GOVERNANCE GLOBAL PRACTICE APRIL 2017 THE MALAYSIA DEVELOPMENT EXPERIENCE SERIES Driving Performance from the Center Malaysia’s Experience with PEMANDU CONNECT WITH US wbg.org/Malaysia @WorldBankMalaysia @WB_AsiaPacific blogs.worldbank.org/category/ countries/malaysia APRIL 2017 THE MALAYSIA DEVELOPMENT EXPERIENCE SERIES Driving Performance from the Center Malaysia’s Experience with PEMANDU GOVERNANCE GLOBAL PRACTICE About KNOWLEDGE & RESEARCH The World Bank Group’s current partnership with Malaysia is focused on knowledge-sharing. It is centered on support for Malaysia’s vision to join the ranks of high income economies by 2020 through inclusive and sustainable growth, and to share its lessons with developing countries. In March 2016, the World Bank Group officially launched its Global Knowledge and Research Hub in Malaysia. The new Hub is the first of its kind, serving both as a field presence in Malaysia and as a global knowledge and research hub. It focuses on sharing Malaysia’s people-centered development expertise and creating new innovative policy research on local, regional and global issues. Knowledge & Research reports are flagship work emanating from the teams based in the Malaysia Hub. The Malaysia Development Experience Series captures key lessons from Malaysia relevant for emerging economies in Asia, Africa and elsewhere that are transitioning out of poverty and into shared prosperity. Cover Photo attribution: © wittayayut / shutterstock The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Please contact jkunicova@worldbank.org if you have questions or comments with respect to content. Table of Contents Acknowledgements 4 List of Acronyms 5 List of Figures 7 List of Boxes 7 Foreword 8 Executive Summary 10 Why is there a global interest in Delivery Units? 16 Delivering on policy promises is often derailed by implementation challenges 17 Delivery Units at the center of government can enhance public sector performance 18 Why is Malaysia’s experience with PEMANDU worth learning from? 20 Malaysia has recently tackled issues that many developing countries face 21 Malaysia was an early adopter of performance-oriented reforms in the public sector 21 PEMANDU is part of a larger performance ecosystem 22 PEMANDU was created with a specific purpose in mind 24 PEMANDU-driven NTP demonstrates results 27 How does PEMANDU drive performance? 30 PEMANDU fulfills multiple well-defined roles 31 PEMANDU focuses on granular tasks 34 PEMANDU’s institutional setup allows attracting talent from the private sector 35 PEMANDU introduced “Labs” as a multi-stakeholder problem solving tool 36 PEMANDU creates performance incentives through monitoring and reporting of KPIs 38 PEMANDU uses an institutional infrastructure for delivery that extends to MDAs 40 PEMANDU developed a strong communication function 41 What can be learned from PEMANDU’s challenges? 42 A complex performance ecosystem creates a heavy reporting burden and coordination challenges 43 PEMANDU’s size and private sector corporate culture present tradeoffs 46 Focus on KPIs is a mixed bag 48 Lack of impact evaluations creates questions about attribution 48 What are the key takeaways for other countries? 52 Learning from PEMANDU’s strengths 53 Secure strong backing and involvement of the top leadership 53 Create a prioritized and granular results platform 53 Combine top-down control with bottom-up voice 54 Create institutional interface between the DU and MDAs 54 Learning from PEMANDU’s limitations 55 Balance private- and public-sector elements in a DU 55 Optimize the amount of reporting by MDAs 55 Strengthen impact evaluations 56 References 57 Annex 1. PEMANDU’s Overseas Experience 58 Annex 2. Eight Steps of Transformation 61 Annex 3. NTP: Reporting Burden of the MDAs 63 Driving Performance from the Center: Malaysia’s Experience with PEMANDU 3 Acknowledgements Driving Performance from the Center: Malaysia’s Experience with PEMANDU was prepared by the World Bank team consisting of: Jana Kunicova (task team leader), Robert P. Beschel, Miki Matsuura, Jeevakumar Govindasamy, and Arividya P Arimuthu (authors). Other colleagues, including Bernard Myers, Robert Boothe, Mei Ling Tan, Luis Blancas, Alan Sie Ping Lau, Rafael Munoz Moreno, Lars Sondergaard, and Michael Woolcock provided useful inputs. Joshua Foong and Chancey Lee Pacheco provided excellent editorial assistance. The team worked under the overall guidance of Robert Taliercio and James Brumby, and closely coordinated with Ulrich Zachau, Faris H. Hadad-Zervos, and Shabih Ali Mohib. The team is grateful to peer reviewers (Kathrin Plangemann, Theo Thomas, and Joanna Watkins) for their thoughtful comments and suggestions. Further useful comments were provided by Kai Kaiser, Soren Davidsen, Pui Shen Yong, Frederico Gil Sander and Ricardo Habalian. This report benefited from presentations, fruitful discussions, comments, and information from various sections of the Performance Management and Delivery Unit (PEMANDU) in the Prime Minister’s Department, the Economic Planning Unit (EPU), the Ministry of Finance (MOF), the Ministry of Education, the Ministry of International Trade and Industry (MITI), and many other ministries and agencies of the Government of Malaysia. We are indebted to the PEMANDU team for their ongoing collaboration with the World Bank and in particular, their strong leadership in the launch of this report. Ku Kok Peng, Alex Iskandar Liew, Miti Nurbaya Zainudin, Kelvin Tan, Zehan Teoh, Azree Ahmad Pardas, Andrew Fan and Ng Chean Yeaw were exceptionally forthcoming and proactive in providing information and coordinating with other line ministries, departments, and agencies. Special thanks to Dato’ Sri Idris Jala for his personal involvement in the Foreword and proof-reading the final version of the report. The report is based on information as of December 2016. 4 Driving Performance from the Center: Malaysia’s Experience with PEMANDU List of Acronyms APMF Activity Performance Management Frameworks AUP Agreed Upon Procedures BFRI Big Fast Results Institute BRN Big Results Now BRT Bus Rapid Transit CAGR Compound Annual Growth Rate CCE Communications Content and Infrastructure CEO Chief Executive Officer COL Cost of Living CSL Competition, Standards & Liberalisation DMO Delivery Management Offices DU Delivery Units ECCE Early Childhood Care & Education EDU Education E&E Electrical & Electronics EKSA Public Sector Conducive Ecosystem EPP Entry Point Projects EPU Economic Planning Unit ETP Economic Transformation Programme GDP Gross Domestic Product GKL/KV Greater Kuala Lumpur and Klang Valley GNI Gross National Income GST Goods and Services Tax GTP Government Transformation Programme HCD Human Capital Development HRM Human Resource Management ICU Implementation and Coordination Unit IE Impact Evaluation KEMAS Department of Community Development KPI Key Performance Indicator KSN Chief Secretary to the Government KTM Malayan Railways Limited LIH Low Income Households LINUS Literacy and Numeracy Screening LRT Light Rail Transit LTPP Long Term Perspective Plan MAMPU Malaysian Modernisation and Management Planning Unit MDAs Ministries, Departments and Agencies Driving Performance from the Center: Malaysia’s Experience with PEMANDU 5 List of Acronyms MDU Ministerial Delivery Unit mg/L Milligram per Litre MITI Ministry of Trade and Industry MOE Ministry of Education MOF Ministry of Finance MoU Memorandum of Understanding MRT Mass Rapid Transit NBOS National Blue Ocean Strategy NGO Non-Government Organisations NITI National Institution of Transforming India NKEA National Key Economic Area NKRA National Key Result Area NPA National Priority Areas NTP National Transformation Programme OBB Outcome Based Budgeting OECD Organisation for Economic Co-operation and Development OGE Oil, Gas & Energy PADU Education Performance and Delivery Unit PDB President's Delivery Bureau PEMANDU Performance Management and Delivery Unit PEMNA Public Expenditure Management Network in Asia PEMUDAH The Special Task Force to Facilitate Business PM Prime Minister PMD Prime Minister's Department PMDU Prime Minister's Delivery Unit PPMF Program Performance Management PSD Public Service Department PSDT Public Service Delivery Transformation PSM Problem Solving Meeting PSTF Public Sector Transformation Framework PwC PricewaterhouseCoopers SOE State-Owned Enterprises SPP2 Project Monitoring System (managed by ICU) SPV Special Purpose Vehicle SRI Strategic Reform Initiative TDC Transformation and Delivery Council U.S. United States UKP4 President's Delivery Unit for Development Monitoring and Oversight UPT Urban Public Transport USD United States Dollar W&R Wholesale & Retail 6 Driving Performance from the Center: Malaysia’s Experience with PEMANDU List of Figures Figure 1. A long and precarious road to citizen outcomes 17 Figure 2. Public Sector Performance: Achieving Development Outcomes 18 Figure 3. Malaysia’s National Transformation Programme (NTP) 25 Figure 4. Aggregate Indicators in selected NKRAs 27 Figure 5. 2015 NTP performance 28 Figure 6. Eight Steps of Transformation 31 Figure 7. Staff Size of DUs in Comparative Perspective 47 List of Boxes Box 1. What is a Delivery Unit? 19 Box 2. Malaysia’s Performance Ecosystem 23 Box 3. How was PEMANDU created? 26 Box 4. Documenting NKRA Results 29 Box 5. De-Bottlenecking: The Escalation Process 32 Box 6. Coordinating Different Levels of Government 33 Box 7. Emphasizing Granularity: Delivery Roadmaps 34 Box 8. How do PEMANDU Labs work? 36 Box 9. Performance Management through Ministers’ Scorecards 39 Box 10. Balancing PEMANDU's Strengths with its Natural Limitations: The case of Urban Public Transport 44 Box 11. Which MDA is in charge? The case of the transport sector 45 Box 12. Crime NKRA: Addressing Citizens’ Perceptions through Policy Implementation 49 Box 13. EDU NKRA: Literacy and Numeracy Screening (LINUS) 50 Box A1. PEMANDU’s Overseas Engagements 58 Driving Performance from the Center: Malaysia’s Experience with PEMANDU 7 Foreword When I began my journey in 2009 with the public sector under the appointment of the Prime Minister, Malaysia was beset with four problems. Firstly, there had been concerns that Malaysia was caught in the middle income trap since the 1990s. Secondly, our fiscal deficit was reported at 6.6 percent. Thirdly, our Government debt was rising at 12 percent per annum of GDP. And fourthly, we needed to move the country into high-income status by 2020. I agreed to take on the task to start and lead a team, which we now all know very affectionately as PEMANDU, because I was given the assurance by “To achieve the Prime Minister in 2009 that the government is altogether committed in the pursuit of sustainable transformation, and inclusive socioeconomic transformation. leaders have to dance That commitment proved to be catalytic and is on the boundaries firmly established in the National Transformation Program (NTP), which kicked off in 2010. According of expectations; to the latest available data from the World Bank, gradually pushing Malaysia’s GNI per capita as at 2015 was USD10,570, just 15 percent short of the current high-income the bubble from threshold of USD12,475. In comparison, our GNI per capita was USD8,280 in 2010. There was a gap one dimension to of 33 percent from the then-high-income threshold another.” of USD12,276. Additionally, we have catalyzed a 2.2 times growth in the compound annual growth rate (CAGR) of private investment. While the previously recorded CAGR was 5.5 percent in 2006-2010, private investment recorded a CAGR of 12.1 percent between 2011- 2015. And we have achieved this without further compromising our fiscal deficit, which in fact has improved from 6.6 percent of GDP in 2009 to 3.2 percent in 2015. This data clearly show that we 8 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Foreword have been managing our fiscal position, moved out leadership and not enough time talking about the of the middle income trap, are more than halfway perspirational aspects of it.” to high-income status, and on track to achieve our goals by 2020. People are often uncomfortable with change. It is not easy to lead adaptive change. Clear, directed, There is no denying that the government made resolute and committed leadership is key to some very tough calls on fiscal policies, as transformation. Transformational leadership is opposed to sticking with popular ones, to drive about disappointing people at the rate that they will a sustainable and resilient economy. An adaptive permit you to. To achieve transformation, leaders change was required. Subsidies were cut. A Goods have to dance on the boundaries of expectations; and Services Tax (GST) was imposed. Policies were gradually pushing the bubble from one dimension also implemented to enable a friendlier business to another. That means taking tough measures that environment for the private sector to flourish. often go against the status quo. And prescribing Since 2010, the NTP has been getting Malaysians focused intervention to problem-solve and to adapt to a new reality. A reality where they are accelerate progress. expecting positive trade-offs for the opportunity cost. Malaysia has been recognized by many global institutions, academic groups and governments in To this end, through the NTP, we have helped the course of the last seven years of the NTP as a raise the quality of life of everyday Malaysians in model of national socioeconomic transformation. an inclusive way, such as through the completion This did not come without the perspiration. of 5,286 km of rural roads benefiting 3.5 million people. We have also connected 144,025 rural houses to reliable electricity, lighting up the lives Dato’ Sri Idris Jala of 720,125 people; provided 1.68 million living in President and CEO 334,593 rural houses with access to clean water; PEMANDU Associates Sdn. Bhd. as well as having built and restored 79,137 houses benefiting 412,360 people. I return to my point of leadership. Without the PM and his Ministers’ leadership commitment, the NTP would have failed. In short, a concerted leadership is a critical prerequisite for any national transformation to succeed. Marty Linsky, a professor at the Harvard University Kennedy School of Government and a co-founder of Cambridge Leadership Associates said, “Too often we focus on the inspirational aspects of Driving Performance from the Center: Malaysia’s Experience with PEMANDU 9 Executive Summary Many governments have introduced delivery units (DUs) to tackle pressing implementation challenges, deliver on key political priorities, and better respond to citizen needs. Despite adopting good policies, governments often face implementation challenges in delivering outcomes. The outcomes citizens expect from governments often have a long results chain: from defining policy priorities to policy formulation, policy implementation, and service delivery outcomes for citizens. Governments have recognized that enhancing public sector performance is key to achieving better citizen outcomes. DUs at the center of government are one type of such a solution. Under the right circumstances, DUs can help to strengthen the link between a given policy and citizen outcomes. They can also work to create strong performance incentives, driving the public sector to produce high-quality outputs in an efficient and accountable manner. Malaysia introduced the Performance Management and Delivery Unit (PEMANDU) in 2009. Since its inception, PEMANDU helped design and then facilitated the implementation of the National Transformation Program (NTP), a set of high-level strategic priorities of the government broken down into concrete interventions. NTP has been implemented by ministries, departments, and agencies (MDAs), while PEMANDU helped track, monitor, and de-bottleneck the process. PEMANDU became the largest and one of the most prominent DUs in the world, with many countries looking to learn from its experience. Malaysia’s experience with PEMANDU is best understood in the context of the country’s broader development journey and public sector performance culture. Malaysia’s public sector development, which pre-dates PEMANDU, has created an enabling environment that set the stage for PEMANDU. Since the country’s independence in 1957, Malaysia’s public sector focused on solving development challenges facing the newly-independent country, including providing services to eradicate poverty and build up infrastructure to enable the diversified growth of its economy. The focus has been on results from the very beginning. This performance orientation created elements of a performance culture. As the public sector developed, it also gave rise to an institutional ecosystem for performance management. These elements provided the foundations on which PEMANDU could build. 