they would perform. With items discussed. An internal Chancellery study governing coalitions lasting a year on average, found that the average Cabinet meeting in 2001 there was little chance politicians would be around lasted 6.5 hours. long enough to implement those ambitious plans. An additional challenge—one that shaped all As a result, many within government found the the reformers’ efforts—was the need to navigate process meaningless. political and cultural sensitivities. Veismane knew Ministries, busy developing and she had to tread carefully in creating rules and implementing their own initiatives, frequently procedures for policy planning because of dragged their feet on Latvia’s broader priorities— Latvians’ general aversion to any system that specifically laws and regulations necessary for EU resembled Soviet-era centralized planning. In accession. A survey produced for the World Bank devising new rules and enforcement mechanisms, found that in 1999 ministries submitted 46% of Veismane had to make it clear that the new EU-related proposals to the Cabinet more than system had no relation to the Soviet system. Inga six months after their agreed-upon deadlines.3 Bite, an analyst who joined the department at a Furthermore, line ministries did not later stage, explained, “The meaning of planning coordinate plans with each other. Proposals was spoiled here. There was a perception of submitted by one ministry were not rigorously planning as Soviet, that plans should be many and reviewed by others before the Cabinet gave its long, detailed in situational descriptions but not in imprimatur. As a result, policy documents often future activity. We had a thinking problem.”

Jonathan Friedman Innovations for Successful Societies

FRAMING A RESPONSE In August, Veismane began reviewing the From the outset, Veismane aimed to create a qualifications of 120 applicants for six positions in new unit, to be called the Policy Coordination the coordination department. She said she looked Department, in the State Chancellery to design for analytical skills among applicants, experience and manage a policy-making system. She said the in public administration, and diverse and sector- need for a unit with this mandate became evident specific expertise. To lead the unit, she selected to her when she had trained state secretaries, and Klapkalne, an adviser to the Ministry of Interior the idea was one of the central recommendations and former deputy state secretary in the Ministry of the Mountfield report. Having won the of Defense. Klapkalne began her career in 1992 at endorsement of Prime Minister Bērziņš, she the State Civil Service Administration, where she needed to present her proposal to the Cabinet and came to know the chancellor through her agency’s persuade ministers to support her efforts. She cooperation with Veismane’s training school. won their approval with an approach that was Veismane selected five others who were mostly cooperative rather than confrontational, stressing young, Western-educated and fluent in English. the need to address shared challenges. “I didn’t Ugis Sics, former head of planning at Latvia’s start with ‘we will manage everything,’ or ‘we will European Integration Office and one of the look through your papers and tell you you’re right analysts selected, remarked that English language or wrong,’” Veismane said. “Instead, I said ‘we skills were highly sought-after at the time for will help you, we will propose some challenges, government posts, and it was predominately the propose some directions.’ The point was to young that had those skills. “That was during the persuade ministers that the unit was necessary not time when we joked that kids ran everything in only for the prime minister but for them as well.” government,” he said.

