Pound foolish, penny wise

But not literally

Being too cautious with small amounts of money now, could cost you a lot of money later. All of us are familiar with this universal truth. In fact, there’s a well known idiom for it: penny wise, pound foolish.

But what about the opposite? What if you spend a lot of money  now, and end up having to count every penny later? That would be foolish, plain and simple. No idiom is needed, and none exists, to describe such fools.

The government spend more than US$ 10 million to hire McKinsey. That works out to about Nu 500 million.

The government spent more than Nu 500,00 million and, last week, they announced, with pride, that, in 2011, they realized a savings of Nu 370,110 from cement rebates.

I don’t know whether to laugh … or to cry.

Nervous and scared

Full of promise

The Class XII results are out. 8,576 students took the exams last year. And a good 86% of them passed.

They’ve completed school. Some of them will go to college. Some will undergo training. And the rest will enter the world of work. They’ve begun a brand new chapter in their lives, a chapter that should be full of promise and excitement. So we should be happy for them. And we should be excited for them.

But I’m not. I’m not happy. And I’m not excited. Instead, I’m nervous. And I’m scared.

More than 7,300 students passed the Class XII exams. The Royal University of Bhutan’s 10 colleges have room for only 2,000 students. And fewer than 250 students will receive scholarships to study abroad.

The rest of them – about 5,000 students – will have to fend for themselves. They’ll have to look for money to continue their studies. Or they’ll have to look for jobs.

Youth unemployment is already high. So securing jobs won’t be easy. That means that many parents will be forced to take out loans to send their children to study in India. And that means that the remaining thousands of students face the dreadful prospect of unemployment.

The government has promised full employment, especially for educated youth, by creating 75,000 jobs during the Tenth Plan. And most of those jobs were to be generated by the accelerating Bhutan’s socio-economic development (ABSD) program for which McKinsey was employed.

McKinsey’s consultants have come and gone. The Tenth Plan will be over by June next year. Youth unemployment is already high. And thousands of Class XII students will now need jobs.

So it’s time for the government to make good on their promise. It’s time to show us the jobs. Otherwise, it’s time for us, all of us, to get nervous. It’s time to get scared.

Conflicting news

How is it that one week the government calls McKinsey’s Accelerating Bhutan’s Socioeconomic Development project “A success story”, and the next week the government has used our foreign currency reserves to “rescue Bhutan from rupee crisis”?

Why would our economy need to be bailed out by using our hard earned foreign exchange reserves if the McKinsey project really was “…an initiative that created 14,000 new jobs in two years, helped tourist arrival cross the magical 50,000 figure, and will save the government Nu 360mn within its tenure, among numerous other benefits” ?

Saving McKinsey

Where's the savings?

McKinsey is costing the government US$ 9.1 million. That works out to about Nu 432 million. That’s a lot of money. The government knows it. And that’s probably why the government makes it a point to tell us that the McKinsey project will bring about “savings” in excess of the US$ 9.1 million being charged by them.

About two years ago, when McKinsey’s “accelerating Bhutan’s socio-economic development” project was first announced, we were told that, “The savings the government makes through this project will more than make up for the consultancy cost.”

A year later, amid increasing public concern about the usefulness of McKinsey’s recommendations in the tourism and construction sectors, we were told that the project had identified, “A preliminary saving potential of Nu 500M over the 10th Plan period for government has been identified.”

A few months after that, when the PM was asked why McKinsey were hired when our own civil servants could have done whatever the consultants were doing, we were told that, “through the project, a saving potential of Nu 500M in the health and constructions sectors has been identified, while additional savings are also being identified in the ICT and agriculture sectors.”

But can McKinsey really bring about savings to offset their huge fees? And, more importantly, will the savings bought about by McKinsey be real?

McKinsey have almost completed their project. So it’s time to evaluate their work. And it’s time to count our “savings”.

Fist, McKinsey says that we can save Nu 13 million by “having a long-term contract with one supplier, and bringing in supplies directly from the wholesaler” when buying medical supplies.

Okay … but is this really something that we didn’t already know? And aren’t there reasons – to prevent corruption, for example – why our financial rules purposely discourage long-term contracts with any one particular supplier or buy directly from wholesalers?

If purchasing medical supplies directly from the source is a good idea, why stop there? Why not purchase paper directly? And vehicles? And fuel?