10 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Executive Summary What makes PEMANDU effective? B y desig n , P E M A N D U fulf ills multiple “Labs” were one of PEMANDU’s signature roles that are well-defined and sequenced. innovations that created ownership of the NTP PEMANDU’s signature methodology, “Eight Steps among a wide variety of stakeholders. The Lab of Transformation,” ensures its focus on key tasks is a consultative process: an extensive stakeholder at every point in time. These eight steps start engagement workshop focused on a policy priority with the strategic direction from the cabinet on area lasting six to nine weeks, where participants government’s priorities early in the government’s work together to design solutions to identified term. PEMANDU helped break down these policy challenges. The par ticipants include high-level priorities into concrete interventions representatives from the MDAs, both leadership contained in the NTP and create stakeholder and rank-and-file, as well as representatives ownership. After that, PEMANDU has acted as from the business community and civil society. technical support to MDAs in implementing the PEMANDU-run Labs were responsible for taking NTP, including setting and monitoring the key strategic priorities of the new government in 2009 performance indicator (KPI) targets. If problems and unpacking them into projects and actions occurred during implementation, PEMANDU under each NKRA, NKEA, and SRI. Through Labs, escalated the process to progressively higher PEMANDU ensured that the NTP was demand- levels of decision-making to de-bottleneck the driven and widely owned by the implementation implementation. Toward the end of the cycle, the agencies. reported KPIs were validated by a third party and communicated to the stakeholders and the public PEMANDU creates incentives at all levels through the annual report. through rigorous monitoring and reporting of KPIs. KPI target-setting for the NTP cascades down PEMANDU’s goals are specific and granular from the Minister to the MDA staff. While the initial in order to create maximum focus and KPIs were set during the original Labs, annual targets accountability for results. The key to success of are revised jointly between PEMANDU and MDAs. any DU is to focus on a limited number of well- The set of KPIs is then presented in a Minister’s defined priorities. For PEMANDU, these priorities Scorecard. PEMANDU uses a dashboard for KPI are defined by the NTP: eight national key results tracking that is updated weekly. Weekly monitoring areas (NKRAs), twelve national key economic area often reveals implementation problems. These can (NKEAs), and six strategic reform initiatives (SRIs). either be solved with PEMANDU’s assistance at At the same time, these high-level priorities are the first instance, or further referred to technical further stepped down into projects with specific committees. If those fail to solve the issue, it is then KPIs and timelines that PEMANDU follows up on. referred to monthly steering committee meetings. It is important to note that the responsibility for If the problem remains unresolved, it is referred the implementation of the NTP projects, including to the semi-annual PSM, chaired by the Prime the budgetary authority, lies with the MDAs, not Minister. PEMANDU. At the same time, PEMANDU drives the NTP – through its design, adjustments, monitoring, PEMANDU ’s institutional setup allows to de-bottlenecking, and communicating. attract talent from private sector, introducing Driving Performance from the Center: Malaysia’s Experience with PEMANDU 11 Executive Summary private sector elements into public sector escalate, coordinate and facilitate the processes management. As a “special-purpose vehicle” in associated with the KPI reporting. the Prime Minister’s Department, PEMANDU has flexibility in recruiting its staff who are not civil P EMAN DU puts much empha sis on its servants. PEMANDU’s pay structure is outside communication function, reinforcing the the civil-service pay scale, enabling PEMANDU ownership of the NTP and government’s to attract talent from both the private and public accountability to the public. Its communications sector. This naturally allows for a mix of ideas and plan is designed to keep stakeholders informed best practices to be shared and implemented. every step of the way: to put the strategic direction While the technical skills of its staff are important, into the global perspective; highlight the subject PEMANDU also develops “soft skills” of its staff: matter, findings and progress of the Labs; public communication, relationship building, positive engagement and communication of feedback; attitude and problem-solving have proven valuable illustrate the accountability, commitment, and built- in interacting with MDAs and stimulating their in flexibility of the KPI targets; highlight milestones performance. and challenges during the implementation; emphasize that the external validation of results PEMANDU’s interaction with stakeholders is achieved through the audit; and summarize within and outside the government is key what the NTP delivered in the Annual Report. to achieving results. The implementation of Besides the NTP Annual Report, key outputs of the NTP is enabled by institutional structures, PEMANDU’s communication team include weekly such as Delivery Management Offices (DMOs) communications plans that are developed a year within ministries, which become the vehicles that ahead and utilize a wide range of platforms: allow PEMANDU drive the NTP implementation. infomercials, social media, radio, editorials, as well These structures include MDA officials who work as direct engagement through roundtables and alongside PEMANDU staff to set, track, and adjust workshops. the KPIs. The DMOs also assist PEMANDU to What are the limitations of PEMANDU’s experience? PEMANDU’s biggest challenges are a flip side and among the implementation agencies creates of its greatest strengths. The same features overlap, blurred accountabilities, and coordination that make PEMANDU effective can turn into challenges. Aside from PEMANDU’s mandate, weaknesses when the mix is not right, or conditions which involves reporting on NTP KPIs, ministries change. This points to a set of tradeoffs that DUs have a number of other performance tracking must balance. obligations. This results in a heavy reporting burden for MDAs. In addition, different sets of The existence of a robust institutional KPIs make performance incentives complex and ecosystem focused on public sector performance sometimes conflicting. is a strength until the ecosystem becomes too complex. PEMANDU relies on the existing A private sector corporate culture and top sophisticated system of planning, monitoring and talent infuse innovation into the public sector evaluation, and reporting. However, a plethora management, but also create a perception of institutions both at the center of government that PEMANDU staff are outsiders with 12 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Executive Summary limited public sector exposure. This tension is the revamped curricula, district transformation inevitable. It is also present in other DUs that rely program, or others), or some combination of the on a similar model. The salary differential between above? To be clear, the problem of attribution PEMANDU staff and civil servants potentially is not between the MDAs and PEMANDU; it is creates an additional strain. PEMANDU staff strive unequivocal that the MDAs are the implementer to counter this by focusing on areas where they can and the DU the facilitator. Rather, the question is add value for MDAs, such as monitoring, just-in- whether the overall impact was a result of a narrow time problem-solving across MDAs, and resolving strategic intervention in the NTP, or of a multitude bottlenecks through the escalation process. of other programs that are ongoing in parallel. Overall, the perception of PEMANDU varies among Although PEMANDU Labs created stakeholder ministries. In some MDAs, the relations are cordial ownership, they did not build in features into the and PEMANDU is perceived as an asset; in others, project design that would allow impact evaluations a more skeptical attitude prevails. of the NTP programs. Evidence from impact evaluations is the best defense against the critique Rigorous KPI monitoring and reporting can drive that the priorities are narrow and communications performance; on the other hand, it is limited aggressive. by the quality of the indicators and the data. PEMANDU’s efforts are not immune to the well- known critiques of KPI-driven efforts to improve At the same time, the NTP interventions are public sector performance. If the indicator does meant to be catalytic and not all-encompassing. not measure a desired outcome, then the MDAs Shifting the emphasis to impact evaluations for the “meet the target but miss the point” of a broader sake of clear attribution may be missing the point of reform. Some parts of the NTP, particularly the a transformational exercise. The impact of the NTP NKEAs, yield themselves to measurement; yet is by design expected to be more than the sum of others, notably the NKRAs such as reducing crime the impact of its projects. Impact evaluations will or controlling corruption, are notoriously hard to only be able to show part of the picture. However, measure. There is also a more general discussion they can help build the overall support for the DU about whether the targets are meaningful, given efforts, maintain the MDA buy-in, and also establish that MDAs achieve and overachieve the majority of the cost efficiency of the priority interventions. them. The critics sometimes call into question the credibility of the underlying data used to measure the KPIs, but PEMANDU’s reliance on an annual third-party audit assuages these concerns to some degree. Designing the transformation program through Labs may have missed some important elements of project design that would allow attributing results to the NTP and not to other efforts. Because the NTP represents only a small portion of government efforts under the five-year plan, the questions of attribution of the outcomes are often raised. For example, if literacy improves in Malaysia, is this due to the NTP interventions (i.e. the literacy and numeracy screening), or to one of the many other non-NTP initiatives (e.g. Driving Performance from the Center: Malaysia’s Experience with PEMANDU 13 Executive Summary What are the key lessons learned for other countries? Countries looking to learn from PEMANDU will have to carefully weigh the tradeoff between the cost and replicating the whole structure in its entirety. Among the DUs around the globe, PEMANDU is the largest in size. This has cost implications: few developing countries are able to afford a large DU. In addition, not all countries will be able to get exemptions from the civil-service salary structure that allowed PEMANDU to recruit talented staff from the private sector. Many contextual factors, such as a relatively- developed institutional ecosystem and performance culture, also contributed to PEMANDU’s ability to drive performance. On the other hand, the potential benefits of the PEMANDU model are significant. While PEMANDU’s critics point to the high costs of setting up and operating this model, PEMANDU and its supporters consider these costs a reasonable investment, given the benefits to the Malaysian economy from the NTP. A careful consideration of the country context and a cost-benefit analysis will therefore have to precede any decision to adopt a similar model. Because of the tradeoffs inherent in its design features, PEMANDU’s experience is instructive both for its successes and challenges. Finding the right balance is key. The features that played to PEMANDU’s strengths point to the following lessons and tradeoffs for countries considering establishing a DU: »» Secure strong backing and involvement of the top leadership PEMANDU’s success depends critically on the Prime Minister’s direct involvement in its routines. PEMANDU not only tracks progress in implementation, but is actively involved in clearing up bottlenecks between MDAs. These incentives work only with the regular involvement of the Prime Minister through routines, such as the PSMs and performance reviews. The tradeoff is the potential politicization of the technical implementation process, which in turn requires a strong leader of the DU that can manage these issues. »» Create a focused and granular results platform linked to an overarching national results framework It is impossible to discuss PEMANDU without discussing the NTP – a results platform that PEMANDU helped create and whose implementation it drove. Just like PEMANDU did with the NTP, successful DUs generally focus on a limited number of well-defined and operationalized strategic priorities. At the same time, the selectivity of such focused platforms may create questions about the attribution of national outcomes to the narrow interventions facilitated by the DU. Building in ways to ascertain such contributions ex ante can assuage this concern. »» Combine top-down control with bottom-up voice As is typical of most DU approaches, PEMANDU is embedded within a top-down, command-and-control system. Yet through the Labs, the process of operationalizing the government’s strategic priorities included the voice from the rank-and-file MDA staff who became the eventual implementers of the NTP. This process has also built in some responsiveness to line MDAs’ objectives, issues, and challenges. »» Create institutional interface between the DU and MDAs The DU by itself does not implement the policy prerogatives – the MDAs do. The DU’s role as a driver of MDAs’ performance is greatly facilitated if there is an institutional interface with MDAs, such as DMOs within MDAs, ministry-level DUs, or specialized M&E divisions. Because MDAs are the implementers of government’s top priorities, the real action takes place on their turf, not at the Prime Minister’s office. The DU strengthens the link through introducing the routine of reporting and regular problem-solving meetings where unresolved issues are progressively escalated. 14 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Executive Summary The challenges that PEMANDU has faced, as well as the limitations of its experience, also offer valuable lessons for other countries. The following are worth highlighting: »» Balance private and public sector elements in a DU Attracting private sector talent into a DU infuses the public sector with innovations and urgency, but comes at a cost of being perceived as outsiders and pay differentials creating resentment in the civil-service. Finding the right balance of public- and private-sector staff and approaches mitigates the downside risks. »» Optimize the amount of reporting by MDAs Whenever possible, build KPIs around the existing indicators that MDAs already report on. Work across the performance ecosystem to create synergies with existing reporting structures, such as existing performance-based budgeting or national development plan reporting. The Ministry of International Trade and Industry (MITI) has a single Monitoring and Evaluation Division responsible for all reporting. This is a good model to learn from and build on. »» Strengthen impact evaluations Build in impact evaluations (IEs) into the program design. IEs can help resolve questions of attribution and cost effectiveness through comparing treatment and control groups. This has implications for program design, as IEs must be built into programs from the very start. If the programs are developed through a Lab or Lab-like process, then Labs should include IE specialists as technical advisors. Driving Performance from the Center: Malaysia’s Experience with PEMANDU 15 CHAPTER 1 Why is there a global interest in Delivery Units? “The challenge for governments across the world is to efficiently and effectively turn political ambitions into policy; policy into practice; and the engagement of front line public service professionals into results for and with citizens.” World Bank (2014) 1 “People may deliver what you expect. People will deliver what you inspect.” Dato’ Sri Idris Jala, CEO, PEMANDU 1 Bellver, Ana, Indu John-Abraham, Ray Shostak, and Joanna Watkins. 2014. “When Might the Introduction of a Delivery Unit Be the Right Intervention?” Governance & Public Sector Management: Driving Results from Public Institutions. Washington, DC: World Bank. http://siteresources.worldbank.org/PUBLICSECTORANDGOVER- NANCE/Resources/285741-1368636830774/When_Might_the_Intro_of_a_DU_Be_the_Right_Intervention_FINAL.pdf 16 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 1: Why is there a global interest in Delivery Units? Delivering on policy promises is often derailed by implementation challenges Delivering citizen outcomes hinges on the implementation capability of the state. While there is no question that good policies are necessary for achieving development outcomes, there is also increasing recognition that they are not sufficient: good policies need to be effectively implemented. Enhancing implementation capability has received much attention from policy makers, the international development community, and academic research.2 However, there are no ready-made solutions. Different countries around the world are now exploring innovative ways in which to enhance the quality of policy implementation. FIGURE 1 . A long and precarious road to citizen outcomes Political Policy Implementation Frontline CITIZEN Ambition (often across (often across Practice for and Ministries) Ministries) OUTCOMES Manifestos with citizens Source: World Bank (2014) Outcomes that citizens expect from their governments – reduced crime, better healthcare and education, or quality infrastructure – are at the end of a long results chain. Many actors and systems must work in unison in order to deliver these outcomes. Politicians will rely on the public sector institutions to implement their policy vision for better citizen outcomes. Further downstream, it depends on how service delivery professionals – doctors, teachers, or the police force – respond to the incentives created by new policies to deliver better outcomes for citizens. There are many potential weak links in this results chain. There are numerous principal-agent problems, where those responsible for policy implementation bear the full cost of change but do not receive its benefits. This results in institutional inertia and status quo bias. As multiple ministries, departments, and agencies are involved in complex service delivery outcomes, coordination and oversight challenges also abound. 2 See, for example: World Bank. 2011. The Practice Of Policy-Making In The OECD: Ideas For Latin America. Washington, DC: World Bank. http://documents.worldbank.org/curated/en/127701468217446803/The-practice-of-policy-making-in-the-OECD-ideas-for-Latin-America; Andrews, Matt, Lant Pritchett, and Michael Woolcock. 2017. Building State Capability: Evidence, Analysis, Action. New York: Oxford University Press. Driving Performance from the Center: Malaysia’s Experience with PEMANDU 17 Chapter 1: Why is there a global interest in Delivery Units? FIGURE 2. Public Sector Performance: Achieving Development Outcomes The Public Sector... ...and its functions Sector Agencies Sector Outputs Center of • Services / SOEs and Government / • Regulations Corporate Bodies / Upstream • Infrastructure Investments Downstream • Sector Policies Fiscal and Institutional Sustainability Objective and • Realistic and achievable revenue targets Subjective • Cooperation between levels of government • Support for oversight bodies Development • Effective management of fiscal policy and aggregates Outcomes Source: World Bank (2014) Enhancing public sector performance is key to achieving better citizen outcomes. The public sector delivers a wide variety of outputs. Some of them are “downstream” as they affect citizens and firms directly; for example, public services such as health, education, sanitation, infrastructure management, and regulations. Others are less tangible but equally critical; they occur further “upstream” in the public sector delivery process: for example, policy formulation and prioritization; coordination across government bodies; fiscal and institutional sustainability; revenue and expenditure management; accountability and governance mechanisms. Figure 2 depicts the public sector results chain that includes both types of outputs. Satisfactory public sector performance means that the links in the results chain are working well, producing high-quality outputs in an efficient and accountable manner. In contrast, poor public sector performance can be traced to weak links within the results chain. For example, poor education quality can be caused downstream (e.g. school management arrangements that weaken accountability) or upstream (e.g. by financing mechanisms that allow funds to dissipate before they reach schools). Weak links can be either in formal rules and procedures, or in their lack of enforcement. Governments around the globe are looking for new ways of fixing these weak links, be it to improve the quality of service delivery to citizens and firms, or to improve upstream functions of the public sector. Delivery Units at the center of government can enhance public sector performance Many governments have sought to strengthen the link between the center of government and citizen outcomes in order to address principal-agent problems, create stronger performance incentives, and improve oversight. DUs have been introduced around the world as one type of such solutions. In the UK, the Prime Minister’s Delivery Unit (PMDU) was established in 2001 as the first such unit at the Head of State 18 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 1: Why is there a global interest in Delivery Units? level. Other countries followed suit: Malaysia (PEMANDU), Chile (President’s DU), Albania (PMDU), Romania (PMDU), Indonesia (the President’s Delivery Unit for Development Monitoring and Oversight - UKP4), and others. There are also DUs at the subnational and municipal levels in the US, South Africa, and elsewhere. Box 1 provides a definition of a DU and further details on its form and function. BOX 1 What is a Delivery Unit? A DU is a discrete unit at the center of government with a mandate to