Building a team Defining a role Although Veismane had political support Klapkalne was aware that her team would from Bērziņš, she decided to find funds from encounter political resistance when it began to within the State Chancellery to finance the new implement a new planning system. Setting rules coordination department. As a matter of principle for policy planning and for analyzing ministerial and best practice, she said, she wanted to reform plans meant the State Chancellery would take on the Chancellery without seeking additional funds. a larger role than in the past. The coordination Additionally, seeking new funding might create department could implement most changes political headaches and delays. through the Cabinet’s Rules of Procedure but still Veismane conducted a functional audit of the needed political support from the Cabinet to State Chancellery in the summer of 2000 and approve the changes. “Creating something like spoke with every employee about his or her role to that meant a shift in power, and the ministries uncover duplicative and unnecessary functions. understood that right away,” Klapkalne said. For example, in a holdover from the Soviet era, “Formally, everyone accepted. In reality, those the Chancellery still employed a full-time dentist. ministers who were weaker were happy about this, Veismane fired 34 staffers. “It was not easy and stronger ministries didn’t want to lose their because it’s dealing with people,” she said. “But at power.” the same time, they were doing very routine jobs, Klapkalne’s unit at the State Chancellery and people were staying at the State Chancellery faced crosscurrents. Even though it served the for more than 10 or 20 years.” prime minister, in practice the Chancellery was # © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies considered apolitical. Veismane and members of analyst on the team. “We found that planning the coordination department were civil servants does exist, but [the rules] were not written and were supposed to act without political bias. anywhere—no unified approach, criteria or In order to set planning rules, analyze documents system.” Klapkalne said in reviewing Latvia’s past and make honest recommendations, her staff policies, the group asked two questions: “When needed to remain objective, and they had to Cabinet makes decisions, are they well- maintain their reputation for objectivity substantiated or not? Second, just looking at the throughout government. However, they also kinds of policy documents, what is in them, what understood that they needed the prime minister’s do they look like, and should it be like that or support in order to make systemic changes. In not?” introducing new initiatives that would push Klapkalne reached out to the embassies of political limits, they could not take for granted the United Kingdom, United States and Canada continued support from Bērziņš or future prime for samples of policies to analyze, and to the ministers. They had to find ways to make United Nations Development Programme and themselves useful to the prime minister to sustain World Bank for advice. “We tried to gather as reforms without compromising the perception of much information about policy making as their objectivity. Often, the coordination possible,” she recalled. Department members met department would have to call on Veismane, who with Canadian consultant Gordon Evans, who had a high profile and important connections, for worked primarily with the Lithuanian backing. government, which was developing its own The coordination unit would have to make planning system. They also consulted New rules and procedures that decision makers found Zealand’s former Treasury secretary, Graham useful. Sics summed up the unit’s objectives: “The Scott, on matters of linking policy planning and idea was simple—that we want to improve the budget processes. quality of information that the government as a The study lasted more than a year, and principal gets from the administration [civil deliberations among department members were service structures in support of government]. And contentious at times, but the process yielded a by improved information I mean better-written reform plan all supported. The unit would set policy papers, explanations of some of the results specific procedures and formats for introducing that are expected from policies.” and coordinating policy documents. It would then pilot a planning system that linked policies to Diagnosing problems budgets in selected ministries, and it would With Veismane’s blessing, Klapkalne and her monitor the new rules through reviewing all policy staff began to seek more precise diagnoses of the proposals to ensure they complied with standards. problems in Latvia than what was contained in Klapkalne recalled the value of building team the Mountfield report and what Veismane had consensus for specific policy formats and reform presented to the Cabinet. This required months options through vigorous—and sometimes of reviewing Latvia’s past policy documents, intense—debate. “We had terrible quarrels studying models from other countries, and between ourselves, extremely hard ones, because consulting with outside experts. all of us are different, different backgrounds, “First we screened what is out there [in different ideas of how things should be done, and Latvia’s past],” said Baiba Petērsone, another very strong personalities,” she said. “Doors were

