Efficiency of the State, Governance and Red Tape Reduction
Why Efficiency of the State, Governance and Red Tape Reduction?
State inefficiency translates into substandard, low-quality public goods and services. As a result, resources that could be invested in production are diverted both due a high taxation and to the need for the private sector to take on responsibilities that belong to the state. Both impose costs on society.
The Brazilian State spends a lot on cost financing. Increasing the efficiency of the state entails allocating more funds for investment, systematically evaluating government projects and programs and implementing mechanisms to prevent and fight corruption.
For this purpose, it is necessary to reduce red tape, improve the capacity of the state to plan and implement its policies and investments and increase transparency in the public sector.
VISION FOR 2022
The Brazilian State improves its management efficiency and effectiveness and carries out a comprehensive red tape reduction program. Public policies are evaluated with greater transparency and management is professionalized based on the adoption of criteria to fill most public positions. Governance and the fight against corruption are improved on an ongoing basis. The capacity and agility to invest and to open and license businesses are significantly expanded.
How are we doing?
Brazil ranks last among 18 countries in the Efficiency of the State indicator in the report
Competitividade Brasil 2017-2018: comparação com países selecionados.
EFFICIENCY OF THE STATE RANKING
Where do we want to get to?
Main Goal: Improving the efficiency of public spending by increasing public investment
Macro objective: Increasing the share of investment in government spending from 3.9% to 5.0%
CENTRAL GOVERNMENT SPENDING WITH INVESTMENTS IN RELATION TO TOTAL CENTRAL GOVERNMENT PRIMARY SPENDING
Improving the quality of public services translates into greater efficiency in resource allocation and in the management of policies
The Brazilian State has not been providing basic services to the population appropriately. Insufficient and low-quality public goods and services make economic activities more expensive and discourage investment.
The inadequacy of public services is mainly due to the poor quality of public management. It is possible to improve the quality of the services provided without increasing costs.
Evaluating public policies and improving the management of processes, results and human resources are key requirements for improving service delivery without putting pressure on public spending. Policies must have goals and metrics defined before they are implemented and it is necessary to evaluate them periodically to check whether they are achieving their goals. This way, programs can be expanded with positive results and other programs that are not yielding the expected results can be discontinued.
Sustained economic growth, at a high level, requires structural adjustments in the public sector. Accurate evaluations of the costs and benefits of programs and policies with the aim of ensuring more productive spending and balanced public accounts is even more essential in a scenario of increasing fiscal constraints.
The public management modernization agenda must be designed to promote a more efficient state, one that acts with transparency and in partnership with the private sector, so as to increase its capacity to produce benefits for society.
PUBLIC SPENDING QUALITY RANKING
Increasing the efficiency of public spending
Improving Brazil’s score on efficiency in the management of public finances from 1.63 to 5.00
- Encouraging cost-benefit analysis of government actions with a high impact on competitiveness
- Evaluating resource allocation in the federal budget and its impact on competitiveness
- Modernization of public administration
Increasing transparency in the public sector
Improving Brazil’s score on transparency of government policy from 1.95 to 4.50
- Improving the tender law
- Implementing mandatory consultation mechanisms in the process of regulating laws
- Regulation of lobbying
Advancing the competitiveness agenda depends critically on improving links between public policies
The management of the competitiveness agenda in Brazil is fragmented between several programs carried out by different agencies and bodies, making it difficult to align objectives and measure results and leading to repeated and even conflicting efforts. Ensuring effective links between public policies is a key measure for Brazilian industry to become a global, competitive and sustainable industry.
The model currently adopted for the management and governance of the state is not leading to the transformations required to improve competitiveness. It is necessary to improve institutional frameworks and focus on the competitiveness agenda.
The state needs appropriate mechanisms to coordinate and align medium- and long-term strategies and objectives on an ongoing basis. Clear priorities and responsibilities need to be set to make it possible for the agendas under the responsibility of different government agencies and bodies to be managed with a view to delivering results.
New links and cooperation arrangements should be established among governmental, entrepreneurial and political actors and these interactions should be regulated and coordinated in such a way as to make it possible for bottlenecks hindering competitiveness in the country to be eliminated.
The performance of regulatory agencies needs to be improved. It is necessary to evaluate impacts for companies and consumers before, during and after the implementation of regulatory decisions. Adopting technical criteria to fill public positions is one way of furthering this process. Disseminating best practices in regulatory quality, such as public consultations, regulatory impact assessments, and public policy evaluation, is another way.
CAPACITY OF THE FEDERAL ADMINISTRATION TO PROMOTE A RESULTS-ORIENTED CULTURE
Increasing governance effectiveness
Improving Brazil’s score on effectiveness in implementing government decisions from 2.68 to 5.00
- Ensuring sound governance as part of the competitiveness agenda
- Improving the federal regulatory system
- Improving regulatory quality
Improved public safety should translate into better quality of life and into a more favorable environment for economic activity
High levels of crime and violence mean losses for both society and the economy of a country.
Poor public safety forces people to pay twice for their security, first in taxes and second in private security solutions. Funds that could have been allocated to production are diverted for purchasing safety equipment and hiring private security and insurance, reducing the productivity of the economy as a whole.