use the authority of the chief executive to: »» Focus on improving citizen outcomes in a limited number of priority areas; »» Unblock obstacles when monitoring shows that progress is off-track; and »» Build understanding and capability for strengthening the underlying actors and systems/processes. The DU approach to public sector performance draws on two broad methodologies: (i) the leadership and management practices from both private and public sectors, and (ii) an understanding of the network of organizations and their relationships that must work together to deliver services to citizens, known as “delivery systems.” DUs are created at the center of government and are typically close to the chief executive (President or Prime Minister). This signals the leadership’s commitment to results and focus on performance. International experience shows that DUs work best when they: (i) rely on the existing organizational performance framework; (ii) drive a limited number of high-profile goals; and (iii) receive high-frequency data to monitor progress. Different countries adopted different forms of DUs depending on their existing government structures. Although their size varies, DUs usually rely on a relatively small and nimble team of highly skilled experts. Their focus is to change the culture in the public sector with the end goal to deliver quality services faster. Given that they are closely tied to a Chief Executive who drives their establishment and provides the authorizing environment, DUs may not last beyond a specific administration or term in office – they are often semi-permanent structures. DUs must rely heavily on the functioning of existing public management systems within MDAs. After all, it is the MDAs who deliver, while the DUs enable the center of government manage the process. Source: Adapted from World Bank (2014) Driving Performance from the Center: Malaysia’s Experience with PEMANDU 19 CHAPTER 2 Why is Malaysia’s experience with PEMANDU worth learning from? The answer to this question has two parts: the first has to do with Malaysia’s development journey, and the second with the characteristics of PEMANDU. The first part concerns Malaysia’s broader performance culture and an institutional ecosystem development experience, and its public sector for performance management. These, in turn, development in par ticular, that pre - date provided the foundations that PEMANDU could PEMANDU. This recent history has set the build on when it was created in 2009. The second stage for PEMANDU’s success. It includes the part of the answer has to do with PEMANDU’s development of the public sector that focused success. The Unit was created with a specific on solving development challenges facing the goal in mind: to focus attention on a manageable newly-independent Malaysia, including providing number of national priorities contained in the NTP. services to eradicate poverty and build up Subsequently, the NTP, driven by PEMANDU, has infrastructure to enable the diversified growth recorded measurable results, which in turn led of its economy. The performance orientation of to the demand for knowledge transfer to several Malaysia’s public sector created elements of a countries around the globe. 20 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? Malaysia has recently tackled issues that many developing countries face A South-South exchange is better suited for learning about the process of public sector reform, rather than disseminating best practices from OECD countries. Many developing countries look to diversify their economies and move from a primary-sector-driven growth to value-added manufacturing and developing a services sector. This requires fostering a dynamic public sector that evolves to meet changing needs and cuts across institutional and organizational silos to achieve development results. Malaysia faced the same challenges in the recent past, which makes public sector solutions developed in Malaysia better suited for peer learning for other countries in the global South. At the same time, Malaysia’s current strategic priorities focus on attaining upper-income-country status, which make its development experience also worthwhile for other middle-income countries. Malaysia was an early adopter of performance- oriented reforms in the public sector Since attaining independence in 1957, Malaysia has achieved impressive socio-economic results. During this time, per-capita income grew from USD 240 in 1962 to USD 10,570 in 2014.3 Poverty was all but eradicated, falling from 50 percent to under one percent. Overall, the country achieved significant improvement in virtually every measurable development indicator.4 At the same time, the newly-independent federal state had to build up its public-sector institutions and their implementation capability that would deliver public services underpinning these impressive results. Creating a public sector performance culture became a key part of the solution to Malaysia’s development challenges. Malaysia has recognized from an early stage that effective frontline service delivery depends critically on a strong public sector governance backbone. Malaysia has a well-articulated and comprehensive vision for national development supported by a strong planning function. Development planning in Malaysia first emerged in the 1950s with the preparation of the first five-year development plan (1956 – 1960). The Economic Planning Unit (EPU) was established within the Prime Minister’s Department in 1961 to undertake a development planning role, endowed with authority and convening ability to facilitate inter-agency planning and cross-government monitoring. Strong planning is linked to budgeting for performance. As early as the 1960s, Malaysia moved to introduce results-based budgeting to support the efficient and effective delivery of public services. Drawing on this experience, the country has positioned itself as a leader in regional and global public sector governance initiatives. In the Public Expenditure Management Network in Asia (PEMNA), Malaysia plays a central role in both Budget and Treasury Communities of Practice. 3 World Bank. 2016. World Development Indicators (WDI). The figures are for Gross National Income (GNI) per capita (Atlas Method). 4 Ibid. Driving Performance from the Center: Malaysia’s Experience with PEMANDU 21 Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? PEMANDU is part of a larger performance ecosystem DUs cannot accomplish their goals alone. To are squarely focused on results. When PEMANDU the contrary: DUs can only assist the Ministries, was introduced in 2009, it was able to work with the Departments and Agencies (MDAs) in their efforts existing building blocks of a performance culture to implement the key strategic priorities of the in Malaysia’s public sector. At the same time, the government. DUs also must rely on the existing fast economic growth and growing revenue base overall monitoring and evaluation systems. Over since independence may have created a conducive the years since independence, Malaysia developed environment for the proliferation of public sector a complex ecosystem of public sector performance institutions and an overly-complex performance institutions and processes. This ecosystem spans management framework. Box 2 provides an economic development planning, budgeting, overview of Malaysia’s performance institutions. implementation, and monitoring and evaluation that 22 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? BOX 2 Malaysia’s Performance Ecosystem The institutional ecosystem that fosters public sector performance is clustered around the center of government in Malaysia. This includes the Ministry of Finance as well as the Prime Minister’s Department (PMD). PMD contains over 50 agencies; aside from PEMANDU, the key ones for performance management are the Economic Planning Unit (EPU), Implementation and Coordination Unit (ICU), Malaysian Modernisation and Management Planning Unit (MAMPU), Public Service Department (PSD), and the Chief Secretary’s Office. On the service delivery efficiency front, a taskforce (PEMUDAH) was established by the Government to tackle business environment and red tape issues together with the private sector. There are five key national-level performance frameworks that drive performance in Malaysia’s public sector. These include: (i) the five-year national development plans developed by the EPU; (ii) the NTP driven by PEMANDU; (iii) the Outcome Based Budgeting (OBB) framework by MOF; (iv) the project monitoring system (SPP II) managed by the ICU; and (v) the Public Sector Transformation Framework by the PSD. There are also national frameworks that focus on service delivery and administrative improvements. This includes MAMPU’s framework on the Public Sector Conducive Ecosystem and PEMANDU’s Public Service Delivery Transformation (PSDT). Some of these frameworks also come with their own set of tools for planning, coordination, implementation, and monitoring purposes. PEMUDAH also has its own monitoring mechanisms, including an annual report to communicate improvements in service delivery and efforts to reduce red tape. To monitor the implementation of capital investments, MDAs are also required to provide updates to the ICU for all development projects under the Malaysia five-year plan. There are some linkages between the PEMANDU tools and these national performance frameworks; however, the strength of these linkages varies. For example, PEMANDU’s monitoring and reporting runs independently from the monitoring tools used in the OBB, e.g. MyResults. Ministries update the OBB indicators separately from the PEMANDU KPIs. Some MDAs, such as MITI and MOE (through its own DU, PADU), have made efforts to streamline their performance reporting to meet the requirements of the NTP and OBB. In addition, the PSD has established KPIs for senior civil servants that are separate from NTP-related KPIs. The existence of a performance ecosystem is a precondition for the success of any DU. However, a sophisticated system will inevitably create its own challenges of coordination, overlap, and duplication. Managing this tradeoff skillfully then also becomes one of the roles that the DU must fulfill, by both integrating into the existing planning and reporting structures, as well as actively facilitating inter-agency coordination. Source: Authors Driving Performance from the Center: Malaysia’s Experience with PEMANDU 23 Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? PEMANDU was created with a specific purpose in mind PEMANDU was established at the end of development of these industries, and supporting 2009 and mapped to the Prime Minister’s their implementation. This function is generally Department, with direct reporting lines to the reflected in the NKEAs. 7 The other role is the Prime Minister. 5 PEMANDU means “driver” in implementation of public sector and service delivery Malay, as it is intended to drive the implementation reforms under the NKRAs and SRIs. This dual role of the government’s policy priorities. Box 3 provides can be both helpful and present tradeoffs.8 Most details on the process of PEMANDU’s creation. other DUs around the world focus almost exclusively PEMANDU recognized from the start that in order on public sector and service delivery reforms; for these strategic priorities to receive traction, they hence, this note analyzes this function of PEMANDU had to be owned by a wide swath of stakeholders, in more depth than its industrial policy function. both within the government and beyond. Through a series of in-depth stakeholder workshops PEMANDU is responsible for monitoring the (“Labs”)6, PEMANDU led the operationalization of achievements of each MDA involved in the the incoming government’s strategic priorities into implementation of the NTP. The NTP was created the NTP. to support the Prime Minister Najib’s government policy priorities while being grounded in the Prime Minister Najib Tun Razak unveiled the ten- existing national development planning framework. year PEMANDU-driven NTP in 2010, anchored The NTP builds on the foundations of the 10th and in the vision of transforming Malaysia into a 11th Malaysia Plan, while being guided by the PM’s high-income nation by 2020. NTP consists of the vision and the motto “People First, Performance Government Transformation Program (GTP) and Now.” In driving the implementation of the NTP, Economic Transformation Program (ETP). The GTP PEMANDU is responsible for select key priorities has the seven National Key Result Areas (NKRAs) while building on the national development and their related KPIs; the ETP has the twelve planning and performance systems. National Key Economic Areas (NKEAs) and six Strategic Reform Initiatives (SRIs). These are further In the spirit of DUs as semi-permanent stepped down into 131 Entry Point Projects (EPPs) structures, the NTP is time-bound by the goal and 60 business opportunities. Figure 3 illustrates of transforming Malaysia into a high-income the structure of the NTP. nation by 2020. PEMANDU’s future beyond the life of the NTP and the current government’s term The difference between the GTP and SRIs on is not fully defined. In the words of its own staff, the one hand and the ETP on the other reflects PEMANDU will have succeeded if it puts itself out of two largely distinctive roles that PEMANDU business by 2020. It may serve to drive a new policy plays. The ETP essentially reflects industrial policy: agenda, or may morph into a different function. picking industries, choosing projects to accelerate 5 PEMANDU Corporation is a “special purpose vehicle” (SPV) under the Prime Minister’s Department; see Chapter 3 for further discussion of PEMANDU’s structure and institutional setup. 6 Labs are discussed in depth in Chapter 3 of this report. 7 See Jordan, Luke, and Charles Sabel. 2015. “Doing, Learning, Being: Some Lessons Learned from Malaysia’s National Transformation Program.” Columbia University. http://www2.law.columbia.edu/sabel/papers/CS-LSJ--DLB%20Malaysia%20PEMANDU--Final-190115.pdf 8 In some cases, there is significant overlap; for example, “Greater Kuala Lumpur” is an NKEA, although it is a largely urban development initiative. Also, some of the EPPs resemble more public service delivery than industrial policy, while others, such as offering incentives for multinational companies to relocate to Kuala Lumpur, can be seen as industrial policy. 24 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? FIGURE 3 . Malaysia’s National Transformation Programme (NTP) The 7 NKRAs under the Government Trasformation Programme (GTP) and the 12 NKEAs & 6 SRIs under the Economic Transformation Programme (ETP), all form part of the National Transformation Programme (NTP) FOCUS COMPETITIVENESS “DRIVERS” to ensure focus on high-impact areas “ENABLERS” to ensure competitiveness 7 NATIONAL KEY RESULT AREAS 12 NATIONAL KEY ECONOMIC AREAS 6 STRATEGIC REFORM INITIATIVES (NKRAs) (NKEAs) (SRIs) Addressing Reducing Oil, Gas & Palm Oil & Rubber Financial Services Competition Public Finance Public Service Cost of Living Crime Energy Standards & Reform Delivery Liberalisation Fighting Improving Student Tourism Business Services Wholesale & Retail Narrowing Reducing Human Capital Corruption Outcomes Disparities Government’s Development Role in Business Raising Living Improving Rural Education Healthcare Communications Standards of Low- Development Content & Income Households Infrastructure Improving Urban Electronics & Agriculture Greater Kuala Lumpur Public Transport Electrical / Klang Valley Source: PEMANDU Associates Driving Performance from the Center: Malaysia’s Experience with PEMANDU 25 Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? BOX 3 How was PEMANDU created? In April 2009, after disappointing electoral of the workshop, the initial priorities started results, Prime Minister Abdullah Ahmad Badawi to emerge, as Ministers coalesced around the resigned. His deputy, Najib Razak, was sworn in. biggest challenges facing the country: crime, With the memory of public discontent fresh in education, corruption, unity, economy, and everyone’s mind, the Najib government had to transportation. deliver results fast. The second Cabinet workshop further refined Malaysians were unhappy with the government’s these priorities. This time, the McKinsey team performance: inefficient and low-quality public brought in the results of two public perception services and perceived lack of government surveys to get the pulse of the nation and help accountability. Citizens complained about the shape the Ministers’ conclusions from the first rising cost of living and current levels of income workshop. One survey was commissioned by inequality which exacerbated the effects of the then Prime Minister Badawi in September 2008 economic stagnation. after the elections, the other was conducted by the Merdeka Center, an independent Malaysian Najib’s predecessors tried various ways to research firm. Consultants from McKinsey also improve efficiency of the public sector. Badawi’s analyzed media coverage post-election 2009 to predecessor Mahathir launched the “clean, see what issues were discussed most and where efficient and trustworthy” campaign in 1981, the public’s discontent was strongest. Through encouraging Malaysians to “look East” to learn further reflection on this additional information from the Japanese approaches to efficiency. In and consensus building, the Ministers settled the 1990s, Mahathir pioneered computerization on six original NKRAs: reducing crime, fighting and automation in the government, relying corruption, improving student outcomes, raising heavily on MAMPU to drive the introduction living standards of low-income households, of the ICT technologies to the government. bolstering rural development, and improving Yet the public perception of the government urban public transportation. Later, reducing cost as inefficient and slow persisted despite these of living would be added as an additional NKRA. strategies. In the past, the government would have To Najib, this implied that the old ways did not formed a task force to follow up on progress work and a new approach was needed. His toward achieving the new goals and targets. advisors suggested a series of Cabinet workshops However, Najib wanted to try a new approach. to determine how to address the apparent crisis After months of discussions, the government of public confidence and build consensus around decided to create a separate government unit to the government’s top priorities. To infuse these oversee and implement the kind of performance workshops with innovation and a new way of monitoring needed to revamp service delivery. thinking, Najib decided to invite international Thus was born the Performance Management consultants and select private sector leaders. and Delivery Unit, better known by its acronym The first Cabinet workshop in May 2009 PEMANDU, or “the driver” in Malay, with Idris included McKinsey consultants discussing what Jala at the helm. drives transformation in companies; in addition, Michael Barber, also a consultant with McKinsey The Cabinet workshops were then followed by at the time, relayed his experience as head of UK intensive lab sessions with participants from both Prime Minister Tony Blair’s DU. Idris Jala, then a the public and private sector. These labs aimed prominent Malaysian corporate executive who to granularize the targets set by the Cabinet turned around the Malaysian Airline System, workshops and develop concrete projects that discussed his experience in the private sector would help achieve these priorities. and successful leadership strategies. At the end Source: Lesley (2014) 26 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? PEMANDU-driven NTP demonstrates results Now in its seventh year of implementation, Malaysia has recorded measurable progress towards the NTP goals. Figure 4 illustrates the dynamics of selected aggregate indicators in some of the key NKRAs under the GTP. Since the launch of the GTP, preschool enrollment rates have steadily risen, as has the public transport ridership. Rural infrastructure has been significantly improved. The crime index has fallen significantly each year since 2010. However, the selectivity of the GTP interventions and a plethora of concurrent initiatives implemented through the Malaysia 10th and 11th plan inevitably lead to questions of attribution: what part of these improvements results from the narrow interventions within the NTP driven by PEMANDU, and what part is the end result of concerted effort of all ongoing initiatives? In the absence of impact evaluations of the specific projects under the NTP, it is difficult to answer this question. FIGURE 4 . Aggregate Indicators in selected NKRAs EDUCATION CRIME Preschool Enrollment R te Reduction in index Crime (%) (%) 84.2% 84.6% 80.5% 81.7% 77.0% 67.0% 6.5% 67.0% 67.0% 67.0% 67.0% 0.9% 0.0% -4.3% -7.6% -11.1% -12.6% -15.