Jonathan Friedman Innovations for Successful Societies slammed and pens were flying around the office. The coordination department issued standard But then we went out, and the quarrel was done, formats for each of the four categories of policy all of us were behind that idea, fully and totally.” documents. Sics explained that for each document, ministries had to be aware of “who is GETTING DOWN TO WORK the reader, what is the purpose, and what Although Klapkalne intended to make major information should be provided.” Ministries changes, she knew she had to implement reforms could present concept papers to the Cabinet to one step at a time so that her small unit would not discuss multiple approaches to an issue if the be overwhelmed by the workload. “We were only government did not have a defined policy. six, so we could not do everything at once,” she Concept papers could lead to concrete actions—in said. She and her staff would first unveil rules and which case ministries had to develop one of the procedures for policy making, then introduce three other policy documents—or they could mechanisms to better coordinate planning stand alone as analytical documents. between ministries, and last take steps to link the Guidelines, the category in which the planning and budgeting processes. coordination department introduced the document classification system, referred to policies Framing a policy planning system that covered medium- or long-term spans, from The first step in the reform process was to five years to 10 and beyond. Ministries could standardize the documentation procedure by develop guidelines to initiate new policies or creating four categories of policy documents— clarify areas where existing policy was unclear. concepts, guidelines, programs and plans—each Ministries had to write guidelines in a format that with its own format, content requirements and required a formulation of the problem, basic purpose. Any proposal ministries wanted to principles of the new policy, objectives, results, submit to the Cabinet would have to take the proposed actions, financial impact, and reporting form of one of these four. Klapkalne and her staff and evaluation procedures. unveiled the new classification system in late 2001 Programs and plans had their own uses and in a document titled “Policy Planning formats. Ministries submitted programs as Guidelines.” Aiming to lead by example, they medium-term planning documents covering five- wrote the paper in the format of one of the four year periods to implement guidelines that had types of policy documents. “We had to be role been approved by the Cabinet. In programs, models,” said Klapkalne. “So we created the ministries specified the document’s relationship to Policy Planning Guidelines in the format of the its corresponding guidelines, and specified the new system, the format we wanted from others.” objectives, indicators, main tasks, implementation

Jonathan Friedman Innovations for Successful Societies schedule and source of funding in greater detail. show them it’s lacking substantiation, not written Plans, the fourth category of documents, detailed properly.” the implementation of short-term tasks that The coordination unit worked with ministry would require one to three years. These tasks staff to improve policy documents and organized could be one of several envisioned in medium- training sessions through Latvia’s School of Public term planning documents, or they could detail Administration, the government’s training how ministries intended to overcome problems program. “We were trying to think ahead,” resulting from weak coordination with other Klapkalne said. “We said we would follow every ministries. Table 1 provides examples of policy document and we would give comments. This documents created under the new classification was our way to safeguard the system.” system. In addition to policy proposals, the The coordination department introduced the coordination department required ministries to document-category system in late 2001, and the submit detailed impact assessments. Although Cabinet incorporated the new rules in its policy papers discussed some situational factors procedures in March 2002. “Luckily, the legal behind selected policies, decision makers needed department was working on internal rule of to know the expected financial, legal and practical procedures [for the Cabinet], so we included these ramifications of policies beyond the results and right away,” Klapkalne said. “It became a legal indicators included in policy papers. Klapkalne document, which is key, because without that said ministries were especially weak in assessing nobody would follow it.” To build understanding financial impact. “There was a tendency at the and buy-in from other parts of the government, time to say initiatives wouldn’t cost anything, or Klapkalne said the department had “selling would cost so much you can’t do it—two options, events” for state secretaries and other civil both of them wrong. We had to persuade servants. She said that political leaders were not ministries how to calculate the cost of policies. too interested in the new system but that state This was a really tough part,” she said. secretaries and civil servants understood that the The Ministry of Finance played an important changes were necessary. Sics said the new system role in reviewing impact assessments along with “showed what we thought was wrong and how we the coordination department and the ministries of could fix it, and, surprisingly, most people welfare, environment and justice. However, Sics agreed.” said, the finance ministry failed to provide reliable In