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developing measures aimed at improving compensation of public servants and financial, economic, and logistic support of the public service of the Russian Federation, and at using advanced information technology in the public service system in a rational manner;

implementing staff training programs for the public service of the Russian Federation and professional development programs for public servants; and forming a system of management of the public service of the Russian Federation.

2.16 The specific objectives are described in the Federal Program as following:

creating conditions for optimal organizational and legal support of the public service;

defining roles, powers, and responsibilities of public servants on the basis of job (service) descriptions;

implementing new techniques for planning, financing, stimulating, and assessing public servants activities, and using public service system resources in a rational manner;

ensuring openness of the public service for the benefit of civic society development and strengthening of the state;

applying efficient methods for selecting qualified personnel for the public service and for assessing professional performance of public servants, as well as creating conditions for their job (service) promotion;

implementing staff training programs for the public service and professional development programs for public servants;

implementing mechanisms for identifying and solving public service-related conflicts of interest, as well as introducing a legal regulation of professional ethics of public servants;

creating an optimal material and technical environment for efficient functioning of the federal public service and for performance by public servants of their official (service) duties; and ensuring the development of a public service administration system.

2.17 During 20022003, significant progress has been achieved in conceptualization of the reform approaches and preparation of the legislation that is to provide a basis for reform measures implementation. A framework Federal Law On State Service System of the Russian Federation, enacted in May 2003, established a two-level system of public service in Russia:

federal public service (administered by the Federal Government); and civilian public service of a subject of federation. Federal public service is subdivided into civilian, military and law enforcement service. Rule of law, pre-eminence of human and civil rights and freedoms, equal access to public service for all citizens, integrity of the public service, interconnection of civil and municipal service, openness and accountability, professionalism and protection from undue interference in public service activity by private individuals or legal entities are declared as guiding principles for public service system in the country. The law introduces a notion of a consolidated register of public servants positions as well as class, diplomatic, military, and special ranks that are to substitute the professional grades that existed under the previous legislation.

2.18 The framework law requires separate laws to be enacted for each type of public service (civilian, military, and law enforcement). To this end, a draft Federal Law, On State Civil Service of the Russian Federation, was prepared and approved by the State Duma in the first reading on November 2003, and the second reading on March 2004. This Draft Law defines rights and obligations of civil servants (Articles 14, 15); limitations and prohibitions of the state service (Articles 16, 17); requirement to the conduct of the civil servants (Article 18);

regulation of the conflict of interests (Article 19); and obligations to annually submit information on income, property, and related obligations (Article 20). The draft law provides for a classification of civil service positions in accordance with categories and groups of appointments (see Table A2.2 in Annex 2.2). The draft law contains a number of important innovations, including competitive recruitment for civil service positions; introduction of job descriptions that should, inter alia, contain performance indicators for each position; and changes in remuneration related to introduction of performance-oriented incentives.2.19 In the framework of the civil service reform based on functional reviews several experiments related to introduction of performance budgeting and performance management have been launched in five pilot regions participating in the Program.

2.20 Significant attention is also given to the administrative reform agenda that, in the narrow sense, includes inventory of functions of the federal executive bodies and restructuring and right-sizing of the government. Priority areas for implementation of administrative reforms for 2003-2004, defined in the Presidential Decree No. 824 dated July 23, 2003, "On Measures of Implementation of Administrative Reform in 2003-2004," are the following:

restriction of the state interference in economic activity of entrepreneurs, including restriction of state over-regulation of the business;

elimination of duplication of functions and authorities of organs of the Federal Executive powers;

development of the system of self-regulating organizations in the economy;

organizational separation of functions related to the regulation of economic activity, control and supervision, management of state property and provision of service to the citizens and legal entities by the state structures; and completion of the process of separation of functions between structures of executive power at federal and regional levels, optimization of the activity of the territorial structures of the federal executive power.

2.21 In February 2004 a specially created Government Commission chaired by the Vice Prime Minister completed the review of all 5,600 functions of the federal executive bodies and it was expected that about half of the functions would be revised or abandoned. This would require significant changes in the legal and regulatory framework to be implemented by the end of 2004. The results of this inventory of functions17 became the basis for a major According to some analysis, however, the provisions for linkages between pay and performance in the draft law are still not sufficient since about 84 percent of pay would not depend on performance (HSE, 2003).

It should be noted that the review looked at the functions as they are set up in the existing legal and regulatory framework, without any analysis of whether these functions have been actually implemented or whether the functions have been actually performed but are not reflected in the regulatory framework. More detailed agency-specific reviews would be needed later to increase the efficiency of executive bodies. These future reform in the federal executive government structure launched by the President in early March 2004. As opposed to the previous structure of the federal government, the new one introduces a clear mechanism for division of authority and responsibility between the three tiers of the executive power: federal ministries responsible for policy development, federal services for exercising control and supervisory functions, and federal agencies in charge of public service delivery. The number of federal ministries was drastically cut from 23 to 14. While the division of particular functions between various types of the newly created government bodies, as well as establishment of new benchmarks regarding both employment and payroll levels and wage differentiation have not been completed yet, significant attrition in the federal executive branch is currently expected.