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 L unch L unch of GTP of GTP PUBLIC TRANSPORT RURAL BASIC INFRASTRUCTURE Ridership of Public Tr nsport Len th of Rur l Ro ds Build p. . (’000) (KM) 455.0 447.0 1,553 437.0 321.0 334.0 1,013 240.0 236.0 783 718 732 485 220 220 220 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 L unch L unch of GTP of GTP Source: PEMANDU Associates Driving Performance from the Center: Malaysia’s Experience with PEMANDU 27 Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? The NTP Annual Report provides a more granular look at the NTP performance. It lists all KPIs across NKEAs, NKRAs, and SRIs, reporting to what extent the targets had been achieved. These annual results undergo a third-party validation by Pricewaterhouse Coopers (PwC) according to the Agreed Upon Procedures (AUP). While the AUP enhance the accuracy and transparency of reporting, they focus on the process rather than the impact. Figure 5 summarizes the results: targets are achieved 90 percent or higher in all areas with the exception of improving mass public transport. The NTP over-performs the majority of its own targets in most of the key areas, although these KPIs are susceptible to the common critiques of aggregate indicators. In addition, the results that are directly linked to the NTP interventions are more focused on outputs and intermediate outcomes, rather than the impact of the Program. In the absence of impact evaluations, it is difficult to attribute the outcomes to the NTP, but the NTP proponents argue that the transformational effect of key programs would be only partially captured by impact evaluations. On balance, the aggregate data show that the country is moving in the right direction. The debate about the attribution of these results to the NTP or other interventions may be difficult to resolve, but the improvements for the citizens are measurable. In some areas, it is easier to document the link between the NTP interventions and results than in others. Box 4 illustrates such connection between the efforts in education and urban public transport NKRAs with observed results. FIGURE 5. 2015 NTP performance NATIONAL KEY RESULTS AREAS KPI Total NATIONAL KEY ECONOMIC AREAS KPI Total (NKRAs) Score* (NKEAs) Score* Reducing Crime 114% Oil, Gas & Energy 107% Fighting Corruption 93% Palm, Oil & Rubber 111% Improving Rural Development 107% Financial Services 103% Improving Urban Public Transport 72% Agriculture 104% Raising Living Standards of 97% Communications, Content & Infrastructure 123% Low Income Households Assuring Quality Education 94% Healthcare 101% Addressing the Rising Cost of Living 98% Business Services 109% Public Service Delivery Transformation 120% Tourism 97% Education 109% KPI Total Wholesale & Retail 122% STRATEGIC REFORM INITIATIVES (SRIs) Score* Electrical & Electronics 116% Competitioin, Standards & Liberalization 110% Greater Kuala Lumpur / Klang Valley 111% Human Capital Development 108% Public Finance Reform 95% *KPI Total Score is taken as calculated as per Method 1 (Scoring is calculated by a simple comparison against set 2015 targets) in National Transformation Programme Annual Report 2015. Narrowing Disparity 120% Source: NTP Annual Report (2015) and Authors’ calculations 28 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 2: Why is Malaysia’s experience with PEMANDU worth learning from? BOX 4 Documenting NKRA Results Education (EDU) NKRA Funds were made available under the EDU NKRA to open public pre-schools, create an online data capture system, offer incentives such as  launching grants and fee assistance to encourage opening of private pre-schools, with policy changes implemented to recruit and upskill pre-school teachers to increase the professionalism of ECCE educators. A taskforce was set up to co-ordinate the pre-school initiative that involved agencies that offer pre-school education, including MOE, KEMAS (the Department of Community Development), Perpaduan, PERMATA and ECCE Council (private pre-school). All these concerted efforts followed from the Lab recommendations and were supported by the NKRA funds. As a result, pre-school enrolment increased from 67 percent in 2009 to 85 percent in 2016. Urban Public Transport (UPT) NKRA The UPT NKRA focus is to put in place sustainable the cost and stress level for commuters entering building blocks that will provide a better public the city and subsequently opening possibilities for transport landscape in Greater Kuala Lumpur people who do not own cars to capitalize on career and Klang Valley (GKL/KV). Since the inception opportunities in the city. of the NTP, the capacity of the existing public transport system has been expanded, as well as the All of these initiatives will significantly improve construction of large-scale infrastructural projects mobility, productivity and quality of life in the has begun. Early results can already be seen, GKL/KV area. The modal share of urban public including the injection of new trains for the Light transport has in fact risen from 10 percent in 2009 Rail Transit (LRT) Kelana Jaya line and KTM Komuter; to 20 percent by the end of last year. GKL/KV new Park and Ride facilities; and refurbishment of ridership today serves up to 1.37 million commuters bus stops. This was followed by the completion of daily and customer satisfaction also continue to larger transportation projects, such as the MRT Line record tremendous improvements from the 2010 1 (phase 1), LRT Extension Project, BRT Sunway, baseline. It will significantly reshape the urban and the upcoming projects like MRT Line 2, BRT KL- public transport landscape in GKL/KV, directly and Klang and LRT3. indirectly enhancing the lives of many in GKL/KL. The current public transport system in GKL/ KV is at the brink of a significant capacity boost leading up to 2020 with many high-impact projects that are underway if not already completed. This will help alleviate the choking traffic conditions, subsequently reducing loss of productivity due to congestion. UPT NKRA projects will help increase connectivity between many suburban centers with the KL City Centre. With higher availability and reliability on public transportation, this will also help to reduce Source: PEMANDU Associates Driving Performance from the Center: Malaysia’s Experience with PEMANDU 29 CHAPTER 3 How does PEMANDU drive performance? PEMANDU’s ability to drive performance stems from its design features, innovative tools, as well as how it works with others. By design, PEMANDU fulfills multiple roles that Similarly, PEMANDU creates incentives at all levels are well-defined and sequenced, which ensures its through monitoring and reporting of KPIs. Finally, focus on key tasks and prevents mission creep. Its PEMANDU’s interaction with stakeholders within goals are specific and granular in order to create and outside the government is key for achieving maximum focus and accountability for results. its results. The implementation of the NTP is PEMANDU’s institutional setup allows to attract enabled by institutional structures, such as DMOs talent from the private sector, introducing private within MDAs, which become the vehicles that allow sector elements into public sector management. PEMANDU to drive the NTP implementation. Last The second piece of the puzzle has to do with but not least, PEMANDU takes its communication PEMANDU’s tools. Labs were one of PEMANDU’s function seriously, reinforcing the ownership of the signature innovations that created ownership of Program and government’s accountability to the the NTP among a wide variety of stakeholders. public. 30 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 3: How does PEMANDU drive performance? PEMANDU fulfills multiple well-defined roles PEMANDU acts as a convener, coordinator, and technical support to MDAs on performance management, monitoring and reporting. Although these are distinct roles, they are well-defined and structured in PEMANDU’s “Eight Steps of Transformation” (Figure 6). PEMANDU acts as a convener at Step 1, when multiple cabinet retreats provided strategic direction and alignment at the highest leadership level. PEMANDU also convenes and coordinates Labs (Step 2) that break down the strategic priorities into concrete interventions and create ownership among stakeholders. PEMANDU continues in the same role by holding Open Days (Step 3) and publishing Roadmaps (Step 4), ensuring that the public is aware of the government plans and holds it accountable for delivery. In Step 5, PEMANDU switches gears and acts as technical support to MDAs in setting and monitoring KPI targets. If problems and bottlenecks occur in during implementation (Step 6), PEMANDU becomes a convener and coordinator again, escalating the process through the Steering Committee and PSMs (see Box 5 for details). In Steps 7 and 8, PEMANDU is again a technocratic agent overseeing that the reported KPI targets are validated by the third party and compiled into the Annual Report. Annex 2 describes the eight steps in more detail. FIGURE 6 . Eight Steps of Transformation 2 LABS Establish in detail what needs to be done 3 1 OPEN DAYS STRATEGIC Share Lab output DIRECTION with people To ascertain the and seek their strategic direction feedback required 4 ROADMAP Tell the people what we are going to do 8 5 ANNUAL KPI TARGETS REPORTS Setting KPIs for Tell people what we monitoring and have delivered tracking 7 6 IPR & AUDIT IMPLEMENTATION External Problem-solving validation on on the ground results achieved implementation Source: PEMANDU Associates Driving Performance from the Center: Malaysia’s Experience with PEMANDU 31 Chapter 3: How does PEMANDU drive performance? BOX 5 De-Bottlenecking: The Escalation Process PEMANDU monitors progress towards the NTP KPI targets on a weekly basis. MDAs submit information to PEMANDU every week. PEMANDU reviews the information and updates its dashboard. If the weekly monitoring uncovers implementation issues, PEMANDU refers them to the Technical Working Group, which consists of the staff from the relevant MDAs that are involved in implementing the relevant NKRA/NKEA/SRI. Implementation issues that cannot be resolved at the Technical Working Group are elevated to the Steering Committee. The Committee is typically chaired by one or two ministers, and also comprises secretaries-general, directors-general and CEOs from core ministries or agencies. The Committee serves as the principal decision-making forum (as opposed to the Technical Working Group that serves as the principal working session) and meets on a monthly or quarterly basis. The issues that remain unresolved at the Steering Committee level are then elevated to the Problem-Solving Meeting (PSM), which is held twice a year, chaired by the Prime Minister. The PSM is pivotal in resolving difficult, cross-ministerial issues. At mid-year and year-end, the Prime Minister also conducts reviews with the respective ministers, with the CEO of PEMANDU in attendance, where issues are highlighted for his direction and decision. It also provides an avenue for revision of targets, if and when endorsed by the PM. Source: Authors Some of PEMANDU-managed NKRAs and NKEAs (including public transport, petrochemicals, and agriculture) involve coordination with sub-national governments. PEMANDU’s approach to goalsetting through Labs resulted in an open, transparent and inclusive process, which tended to generate buy-in at multiple levels of government, along with the persuasive power that initiatives emanating from the Prime Minister’s office tend to enjoy. This is augmented by PEMANDU’s status as an independent, technocratic institution focused upon performance. At the same time, Malaysia’s federal structure adds implementation complexity to many NTP initiatives. Box 6 illustrates the types of implementation issues that arise, as well as PEMANDU’s coordinating role. 32 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 3: How does PEMANDU drive performance? BOX 6 Coordinating Different Levels of Government Agriculture This requires coordination among the Federal, State and Local Governments. In the Agriculture NKEA, one of the EPPs is “Mini Estate Farming for Seaweed in Sabah.” The Federal A joint Federal-State governance structure was Constitution provides that land matters, including created to coordinate the development of the PIPC. ownership and leasing, are under the purview of PEMANDU helped create the Malaysian Petroleum state authorities rather than the central government. Resources Corporation (MPRC) as a federal agency Therefore, while the right to own property, including to develop the downstream segment of the oil and land, is guaranteed under the Federal Constitution, gas sector at the national level. The Johor Petroleum the formalities through which land can be owned, Development Corporation (JPDC) is a subsidiary transferred, and disposed of, are given effect of MPRC tasked to coordinate development of through state legislations. Such division of authority the PIPC in the Johor economic corridor. Putting sometimes leads to difficulties for companies to in place the required infrastructure and utilities acquire lands and embark on agriculture projects. in the Pengerang district in Johor to cater to the The progress of this EPP was initially stunted due to future expansion needs of PIPC poses several the mini estate companies’ difficulties in acquiring challenges. These include the construction of new land titles and meeting the requirements for roads, installing a comprehensive network of power, leasing. After PEMANDU intervened and brokered telecommunications and water supplies, upgrading an agreement among the stakeholders, state roads to highways to facilitate movements of goods authorities stepped in to exempt companies from and services, and a centralized management of some of these requirements to ensure that the EPP industrial waste products from the complex. was back on track. This is a massive project with significant land requirements, which are the purview of the state. Anticipating coordination challenges, a joint Integrated petrochemical governance structure for PIPC involving the central complex (Johor) government and sub-national government was created. The JPDC Board of Directors is represented The Pengerang Integrated Petroleum Complex by both the Malaysian Federal Government and the (PIPC) is one of the major initiatives under the Johor State Government to align efforts in making Oil, Gas and Energy NKEA. The PIPC project was PIPC a success. The CEO of PEMANDU is the introduced for the development of the oil and gas Chairman of JPDC, while the Johor State Secretary downstream segment and is located in the southern is a member of its Board of Directors. state of Johor, Malaysia. The PIPC is expected to commence operations by 2019; it will span 20,000 acres and house oil refineries, naphtha crackers, petrochemical plants as well as a liquefied natural gas import terminals and a regasification plant upon completion. The project is estimated to generate about MYR 18.3 billion Gross National Income (GNI) by the year 2020 and help to create 8,600 high-income and high-skilled jobs. The PIPC is an example of a high-priority national-level economic development project located in one of the States. Source: Authors Driving Performance from the Center: Malaysia’s Experience with PEMANDU 33 Chapter 3: How does PEMANDU drive performance? PEMANDU focuses on granular tasks Besides selectivity, one of the defining features of the NTP is its granularity. Not only does the NTP focus on a manageable number of areas, it also unpacks each priority area into concrete interventions (see Box 7). The metaphor often used by PEMANDU is a perspective from a descending airplane. At 30,000 feet, only a big picture is visible: for example, the NKEA of the revitalization of Greater Kuala Lumpur and the Klang Valley, including one of its EPPs that strives to transform Klang River into a vibrant and livable waterfront. Descending to 10,000 feet, the EPP’s components come into view, including river cleaning, beautification, and development. Further down at 1,000 feet, activities that are needed to achieve each of those objectives come into view, as well as the indicators that must be monitored. Yet the NTP descends further: at 100 feet, it defines parties responsible for each activity, timelines, and stakeholders. At three feet, weekly progress is tracked and problems troubleshot. BOX 7 Emphasizing Granularity: Delivery Roadmaps Transforming Klang River into a vibrant and liveable waterfront with high economic value 10,000 feet RIVER CLEANING RIVER BEAUTIFICATION RIVER DEVELOPMENT 1,000 feet Indicators of a clean river Example of Activities • Decrease nitrogen from .9 to .3 mg/l (in order of highest potential impact): • Decrease biological oxygen demand from 6 to 3 mg/l 1. Upgrading existing sewerage facilities • Decrease suspended solids from 150 to 50 mg/l 2. Expand regional sewage treatment plants 3. Install 5 wastewater treatment plants 100 feet Details for each activity - key questions asked: • What is to be done? • Who is responsible? • Timeline • Stakeholders • Anticipated impact Source: PEMANDU Associates 34 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 3: How does PEMANDU drive performance? PEMANDU supports the MDAs responsible for the NTP implementation in specific activities to achieve the NTP’s KPIs. Technically, PEMANDU is not the implementer of the NTP – the MDAs receive the budget for NTP projects and are ultimately accountable for the NTP results. However, PEMANDU’s incentives are aligned with the MDAs, as 70 percent of PEMANDU’s teams’ performance is assessed based on the KPI score of their lead implementing MDA. The specificity of the KPIs ensures the accountability for results both on the MDA and PEMANDU side. PEMANDU’s institutional setup allows attracting talent from the private sector PEMANDU was established in the Prime Minister’s Department as a “Special Purpose Vehicle” (SPV). As such, it can recruit its own staff who are not civil servants. This allows flexibility in attracting talent from the private sector, as PEMANDU’s remuneration structure is outside of the civil-service pay scale developed by the Public Service Department (PSD). While PEMANDU’s culture is markedly influenced by the private sector, it does not exclusively cull talent from the private sector. PEMANDU has direct hires with experience from both public and private sectors, as well as staff seconded from the PSD. PEMANDU has its own Human Resource Management (HRM) unit that oversees hiring and talent management. The direct hiring process is competitive; the interviews for qualified candidates focus on a rigorous case study that tests for problem-solving as well as presentation and speaking skills. The civil-service secondment plays a dual role: it provides Malaysian civil servants with the exposure to the Big Fast Results (BFR) methodology and PEMANDU’s private-sector influenced culture, and at the same time strengthens the relationship between PEMANDU and various government units that the secondees represent. Assignment of roles is based on competencies and expressed areas of interest. PEMANDU’s organizational structure mirrors the delineation between the domestic and the overseas agenda: (i) PEMANDU’s Operations segment focus on supporting the domestic agenda through the NTP; (ii) PEMANDU’s Corporate Services segment, including the Big Fast Results Institute (BFRI), focus on the overseas agenda and sharing the BFR methodology. PEMANDU’s operating expenditures are financed from the national budget, while BFRI’s operations are charged on a cost recovery basis to the requesting governments. Annex 1 discusses the overseas agenda in more detail.9 PEMANDU’s reporting structure reflects its two types of activities. PEMANDU is led by the CEO, Dato Sri Idris Jala, who is supported by Directors overseeing the various NKRAs, NKEAs, and SRIs. PEMANDU’s consulting arm, BFRI, is led by the Managing Director and is supported by an ad hoc team based on requests from interested governments. Consequently, PEMANDU’s staff consists of two types of officers: PEMANDU officers whose primary focus is NTP work, and BFRI officers dedicated to overseas assignments. However, the delineation between these two groups is fluid: PEMANDU officers may choose to be considered for overseas assignments on a case-by-case basis, in which case their time will be charged to the BFRI clients. 