EWI-Review 3 / January 2008

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Combining Economy, Science and Innovation for a better society

Periodical of the Department of Economy, Science and Innovation | January 2008

N3

TowardsTowardsimprovementimprovement

Flemish government

EWI 3 ENG.indd 1EWI 3 ENG.indd 1 03-01-2008 13:52:0103-01-2008 13:52:01


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The last edition of EWI Review looked at foresight studies and prospective policy. Little did we know that there

would be some major changes in store for EWI itself, with a new (acting) secretary-general and minister now

in place.

In the wake of these events, the issue of the division of tasks between the administration and ministerial offices

has come to the fore. Even a recent OECD study on administration identifies this as a Belgian Achilles heel. The

administrative reform - known in Flanders as Beter Bestuurlijk Beleid(Better Administrative Policy) - should

in theory alleviate some of the problem and recent decisions by the Flemish government in response to the

Flemish ombudsmans report will help to consolidate the trend.

For the central theme of the third EWI Review, we have chosen another topic dealt with by the same OECD

study, namely government efficiency. It too crops up regularly in the media and elicits strong political and public

opinion. Keen to examine the issue from various angles and avoid a one-sided sound-bite approach, we will

examine, amongst other things, the proposals put forward by the Flemish administration itself on this subject

(see p. 32).

EWI too is moving in the right direction. With the new FRIS change programme (see p. 23), we are seeking

to promote efficient decision-making on R&D. We also examine what factors influence the efficiency of the

doctoral process (see p. 38) and look at efficiency monitoring for legislation (see p. 26). This issue also boasts

the usual features, including an explanation of the -index (see p. 35) and the division of responsibilities in

the field of science, technology and innovation in Belgium (see p. 8). Finally, we report on the sad story of the

Botanic Garden (see p. 36) - an example of inefficient cooperation between different governments in a federal

state - in the hope that the situation there will finally be resolved.

In short, what we have for you is a varied issue with a topical central theme, which

will hopefully make for exciting reading, and which comes with our very best

wishes for the New Year. Please feel free to send us your reactions at:

www.ewi-vlaanderen.be/reageer.

Peter Spyns

General Editor

Are we on the right track?

> Welcome

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> Results

Civil servants inthe private sector:

a contradiction interms?DEFINING THE CUTTING EDGE IN REGENERATIVE MEDICINE

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1 The aim of the interface policy is to ensure (rapid) throughflow to companies of knowledge developed at universities and university colleges. Spin-offs are locatedat the interface between research and business. They are a way of translating research findi ngs into practical innovations (= research transfer).

Youve been a civil servant for over15 years, dealing with the theory ofinnovation on a daily basis, but havenever spent more than 120 minutesin a business environment. What doyou do when an exchange programmecomes along? You seize the chancewith both hands, of course! Launchedby the EWI Department in spring 2007,the programme aims to bring the civilservice and business world closer toge-ther by allowing staff from each sectorto spend a period of time in the othersworking environment.

For me, a university spin-off companywas the natural choice. As head of theAcademic Policy Team, I help to deve-lop the interface policy1 that encoura-ges universities and university collegesto set up high-tech spin-offs. With mybackground in biomedical sciences, Iwas drawn to TiGenix nv. Founded in2000 as a spin-off of Ghent Universityand K.U.Leuven, TiGenix will soon bemarketing its first product, Chondro-Celect - a permanent repair product for

cartilage defects of the knee, offeringa beacon of hope for sportsmen andwomen with knee injuries.

TiGenix seemed happy to take part inthe exchange programme and to haveme work for them two days a weekover a four-month period. I was assig-ned to the Business Development Unitand from day one there were a numberof projects on the table with which Iwas involved. My main task was to col-lect and process strategic information,with business plan analyses, marketforecasts, patent applications, strategicalliances and new technologies the dailyfare. Ive never spent so much time oninternet research in my life!

What struck me most while I was therewas how companies around the worldcontact and interact with one anotheron the lookout for deals and alliances.Activities shift constantly, some starting,others ending, in the pursuit of revenueand growth. In this respect, a sectorsuch as biopharmaceuticals is like a

living organism with its own individualdynamic. Hence the term business eco-systems, which is sometimes used.

By contrast, the timescales involved arelong. The whole process of bringingnew biotherapeutics to market is heavi-ly regulated. Supervisory bodies such asthe US Food and Drug Administrationand the European Medicines Agencyset the pace. A promising technologyand successful clinical studies are onlythe start: cost-effective marketinginvolves yet more hard work.