addition to setting new standards for guidance to ministries about standard costs for policy documents, the coordination department basic items, inflation rates, or changes in levels of reviewed each such document and legal act and benefits. Klapkalne’s unit also worked to get submitted comments to line ministries. Klapkalne ministries to perform evaluations, though she said explained that the purpose of reviewing these were often of poor quality. Ministries often documents was to help train ministries and to claimed they lacked the resources to conduct ensure the quality of documents in the long term. evaluations or claimed that policies failed simply “It was clear that at first the quality would be very because resources were not available. poor because the system was new; nobody had been trained yet,” she said. “We had to develop Making policy planning more inclusive training courses so that people understood what After creating clear formats for policy they had to write. We were ourselves trying to documents, Klapkalne and her unit looked to explain to ministries and later on by examples— open up planning to incorporate input from other & © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies ministries and from stakeholders outside details should be solved at lower levels.’ It was an government. The goal was not only to make effective selling point, and actually it turned out planning more inclusive and transparent but also that it was true!” to negotiate differences of opinion at lower levels The new consultation procedures brought a so that high-level decision makers would have level of transparency to policy planning that was clear choices to consider. Klapkalne explained, unprecedented in Latvia and in the region. At “Our goal was to solve every issue at the lowest every stage of the policy process, proposals, possible level … to have as few unharmonized comments and discussion notes were posted to a documents at government meetings as possible.” government website open to the public. Cabinet The unit addressed the coordination problem meetings and joint meetings with ministers and by introducing new procedures, with the Cabinet’s state secretaries were open to public viewing, and approval, that required ministries to share and civil society representatives were invited to openly debate proposals. Ministries would send participate. Sics said, “We required all ministries documents to other ministries and to civil society to publish their research; we published all drafts to groups, which then had two weeks to submit a government website. Previously, ministries comments. Ministries would notify civil society wasted their research budgets, but as their reports groups about policy proposals through Latvia’s were made subject to public scrutiny they had to Civil Alliance, an umbrella organization that start spending that more wisely and take research relayed information to dozens of non- more seriously.” governmental organizations. Once the sponsoring ministry received comments, it had two weeks to Linking planning and budgeting update its proposals and resubmit them to all In 1997, Latvia’s Ministry of Finance had stakeholders. Disagreements ranged from legal introduced a system of program budgeting that wording and cost estimates to the coherency and was meant to provide the ministry with more direction of the proposal. information about how line ministries used funds. The responsible line ministry then organized In standard program-budgeting systems used in a meeting of all stakeholders including a some form by the U.S., U.K., Canada and New representative of the coordination department to Zealand, ministries gave the detailed costs, resolve any outstanding disputes. If the group objectives and expected outputs for every activity failed to agree, disputes elevated to weekly performed. Programs referred to groups of meetings of state secretaries, the top civil servants activities that had similar objectives. For example, in all line ministries. Outstanding issues were the Ministry of Education could have a program then addressed at weekly joint meetings of state to raise academic standards in universities, with secretaries and ministers, and finally, remaining several initiatives geared towards that goal. items went to weekly meetings of the Cabinet. However, Latvia’s finance ministry did not Klapkalne said the idea was to create multiple support ministries with detailed methodologies. stages at which lower-level officials could resolve Largely in the dark, ministries shaped budget technical or minor issues so that ministers had to programs around the activities already in place, deal only with matters that involved clashes of and produced only some cost information without legitimate opinion. She said, “This was a selling detailing activities or expected results. The point for government that really ‘you’re working finance ministry’s inability to produce reliable too much’ and that ‘you shouldn’t be doing what three-year budget estimates, in part due to the civil servants should be doing; all those technical quicker-than-expected rise in government revenue ' © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies after 2000, further undermined the program the usefulness of such planning. Without support budgeting system. from the finance ministry in setting reliable three- In 2002, the coordination department set out year budgets, the system set up by the department to complement the program-budgeting system could not do everything it was designed to do. with what