9 On March 1, 2017, PEMANDU announced the handover of its remaining domestic functions to the civil-service over a two-year transition period. The newly-created Civil Service Delivery Unit will oversee the final phase of the NTP implementation. At the same time, a private entity, PEMANDU Associates Sdn. Bhd., was created to focus fully on the non-NTP domestic and overseas agenda, both public and private. Driving Performance from the Center: Malaysia’s Experience with PEMANDU 35 Chapter 3: How does PEMANDU drive performance? BOX 8 PEMANDU introduced “Labs” as a multi-stakeholder problem-solving tool How do Labs are one of the highest value-added innovative tools PEMANDU that PEMANDU introduced. They are extensive stakeholder engagement workshops lasting 6-9 weeks organized around a Labs work? policy priority area. Box 8 describes the Lab process in detail. In Malaysia, Labs were conducted early in the transformation PEMANDU initiated Labs to ana ly ze how to implement process. As Figure 6 depicts, the Labs took place during Step Malaysia’s goal of becoming a 2 in PEMANDU’s eight-step methodology. After Step 1 defined high-income country by 2020. At the government priorities grounded in the national development the beginning of initiating the NTP, framework, the Labs achieved three main results: PEMANDU invited officials from line ministries and representatives of the 1. Labs took the government’s strategic priorities to the private sectors for 6-9 weeks and more granular level, focusing on developing and specifying discussed sectoral and industrial the projects and actions under each NKRA, NKEA, and SRI. priorities and implementation The resulting delivery maps included timelines, resources, plans. PEMANDU worked with line KPIs and targets (see Box 7). ministries and the private sector to 2. Through Labs, PEMANDU ensured that the NTP set the objectives, actionable work was demand-driven and created ownership among plans, specific deliverables, and a wide range of stakeholders. Labs brought together timeline, as well as resource needs representatives from the relevant government MDAs, the to implement policy objectives. private sector, and civil society. EPU and MOF officials were In Dato’ Sri Idris Jala’s (CEO of PEMANDU) words, Labs allowed invited to the Labs to ensure that the proposed budget for “the descent from 30,000 requirements were realistic. feet to 3 feet” and facilitated the 3. Labs gave voice to rank-and-file MDA officials. In a prioritization of policies, KPIs and Lab setting, hierarchy does not matter. Subordinates felt action plans of NKRAs and NKEAs empowered to challenge their superiors and highlight that would support the Malaysia’s potential implementation challenges, resulting in more development goals. realistic delivery maps and targets. Labs are a flexible tool that allows for iteration and modification of programs and targets, but are also vulnerable The Lab is a to critique. PEMANDU learned from experience that the 8-step consultative process, BFR methodology is not linear. As the economic, political and where people work social contexts change, the implementation of key policy together iteratively priorities must adjust as well. PEMANDU’s current approach is to allow for a 30:30:40 ratio: 30 percent of Lab recommendations to design solutions are implemented, another 30 percent are implemented with to identified policy refinements, and 40 percent of new initiatives not suggested challenges within a during the Labs are introduced. Labs’ critics suggest the duration strict timespan. of six to nine weeks is excessive and makes the NKEAs vulnerable to capture, as only private-sector actors with strong commercial interests and upside potential would be able to spare the time to participate. Source: Authors and PEMANDU BFRI 36 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 3: How does PEMANDU drive performance? LEARNING BRAINSTORMING & • Fact-finding PROBLEM SOLVING • Research (best • Intervention design practices, success • Follow-up on INPUTS stories, etc.) outstanding issues OUTCOMES • Lab Environment • Documentation and • Working teams • Skilled and • Lab Objectives data entry • Key stakeholders motivated teams (internal and • Delivery plan for external) each NPA • Data and • Resourcing background ANALYSIS DISCUSSIONS strategy (people materials & DEFRIEFS and financing) • Data analysis and number-crunching • Outcomes from external meetings • Stakeholder analysis and discussions • Root cause analysis • Syndication Senior leaders act as “Lab brainstorming and problem and the retail sector at the state sponsors” to suppor t the solving, and discussions and level in Andhra Pradesh, India. conduct of the Lab. The Lab debriefs. The Lab produces a The Education Lab focused consists of three sessions; the report containing sectoral or on how to improve the quality pre-Lab, the main Lab and the thematic initiatives, detailed of education across the pre- post-Lab. The pre-Lab session implementation plan, lead school, primary and secondary includes planning among key agencies and identified KPIs. levels. The Lab detailed the stakeholders, initial analysis The report is then presented policy outcomes and KPIs to and selection of relevant Lab to the “Lab sponsor.” Once monitor the achievement of par ticipants. The main Lab Lab sponsor endorses the the objectives. This included session is held at a physical report, the post-Lab session of improving student learning location and the participants public consultation starts. If no outcomes, improving quality work together to create a significant public objections are of teachers, and enhancing solution in a specific timespan. received, the initiatives will be the school system. The Lab The participants select a Lab implemented. involved 92 participants from leader among themselves. 26 organizations. Similarly, PEMANDU deploys L ab PEMANDU’s Big Fast Results the Retail Lab focused on facilitators who moderate the Institute (BFRI) has been how to generate investment, discussions and ensure that conducting Labs in countries jobs and income, involving Lab leaders undertake their outside of Malaysia. BFRI staff 13 government agencies, two assigned role. The session facilitated the running of the NGOs, and 18 private-sector focuses on learning, analysis, Labs in the education sector organizations. Driving Performance from the Center: Malaysia’s Experience with PEMANDU 37 Chapter 3: How does PEMANDU drive performance? PEMANDU creates performance incentives through monitoring and reporting of KPIs NTP KPI target setting is an iterative process the NTP. An external auditor (PwC) reviews the that cascades from the Minster to the MDA performance results. staff. The initial KPIs are set during the original Labs. Subsequent to the Labs, the annual targets PEMANDU creates incentives to resolve are revised jointly between PEMANDU and the implementation issues at the lowest possible MDAs. The annual target setting also includes the level through the gradual escalation process. development of KPIs for Ministers and Secretary- Weekly reporting on the NTP KPI targets often Generals for the MDAs involved in the NTP reveals working-level implementation problems. In implementation. The set of KPIs is then presented the first instance, PEMANDU provides assistance in a Minster’s Scorecard (see Box 9). Ministers’ to the implementing MDA or refers these issues KPIs are cascaded through the departments and to technical committees. The implementation agencies under the relevant ministry. issues that cannot be solved at the technical level are referred to the monthly Steering Committee PEMANDU uses a dashboard for KPI tracking. meetings. Steering Committees are chaired by a The dashboard monitors the achievements of lead implementing MDA for each NKRA, NKEA, each NKRAs, NKEAs, and SRIs against the set KPI or SRI. If the problem is still unresolved, it is targets. It is updated weekly. The implementing referred to the PSM with the Prime Minster, held MDAs are required to provide the progress update twice a year. It is used to resolve difficult, cross- by end of each week; PEMANDU examines the ministerial problems. At mid-year and year-end, input and updates the dashboard and the Minister’s the Prime Minister also conducts reviews with the scorecard. The MDA top management has access respective ministers, with the CEO of PEMANDU to the dashboard and can view their MDA’s in attendance, where issues are highlighted for his progress. The audited numbers for the KPI results direction and decision. It also provides an avenue are also reflected on the dashboard. The audit is for revision of targets, if and when endorsed by one of the AUP, which is also part of PEMANDU’s the PM. year-end review on the annual performance of 38 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 3: How does PEMANDU drive performance? BOX 9 Performance Management through Ministers’ Scorecards Performance Management Framework Minister Scorecard Annual Cycle 1 4 Target PM - Minister PM - Minister Cabinet Peer Performance Performance Setting Review Review (Mid Year) Review (Year End) Oct - Dec ‘10 Jan ‘11 Jun ‘11 Dec ‘11 Jan ‘12 Mar ‘12 2 3 5 Implementation Weekly, Monthly and Quarterly Consequence / Action Plan Performance Monitoring Management Minister’s Score is visible to all Congratulatory notes Constructive comments Well done on the flood mitigation projects Make Mega Diversity Hub happen with MoTOUR Proper management of Monsoon Drains! Areas for improvement Source: PEMANDU Associates Driving Performance from the Center: Malaysia’s Experience with PEMANDU 39 Chapter 3: How does PEMANDU drive performance? PEMANDU uses an institutional infrastructure for delivery that extends to MDAs DMOs were established in the relevant MDAs address lagging performance. PADU also publishes to assist the interface between MDAs and reports, and provides stakeholder engagement PEMANDU in implementing the NTP. The support. PEMANDU interacts with PADU on the DMOs include MDA officials who work alongside specific national-level priorities of the EDU NKRA. the PEMANDU team in the setting, tracking, adjustment, escalation, coordination and MITI set up the Monitoring and Evaluation facilitation required for the KPIs. This includes Division to monitor the overall performance coordinating the monthly to quarterly Steering of the Ministry. This is a broader mandate than Committee Meetings and Technical Working a traditional DMO, as the division monitors not Group Meetings, and the mid-year reviews. The only the progress in MITI-led NKEA (Electrical form and function of DMOs in different ministries & Electronics, E&E), but also the Outcome- have evolved, depending on a particular nature of Based Budgeting (OBB) indicators, and the MITI the NKRA/NKEA/SRI that the ministry leads. Transformation Plan. The division tracks the progress of all 20 EPPs under the NKEA E&E as well MOE established the Education Performance as EPPs outside this NKEA. For example, the NKEA and Delivery Unit (PADU) in 2013 replacing Oil, Gas and Energy does not come under MITI’s the traditional DMO function. PADU is a central purview, but MITI monitors specific EPPs such coordination unit within MOE and was given the as encouraging FDIs in this NKEA. The Division mandate for the implementation of the EDU NKRA updates the PEMANDU Dashboard and the Project and the education strategy called “Malaysian Monitoring System (SPP II) on a weekly basis. Upon Education Blueprint.” PADU helps implement completion of an EPP, the division prepares an MOE’s KPIs, monitors the implementation Outcome and Impact Achievement Report. progress, and recommends specific actions to 40 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 3: How does PEMANDU drive performance? PEMANDU developed a strong communication function PEMANDU channels substantial attention infomercials, social media, radio, and editorials, as and resources towards communications. well as direct engagement through roundtables During the initial stages of the NTP, PEMANDU and various fora. PEMANDU’s communication received a special budget allocation to develop team also periodically collects feedback on the communications strategies and plans for ministries. NTP through a survey of the general population, PEMANDU recognized early on that managing the business leaders, and opinion leaders, which it public perception of the Government’s reform calls “the NTP health check.” efforts is one of the key tasks of the transformation agenda. The NTP Annual Report, the final step of the BFR methodology, is one of the key outputs of PEMANDU’s communications strategy is also the PEMANDU communications efforts. anchored in the BFR eight-step methodology. The communications plan is designed to keep stakeholders informed every step of the way: to put the Strategic Direction into the global The NTP annual perspective; highlight the subject matter, findings and progress of the Labs; provide public report is a rigorous engagement and communication feedback on the exercise that Open Days; inform the public about the details of the Roadmaps; illustrate the accountability, engages internal commitment, and built-in flexibility of the KPI Targets; highlight milestones and challenges teams, both public during the Implementation; emphasize that the and private sector, external validation of results is achieved through the Audit; and summarize what the NTP delivered and external in the Annual Report. auditors, as well Efforts are made to define and map internal as a monitoring and external stakeholders. This identification allows messages to be customized. Transparency, process to ensure credibility of the outcomes, and feedback for accuracy and improvement are the general principles around which the communication strategy is built. The on-time delivery. communications strategy is managed from the highest level to the implementation level. It includes providing frequent narratives to the weekly Cabinet The Report is comprehensive and includes a meetings to keep Ministers informed and updated variety of testimonials and in-depth information of the NTP’s progress. Communication plans are on the implementation progress of each NKRA, comprehensively laid out. Weekly communications NKEA and SRI, as well as a table with the externally plans are developed for up to a year ahead, utilizing audited achievement of the NTP KPI targets. a wide range of tools and platforms, including Driving Performance from the Center: Malaysia’s Experience with PEMANDU 41 CHAPTER 4 What can be learned from PEMANDU’s challenges? PEMANDU’s biggest challenges are a flip side of its greatest strengths. The existence of a robust institutional ecosystem performance, but on the other hand it can also be focused on public sector performance is a strength gamed and undermine citizens’ trust in the entire until the ecosystem becomes too complex transformation process. The same is true for a and creates overlap, blurred accountabilities, sophisticated communications effort that may be and coordination challenges. A private-sector viewed as an aggressive public relations campaign. corporate culture and top talent infuse innovation Finally, designing the transformation program into the public-sector managements, but also through Labs may have created stakeholder create a perception that PEMANDU staff are ownership, but did not build in features that would outsiders with limited public sector exposure. allow impact evaluations of at least some of the Rigorous KPI monitoring and reporting drives NTP programs. 