In conclusion, I would say that expe-riencing policy from the other end,as it were, is an absolute must for allpolicy-makers.

Veerle LoriesPolicy Support andAcademic Policy Team

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> Whats what

6

The age

of Schumpeter



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Creative destruction, the idea developedby economist Joseph Schumpeter in thefirst half of the last century, has had aprofound impact on the developmentof the world economy over recent deca-des. And in the future it could shape the

behaviour of homo economicus morethan ever before, especially regarding ofsustainable development.

Creative destruction

Innovation underpins the developmentof our capitalist society. By a processof constant renewal, we create theeconomic growth underlying societysprosperity.But as Schumpeter observed in the early20th century: with innovation comes akind of destruction. Antiquated thingsmake way for newer, better ones. Pro-gress and prosperity have their price.

How should we approach tomorrowschallenges, assuming that our societyremains capitalist? What are the prosand cons of a philosophy that pushesour society forward regardless of thecost? What does it bring us? And whatprice are we prepared to pay for crea-tive destruction in the future?

Theorists and broad-minded economistsmay be able to square sustainable deve-lopment with the logic behind creativedestruction. The concept offers a hostof possibilities for further economicdevelopment in a globalised society. Butthere are undoubtedly limitations too.How can creative destruction be trans-

lated into sustainable development?What is the outlook for the future?These things are worth thinking about.And not just in theory, but - followingSchumpeters lead - in practical termstoo.

Sustainable economy

Successful investing is anticipatingthe anticipation of others, wroteKeynes, another leading economist of

the last century. Anticipating based onthe observation of trends and develop-ments. Taking a step back, gatheringknowledge, and then getting down tobusiness; in short: developing a sustai-nable economy.

An example. In recent years, failure toreact promptly to the demand for lesspolluting products and production pro-cesses has caused major problems forbig companies. Through the actions oflegislators and consumers, the demandfor ecologically sound products, in theautomotive industry for instance, hasincreased sharply. Consequently, com-panies that use research and innovationto market new, environmentally friendlycars are squeezing their non-environ-mentally conscious competitors, whowill disappear from the market unlessthey in turn implement a research andinnovation policy that can stand up to

the competition.

This benefits both consumers and theenvironment. Moreover, events in theautomotive industry are being paralleledin an increasing number of sectors. Thewhole Western economy is undergoinga revolution that could have far-rea-ching, and likely very positive, conse-quences for our society - assuming thatthe rest of the world follows suit.

Creative destruction is the key. Innova-tion. Technological developments allowus to address the sustainable develop-ment challenges facing our society withincreasing efficiency, and Schumpeters

philosophy has helped us to realise thisfact in recent years.

Sustainable development is not just amatter for policy-makers and does nothave to be confined to a Keynesiantop-down approach. Thanks to creativedestruction, the notion of sustainableeconomy is gaining a place in our soci-ety. Growing environmental awarenessin the business community and the rea-lisation that research and development,

knowledge and innovation can makeour economy sustainable and efficient:these are guarantees for a better future.

Keep the fire alive, dont stare at theashes, Jean Jaurs said. As a socialist,

he may have been the political antithe-sis of Schumpeter, but he was also aman of vision.

Frank VereeckenOffice for Policy Research andForesight studies

Creative minds of all

countries, unite!

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Belgian Science and Technological Innovation (STI) po-

licy is unparalleled in the European Union, with different

governments responsible for different parts of this broad

policy area. Which policy level should universities apply to

for support for a scientific research project? And where can

companies find help with developing an innovative idea? A

snapshot of a complex landscape...

> Let us explain

The Federal State

The Flemish Community

The Flemish Region

The French Community

The Brussels-capital Region

The German-speaking Community

The Wallon Region

Source: Federal portal www.belgium.fgov.be

BELGIUM

COMMUNITIES

REGIONS

8

Science policy in Belgium:who does what?

Figure 1: federal entities in Belgium (taken from2)



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Responsibilities for scientific research

in Belgium have - as a result of succes-

sive state reforms - been systematically

transferred to the federated entities.3

Nowadays, most responsibility for STI

lies with the communities and regions.

This includes scientific research - both

basic and applied - and technological

innovation.

Communities and regions

The communities are responsible for sci-

entific research in the field of education

(including universities and institutes of

higher education), science policy, culture,

media, sport, youth, vocational training

and matters relating to the individual

such as health policy (prevention, care,

health education) or assistance to per-

sons (e.g. family policy, youth support,

care for the elderly, ). This covers both

research on these subjects and research

conducted by organisations in the sector

concerned.