it lacked—a system of strategic Although it could help ministries think about how planning. The purpose was to allow ministries to to organize their units and allocate resources to determine the administrative structures and achieve their goals, it would not serve as a resources, both financial and human, needed to medium-term planning system because it would achieve their aims and to make adjustments if they not be linked to budgets. found their current structures and resources were To establish the system’s credibility, the inappropriate for the tasks. In this system, coordination department decided to begin by ministries would create three-year plans structured piloting strategic planning in select ministries and around budget programs, using the logic model of letting the results speak for themselves. “The idea identifying the desired outcomes of programs, was right, we knew we should do it,’ said results, outputs, activities, inputs and costs, with a Klapkalne. “… We had to go through a pilot set of indicators to gauge progress. stage to understand ourselves what are the Klapkalne said her unit became interested benefits, how it should work, and how we really after the finance ministry rejected the World can sell this later on to the ministries.” Bank’s proposal to develop strategic planning to Klapkalne attempted to persuade ministry complement program budgeting. “They [the representatives in a meeting in late 2002 of the World Bank] tried to sell the idea of strategic merits of strategic planning, and she succeeded in planning to the Ministry of Finance and it didn’t enlisting the Ministry of Agriculture for the pilot work, so we took the idea and started to program. Sics said it was the perfect ministry, implement it,” she said. from the unit’s perspective. “Agriculture had just Sics explained that the finance ministry undergone a functional analysis and fired 300. It simply did not have the resources or the mindset had a history of transformation,” he said. to support strategic planning reforms. “The issue The agriculture ministry’s state secretary, was capacity,” he said. “The people in charge just deputy state secretary and head of internal audit didn’t have time to bother with more advanced formed a working group that led the process of stuff—didn’t have the people to do it.” developing a ministerial strategic plan. The Additionally, he said, the finance ministry still coordination unit helped on process issues but had a Soviet-era understanding of its role. “They allowed the working group to develop a plan it were still accountants, not managers of public thought would suit them best. “We gave the finance,” he said. Veismane agreed: “The Ministry of Agriculture examples [of strategic Ministry of Finance at that time was a routine plans], and they told us what worked for them ministry, without changes in attitude or way of and what didn’t,” said Sics. “They had sectoral doing things. There was no personal animosity, expertise; we had methodological expertise.” but we couldn’t do anything with them. They had The agriculture ministry made important no interest in changing.” changes as a result of the strategic-planning Although the coordination department exercise. The ministry reorganized its 30 budget stressed the potential benefits of strategic programs into four program areas, each with a set planning, its members recognized that several of outputs and indicators. This change made it ministries, especially finance, were skeptical about much easier to monitor progress and to reallocate ( © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies funds as necessary. Sics said the ministry also to operate. “We started facing resistance when reorganized several units. “They restructured after the system had to be implemented and we rejected realizing their existing structure wouldn’t allow proposals that didn’t meet standards,” Sics said. them to achieve what they set out to achieve in Such opposition often involved disagreements their strategic plan,” he said. “Drafting the over spending. Veismane said, “We did a lot to strategic plan helped them identify internal create better strategies and structures for public structural flaws.” administration institutions, but at the same time Encouraged by the success of the agriculture you find places where money’s not spent in the ministry, other ministries joined in. During 2003 right way. This is when ministries understood and 2004, the ministries of culture, finance, what we meant by policy coordination and what it economy, justice and the state chancellery itself meant as an instrument for the prime minister.” adopted strategic planning exercises. Again, the Always serving under prime ministers who coordination unit offered general guidance and relied on fragile coalitions, the coordination allowed the ministries to tailor the process to their department became caught up in disputes between liking. The culture ministry, for example, coalition rivals. Leaders of some ministries bore conducted the process using entirely internal staff, grudges over what they perceived as excessively whereas the coordination unit brought in critical assessments of their proposals. Making consultants to assist the justice ministry in matters worse, successive prime ministers called developing its strategic plan. The culture ministry on the department to perform arguably political reported that the exercise of writing the plan tasks in addition to its core work. In response, helped identify gaps in policies and in ministries leveled allegations of political mechanisms to collect information it would need partisanship and at various times sought the unit’s to assess its own effectiveness. demise. The coordination unit used the success of the Although Veismane worked to shield the pilot programs to persuade other ministries to department from the political turmoil, she had to make strategic planning standard across make difficult concessions. In November 2002, government. Based on the pilot programs, the Einars Repše of Latvia’s center-right New Era coordination unit set government-wide guidelines, Party succeeded Bērziņš as prime minister. modified formats, and assigned staff to support Bērziņš had helped initiate the reform effort in specific ministries to develop their strategic plans. 