42 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 4: What can be learned from PEMANDU’s challenges? A complex performance ecosystem creates a heavy reporting burden and coordination challenges The sheer complexity of Malaysia’s performance and the responsible MDAs. First, the complexity of monitoring system is striking. On the one hand, the NTP initiatives varies: some, such as the Greater the existence of a performance ecosystem is a KL and Klang Valley NKEA, are implemented by prerequisite for the success of any DU. On the as many as 20 MDAs; others, such as the Cost of other hand, its complexity creates new challenges. Living NKRA and Wholesale & Retail NKEA, have PEMANDU’s mandate is relatively narrow only one responsible implementing agency each. yet complex. Although the NTP focuses on a The more MDAs involved, the more complex the “manageable” number of NKRAs, NKEAs, and SRIs, coordination issues. As Box 10 illustrates, some these are further stepped down into component of these coordination challenges are beyond the parts; for example, the 12 NKEAs contain 131 scope of DU interventions and require institutional EPPs and 60 business opportunities. On top of reforms within the sector. Second, the total number this, ministries have their own sets of strategic and of KPIs per NTP initiative ranges from one for the operational indicators at the ministerial, program Cost of Living NKRA to 35 for the Greater KL NKEA. and activity level, some of which are tracked through The periodicity of reporting also varies. Out of Program Performance Management (PPMF) and the total 277 KPIs for the whole NTP, only 43 are Activity Performance Management Frameworks reported weekly. By far the largest number of KPIs (APMF). (148) are those reported on a monthly basis, while the remaining ones are gathered quarterly and The coordination challenges and reporting annually. burden of the NTP KPIs vary among MDAs. Annex 3 lists the number of 2016 NTP KPIs and the periodicity of their reporting by each NTP initiative Driving Performance from the Center: Malaysia’s Experience with PEMANDU 43 Chapter 4: What can be learned from PEMANDU’s challenges? BOX 10 Balancing PEMANDU’s Strengths with its Natural Limitations: The case of Urban Public Transport DUs cannot accomplish national goals integration (e.g. across strategic, tactical, and alone: ultimately, delivering on development operational planning), geographic integration outcomes is the responsibility of the MDAs (e.g. across local authorities along the BRT in charge of the interventions, policies, corridor), modal integration (e.g. across regulations, and institutional strengthening public transport — BRT, LRT, MRT, commuter measures adopted in pursuit of those rail, regular buses — and private transport, goals. PEMANDU’s key strengths include a due to the dedicated lane that is taken up constant focus on results, the deployment by the BRT service), and integration across of innovative practices such as Labs and levels of government (e.g., federal, state, collaborative approaches to decision making, and local). International experience shows and a committed, capable, and empowered that these kinds of integrations are difficult staff. But these assets are not meant to be to operationalize and tend to be the result a substitute for institutional, planning, and of institutional reform. This is something that regulatory reforms at the MDA level. falls well beyond the scope of PEMANDU’s remit, mandate, and capabilities. The urban public transport NKRA — the only NKRA with a KPI achievement score PEMANDU has convened and led Labs in the 70 percent range — illustrates this and discussion sessions among the many point. Despite tangible achievements in the stakeholders involved in the BRT project. delivery of improved urban public transport in Kuala Lumpur and the Klang Valley, many challenges remain. One such challenge has Labs and been the deployment of a Bus Rapid Transit (BRT) line linking Kuala Lumpur with Klang, collaborative an important component of the Land Public discussions, while Transport Master Plan for the Kuala Lumpur/ Klang Valley region. Despite an initial delivery helpful in many target in 2016, the 34 km Kuala Lumpur- settings, are not Klang BRT has still yet to be designed and a panacea. constructed as of early 2017. In this, the Kuala Lumpur-Klang BRT is hardly alone — many BRT schemes around the world have experienced When it comes to strengthening public sector delays, largely due to their planning and decision-making through integration, the decision-making complexity. Like most urban adoption of lead urban transport agencies at transport interventions, delivery of the BRT the conurbation level have tended to work depends on close integration across several best. DUs are a complement to such efforts, dimensions of decision making: functional not a substitute for them. Source: Authors 44 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 4: What can be learned from PEMANDU’s challenges? Aside from the NTP, parallel monitoring systems proliferate, which creates an additional reporting burden on MDAs. Outside PEMANDU’s remit, the key part of the national performance monitoring system also includes the Outcome-Based Budgeting effort, which has its own set of requirements for reporting performance linked to annual and medium-term plans. Aside from reporting on the NTP-related KPIs, the MDAs also report on the indicators related to the implementation of the Malaysia five-year plan to the EPU. In addition, MDAs provide updates to the Implementation and Coordination Unit (ICU) in the Prime Minister’s Department that monitors all public investments projects through the SPP II system. There are a multitude of institutions involved in performance monitoring. The size of the Prime Minister’s Department, with over 50 different agencies reporting to it, is quite unique. Only a small number of centers of government worldwide, including the U.S. and Russia, are that large. With a multiplicity of agencies active at that level, and what appears to be the lack of well-defined coordination mechanisms between them, it is not surprising that lines and roles often get conflated. Overlap of functions and blurred accountability for results inevitably ensue from this system. Box 11 illustrates this issue in the transport sector. BOX 11 Which MDA is in charge? The case of the transport sector The Ministry of Transport is in charge of planning, formulating and implementing policies on maritime transport, rail, ports and civil aviation. The Ministry’s Transformation Plan, published in June 2015, also lists the development of a holistic, sustainable and integrated National Policy on Transport as one of the agency’s strategic initiatives. On the other hand, the Land Public Transport Commission (SPAD), an agency under the Prime Minister’s Department, is empowered to plan, regulate and enforce all matters related to land public transport. To this effect, SPAD has also developed a National Land Public Transport Masterplan. Adding to this mix is the Jiwa Murni project, undertaken through the National Blue Ocean Strategy (NBOS) initiative, in which a number of agencies came together to build roads in the rural areas of Sarawak. These agencies were the Ministry of Finance, the Ministry of Defense (specifically the Malaysian Armed Forces and the Royal Armed Engineers Regiment), as well as the Sarawak State Government. Source: Authors Different sets of KPIs blur performance incentives. Aside from the NTP-related KPIs for ministers, the PSD also sets KPIs for senior officials (Chief Secretary, Secretaries-General, Directors-General, and State Secretaries). These KPIs are broader than the NTP-related KPIs and include three components: (i) Shared & Collective Responsibility; (ii) MDA’s Specific Programs; and (iii) Leadership & Core Personality Values. PEMANDU is invited to provide input into PSD’s KPIs, which also cascade down to respective ministries and agencies. It is not clear how the NTP-related KPIs are captured in PSD’s KPIs for senior officials, leading to questions about how various cascading KPIs interact and potentially create conflicting performance incentives. Even if they do not conflict, at the very minimum their multitude and complexity is bound to create confusion and blur performance incentives. Driving Performance from the Center: Malaysia’s Experience with PEMANDU 45 Chapter 4: What can be learned from PEMANDU’s challenges? PEMANDU’s size and private-sector corporate culture present tradeoffs The corporate culture of PEMANDU is derived strong technocratic staff from what is often a limited from private-sector consulting. Around 80 talent pool. percent of the staff come from the private sector. This is both a source of strength (in that they PEMANDU is unique among DUs worldwide are praised for bringing in fresh insights and given the breadth of its mandate. This includes approaches) and a source of weakness (the most not only the service delivery aspect (NKRAs and common complaint is that they “don’t understand SRIs) that is the remit of other DUs worldwide, the nuances of what the public sector does or how but also the industrial policy (NKEAs). In addition, it functions”). PEMANDU staff try to guard against part of PEMANDU’s size can be explained by its these allegations, arguing that they really need to commercial arm, which accounts for around 40 get “down into the weeds” and grapple with these percent of PEMANDU’s staff complement. Finally, challenges. In addition, the non-civil-servant status PEMANDU has also staffed certain functions, such of PEMANDU officials and their salary differential as communications, far more extensively than other may create implicit resentment vis-a-vis their public DUs. This breadth of scope results in PEMANDU’s service colleagues in the MDAs. slightly over 100-person staff strength. The perception of PEMANDU staff varies While PEMANDU may be the largest in size, across ministries. There are some, such as the it is important to weigh its costs against the Ministry of Plantation Industries and Commodities, benefits that the NTP produces. A large DU with where relations are quite cordial and PEMANDU top-notch private sector talent carries considerable staff are clearly perceived to be an asset. A clear setup and operating costs. The costs of setting up division of labor has emerged, whether the ministry PEMANDU in 2009 included engaging international implements and PEMANDU monitors, checks, and consultants such as McKinsey (see Box 3 on helps to resolve bottlenecks. There are others McKinsey’s role). In addition, PEMANDU’s annual where this is not the case. operating budget is about RM 40 million (about USD 10 million), which includes emoluments, services When it comes to the size of DUs worldwide, and supplies, Labs, open days, workshops, surveys, PEMANDU is the largest because of the breadth and similar.10 PEMANDU’s critics bemoan the high that it covers. As illustrated in Figure 7, most DUs costs of setting up and operating this model, while range in size from around six to about 16 staff; the PEMANDU and its supporters consider these costs original PMDU under Tony Blair had staffing ranging a reasonable investment, given the benefits to the between 30 and 40. Their small size is reflective of Malaysian economy from the NTP. For example, a variety of dynamics. Some are small by design, PEMANDU records that the ETP Lab garnered as in many cases deliberate decisions were taken private-sector investment commitments totaling to keep the DU’s organizational footprint light USD 406 billion, which is expected to create 3.3 and not to create large structures that could million jobs and deliver an additional GNI of USD potentially compete with line departments in 250 million in 2020. As reported in the NTP Annual either policymaking or delivery. In other cases, it reports audited by PwC, the realization of these reflects the inherent limitations involved in trying to figures is on track. On this basis, the return on establish such units quickly, and recruit or second investment is likely to be significant. 10 This is separate from the operating budget for the NKRAs (RM334 million, or about USD 83.5 million) and NKEAs (RM355 million, or about USD 88.75 million) in 2011. The majority of these budgets sit with the implementing MDAs, while a portion is allocated to the Prime Minister’s Department to ensure coordination. Source: Media Statement by DS Idris Jala, Minister in the Prime Minister’s Department and CEO, PEMANDU (29 October 2010). 46 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 4: What can be learned from PEMANDU’s challenges? Nevertheless, the size of PEMANDU raises is heavily predicated on adopting transformational questions about how readily this model can be leadership from the highest level and hard-wiring adopted elsewhere. Few developing countries are a new way of working, since the old ways have able to afford a large DU. In addition, few countries not delivered the desired results. Implementing will probably be able to get exemptions from the selected tools and approaches without linking to civil-service salary structure that allowed PEMANDU others may result in suboptimal outcomes. This is a to recruit talented staff from the private sector. At tradeoff that other countries must evaluate carefully the same time, PEMANDU argues that its success before embarking on their own initiatives. FIGURE 7. Staff Size of DUs in Comparative Perspective DSU, Western Cape Province South Africa PDU UPK4 Chile Indonesia 0 50 100 PMDU Tony Blair PEMANDU Albania UK Malaysia PMDU Romania Results and Delivery Unit Canada Source: Authors Driving Performance from the Center: Malaysia’s Experience with PEMANDU 47 Chapter 4: What can be learned from PEMANDU’s challenges? Focus on KPIs is a mixed bag The actual KPIs themselves may have left a mixed legacy that is typical of broader efforts to rely heavily upon indicators to improve public sector performance. This includes the focus on certain (typically politically motivated) priorities to the detriment of other important objectives. Another is the danger that such targets can be “gamed” or manipulated. The success of KPI-driven performance depends on whether the right indicator has been chosen. If it doesn’t measure the desired outcome, then focus to meet the target misses the broader point of the reform. There are some parts of the NTP, particularly the NKEAs, which easily yield themselves to measurement and quantification. Others – especially the key parts of the GTP such as the NKRAs of fighting crime and combatting corruption – are notoriously difficult to measure. Those measures that PEMANDU ends up using are often critiqued as selective. As Elena Lesley writes: “According to the 2012 GTP annual report, street crime dropped 40.8% after the launch of the transformation program. […] However, many Malaysians felt the police were not transparent about how crime statistics were compiled, and they suspected that certain incidents went underreported. Detailed crime statistics obtained by the New York Times from the Malaysian government in 2013 showed mixed results: Although armed robberies and gang robberies had decreased dramatically since 2000, the number of homicides had remained relatively unchanged, and rapes had increased. […] People do not feel 40% safer, and that’s why there’s a lot of disbelief in these crime statistics.11” If the reported KPIs clash with citizens’ own experiences, it can undermine the trust in the entire transformation effort. Such discrepancies fuel skepticism about the metrics employed and successes reported, and lead to attributing transformation successes to aggressive communications and public relations campaign. Box 12 documents most recent efforts by PEMANDU to address the fear of crime among citizens, including the most recent encouraging results. Lack of impact evaluations creates questions about attribution The evaluations that PEMANDU commissions for various programs under NKRAs and NKEAs are mostly process evaluations, while the impact evaluation culture is less developed. The evaluations at the vertical team level do examine rigorously whether the implementation of particular programs is working as intended. However, this is different from designing a program in a way that would allow to ascertain how it contributes to desired impacts further down the results chain (see Box 13). Impact evaluations (IEs) seem to be rare among the NTP programs, but without them it is difficult to resolve questions of attribution. The correct attribution of results to a particular intervention is especially important for DUs who by their design only focus on a very limited set of priority initiatives, with many programs under implementation at the same time. PEMANDU’s and NTP’s critics often scoff at crediting 11 Lesley, Elena. 2014. “Mapping a Transformation Journey: A Strategy for Malaysia’s Future.” Innovations for Successful Societies. Princeton University. http://successfulsocieties.princeton.edu/sites/successfulsocieties/files/EL_COG_Malaysia.pdf 48 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 4: What can be learned from PEMANDU’s challenges? BOX 12 Crime NKRA: Addressing Citizens’ Perceptions through Policy Implementation The key programs that forms the backbone oriented solutions. It is crucial to ensure of the NKRA Reducing Crime are the continuity of this program as the police Omnipresence Program, Community Policing move from a traditional policing mindset Program and Safe City Program. to a service-oriented force under Modern Policing. The Omnipresence Program’s objective is to increase police visibility (target hardening) The Safe City Program is based on the Broken at crime hotspot areas through: (i) replacing Windows theory and Crime Prevention personnel on administrative duties with Through Environmental Design, where the civilians and freeing them up for patrolling; program involves reducing the opportunity (ii) collaborating on joint patrols with other to commit a crime by installing bollards uniformed personnel such as the military, and railings separating the pedestrians and Department of Civil Defence (JPAM) and roads, brightening dark alleys and streets, People’s Volunteer Corps (RELA); and (iii) and collaboration with other agencies and investments in replacing beyond-lifespan ministries to conduct clean-up operations. police vehicles, which have resulted in response time improvement (from 15 minutes Pre-GTP, the crime index was rising steadily to 8 minutes). Moving forward, under the (with a slight drop of 0.9 per cent in 2009). Modern Policing initiative, the Omnipresence After 6 years of implementation, a cumulative Program will undergo a shift from physical drop of 45 per cent, or an average of 7.5 visibility to more reliance on technology and per cent drop annually, has been achieved. simplification of decades-old processes. However, despite the NKRA’s best efforts, the fear of crime remained a challenge up until The Community Policing Program is about 2016, with people still feeling fearful (80 per engaging citizens and encouraging open cent and above). Results in the most recent dialogue and problem-solving sessions annual perception survey measuring the level between the police and residents. The of fear have finally shown an improvement, Community Policing framework is based on dropping to 61 per cent in 2016 from 80 per mutual respect, removing bias, and action cent in 2015. Source: PEMANDU Associates Driving Performance from the Center: Malaysia’s Experience with PEMANDU 49 Chapter 4: What can be learned from PEMANDU’s challenges? the NTP for Malaysia’s aggregate achievements, as the NTP represents only a narrow set of priorities while many initiatives under the Malaysia five-year plan are working toward the same goals. Consequently, this perception undermines the overall trust in the NTP, ascribing its success to a mere public relations campaign. In this case, the problem of attribution is not between the MDAs and PEMANDU; it is unequivocal that the MDAs are the implementer and the DU the driver. Rather, the question is whether the overall impact was a result of a narrow strategic intervention in the NTP, or of a multitude of other programs ongoing in parallel. Designing the NTP through Labs may have missed the opportunity to build in IEs into the program design. Labs may be an excellent problem solving platform, ushering consensus building and bringing various stakeholders together. However, introducing sophisticated forward-looking technical design features that enable impact evaluations is not the comparative advantage of the Lab method. However, going forward and applying the Lab method elsewhere, nothing prevents bringing in impact evaluation specialists to the Labs to address this shortcoming. At the same time, NTP interventions are meant to be catalytic and not all encompassing. The impact of the NTP is by design expected to be more than the sum of the impact of its projects. PEMANDU argues that shifting the emphasis to IEs for the sake of clear attribution may be missing the point of a transformational exercise. IEs will only be able to show part of the picture. However, they can help build the overall support for the DU efforts, maintain the MDA buy-in, and also establish the cost efficiency of the priority interventions. BOX 13 EDU NKRA: Literacy and Numeracy Screening (LINUS) Malaysia introduced Literacy and Numeracy 100 percent by the time students are in Year