The regions are responsible for research

relating to economic policy (economic

support, industrial policy, innovation),

energy policy (excepting the nuclear fuel

cycle), public works, communication

networks, environment and water policy,

nature conservation, housing, transport,

spatial planning, natural resources, town

and country planning, development aid,

agriculture, foreign trade and investment

and some elements of employment

policy.

Communities and regions are also res-

ponsible for their own institutions in the

STI domain, namely scientific institutions

and public research organisations.

Educational institutions are thus mainly

funded via the communities, while

support for company research and

development is a regional responsibility.

That means that the various universi-

ties and institutes of higher education

in the bilingual Brussels-Capital Region

receive support from either the Flemish

or the French Community. By contrast,

technology transfer and research valo-

risation from these institutions to local

companies is regulated and supported by

another authority: the Brussels-Capital

Region.

What about the federal government?

As an exception to the general rule, the

federal government remains responsible

for a number of specific scientific fields

and institutions, such as the National

Botanic Garden4. In addition, it can or-

ganise scientific programmes to finance

community or regional institutions. The

collective research centres are also partly

supported by the federal government.

The federal level has also retained res-

ponsibility for virtually all the framework

conditions applying to STI policy in the

broad sense. This includes matters rela-

ting to standardisation; intellectual pro-

perty rights; accreditation; social security

contributions of researchers operating

in Belgium; certification; labour regulati-

ons for researchers who move between

companies, (public) research institutions

and authorities.

Finally, the federal government can

also offer support to university research

teams in conducting scientific projects,

usually as part of specific programmes.

Policy implications

As a result of all this, Belgiums vari-

ous governments each develop and

implement their own STI policy. They

do so within their own areas of respon-

sibility, and using their own institutions

and legal rules, independently of the

other institutional players in the field.

For instance, the federal government

and each community government has its

own minister or state secretary responsi-

ble for scientific research. Similarly, each

regional government has a minister or

state secretary responsible for techno-

logical innovation5. Each minister and

government sets its own priorities for its

own STI policy, the budget for which is

submitted to the relevant parliament for

approval. Each government has its own

scientific research advisory body, which

assists the parliament and/or govern-

ment with policy preparation. Each

government also has its own scientific

institutions and/or research organisati-

ons, which may or may not operate in

similar fields.

Cooperation examined critically

The Interministerial Commission for

Science Policy (IMCWB) was set up

9

22%

1%

27%

50%

Federal government

French Community + Walloon Region

Flemish government

Brussels-Capital Region

Figure 2: Distribution of R&D funding in Belgium (2006)



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to promote cooperation between the

various entities in the field of scientific

research. It brings together the federal

government, the communities and the

regions.

At civil service level, the International

Cooperation Commission (CIS) and the

Federal Cooperation Commission (CFS)

were set up in the early 1990s to pro-

vide forums for issues requiring a joint

position, reporting or implementation

at international or national policy level.

Each commission consists of a number

of thematic sub-commissions. One such

is the CIS/COST, which coordinates

Belgian participation in the international

cooperation programme COST6. Note,

however, that this is not an overarching

participation by Belgium as a whole in a

specific COST activity, but rather a form

of participation whereby each govern-

ment decides separately to take part in a

specific COST activity, depending on the

case and the level of potential interest.

In short, the level of coordination,

cooperation and joint priority-setting

among the various institutional entities

is extremely limited, and virtually no at-

tempt is made at policy orchestration.

Priorities and instruments are determined

and implemented by a government wit-

hin its field of competencies. The basic

premises and philosophies may vary, and

where there is cooperation it arises from

the need for a common Belgian position

or common Belgian reporting. Conse-

quently it is more of a formal contrivance

than an expression of genuine concerns,

initiatives or pressing issues. That said,

there are similarities between a number

of instruments, measures, programmes

and organisations associated with dif-

ferent governments. Conversely, there

are also measures implemented by one

government which its counterparts have

not (or not yet) developed or for which

there is little interest or need.

Let the figures do the talking

In 2006, the R&D budget for all of

Belgiums governments combined was

1,929.9 million. In absolute terms,

Higher Education took the biggest

share of this 1.9 billion, with a budget

of almost 460 million, followed by Ac-

tion programmes and organic systems

for R&D, which accounted for 321.4

million. This latter figure illustrates the

2 M. Cincera et al., Belgian Report on Science, Technology and Innovation, Part I, 2001, DWTC,p. 142

3 More particularly, the communities and regions first acquired a degree of responsibility for(applied) scientific research under Article 6a of the special law on institutional reform (BWHI)of 8 August 1980. In 1988, the division of powers was altered (partly due to the transfer ofresponsibility for education to the communities). In 1993, this was revised once again under theSaint Michael agreements.

