Setting strategic direction
Governments may use various tools and techniques to consider different future scenarios and their likely impact. Once they have analysed possible futures and the possible implications, they still have to translate the results into action. It is not enough to make predictions about the future. Governments must act on those predictions, and do so in a strategic and comprehensive manner. In addition, government leadership aspirations will play a key role in setting the direction of the state, outline their vision and objectives for the future and provide a coherent framework for policymaking over the long term.
Nations also have to consider the best mechanisms for driving policy and delivering services. These can range from government ministries, departments and agencies through to government-owned enterprises (also known as parastatals), public-private partnerships, partnering with the third sector or even helping citizens deliver services themselves.
For governments, the articulation of a vision serves a number of purposes. As the Japanese proverb goes, ‘vision without action is a daydream; action without vision is a nightmare’. Having a vision is important. It may set out an organization’s aspirations and philosophy, state its purpose and show the direction the organization intends to head in. For employees, the vision can create a cohesive sense of purpose, galvanizing action in a particular way. A shared vision can create shared meaning and guide decision making.
National visions
It is not just companies that see the value of the vision statement. Effective leadership has long been associated with having a strong sense of vision and purpose. Political leaders have used vision to create cohesion and purpose among their followers. John F Kennedy, for example, famously united a nation behind his vision of America putting a man on the moon by the end of the 1960s.
More recently, a growing number of countries, such as Singapore and Finland, have established a clear national vision. They do this both through an explicit articulated vision and by identifying a number of areas of government activity and the priorities and ambitions in each.
An OECD survey of twenty-seven responding countries looked at the functions of the centre of government and, as part of that, at the issue of strategic planning in central government.26 The survey asked whether there was a document that outlined a strategic vision for the country, and if so, who prepared that document, what kind of time horizon was involved and who had access to that document.
Of the responding countries, twenty-one (77 per cent) had a strategic vision document. In most cases, that document outlined a vision for the next one to five years. However, in one case, the vision extended beyond twenty years, with seven countries looking beyond six years. Of the twenty-one countries that replied to the question about access, eighteen made their vision document available to the public, with fifteen nations placing the document on the Internet.
Transformation at work: NSW 2021
In Australia, the government of New South Wales set out its vision for the future in its report ‘NSW 2021: A plan to make NSW number one’. The ten-year plan aims to ‘rebuild the economy, provide quality services, renovate infrastructure, restore accountability to government, and strengthen local environment and communities’.27
NSW 2021 focuses on five strategies which contain 32 more broadly defined goals and 180 more specific targets. The first goal is to rebuild the economy, and in doing so, make the state capital, Sydney, an economic and financial powerhouse in the Asia-Pacific region. To achieve this, NSW 2021 introduces a range of economic targets, including employment, business, investment and gross state product per capita.
The state’s vision for the future also promises better public services, improvements in infrastructure and handing citizens more power. It gives local communities increased control over issues such as planning, conservation, the quality of the built and natural environment, and policies directed at service provision for an ageing population.
Finally, state accountability is to be increased, with greater public access to information, greater participation in local government decision making, and a focus on improving satisfaction with government services. Usefully, the state’s vision document not only sets out its goals and targets, but also designates the ministers and agencies accountable for those goals and targets.
Transformation at work: Kenya Vision 2030
The Kenyan government announced its vision for the future in 2008. The new Vision 2030 followed on from the government’s economic recovery strategy, which ran from 2003 to 2007.28 The government’s overall objective is to ‘create a globally competitive and prosperous nation with a high quality of life by 2030, that aims to transform Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment’.
Founded on three pillars – economic, social and political governance – Kenya’s Vision 2030 is being implemented as a series of five-year Medium Term Plans (MTP), and the current plan runs from 2013 to 2017.29
Achievements to date include a 40 per cent increase in early years school enrolment; the construction of 2,200 km of roads, well above the 1,500 km target; the connection of Kenya to global Internet networks via three sub-ocean fibreoptic networks; and the enactment of a new constitution in 2010.
Many challenges remain if Kenya is to reach the stated objectives. A number of areas have been targeted as a priority for the second MTP. Within health, the government is extending access to healthcare as part of its long-term objective of providing universal healthcare. It is also investing in medical research and pharmaceutical production, among other measures. On the economy, as it moves towards its overall objective of ten per cent GDP growth by 2017, Kenya is diversifying, moving away from its reliance on agriculture and the services sectors. In terms of governance, the Kenyan government is focusing on implementation of the new constitution.
As Vision 2030 moves forward, priorities are adjusted to make sure the vision stays on track. So, for example, in the second MTP, two important national initiatives were introduced. Following the discovery of oil in Kenya in commercial quantities, the development of oil and other minerals is added as a priority sector under the economic pillar. The government has also extended its foundations for national transformation to include building national values and ethics as part of creating a strong and distinct Kenyan identity.
Positioning by policy
A national vision needs to be cascaded into long-term policies in three key areas: the nation’s attitude towards global markets; the pillars of economic growth as assessed by the mix of labour, capital and total-factor productivity in contributing to total output; and the government’s emphasis on and approach to supporting sectoral drivers of the economy.