Three. Screening (LINUS) in 2009 as a systematic and The improvements in the literacy rate under LINUS comprehensive effort to screen and improve is higher when looking at the state or district literacy and numeracy standards of primary level. There are several indications that LINUS is school students. The objective of the program was perceived as having been a success: its funding to ensure that all students acquire basic literacy has continued; and it has expanded in scope. and numeracy skills at the end of three years of When LINUS was introduced in 2010, it covered primary schooling. The “Screening” part of LINUS screening and remedial efforts in Malay language aims at identifying students who are struggling by literacy and numeracy. In 2013, LINUS 2.0 was introducing mandatory (and universal) assessments introduced to cover English language literacy. of all first-, second- and third-graders. Once identified as struggling, the program provides Even though literacy and numeracy improved, it is additional support to students with difficulties in difficult to tell if it is because of LINUS. Given the reading, writing and arithmetic. many reforms that were initiated during the years from 2009-2012, it is hard to attribute observed LINUS has likely played an important role in the improvements in literacy to one program. LINUS improvements in overall literacy rates that has is one among several key programs designed to been observed in recent years. National literacy improve access to and quality of education, led by rate for early primary school students was initially MOE through the Education National Key Result ranging from 87 percent to 89 percent in 2006 Areas (NKRA) platform facilitated by PEMANDU. to 2008. By 2012, three years after LINUS was LINUS was not launched in isolation. For instance, introduced, the national literacy rate was close to the High Performing Schools (HPS) initiative was 50 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 4: What can be learned from PEMANDU’s challenges? PROTIM vs LINUS results for Struggling Districts 50 45 40 35 30 25 20 15 10 5 0 Ku l Kot Kulim Ku l T n h B chok Seremb n Jempol/ Port P sir Johor B tu Miri Kuchin P d w n Mud / Set r B nd r Kr i Mer h/ Jelebu Dickson Gud n Bh ru P h t Y n Bh ru Jeli % of total 5th graders who % of total 3rd graders who don’t pass % of total 3rd graders who don’t pass are illiterate* 2009 LINUS 2013, second screening LINUS 2014, second screening also introduced to identify and cultivate Malaysia’s of the LINUS program (e.g. FasiLINUS; remedial cadre of internationally competitive schools, lift the teachers; the focus on measuring learning performance of other schools in the system and outcomes) was more impactful in improving use it as a nurturing ground to produce excellent learning outcomes? While there was an in-depth students. There was also a curriculum review which process evaluations conducted to help identify was conducted in 2011 which saw the introduction strengths and weaknesses of implementation, of the Primary School Standard Curriculum (KSSR). an impact evaluation would be beneficial to determine which interventions have worked. If the program design built in impact evaluation features, it would be easier to attribute Aside from problems of attribution, IEs the results to LINUS or some other parallel would allow to determine the program’s cost intervention. When designing and implementing effectiveness. Currently it is difficult to tell which of new sizeable programs, international best practices the interventions embedded in LINUS contributed and experience point towards design features more than others – or whether all were required, that would allow for a rigorous impact evaluation, or only some. This means that it is impossible to e.g. randomized treatment and control. This establish whether the interventions included in means designing implementation in such a way LINUS were “cost effective” -- were some better that one group of students receives “treatment” “value for money” than others? (i.e., is exposed to LINUS interventions) while the Source: Authors. For more information on treatment and control other (“control”) group does not. This allows the groups in IEs, see http://siteresources.worldbank.org/EXTHDOFFICE/ interventions to be both monitored and evaluated Resources/5485726-1295455628620/Impact_Evaluation_in_Practice.pdf to ascertain whether they have an impact on desired outcomes. Most times, the problem is not the lack of data, but program design that does not include elements that would enable impact evaluation. There were no “treatment” and “control” groups for LINUS; to do so, it would be important to sequence the implementation and use pilots as “treatment” groups while comparing to “control” groups that were not exposed to LINUS. For LINUS, it is not possible to ascertain whether it was LINUS or something else that helped improve literacy rates during 2012-2014. Also, what part Driving Performance from the Center: Malaysia’s Experience with PEMANDU 51 CHAPTER 5 What are the key takeaways for other countries? Countries looking to learn from PEMANDU will have to carefully weigh the tradeoff between the cost and replicating the whole structure in its entirety. Among the DUs around the globe, PEMANDU is PEMANDU’s story also demonstrates the semi- the largest in size. This has cost implications: few permanent nature of DUs. DUs rarely last beyond developing countries are able to afford a large the government’s term in office since are focused DU. In addition, not all countries will be able to on driving the implementation of time-bound get exemptions from the civil-service salary priorities. In addition, they introduce private sector structure that allowed PEMANDU to recruit elements that are intended to disrupt some of the talented staff from the private sector. Many unproductive routines in the public sector, but this contextual factors, such as a relatively developed only works for a limited time. As the government’s institutional ecosystem and performance culture, term is coming to an end, PEMANDU is currently also contributed to PEMANDU’s ability to drive phasing out its public-sector role while handing performance. On the other hand, the potential over the reins for the remaining tasks to civil- benefits of the PEMANDU model are significant. service. While PEMANDU’s critics point to the high costs of setting up and operating this model, PEMANDU’s experience is instructive both for PEMANDU and its supporters consider these its successes and challenges. As illustrated in the costs a reasonable investment, given the benefits previous chapter, the same features that result in to the Malaysian economy from the NTP. A careful PEMANDU’s strengths become its weaknesses consideration of the country context and a cost- if the mix is not right, or if conditions change. benefit analysis will therefore have to precede any Finding the right balance is key. decision to adopt a similar model. 52 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 5: What are the key takeaways for other countries? Learning from PEMANDU’s strengths Features that played to PEMANDU’s strengths point to the following lessons and tradeoffs for countries considering establishing a DU: (i) top leadership backing; (ii) prioritization and granularity; (iii) control and voice; and (iv) MDA interface. Secure strong backing and involvement of the top leadership PEMANDU’s success critically hinged on its access to the Prime Minister and his direct involvement in the routines introduced by the unit. PEMANDU not only tracked progress in implementation, but was actively involved in clearing up bottlenecks between multiple MDAs. These incentives work only with the regular involvement of the Prime Minister through routines such as the PSMs and performance reviews. However, such high-level access and hands-on involvement presents its own tradeoffs, including the potential politicization of the technical implementation process. Managing this tension is critical for a DU’s success, which requires strong DU leadership. PEMANDU’s CEO Idris Jala brought in the inspirational leadership, technical skills, as well as the political and business savvy required to maintain the PM’s confidence and to carve out the financial and administrative space to build an effective unit. These lessons are consistent with the conclusions in the existing analyses of DUs worldwide. For example, Bellver et al (2014)12 argue that “unless the most senior members of the government take an active interest in results and communicate that the government regards the efficient and effective delivery of public service outcomes as a political priority, there is little chance that they will focus on outcomes and there will be no platform for a unit to operate.” Create a prioritized and granular results platform It is impossible to discuss PEMANDU without discussing the NTP – the results platform that PEMANDU helped create and which implementation it drove. Just like PEMANDU did with the NTP, successful DUs generally focus on a limited number of well-defined and operationalized strategic priorities.13 There are two important lessons from PEMANDU in this respect. First is on prioritization: the NTP contains only a manageable number of priorities, while broader and far more numerous national objectives are contained in the national five-year plans. The second lesson is on operationalization: it is not enough to simply define the high-level priorities – just as crucially, they have to be translated into granular projects with assigned implementation responsibilities, timelines, and KPIs. At the same time, PEMANDU’s experience demonstrates that the selectivity of such focused platforms may create questions about the attribution of national outcomes to the interventions facilitated by the DU. It may not always be possible to measure the full impact of transformational programs. However, building in ways to show some of their contributions, wherever possible, can assuage this concern and help maintain trust among stakeholders. 12 Bellver, Ana, Indu John-Abraham, Ray Shostak, and Joanna Watkins. 2014. “When Might the Introduction of a Delivery Unit Be the Right Intervention?” Governance & Public Sector Management: Driving Results from Public Institutions. Washington, DC: World Bank 13 See, for example: Jordan, Luke, and Charles Sabel. 2015. “Doing, Learning, Being: Some Lessons Learned from Malaysia’s National Transformation Program.” Columbia University. http://www2.law.columbia.edu/sabel/papers/CS-LSJ--DLB%20Malaysia%20PEMANDU--Final-190115.pdf; Barber, Michael. 2016. How To Run a Government. London: Penguin Driving Performance from the Center: Malaysia’s Experience with PEMANDU 53 Chapter 5: What are the key takeaways for other countries? Combine top-down control with bottom-up voice Driving performance from the center of government should not mean ignoring the rank-and-file implementation staff in the MDAs. As is typical of most DU approaches, PEMANDU is embedded within a top-down, command-and-control system. Yet through the Labs, the process of operationalizing the government’s strategic priorities included active participation by the rank-and-file MDA staff who became the eventual implementers of the NTP. This process has also built in responsiveness to line MDAs’ objectives, issues, and challenges. This facet of the PEMANDU experience illustrates the importance of thoughtful change management. Much has been written about the necessity of creating ownership among a wide set of stakeholders as well as creating the buy-in among the implementers when managing change.14 Similarly, status quo bias due to the change resistance of middle-management and rank-and-file cadres is well documented, both in private- and public-sector organizations coping with change.15 PEMANDU’s experience shows that participatory approaches such as Labs can ease this constraint and help manage change by building ownership of the transformation program from the start. Create institutional interface between the DU and MDAs DUs do not implement the policy prerogatives by themselves – MDAs do. PEMANDU’s role as a driver of MDAs’ performance was greatly facilitated because there were specialized units within MDAs with which PEMANDU interacted. This echoes the existing literature on the monitoring and evaluation (M&E) systems that also highlights the benefits of dedicated M&E units within MDAs.16 An interesting takeaway from the PEMANDU experience is that the institutional interface need not be uniform across MDAs. Some established DMOs, others created their own specialized DUs, yet others integrated the interface with PEMANDU into their specialized M&E divisions. Tailoring these units to the implementing agencies’ needs and sectoral specificities facilitated the implementation. Because MDAs are the implementers of government’s top priorities, the real action takes place on their turf, not at the Prime Minister’s Department. This is consistent with the lessons from the UK’s PMDU.17 At the same time, PEMANDU’s role in interfacing with MDAs extends to creating specific routines, such as regular reporting and trouble-shooting, as well as progressive escalation of unresolved matters to a series of regular high-level meetings. This creates strong incentives to resolve issues at the lowest possible level. 14 See, for example: Mabey, Christopher, and William M. Mayon-White, eds. 1993. Managing Change. London: Paul Chapman Publishing Ltd in association with The Open University; Backoff, Robert W., and Paul C. Nutt. 1993. “Transforming Public Organizations With Strategic Management And Strategic Leadership.” Journal of Management, 19(2), 299-347. 15 See, for example: Pardo del Val, Manuela, and Clara Martinez Fuentes. 2003. “Resistance to Change: A Literature Review and Empirical Study.” Management Decision, 41(2): 148–55; Reginato, Elisabetta, Isabella Fadda, and Paola Paglietti P. 2016. “The Influence of Resistance to Change on Public-Sector Reform Implementation: The Case of Italian Municipalities’ Internal Control System.” International Journal of Public Administration 39 (12): 989-999. doi: 10.1080/01900692.2015.1068325. 16 Kusek, Jody Z., and Ray C. Rist. 2004. Ten Steps to a Results-Based Monitoring and Evaluation System: A Handbook for Development Practitioners. Washington, DC: World Bank. https://openknowledge.worldbank.org/bitstream/handle/10986/14926/296720PAPER0100steps.pdf 17 Barber, Michael. 2008. Instruction to Deliver: Fighting to Transform Britain’s Public Services. London: Methuen Publishing Ltd. 54 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Chapter 5: What are the key takeaways for other countries? Learning from PEMANDU’s limitations The challenges that PEMANDU has faced, as well as the limitations of its experience, also offer valuable lessons for other countries. These include: (i) finding balance between the private vs. public sector elements; (ii) optimization of reporting; and (iii) introducing impact evaluations. Balance private- and public-sector elements in a DU Attracting private-sector talent into a DU infuses the public sector with innovations and urgency, but comes at a cost of being perceived as outsiders. In addition, pay differentials tend to create resentment in civil-service. Although PEMANDU has had a limited number of secondees from various public-sector institutions and hired staff with both private- and public-sector backgrounds, its corporate culture and skills have been strongly skewed toward the private sector. The existing literature finds that that the types of skills that a successful DU must attract include quantitative, qualitative, as well as “soft” skills, such as negotiation, creative problem solving, and collaboration.18 Although their natural reservoir appears to be in private-sector consulting, such skills can arguably be found in both private and public sectors. Finding the right balance of public- and private-sector staff and approaches can mitigate the downside risks and reduce costs. Optimize the amount of reporting by MDAs By requiring regular reporting on KPIs, a DU establishes important routines and promotes data- based decision-making; at the same time, it creates a reporting burden. This burden is compounded especially if the MDAs already report on a number of indicators for existing plans and programs. This issue is omnipresent throughout public-sector performance management. For example, the literature on performance-oriented reforms in public financial management19 concludes that information is not an end in itself, but a means to better performance. In order for this information be used in decision making, the number of performance indicators must be optimized. Similarly, one of the key lessons for the practice of performance-based budgeting is to “measure key strategic goals, but not everything.”20 Countries with the most experience with performance budgeting have steadily reduced the number of programs and indicators over time, reflecting both the administrative burden of reporting and the limited time senior managers have to monitor performance. Whenever possible, a DU should build KPIs around the existing indicators that MDAs already report on. PEMANDU could further work across Malaysia’s performance ecosystem to create synergies with the existing reporting structures, such as performance-based budgeting (OBB) or national development plan reporting. Among the MDAs that PEMANDU worked with on the NTP, MITI’s model of a single M&E Division responsible for all reporting presents a good example to learn from and to build on. Although analyzing MITI’s experience in depth is beyond the scope of this report, such exercise could uncover existing synergies among various results frameworks. 18 Bellver, Ana, Indu John-Abraham, Ray Shostak, and Joanna Watkins. 2014. “When Might the Introduction of a Delivery Unit Be the Right Intervention?” Governance & Public Sector Management: Driving Results from Public Institutions. Washington, DC: World Bank. http://siteresources.worldbank.org/ PUBLICSECTORANDGOVERNANCE/Resources/285741-1368636830774/When_Might_the_Intro_of_a_DU_Be_the_Right_Intervention_FINAL.pdf 19 See, for example, Curristine, Teresa, and Suzanne Flynn. 2013. “In Search of Results: Strengthening Public Sector Performance.” In Public Financial Management and Its Emerging Architecture, edited by Marco Cangiano, Teresa Curristine and Michael Lazare, 225-255. Washington, DC: International Monetary Fund. 20 Moynihan, Donald; Beazley, Ivor. 2016. “Toward Next-Generation Performance Budgeting: Lessons from the Experiences of Seven Reforming Countries.” Directions in Development--Public Sector Governance. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/25297 Driving Performance from the Center: Malaysia’s Experience with PEMANDU 55 Chapter 5: What are the key takeaways for other countries? Strengthen impact evaluations Impact evaluations (IEs) can be used to strengthen the public’s trust in the transformational effect of DU-driven programs. DUs, by definition and design, focus only on a limited number of well-defined priorities. Since many other programs are implemented at the same time, the critics of the DU approach tend to question whether observed successes can be attributed to the narrow interventions that DUs drive. Aside from addressing the questions of attribution, IEs can enhance cost-effectiveness by establishing which components of the priority program contribute most to its impact and which are unnecessary. For these reasons, it is important for a DU to be supported by a strong evaluation function. Far from an academic exercise, IEs are used around the world to refine the existing programs for maximum impact. IEs are now widely used in a variety of settings: for example, to improve resource allocation for family planning programs in Indonesia; to refine program design of malnourishment programs in Colombia; or to improve the cost effectiveness of strategies to increase school attendance in Kenya.21 A DU can similarly rely on IEs for evidence-based policy making and improved implementation. A stronger attention to IEs has implications for program design through Labs. For example, to allow for treatment and control groups to differentiate impact of a particular DU-driven program, IEs must be built into the design from the very start. If the programs are developed through a Lab or Lab-like process, then Labs should include IE specialists who can advise on the appropriate IE method and corresponding program design. 