Investment decisions are also affected by violence. According to CNI (2017b), one in every three industrial entrepreneurs considers that lack of security affects investment decisions in terms of company location. More efficient locations - close to the source of raw materials or to consumers - are disregarded for insecurity reasons, increasing production costs.
Another indirect impact of the lack of safety lies in the fact that it reduces labor productivity. Anxiety about one’s own safety and that of one’s family affects the learning and concentration of workers, in addition to generating delays and even absence from work.
Outside urban centers, insecurity problems such as weak surveillance of borders - routes for smuggling goods, weapons and drugs - and a high rate of cargo theft in highways are evident.
In order to address the problem of lack of security, Brazil needs to modernize and integrate national security systems, increase border control and fight cargo theft. Consumption of drugs, pirated goods and stolen goods also contribute to increased violence and should be discouraged.
IMPACT OF LACK OF SECURITY ON INVESTMENT DECISIONS IN TERMS OF COMPANY LOCATION
Improving public safety
Improving Brazil’s score on crime costs for business from 2.68 to 4.00
- Encouraging the creation of a national public security plan
- Encouraging the creation of a national security information system, with standardized data available to society
- Promoting the fight against piracy and the sale of stolen goods
HEALTH CARE SYSTEM
Improved health care services translate into better quality of life and higher labor productivity
The success of a country depends on the quality of its human capital, which in turn depends on ensuring its population access to a health care system in charge of promoting, preventing, protecting and recovering the health of citizens according to their needs.
The Brazilian health care system (both public and private) has not been doing this appropriately, resulting in early deaths and chronic illnesses. In the context of workers’ health, the effects on companies can be felt in the form of lower productivity, recurrent and prolonged absences from work and higher costs with employee replacement and related insurance.
The Brazilian health care system is expensive and ineffective because it is not focused on prevention, elimination of risk factors and continuous control of chronic noncommunicable diseases, such as diabetes and high blood pressure, among others. When such diseases are not controlled at a low cost through primary care and drugs, patients with these diseases are treated for complications in the emergency wards of hospitals.
Private spending on health care accounts for 57% of all funds earmarked for the Brazilian care health system (WTO, 2018), about half of which refers to health insurance plans in the supplementary health care system. Collective health insurance plans account for 80% of the coverage of health insurance (National Health Agency - ANS, 2017) and coexist with above-inflation increases in their costs.
Increases in the costs of health insurance plans are due to three main factors: lack of moderation in their use by users; judicialization for accessing technologies without due confirmation of benefit for patients in relation to the costs of the care involved; and wastage of human and material resources in excessive patient examinations and procedures.
The management of workers’ recovery and return to work also needs to be improved, since the care provided to workers on sick leave has not been promoting their effective recovery, causing them to relapse into sickness and to go on sick leave up to 10 times a year.
SPENDING ON HEALTH CARE BY SOURCE OF FUNDING (2015)
Improving the performance of the health care system
Improving Brazil’s score on appropriateness of the health care infrastructure from 1.82 to 3.50
- Strengthening health promotion and prevention programs and services
- Improving the regulation of the supplementary health care system
- Improving the quality of the care provided and the management of the rehabilitation of workers on leave due to accidents and diseases
RED TAPE REDUCTION
Excessive red tape reduces productivity in the economy
One of the reasons for the low productivity in the Brazilian economy is the excessive red tape faced by companies, which diverts resources from productive activities to non-productive ones. Instead of concentrating their efforts on their own businesses, companies are forced to spend a large amount of time and resources to start a business, obtain the required licenses and authorizations, handle import and export procedures and pay taxes, i.e. to comply with the legal requirements for their operation.
Regulating economic activity is important to protect society and companies. However, when such regulations are accompanied by excessive red tape, they do more harm than good. Excessive red tape contributes to increasing the size and expenditures of the state and favors corruption and informality.
EASE OF DOING BUSINESS RANKING
Reducing excessive bureaucratic procedures that affect the business environment
Improving Brazil’s score on business losses caused by red tape from 0.67 to 2.00
- Simplifying and stream lining procedures for obtaining licenses and authorizations
- Providing incentives to the self-regulation of productive sectors
- Developing strategies and consolidating proposals to reduce red tape in matters related to taxes, the environment, labor relations, and foreign trade policies
Corruption and embezzlement of public funds promote inefficient allocation of capital, apart from resulting in increased insecurity for investors
There is a long-term negative relationship between a country’s development and the degree of corruption in its institutions.
Embezzlement of public funds and the practice of favoring interest groups over others mean that projects actually implemented may not necessarily be the most efficient ones. Inefficient projects and policies generate low productivity. Corruption drives investors away by generating legal uncertainty and increasing Brazil’s risk premiums.
In addition, corruption undermines the belief in democracy and politics as a means of social change and enhances political instability.
Brazil is going through a key moment in its fight against corruption. It is essential to strengthen institutions and improve instruments designed to prevent and fight corruption. Likewise, it is also important that companies improve their compliance mechanisms.
IRREGULAR PAYMENTS AND BRIBES
Strengthening and improving anti-corruption mechanisms
Improving Brazil’s score on presence of corruption from 0.61 to 2.50
- Improving the Anti-Corruption Law
- Supporting compliance in the private sector
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