Second, McKinsey says that using higher-grade steel – Fe500 instead of Fe415 – in government constructions would bring about savings. Higher-grade steel means higher costs, but “theoretically, upgrading to better quality of steel would mean the quantity required will be reduced.”

That’s probably correct – Fe500, a relatively new product in India, is being marketed aggressively and is already becoming popular. So McKinsey or not, wouldn’t construction in Bhutan – yes, including government construction – have naturally migrated to Fe500?

Third, McKinsey says that importing bitumen packed in polybags instead of barrels will result in savings. But it appears that polybag bitumen is not yet available in India. And anyway even if it was available in India, and even it was cheaper, wouldn’t we have the common sense to buy bitumen packaged in polybags over the more expensive barrels?

Fourth, McKinsey says that the government should buy cement directly from the cement factories, and claim for a rebate on the cement it purchases. That rebate, it turns out, is actually the commission cement manufacturers give their agents. So yes, the government will save money by going directly to the source. But in doing so, they’ll be functioning as cement agents. And they’ll drive all the current cement agents out of business.

It’s good that McKinsey is identifying savings for the government. But the savings must be real. The ones they’ve identified so far won’t do.

Where’s equity?

Bright stuff?

First, the good news: the government has granted autonomy to the Royal University of Bhutan. This means that the university can now concentrate on improving standards without the usual encumbrances of the bureaucracy.

4icu.org, a tertiary education search engine, places our university at a lowly 7,418 of the 10,000 universities they rank. Hopefully, their ranking is not accurate. Hopefully, the RUB will correct it to more accurately reflect their real ranking. And hopefully, RUB will improve on their real ranking.

Naturally, a lot more is now possible – and expected – from our university.  There’s a lot of work to do. But I’m optimistic.

Now the bad news: the first thing that an autonomous RUB has done is to start charging fees.

Actually, charging fees is not bad. Tertiary education is expensive. And, in order to improve standards and to ensure sustainability, we must start paying for college.

But the way the university is going about charging fees is questionable. 90% of their students don’t pay any money, while 10% of them are charged hefty fees. Those 10% of the students have to shell out a colossal Nu 69,000 to 83,000 depending on their course. And on top of that, they, unlike the other students, are required to pay boarding fees.

Our last poll asked if RUB should charge fees. 46% answered “Yes”. And 54% said “No”. Perhaps they too would have supported fees if those fees had been applied more sensibly.

So how should RUB charge fees? With equity!

A minority of the students – say 10% of them – should be given full scholarships for, for example, excelling in academics, sports and culture, and to promote diversity and gender balance. The rest should have to pay fees.

So, instead of 10% of the students paying Nu 70,000 per year, there would be 90% of the students paying a much more manageable Nu 7,777 per year.

And in three years, instead of 30% of the students paying Nu 70,000 per year, as envisaged by the university, there would be 90% of the students paying Nu 30,000 per year.

The RUB should charge fees if they must, especially if college standards are set to improve. But they should do so sensibly. And with equity.

Photo credit: Royal University of Bhutan

McKinsey poll

During the last session of the Parliament I asked the prime minister to explain what Mckinsey were doing that couldn’t be done by our own civil servants. Subsequently, I ran a poll that asked you “Are civil servants impressed with McKinsey’s work?”

Of the 569 who took the poll, 408 (or 72%) replied with a emphatic “No!” while only 72 (or 12%) said “Yes!” The others (16%) answered “I don’t know.”

Our poll results are straightforward: An overwhelming majority of you are not impressed with McKinsey’s performance. That is terrible, especially if, as I suspect, many of you who took the poll are civil servants.

But there’s another side to the story. Last Sunday, Bhutan Times ran a story in which many people – civil servants, ministers and counterparts – went on record to endorse the good work that McKinsey and Company were doing in our country. That is good news.

So are McKinsey doing a good job? The verdict is still out.

Polling McKinsey

During question hour today, I asked the prime minister to explain what work McKinsey were doing that couldn’t be done by our own civil servants. And in my leader to the question, I’d reported that the civil servants I’d spoken with had confided that they were not impressed with the work that McKinsey had done so far.

Naturally, the prime minister saw it differently. He claimed that every civil servant he’d talked to had been impressed with McKinsey’s work and had lavished praise on the world’s leading consultancy firm.

Perhaps.