4 See also p. 36 of this issue

5 For some time now, the same minister has been responsible at both regional and communitylevel.

6 European Co-operation in the field of Scientific and Technical Research. This is the longest run-ning joint European R&D programme (launched in 1971).

STI responsibilities in a nutshell

The communities are responsible for:

- scientific research;- the various funding channels for their universities and institutes of

higher education;- the international scientific cooperation of their institutions;- cataloguing and reporting scientific potential;- raising awareness of and promoting science among the general public;- research into the ethical issues associated with specific aspects of

science;- scientific institutions and knowledge organisations at community level;- international scientific activities.

The regions are responsible for:- transfer of scientific and technical research;- basic technological, industrial and economic oriented research;- encouragement, dissemination, transfer and application of technology

and innovation in the broad sense (including development ofprototypes, new products and production processes);

- the (strategic) research institutions located on their territory, includingresearch and public service activities.

The federal government is responsible for:- the scientific research needed to carry out its own responsibilities,

including scientific research conducted in accordance with internationaland supranational agreements. This is achieved through targetedprogrammes (on space, the information society, sustainabledevelopment, etc.);

- scientific research in a few specifically defined fields, such as researchinto nuclear energy and space travel in the context of internationalprogrammes;

- activities in areas falling within the remit of the communities or regionsand which are related to either an international agreement or activities/programmes that exceed the scope of a single community or region;

- activities requiring homogeneous implementation at national level orof international importance for the country (in collaboration with the

communities and regions);- maintaining an up-to-date inventory of national scientific potential;- popularisation of the areas of science falling within the federal govern-

ments remit;- federal scientific institutions.

strong variations in policy focus: while

Flanders earmarked 62.1 million, the

French Community and Walloon Re-

gion together set aside 187.3 million.

Total R&D funding for Belgium in 2006

was divided up between the different

governments as follows (see Figure 2):

Flemish Community/Flemish Region:

50.25%; federal government: 26.56%;

French Community: 12.73%, Walloon

Region: 9.34%, Brussels-Capital Region:

1.12%; German-speaking Community:

0%.

Niko Geerts

Office for Policy Research and

Foresight studies

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> Central theme: Foreword

Government efficiency is like the LochNess monster: it pops up regularly, ge-nerates a lot of discussion, there are pro-posals to study it and even attempts tocapture it. A popular dictionary definesefficiency as follows: achieving the gre-atest possible effect or result by using orexploiting a given force, medium or con-dition, especially the rational applicationof economic principles in business. Thisimmediately raises the question: what ef-fect does a government aim to achieve?After all, governments do not have thesame objectives as companies Wetherefore need a different yardstick formeasuring government efficiency.

One effect often cited as a must for anygovernment is public satisfaction. Unlikea company, which can focus on targetgroups and submarkets, a governmentis supposed to serve all of its citizens.The objectives of a government aredetermined by politicians. If politiciansdecide and pass laws to the effect thatan administration must be a mirror ofsociety and must therefore provide em-ployment for its less privileged members(known as social employment), thisbecomes an effect to be achieved. This iseasy enough to measure, and some-thing at which a civil service can be veryefficient. Obviously, such a goal mustnot undermine its ability to meet otherobjectives. Policy-makers therefore needto think carefully about which tasks andobjectives they choose to assign to thepublic services. Is it the task of a public

body such as the post office to streng-then the social fabric? Should a postmanbe given time to chat with lonesomeelderly? What about specific communitycohesion schemes such as barbecuevouchers? Political choices determinewhere the money (of which there isusually a dearth) goes.

How heavy a government is dependsnot just on the number of civil servantsbut also on the total amount of chargesand contributions imposed by thegovernment (known as governmentratio). The important question is whatthe government does with this revenue.It has been said that one euro acquiredin tax reduces the private economyby more than one euro7, so effectivemanagement and careful use of moniesis key.

Ministerial offices (also called cabinets)are another relevant factor, as was veryclearly highlighted in a recent OECDstudy8. The principal question is howlarge a ministerial cabinet should be,and how it relates to the administration.A parliamentary discussion and furtherconsultation based on mutual respect foreach others roles are needed here.

In this issue, we examine governmentefficiency from various angles: ways ofmeasuring it (p. 20), Belgiums govern-ment ratio (p. 12), an interview with ElsaPilichowski about the much-discussedOECD study (p. 28), and finally the ini-

tiatives being taken by the College vanAmbtenaren-Generaal (Board of SeniorCivil Officials) in this area (p. 32).