A good example of national positioning is demonstrated by Singapore, which has policies that touch on all three areas. The first area is the country’s position regarding global markets, and whether it adopts an open economy or an economy that is more protected. In Singapore’s case this involves having trade partners at multilateral, regional and bilateral levels; an open economic approach via a lack of import tariffs, export subsidies or exchange restrictions; a strengthening of competition laws; and privatization involving international corporations.
A second issue is articulating the pillars of economic growth, which for Singapore in particular involved strong support of the knowledge economy – with considerable investment in research, innovation and enterprise – and also creating an education and training system that is dynamic and relevant to industry demands.
For economic sectoral drivers, Singapore identified electronics, info-communications and media, and biomedical sciences as sectors where the knowledge economy can be used to sustain competitiveness. There were also some exceptional measures to support viable companies in their attempts to access financing in the post-2008 financial crisis. Overall, however, the extent of government support for the different business sectors in Singapore is low.
Other governments may favour greater state support for various business sectors. Norway, for example, supported its cement industry through a liberal application of competition policy, allowing cartels to create economies of scale and competitive pricing in the international market. The Norwegian government also offered support to domestic exporters of raw materials and infrastructure services via state-funded export credit schemes.
Transformation at work: strategic action in Abu Dhabi
Progress towards meeting national objectives is more likely if a government implements actions that are measurable. Governments for the new age will create strategic action plans with outcomes or indicators linked to the national vision.
A good example is Abu Dhabi in the United Arab Emirates. Abu Dhabi’s Economic Vision 2030, set out in a 142-page document, has as its primary goals ‘a safe and secure society and a dynamic, open economy’.30 It describes a future Abu Dhabi as a ‘sustainable, diversified, high-value-added economy that encourages enterprises and entrepreneurship and is well integrated in the global economy leading to better opportunities for all’.
Diagram 2. Abu Dhabi’s Economic Vision 2030
Source: Abu Dhabi’s economic vision 2030
The Abu Dhabi government identifies nine pillars that will serve as the foundation for the Emirates’ social, political and economic future. Those pillars are a large empowered private sector; the creation of a sustainable knowledge-based economy; an optimal, transparent regulatory environment; a continuation of strong and diverse international relationships; optimization of the Emirates’ resources; premium education, healthcare and infrastructure assets; complete international and domestic security; maintaining Abu Dhabi’s values, culture and heritage; and a significant and ongoing contribution to the Federation of the UAE.
These are supported by focusing on four areas as a priority: economic development; social and human resources development; infrastructure development and environmental sustainability; and the optimization of government operations.
In addition, the Abu Dhabi government set out a detailed framework of its plan to achieve the vision. The framework covered the Emirates’ economic development strategy and policy and regulatory enablers. The economic development strategy outlined the sectors that will be the engines for future growth, the enterprises that will drive growth, competitiveness and the regional and/or social groups that policies should focus on. Policy and regulatory enablers included the business environment, fiscal and monetary policy, infrastructure and services development, and human resource development.
A number of objectives for the policy focus areas – thirty in total – are described in detail. The document also outlines a range of measures to be used to assess success, and check that the government remains on track and is making progress towards its vision.
Taken together, the separate sections in the Abu Dhabi Economic Vision 2030 document provide a road map for the future of Abu Dhabi. The document contains all the essential elements required to establish an effective national position. It offers an overarching vision as well as details of the broad areas of government activity, sectors that are most important in terms of achieving the vision, policy priorities, areas of policy focus and associated objectives, and measures and metrics for assessing progress.
Hybrid future
As we have seen, governments are setting out a well-defined position to signpost their future direction, often in the form of an explicit vision, and with policies that define certain aspects of the government’s approach, such as the attitude to global markets – how open it is, the pillars of economic growth, and the sectoral drivers of economic growth.
Long-term outcomes are specified and a framework provided within which national strategies and implementation plans can be developed. National objectives are further detailed into strategic action plans that are then linked to outcomes or process indicators.
In the past, governments would then have developed and implemented policies through the public sector, designed to achieve their vision and drive their agenda forward. Today, however, many governments no longer depend predominately on public-sector institutions to build a nation that meets their hopes for the future.
The line where government meets non-government is increasingly blurred. ‘Hybrid governance’ is a term used to describe the different types of entities that occupy this space, such as publicly financed corporations, sovereign wealth funds or special economic zones (SEZs).31
Parastatals are entities totally or partially owned by the government, but mostly privately managed, occupying the hybrid space. Parastatals are not new. While they might not have been termed as such, there are examples of entities that were owned, either completely or in part, by the public but managed privately, dating back to the 1600s. The East India Company is a famous example. Until it was brought under the direct governmental control of the British parliament in the 1700s, it operated under a royal charter granted by Queen Elizabeth I in 1600. A hugely successful endeavour for most of those involved, the Company administered the territory of India, ran its own army and amassed tremendous wealth through trading and colonization.