But still, let’s conduct a poll – we haven’t had one in quite a while. Today’s poll asks,  “Are civil servants impressed with McKinsey’s work?”

Public business

Members of the National Assembly met last week to consider points submitted by the local governments and MNAs for inclusion in the Parliament’s 5th session.

The so-called “pre-agenda” meeting is an important conduit for issues of national importance to receive the National Assembly’s attention. We must take the issues seriously as they are an important part of our responsibilities. Article 10.2 of the Constitution requires that:

Parliament shall ensure that the Government safeguards the interests of the nation and fulfils the aspirations of the people through public review of policies and issues, Bills and other legislations, and scrutiny of State functions.

During the meeting, the opposition party proposed four issues to be included in the forthcoming session. They are:

  • Review of the recently approved Economic Development Policy;
  • Review of the government’s proposed reform measures for the construction sector;
  • Review of McKinsey, especially to consider how and why they were recruited, and the work that they are doing.
  • Review of the Punatsangchhu hydropower project and especially to consider why work that can be done by nationals are being awarded to foreign contractors.

The meeting decided against including these points in the agenda, arguing that the MPs would require a lot more time to study the issues carefully.

Since the opposition party feels that these issues are both important and urgent, we have decided not to wait for future sessions. Instead, the opposition party will file motions to discuss these issues during the Parliament’s fifth session itself.

The opposition party also appealed to the Honourable Speaker to permit live TV broadcast of the entire proceedings. The speaker reiterated that live TV broadcast would be allowed for all important sittings, but not for the entire session.

Managing performance

Chapter 12 of the BCSR is dedicated to performance management.

It provides a detailed prescription of how civil servants must plan, review and rate their work in order to improve productivity and accountability in the civil service. The general idea is good: it is to cultivate a performance-based culture that rewards meritocracy and professionalism. It is also intended to boost morale in the civil service.

So the RCSC’s performance appraisal system should be implemented faithfully. But, we are told, it isn’t. Civil servants say that the appraisal system is not taken seriously, and that it does not work. They also admit that appraisal forms are routinely completed ex post, when it’s time for promotions and trainings.

Now there’s a bigger danger: performance compacts. The government, with McKinsey’s guidance, has started signing performance compacts with several agencies. Unfortunately, the RCSC is not involved; they have not even been consulted. So, these compacts will just add to redundancies in the government.

But it’s more than mere redundancy. Our civil servants are confused. They cannot understand why only a few agencies and, within them, only a few officials must sign binding compacts with the government. Most of them don’t understand the new system. And, many of them don’t feel a sense of ownership.

If the performance compact can improve efficiency in the civil service, if it can increase productivity, if it can lift the morale of civil servants, it must be pursued. But for it to succeed, it must first be understood, and then fully accepted by the very people who must ultimately implement the compacts, i.e., the civil servants.

Equally important, the new system must involve the agency that is legally mandated to manage the performance of civil servants, i.e., the RCSC.

Yes, we need to allow our civil servants to improve the way they work. But what we do must be effective. And must be legal.

Performance compacts, as they are currently being implemented, are neither.

420 for McKinsey

Dasho Kinley Dorji to Kuensel, last week, defending the government’s decision to hire McKinsey:

I was told that the total amount of money the government spends on consultants in a year is actually more than the amount made public. It’s about what you are getting for what you are paying. We need to define what is too expensive and too cheap.

That we hire too many consultants is common knowledge. But that the government spends more for them than we are led believe is not.

We should be very concerned if we suspect that the government is misleading the public. And we should be doubly concerned if the government uses that very transgression to justify spending even more money to hire even more consultants.

McKinsey is costing us US$ 9.2 million. That’s about 420 million ngultrums.

420 million for 17 McKinsey consultants. But they are not even full-time consultants. Eight of them will work in Bhutan only in the first year. And, five of them will be available only in the second year.

And the remaining four? They, we are told, are “…top leaders at the prime minister’s level who fly in and out of the country.”

Incredible!

Incidentally, the government spends Nu 440 million a month on pay and allowances for the entire public service.

That’s 440 million for the more than 21,000 full-time employees of the government. And that includes all civil servants, ministers, members of parliament, constitutional post holders, local functionaries, and those serving abroad.

Now back to McKinsey. The government is paying them 420 million. That’s a lot of money. Let’s hope that they are worth it. If not, we’ll be forced to shout: “420!”