21 Gertler, Paul J., Sebastian Martinez, Patrick Premand, Laura B. Rawlings, Christel M. J. Vermeersch. 2011. Impact Evaluation in Practice. 1st ed. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/2550 56 Driving Performance from the Center: Malaysia’s Experience with PEMANDU References Andrews, Matt, Lant Pritchett, and Michael Woolcock. 2017. Building State Capability: Evidence, Analysis, Action. New York: Oxford University Press. Backoff, Robert W., and Paul C. Nutt. 1993. “Transforming Public Organizations With Strategic Management And Strategic Leadership.” Journal of Management, 19(2), 299-347. Barber, Michael. 2008. Instruction to Deliver: Fighting to Transform Britain's Public Services. London: Methuen Publishing Ltd. Barber, Michael. 2016. How To Run a Government. London: Penguin. Bellver, Ana, Indu John-Abraham, Ray Shostak, and Joanna Watkins. 2014. “When Might the Introduction of a Delivery Unit Be the Right Intervention?” Governance & Public Sector Management: Driving Results from Public Institutions. Washington, DC: World Bank. http://siteresources.worldbank.org/PUBLICSECTORANDGOVERNANCE/Resources/285741-1368636830774/When_ Might_the_Intro_of_a_DU_Be_the_Right_Intervention_FINAL.pdf Curristine, Teresa, and Suzanne Flynn. 2013. “In Search of Results: Strengthening Public Sector Performance.” In Public Financial Management and Its Emerging Architecture, edited by Marco Cangiano, Teresa Curristine and Michael Lazare, 225-255. Washington, DC: International Monetary Fund. Gertler, Paul J., Sebastian Martinez, Patrick Premand, Laura B. Rawlings, Christel M. J. Vermeersch. 2011. Impact Evaluation in Practice. 1st ed. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/2550 Jordan, Luke, and Charles Sabel. 2015. “Doing, Learning, Being: Some Lessons Learned from Malaysia’s National Transformation Program.” Columbia University. http://www2.law.columbia.edu/sabel/papers/CS-LSJ--DLB%20Malaysia%20PEMANDU--Final-190115.pdf Kusek, Jody Z., and Ray C. Rist. 2004. Ten Steps to a Results-Based Monitoring and Evaluation System: A Handbook for Development Practitioners. Washington, DC: World Bank. https://openknowledge.worldbank.org/bitstream/handle/10986/14926/296720PAPER0100steps.pdf Lesley, Elena. 2014. “Mapping a Transformation Journey: A Strategy for Malaysia’s Future.” Innovations for Successful Societies. Princeton University. http://successfulsocieties.princeton.edu/sites/successfulsocieties/files/EL_COG_Malaysia.pdf Mabey, Christopher, and William M. Mayon-White, eds. 1993. Managing Change. London: Paul Chapman Publishing Ltd in association with The Open University. Malaysia, Performance Management and Delivery Unit (PEMANDU). 2015. NTP Annual Report, by PEMANDU. Annual report, Putrajaya. Pardo del Val, Manuela, and Clara Martinez Fuentes. 2003. “Resistance to Change: A Literature Review and Empirical Study.” Management Decision, 41(2): 148–55. Reginato, Elisabetta, Isabella Fadda, and Paola Paglietti P. 2016. “The Influence of Resistance to Change on Public- Sector Reform Implementation: The Case of Italian Municipalities’ Internal Control System.” International Journal of Public Administration 39 (12): 989-999. doi: 10.1080/01900692.2015.1068325. World Bank. 2011. The Practice Of Policy-Making In The OECD: Ideas For Latin America. Washington, DC: World Bank. http://documents.worldbank.org/curated/en/127701468217446803/The-practice-of-policy-making-in-the-OECD- ideas-for-Latin-America World Bank. 2012. The World Bank Approach to Public Sector Management 2011-2020: Better Results from Public Sector Institutions. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/22534 Driving Performance from the Center: Malaysia’s Experience with PEMANDU 57 Annex 1 PEMANDU’s Overseas Experience PEMANDU’s model has generated significant demand for peer learning from governments around the globe. In responding to this demand, PEMANDU in 2015 adjusted its structure, creating the Big Fast Results Institute (BFRI), a new subsidiary company under PEMANDU headed by a Managing Director. BFRI is PEMANDU’s development consulting arm and focuses on delivery overseas. Its source of revenue are payments from foreign governments on cost-recovery basis. Box A1 provides details on selected consulting engagements that PEMANDU has overseas. As these summaries show, overseas partners are interested in some of the processes that PEMANDU introduced, including the stakeholder engagement through the Labs and the rigorous monitoring and reporting of KPIs. The demand is growing; the latest engagements include Oman and other Gulf States. Looking past the NTP’s life span, overseas consulting will become the main focus of PEMANDU’s work. BOX A1 PEMANDU’s Overseas Engagements Tanzania Tanzania was the first country that formally invited PEMANDU to share its Big Fast Results (BFR) experience. In 2011, President Kikwete visited Malaysia and was introduced to the delivery Lab methodology as part of the Langkawi International Dialogue Conference in sharing Malaysia’s experience. In 2012, the Tanzanian government expressed interest in replicating the methodology in Tanzania. The Tanzanian cabinet invited the PEMANDU to give a workshop to the approach, and selected six focus areas that are critical in achieving the goals of Tanzania’s Development Plan 2025, Long Term Perspective Plan (LTPP), and annual development plans. The Tanzanian government launched the Big Results Now! (BRN) program in January 2013, facilitated by the PEMANDU team. The PEMANDU team supported the Tanzanian government in conducting delivery Labs in the six NKRAs; agriculture, education, water, energy, resource mobilization, and transport. The PEMANDU team also engaged closely with the Tanzanian President’s office, the Cabinet, and line ministries in setting up and institutionalizing the National Key Results Areas (NKRAs) delivery system. It included establishing necessary institutions such as the President’s Delivery Bureau (PDB), Ministerial Delivery Unit (MDU), Transformation and Delivery Council (TDC), Inter-Ministerial Technical Committee, and 58 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Annex 1: PEMANDU’s Overseas Experience Independent Review Panel. These delivery systems focused on solving problems, and the accountability process in communication. To support the operation, PEMANDU entered into a 4-year Memorandum of Understanding (MoU) agreement with the Government of Tanzania, which allowed the PEMANDU staff to work on the ground and provide advice to the Tanzanian government staff on the planning and implementation of delivery system. The PEMANDU team worked with the Tanzanian government in a different political and institutional context. The Tanzanian government had a priority to coordinate multiple donors’ initiatives with the national development goals, which was very different from the Malaysia BFR context. Tanzania’s DU focused on prioritizing these government key priorities, managing the donors’ programs and funds and the government funds to these six NKRAs. Despite the political changes in Tanzania, the PEMANDU team remained heavily engaged in the country by localizing their approach and provided advisory services to the government. PEMANDU conducted an operational review for the Tanzania engagements. The objective of the operational review was to assess the effectiveness of the BFR to the Tanzanian government; more specifically, to understand the strengths and weaknesses of the BFR model in a different context to Malaysia, and to address BFR’s value addition to the Tanzanian government. In mid-2015, PEMANDU conducted an on-line survey with relevant heads of agencies and staff who were not team members of the BFR Tanzania team visited the country, documenting the operations and the feedback received. The review note covered PEMANDU’s lessons learned and recommendations, and was the first operational review for the BFR engagement. South Africa The PEMANDU team worked with South Africa and conducted the Labs in specific sectors. The PEMANDU team conducted two sets of Labs: (i) Oceans Economy; Oil + Gas, Marine Manufacturing, Aquaculture and Governance and (ii) Healthcare. The Government of South Africa initiated the implementation, and the PEMANDU team was invited to the annual review. To implement the Lab recommendations, the Department of Planning, Monitoring and Evaluation under the Presidency of South Africa has set up a similar delivery system to PEMANDU. One of the challenges for the PEMANDU team was to conduct Labs in specific sectors without having the overall prioritization of the national agenda. This has allowed the team to localize their approach, and focus on supporting the Government of South Africa with the Lab methodology. South Asia Since 2013, PEMANDU has engaged with Afghanistan, Pakistan, Bangladesh, India, and Sri Lanka. Approached by the governments of Afghanistan, Bangladesh, and Sri Lanka, PEMANDU has been exploring the potential of collaborations in various areas, including Driving Performance from the Center: Malaysia’s Experience with PEMANDU 59 Annex 1: PEMANDU’s Overseas Experience conducting Labs, the adoption of BFR methodology, and the assessment of government performance management systems. PEMANDU has established a strong engagement with the government of India. PEMANDU has engaged with India both with the central government and five state governments. In 2014, the PEMANDU team conducted a pilot Lab for the water sector in Mumbai, Maharashtra. In 2015, the PEMANDU team representing the government of Malaysia and the National Institution of Transforming India (NITI) Aayog, representing the government of India, and subsequently with the government of Andhra Pradesh, entered into an MoU to formalize the collaboration between both parties. The MoU focused on cooperation in performance management, project delivery and monitoring related to public programs. Other states included Madhya Pradesh, Chhattisgarh, Telangana, and Karnataka. In addition, PEMANDU has been assisting the Central Government Prime Minister’s Office and the Cabinet with the development of a national transformation program. The engagement model in India is different from that of Tanzania, with the focus on states’ problem solving through the Labs methodology. PEMANDU conducted two Labs to improve the quality of the ‘retail’ and ‘education’ sectors, and expect to conduct ‘governance’, ‘urban development’, and ‘agriculture and industries’ sector Labs in the near future. The Andhra Pradesh Education Lab, for example, focused on improving the quality of education through the pre-school, primary, and secondary levels. This involved 92 participants and 26 organizations. It also ran the Retail Lab to support the key economic drivers of the state, and involved 13 government agencies, two NGOs, and 18 private-sector stakeholders. Source: Authors 60 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Annex 2 Eight Steps of Transformation The “Eight Steps of Transformation” is PEMANDU’s methodology in driving performance for the NTP. According to PEMANDU, the discipline of implementing the “Eight Steps” is the critical success factor in ensuring understanding, buy-in, alignment, and implementation amongst the MDAs and stakeholders. Step 1: Strategic Direction entails identifying stakeholders, ranging from public to private to and agreeing on the “True North” with all key NGOs and academia, sit in a room to brainstorm stakeholders. This is the starting point that lays the and understand the different points of views. foundation for the transformation program. The Lab process aims to breakdown silos and encourage the best ideas from robust discussions. For the 2009 Government Transformation Program It is an iterative process to address difficult issues (GTP), public opinion polls were conducted and accelerate solution development. This process and disseminated to identify the top issues that also encourages the sharing of local solutions and citizens cared and worried about. The results were best practices. discussed in multiple Cabinet retreats leading to the formulation of the National Key Result Areas Another critical feature of the Lab is the emphasis (NKRAs). on developing a “three-foot plan.” This ‘“three- foot plan” is a detailed, step-by-step plan of For the 2010 Economic Transformation Program with delineated responsible actors, deliverables, (ETP), a workshop was conducted to prioritize and timelines. This output is crucial as it ensures sectors for the National Key Economic Areas alignment and responsibility from stakeholders (NKEAs). More than 1,000 leaders from the private from the different agencies. This process aims sector and government leaders participated and to reduce the time lag compared to typical provided their inputs. The NKEAs were determined steering committee meetings that are conducted based on data such as current contribution to GDP, sequentially (every fortnight/month/quarter) that historical and future growth trends, global growth may not reach consensus or decision. trends, and qualitative inputs on competitive analysis and comparative advantage. This resulted Step 3: Open Days are held to communicate in 12 NKEAs agreed upon by the leaders in both the agreed Lab outputs to the public and seek the private and public sector. feedback. Posters and exhibits in simple and clear messages and visuals are on display to inform Step 2: Labs are controlled environments where the public on the Lab objectives, approach and diverse groups of stakeholders come together implementation plans (what, who, when, how). This and experiment new ways of working. Labs usually exercise is significant as this is the first time that the run from six to nine weeks with a commitment of MDAs share their program plans publicly before agreed objectives and plan of action, with specific implementation. By making it public, there is an deliverables throughout the duration of the Labs. expectation from the public and a sense of urgency and responsibility from the Government to deliver In a Lab, there is no hierarchy, in which the most upon its agreed plans. junior are encouraged to voice their views and all inputs are treated equally. Diverse groups of The Open Days for the GTP, ETP and SRI were held Driving Performance from the Center: Malaysia’s Experience with PEMANDU 61 Annex 2: Eight Steps of Transformation in major public convention centers in the city center implementing agencies on the progress of their 3-ft of Kuala Lumpur and various regions. More than plans. 26,500 people attended these three Open Days. Every six months, a performance review session Step 4: Roadmaps for the GTP and ETP are is held between the PM, Minister and the Minister translated into multiple formats to inform the public in-charge of the transformation program and and all stakeholders of the transformation plans. The PEMANDU. The Cabinet Away-Day is held annually three main formats are a full report, an executive to share the progress made amongst the Ministers. summary, and a short video, which were produced This entire process lends a further sense of urgency, to meet the needs of the different stakeholders in focus, and discipline of action to ensure the plan consuming information. The Roadmaps are then is implemented and cascaded to the ground, from shared widely via various media platforms, including federal to state to local agency level. print, online, TV, radio, newspapers and online. The high emphasis on a dissemination strategy and an Step 7: Audit and KPI Target and Validation education plan meant that a large proportion of the Process. The Ministerial KPIs progress reports are public have understood, read or at the very least reviewed and validated by an external audit firm on heard about the GTP and ETP. an annual basis. An international panel convenes on an annual basis to provide a critical review of Step 5: KPI Targets are agreed upon with the the progress of the transformation program. This Ministries and they are assigned to each Minister. step is crucial in ensuring an objective reporting of All Cabinet Ministers have two sets of KPIs. The first progress made versus the successes and challenges set are common KPIs that are cross-cutting across encountered in other countries. the entire Cabinet team; the second set of KPIs are unique to each Minister’s portfolio. The first set of Step 8: Annual Report is published annually in KPIs encourages teamwork and a collective sense of multiple formats (full report, executive summary, responsibility, whilst the second set provides direct infographics, and video) and disseminated widely accountability and responsibility to the Minister through the media and online platforms. Every and his/her team. The Minister’s KPIs are cascaded year, the Prime Minister officiates the launch event to his or her civil-service team in the Ministry. for the Annual Report, and his Cabinet team, civil servants, private sector and partners attend this The NTP KPIs are tracked and reported via an event. online reporting tool to the Minister on a weekly basis. The Prime Minister has a full view of all the KPIs and is able to provide immediate feedback. The weekly reporting means that there is a high degree of urgency to implement and resolve any bottlenecks on a timely basis, as any delays would be flagged up. In Step 6: Implementation, the PEMANDU team works closely with the respective program management teams in the various MDAs. During the implementation phase, PEMANDU plays the roles of convener, facilitator and problem solver to resolve bottlenecks or issues. As KPIs are tracked weekly, PEMANDU liaises closely with the 62 Driving Performance from the Center: Malaysia’s Experience with PEMANDU Annex 3 NTP: Reporting Burden of the MDAs 2016 KPIs reported on Total No of NKRA/NKEA/SRI Number of MDAs Weekly Monthly Quarterly Semi Annual Annual KPIs Basis Basis Basis Basis Basis NKRA Education 2 0 5 1 4 5 15 NKRA LIH 10 4 3 3 0 0 10 NKRA COL 1 0 0 1 0 0 1 NKRA Anti-corruption 5 1 2 0 1 6 10 NKRA UPT 16 0 11 0 0 1 12 NKRA Crime 3 0 3 1 0 4 8 NKEA E&E 8 30 0 0 0 0 30 NKEA Business Services 12 0 1 8 1 0 10 NKEA Tourism 7 0 10 1 1 0 12 NKEA W&R 1 0 3 1 0 0 4 NKEA GKL/KV 20 2 31 2 0 0 35 NKEA Education 6 0 1 12 0 0 13 NKEA Healthcare 7 0 12 0 0 0 12 NKEA OGE 17 0 3 17 0 0 20 NKEA Financial Services 4 0 0 7 0 0 7 NKEA Agriculture 10 0 13 0 0 0 13 NKEA CCI 5 0 10 2 0 0 12 NKEA Palm Oil & Rubber 10 0 24 0 0 0 24 SRI CSL 8 4 1 2 0 0 7 SRI HCD 5 0 13 2 3 0 18 SRI PSDT 4 2 2 0 0 0 4 TOTAL 161 43 148 60 10 16 277 Source: PEMANDU Associates Driving Performance from the Center: Malaysia’s Experience with PEMANDU 63 CONNECT WITH US wbg.org/Malaysia @WorldBankMalaysia @WB_AsiaPacific blogs.worldbank.org/category/ countries/malaysia