2000, and while in power he had continued to Sics said one of the lessons gleaned from the support the coordination unit. Repše, who led agriculture ministry’s experience in particular was Latvia’s central bank from 1991 to 2001 and the need to involve management so that the successfully introduced Latvia’s new currency, had process was a useful planning tool and not merely little experience in public administration. a compliance exercise. “Make sure you work with Although Veismane persuaded him to maintain the management team,” he said. “It’s an the coordination department, Repše assigned the important lesson. It’s much better than setting up unit additional tasks that put it in the line of a specialized unit.” political fire. Specifically, Repše asked the unit to conduct audits of ministries’ activities to find OVERCOMING OBSTACLES potential financial savings and to develop policy From 2002, when the coordination unit proposals on his behalf. began critiquing policy proposals, it faced political “Everything changed at that time, when we opposition that threatened its ability to continue started to do analytical work for him,” Veismane )* © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies said. “We found some not so nice cases where Šķēle’s People’s Party was in the political ministries were asking for more money than opposition when the scandal came out but joined necessary, and when we brought this to his a new coalition government in March 2004 under attention, ministries started to hate us.” the Green Party’s Indulis Emsis and led a Repše also called on the unit to craft a coalition from December 2004 under Aigars pension reform plan, a highly sensitive policy Kalvītis. Veismane recalled, “Other parties in the issue, and to introduce a new salary structure in coalition wanted to close it [the coordination unit] the civil service that would be consistent with a down. There was a big struggle at the political performance-based rather than a career-based level to keep the department open. … He [Emsis] model. Ostensibly, crafting these policies was the was supportive, but couldn’t be supportive publicly responsibility of other government ministries and because another party, the People’s Party, was agencies, but with coalition partners that had pushing, saying, ‘It’s necessary to close it; this different perspectives on these issues, Repše department is not necessary.’” The unit survived wanted the coordination unit to develop proposals intact under Emsis but could not escape that included the policy options he endorsed. unscathed under the People’s Party. Kalvītis, Repše’s coalition partners argued that the under pressure from within his party, offered coordination unit was serving the prime minister’s Veismane an ultimatum: either fire Sics and political interests. From then on, Klapkalne said, Jankovskis or lose the whole department. In “Every next government saw us as servants of 2005, Sics and Jankovskis resigned. previous governments. This created a lot of Klapkalne said this episode was the most tension, the perception that we were working for difficult during her time at the coordination unit, political interests.” but she said she appreciated that Sics and The coordination department came under Jankovskis put the interests of the unit above intense pressure in 2003 after unit members themselves. “It was very hard not to be able to uncovered evidence of possible corruption in a protect your people,” she said. “But we all government contract to install digital television. understood the idea and were behind it.” At Repše’s request, Sics and fellow analyst Jānis Despite the turmoil, the unit continued to Jankovskis analyzed a multi-million dollar operate and, according to Veismane, had an contract that had been awarded to a company that effective working relationship with Kalvītis. “We was thought to be British-owned. Finding had a good enough relationship when we talked irregularities in procurement procedures, Sics and about conceptual proposals and preparing him for Jankovskis looked deeper and found that the Cabinet meetings,” she said. company apparently had ties to numerous influential people in Latvian politics including ASSESSING RESULTS Latvian media mogul Anderjs Ēķis and former In 2006, the World Bank conducted a Prime Minister Andris Šķēle. Repše suspended comparative study of administrative reforms in the deal and called for an investigation. The Latvia and seven other Central and Eastern Prosecutor’s Office launched a criminal European countries that joined the European investigation into more than a dozen individuals Union in 2004. It ranked Latvia at or near the involved, and the case remained unresolved in top of the group in terms of the quality of policy 2012. The case was also taken to international