2.22 As of March 2004 some work on a number of issues related to administrative and civil service reform, including development of concepts and legal framework providing for introduction of administrative operations manuals, quality, and accessibility standards for public services, e-government architecture, and deregulation issues as well as access to information and development of the pre-court appeals system, had been started. Some achievements have been made in introducing performance-oriented budgeting at the federal level18 and initial steps have been taken to strengthen anticorruption activities. This demonstrates the comprehensive nature of public sector reform that is being prepared in Russia with most of the implementation still planned for the future.

C. A FRAMEWORK FOR THE ASSESSMENT OF REFORM IMPACT 2.23 As described in Section B civil service reform includes a variety of measures that, for the purpose of estimating the fiscal implications of the reform, could be grouped into the following key components.

Pay reform intended to reduce the existing gap between the compensation in the public and private sectors (these efforts refer specifically to salary adjustments in core government administration employment). Implementation of this component of reform would have direct fiscal implications caused by an increased wage bill.

HR management reform involving the changes in recruitment, promotion, rotation of staff, training, performance appraisal, disciplinary procedures, career paths, retirement procedures, etc. Implementation of this component would lead to increased expenditures on human resource management and training. Modernization of public service that would entail development and introduction of new business processes and procedures based on modern information reviews should be also linked with the introduction of administrative operations manuals and automation of government business processes (see HSE, 2004).

As a part of the 2004 budget cycle, the Ministry of Finance requested all the agencies that are directly funded by the federal budget to include into their budget requests a description of their mission, functions and objectives, as well as provide a budget allocation of the requested funds across the specified functions with a certain commitment to achieve specific performance targets.

Another possible fiscal implication of the HR reform would be an increase in intensity of inter-regional staff rotation. Currently the scope of rotation inside the civil service is limited because of the fiscal constraints (i.e.

provision of housing, relocation benefits, etc.), and usually it is HQ-directed. Since to the knowledge of the authors, there have been no estimates yet for the desirable intensity of rotation, this aspect of reforms is not taken into account for the purpose of the Note.

technologies and e-government approaches. The direct fiscal implications of this component include additional spending on equipment, use of infrastructure and support services (such as telecommunications), and other overhead costs of core government administration. The costs of modernizing the public service would entail both significant investments and recurrent expenditures on operation and maintenance of the investments made. Estimating the requirements for investments needed for public service modernization is a separate significant task that itself would suggest a number of reform scenarios. Hence, in this Chapter we will be focusing exclusively on current expenditures.20 For the purposes of this analysis, it is assumed that though automation of some functions within the government may lead to reduction in staffing, this effect is not analyzed separately for this reform component. All expected reductions in staff levels in the model are associated with administrative changes and are accounted for under the public administration reform component.

Public administration reform21 includes decreasing the scope of government interference in economic processes, eliminating duplication in functions and authorities of different federal executive bodies, development of self-regulating organizations, differentiation between regulatory, supervisory, property management, and service provision functions of the government, as well as separation of responsibilities between federal and regional executive bodies. It is expected that the reform process would involve restructuring and right-sizing of the core government administration, better allocation of functions between various government agencies, out-sourcing of non-essential functions to the private sector, etc. This component of reforms would mostly affect the executive branch of the core government administration22. The reform would result in budget savings from the reduced number of core government administration employees, as well as in significant efficiency gains23.

2.24 The ongoing debates on civil service reform are mostly focused on salary increases and other improvements in the civil service (both federal and subnational), especially in the executive branch of the federal civil service24. However, the political economy of the reform suggests that a significant pay adjustment in the civil service is likely to become a trigger for corresponding increases in compensation in the whole core government administration25, as Fiscal costs of implementation of some HR management reform components (for example, introducing competitive recruitment for civil service positions) have been estimated by HSE (2004).

Some alternative estimates of the costs of public service modernization related specifically to implementation of electronic administrative manuals are presented in the recent HSE (2004) report.

Formally, the administrative reform in Russia is not seen as a part of the civil service reform. It is considered to be a complementary reform with the priorities defined in Presidential Decree No. 824 of July 23, 2003 On Measures of Implementation of Administrative Reform in 2003 2004.

Civil servants employed by other branches of the core government administration may be affected by other planned/on-going reform efforts (such as a judicial reform). However, for the purposes of this Chapter it is assumed that these other branches remain unaffected by the administration reform.

In the framework of public administrative reform, it is envisaged that some of the functions of the government entities would be abolished, while some of these functions would be transferred to quasi-government entities.

For the purpose of this Note, by a reduced number of core government employees we mean absolute reduction in a number of civil servants/public employees as a result of abolishing some of the existing functions.

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