But while parastatals may have a long history, their fortunes and popularity with governments have fluctuated. There is some evidence of state-owned enterprise prior to World War I.32 They certainly had their uses in the post-war period. In an America suffering from high levels of unemployment and widespread poverty in the wake of the Wall Street Crash and the Great Depression, the concept of government-owned enterprises was seen as a way of providing work for the masses. Governments that have adopted a liberal, laissez-faire, free-market approach to economics have tended to divest the state of enterprise ownership through privatization programmes.
Today, parastatals are on the increase, both in developed economies, as they struggle to emerge from the post-economic crisis depression, and in developing economies. In Russia and Brazil, government ownership accounts for 30 to 40 per cent of stock market capitalization; in China the figure is 60 per cent.33 Strikingly, 208 state-owned corporations featured in the most recent Forbes Global 2000 list of the world’s largest corporations.34 It also estimated that some 90 per cent of the world’s oil and large percentages of other resources were controlled by state-owned entities.
Parastatals cover the full breadth and depth of government activities and industry sectors. There are parastatals involved in utilities, healthcare, brewing, telecoms, media, energy, financial services, sports teams, even in gambling and lotteries (including online gambling such as Internet poker). Many are well-recognized names globally, such as the BBC, Gazprom and the Bank of China.
One reason for the current popularity of parastatals with governments is that they are searching for new solutions to the challenge of delivering effective public services. It is difficult to keep pace with a rapidly globalizing world where technology, among other factors, is transforming the way organizations do business. Governments need to be more agile and flexible with access to cutting-edge specialist expertise, and there is a sense that they can achieve this via parastatals. In developing nations, particularly, parastatals are able to offer advantages not always available to governments. They may be able to attract capital in a way that a government cannot on its own. They have been able to obtain access to global markets and expand their footprint through targeted investments. By adopting governance and managerial practices from the private sector, they have been able to create attractive environments for talent and conducive institutional setups for effective and efficient operations. Practices embraced by parastatals include independent boards, accountable governance frameworks, competitive pay and incentive schemes, as well as a focus on leadership development.
Parastatals also offer potential regulatory advantages. A government may want to attract certain businesses but the businesses may not like the regulatory environment created by that government. So the parastatal provides a way of bridging the gap, and providing a more benign and attractive regulatory environment for specific business that the government wants to attract.
This can be achieved with special economic zones, for example, where the SEZ provides a more liberal trading environment than is normally available in that country – so the SEZ may be exempt from various taxes, quotas and laws in order to promote international trade. The term SEZ covers a variety of different categories, such as free trade zones (FTZs), free zones (FZs), export processing zones (EPZs) and free ports, for example, all with similar objectives. Many states have adopted specialized economic zones. Both China and India have large numbers of SEZs, and China has even helped to establish SEZs in Africa through Chinese state-owned enterprises. In the Middle East, there is an ongoing programme of SEZ development, such as the Industrial City of Abu Dhabi and the Dubai International Financial Centre.
Succeeding with parastatals
States cannot afford to become complacent. In the past parastatals have been dogged by criticism, whether that is for bad management, being poorly resourced, having politically motivated executive appointments or failing to employ sufficiently talented and expert staff. Parastatals must be run well, they must have robust governance and appropriate legal frameworks, high-quality personnel, and a mandate and performance measurement regime tied to national objectives.
Successful parastatals appear to share some common features. For example, a parastatal’s strategy, including its role, purpose, and objectives, should be clearly defined and articulated. Effective management and operation is critical. Parastatals need to be resourced properly – they need adequate access to funding and expert staff, for example. Monitoring and performance evaluation criteria need to be put in place that are both informed by international best practice and tied to strategic economic and sociopolitical key performance indicators.
Evaluation should be closely linked to the ability of the state-owned enterprises to contribute, now and in the future, to the national strategic goals as set out in any national positioning statement.
Parastatals also need robust governance with the necessary supporting policy and legislative framework. A central body can be created and tasked with oversight and other responsibilities for parastatals. The governance model should provide sufficient space for parastatals to be viable and effective, while at the same time ensuring that they contribute to the government’s development plans. Parastatals are typically overseen by a dedicated government department or by the department of finance.
The OECD developed corporate governance guidelines for state-owned enterprises in 2005. These filled an important gap and were widely disseminated and put into practice. As we write, these guidelines are being reviewed to take into account developments since their adoption and the experiences of the growing number of countries that have taken steps to implement them.
In a nutshell: setting strategic direction
Governments increasingly appreciate the value of clearly outlining their strategic direction. Setting out a vision, articulating values, detailing a mission statement, all signal intent and a sense of purpose, focusing minds on the eventual goals and objectives. In addition, articulating a well-defined vision of future direction driven by leadership aspirations and evidence-based analysis provides a coherent framework for long-term policy and decision making.
A government’s vision should cascade into measurable objectives and impactful strategies, policies and plans, and immediate actions that will help in achieving objectives. This needs to be supported by innovative institutional arrangements to overcome the traditional limitations of governmental machinery. For example, hybrid institutions (blending private and public governance models) offer greater agility, can work more effectively and efficiently within the global commercial world, and potentially play a key role in delivering a government’s agenda.
In addition, a rigorous performance framework – one which sets out clear accountabilities for stakeholders and measures progress in achieving goals – is essential to the realization of the vision.