analysis and coordination. “Since 2000 Latvia has arbitrage and settled in favor of the Latvian made significant and in some respects impressive government. efforts in institutionalizing a new policy making )) © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies and strategic planning system voluntarily,” the assessments. Although performance indicators report concluded. “… Above all, the reforms have were better understood than in 2001, the high rate managed to challenge the dominating normative of turnover of civil servants undermined steady culture of public administration by pushing civil progress. Policy documents were clearer and servants (and in many cases politicians) to be more followed specific formats, but there were too many policy and performance oriented. Policy has long-term documents, and the relationship become a significant part of the language in public between them was often uncertain. Five administration.”4 successive governing coalitions during a six-year The Policy Coordination Department span developed long-term planning documents achieved much of what its leaders had set out to with little consideration for the work of their do. With clear formats and content requirements predecessors. for policy proposals, decision makers received Without support from the Ministry of documents that were easier to understand and Finance, the coordination unit did not achieve its contained more relevant information and goal of synchronizing policy and budget planning. meaningful analysis. Ministries that piloted Strategic-planning exercises helped ministries strategic planning endorsed the exercise, and the properly organize resources, streamline budget Cabinet made strategic planning compulsory in all programs, and ensure they had mechanisms in ministries beginning in 2006. Coordination place to monitor results. However, without the requirements helped to make the policy process foundation of a reliable three-year budget, and among the most transparent and inclusive in the with mid-year budget adjustments common, region. “This broke down silos,” Sics said. “We ministries could not effectively use strategic definitely see the benefits. The language of planning to manage their budgets. measuring impacts now is normal, [we are] Mārtiņš Krieviņš, an analyst with the getting good analysis.” coordination department who wrote the 2006 As new procedures forced civil servants to study and succeeded Klapkalne as head of the unit resolve technical issues without involving Cabinet the next year, said the strategic planning exercises ministers, Cabinet meetings became shorter and were a partial success. “A success from this system more focused on policy matters. An internal was not only the flexibility and trying to link it coordination department study found that the with the budget, but also non-governmental average duration of Cabinet meetings shrank to organizations evaluated [strategic plans] because 2.3 hours in 2005 from 6.5 hours in 2001. With they could clearly understand what are the clearer policy documents and fewer technical priorities of the ministry, where they are going to issues to discuss, the Cabinet could act more invest money, what are the amounts of the money, quickly and effectively on a greater number of what are the intended results,” he said. “It opened significant issues. Indeed, despite shorter up the black box of the ministry.” meetings, the Cabinet discussed 2,796 items during 2005, up from 2,443 in 2001. REFLECTIONS However, there were still significant The instability of governing coalitions and shortcomings. The coordination unit’s internal the adversarial relationships between coalition review in 2006 found that although the quality of partners dented the Policy Coordination analysis of policy documents had improved, Department’s reform efforts during its first six ministries did not always meet content years. Although the unit consisted of civil requirements, particularly with respect to impact servants, it designed and implemented reforms )! © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies that were intended to shape policy making at the EPILOGUE political level. It had to distinguish between the As part of the Policy Coordination aspects of policy planning it could address and Department’s 2006 internal review, Mārtiņš others that were too sensitive and politically Krieviņš helped develop a second-generation infeasible. policy planning system for the period 2007 to Political considerations forced the 2013. He developed the new planning system, department to hold back in several areas. One of outlined in a document approved by the Cabinet the unit’s initial goals was to set procedures to in 2006, following consultations with identify government-wide priority policies around coordination unit’s staff and representatives from which ministries could organize their activities. line ministries, Parliament, and the president’s However, these efforts never got off the ground. office. The goal of the new system was to correct Una Klapkalne, who led the department until outstanding weaknesses, expand strategic leaving for the private sector in 2007, recalled, planning, and address new challenges facing “We tried to do something on this level, but we policy planning that had emerged since 2000. For understood we couldn’t do it because of our example, Latvia’s accession to the European political culture.” Union in 2004 created new opportunities and Political dynamics prevented the obligations in policy planning. Latvia had to coordination unit from proceeding with its effort harmonize its numerous national planning to invigorate the budget process as well. The unit documents and make its policy objectives had hoped to introduce negotiations between the consistent with EU membership, and the new prime minister, finance minister and line system would give policy makers the tools to do ministries over the appropriateness of policy goals that. Krieviņš said the coordination unit set the and the use of funds. However, Ugis Sics, a example, much as it had in 2001, by setting the department analyst, explained that the unit time in force for the new planning system from received feedback, in particular from the finance 2007 to 2013 to match the EU’s budgetary period. ministry, that such an approach was not politically During 2007 and 2008, the coordination unit feasible. With loose governing coalitions, a implemented its tasks as planned. Analysts confrontational negotiating process could add fuel worked with all 18 ministries to develop three- to the fire. “We wanted budget hearings with the year strategic plans—still without active support Ministry of Finance and State Chancellery on one from the Ministry of Finance—and initiated a side of the table and the ministries on the other review process to harmonize Latvia’s many side, to have a discussion,” he said. “We couldn’t national planning documents. get to this point.” In late 2008, however, reforms were put on In the areas where the coordination hold. With the onset of the global financial crisis department did proceed, the unit had to play the caused by the failure of prominent Western banks, role of an impartial quality-control team while the Latvian government experienced a sharp drop fending off attempts by prime ministers and in revenue and a 25% contraction in GDP. The others to politicize its functions. “The hardest crisis “brought the whole system to nothing,” part was being able to balance being a civil servant Krieviņš said. “The whole system started to work and being in the most politically-influenced place a little bit, and then it was dropped completely.” where all the interests come together,” Klapkalne Prime Minister Ivars Godmanis had to make said. “I never knew what kind of pressure I would painful decisions to keep Latvia solvent, including be under.” mass layoffs and wage cuts, and he had to )" © 2012, Trustees of Princeton University Terms of use and citation format appear at the end of this document and at www.princeton.edu/successfulsocieties

Jonathan Friedman Innovations for Successful Societies negotiate a series of emergency loans from the responsibility. Additionally, officials from other International Monetary Fund (IMF). The task of line ministries pointed a finger at the coordination producing the data and analyses necessary to department for suggesting what they deemed to manage the IMF loan was so enormous that the be unwise or excessively harsh cuts. “It was a very prime minister called on all arms of the active, but very sensitive time,” recalled State government, including the coordination Chancellor Gunta Veismane. “At that time, we department, to set aside their core tasks to focus were everyone’s enemy.” on more immediate needs. Krieviņš said that in Pressure built on Prime Minister Godmanis that time of urgency, ministries disregarded their to shut down the coordination department, but strategic plans and bypassed official planning Veismane, friends with Godmanis from their time procedures because there was a sense that the together as secondary-school students, convinced procedures were too cumbersome for the tasks at him otherwise. “I said, ‘If you close this unit, hand. “The government was preoccupied with the you’ll have no analysis, no information,” she said. need of actually getting the money to keep the “… Here is the brain. These analysts prepare state running,” Krieviņš said. “In those everything for you.’” circumstance, nobody thinks in terms of budget Valdis Dombrovskis succeeded Godmanis as plans.” prime minister in March 2009 at the height of the The coordination department contributed to crisis in Latvia and agreed to shut down the unit the effort to guide Latvia through its fiscal crisis by 2010. “He (Dombrovskis) knew it was in several ways. At the request of the prime necessary to have the capacity of this unit,” said minister, the department conducted functional Veismane, “but political pressure from other reviews of ministries to identify potential parties was too strong.” efficiency gains and took on the politically Offsetting the loss of the Policy hazardous job of identifying agencies and Coordination Department, Dombrovskis programs whose functions were no longer established the Cross-sectoral Coordination required. Finance ministry officials became Centre in early 2012. He provided the unit with a concerned that the department was performing similar mandate within the State Chancellery and certain tasks that arguably were their appointed Krieviņš as its director.

1 Sir Robin Mountfield, Public Administration Reform in Latvia, Unpublished report, 2000. 2 Mountfield. 3 State Chancellery of the Government of Latvia, Study on Government’s Policy Formulation, Decision-making and Implementation in Latvia, Unpublished report, November 2000. 4 Poverty Reduction and Economic Management unit, Europe and Central Asia, the World Bank, Public Sector Capacity in the EU 8: Report on Strategic Planning and Policy Management in Lithuania and Latvia, October 2006.

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