Veerle LoriesActing Secretary-General ofthe EWI Department

7 J. Albrecht, Blijft de Andere Overheid volslank in Nederland Gids-land?, Itinera Institute Nota 2007/9, p. 1 -6.

8 OECD Reviews of Human Resource Management in Government:Belgium: Brussels-Capital Region, Federal Government, FlemishGovernment, French Community and Walloon Region, OECD, Paris,13/07/2007, 134 p.

11

Government

efficiency:

the be-alland end-all?



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The early 21st is a time of major global transformations. Globalisation and climate change

are familiar topics; less discussed is the changing size of government. Figure 3 illustrates the

trend towards public sector expansion in the OECD countries, the eurozone and Belgium from

1988. Around 2000 the collective tax burden stagnated and has since even fallen slightly.

Belgium seems to deviate from this average pattern.

> Central theme: Explained

12

Time for a slimmergovernment in Belgium? 9



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Is there such a thing as an optimalgovernment size? Is the current level ofexpenditure above or below the norm?These are the questions we addressbelow.

How do we measure government size?

Government ratio is measured usinga variety of statistics. One standardconcept is the collective tax burden, i.e.

total tax receipts for all governments,plus social security contributions. Thismeans the direct and indirect tax col-lected by the federal, regional andlocal governments plus employer andemployee contributions. These contri-butions are expressed as a percentageof gross domestic product (GDP). Abroad definition of the collective taxburden also factors in the governmentsnon-fiscal receipts. Typical examplesof these are profits and dividends frompublic companies, charges (user fees)for public utilities, access fees, fines,etc.; these usually account for 3-5% ofGDP.

Assuming that government budgetsare in overall balance, the collectivetax burden in the broad sense roughlyreflects the collective expenditure ratio.However, if the government toleratesshortfalls, the expenditure ratio willexceed the collective tax burden in thebroad sense.

Is there an optimal size?

That there is an optimal governmentsize can be seen from the Armey curve(Figure 4). This assumes a non-linearrelationship between the size of go-vernment and economic performance.

In the absence of a government,lawlessness, insecurity and instabilityprevail. Even a small, weak governmentcan raise prosperity significantly byprotecting property rights and intro-ducing public order. Such basic lawand order allows the economy to growmuch faster. Prosperous societies favourincreased government involvement.Citizens demand an effective healthcaresystem, an advanced education system

and a generous pension system. Ahealthy and well educated populationallows the economy to grow evenfaster. Unfortunately, economic theorypredicts that the collective tax burdenimposed by the government will be-come too heavy, so that money whichcould be more effectively used in thepublic sector is siphoned off into thepublic coffers. From that point on, hightaxes hold back the growth of GDP. To

achieve higher economic growth, thegovernment must diet.

Family size

Optimal government size, i.e. thatwhich maximises economic growth, isnot the same for each country. Indeed,the optimal tax burden is affected bya range of factors. Chief among theseispublic preference. In Scandinavian

countries, for example, the averageinhabitant favours big government.Other nations, such as the Mediter-ranean countries, seem satisfied with aless extensive network of governmentservices.

In this connection, we can observe astriking correlation between family sizeand public preference regarding go-vernment size. Within a society, citizens

13

Growth rated

bbp

Tax burden as

% bbpT*

G0

G*

Figure 4: The Armey curve

Figure 3: Collective tax burden (OECD)

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

1997

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

2007

55

50

45

40

35

30

Taxburdenas%o

fGDP

Collective tax in the broad

OECD

eurozon

Belgium



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are subject to various micro-economicrisks: medical (illness, disability), social(theft, violence), economic (individualunemployment, bankruptcy) and life-cycle (birth, old age) problems. Eachof these risks is offset to a greater orlesser degree by a family safety net. Thestronger this safety net is, the less thegovernment is likely to have to intervenein times of need.

Family size in the OECD countries hasfallen steadily over recent decades. In

1850 the number of children in the aver-age European family was just under 5,while by 1999 this had fallen to a mere2.5. The anorexic family was born.A still largely undocumented empiricalobservation is the negative correlationbetween family size and the overall sizeof the public sector. The negative linkbetween government expenditure andfamily size is illustrated graphically inFigure 5. Family size is a significant ex-planatory variable for government size.Others include: trust in government,openness and GDP per capita. Family

size can also be seen as an indicator ofa societys implicit preference as regardslevel of government interference.

To explain this empirical observation, weneed to start by considering the tasksof government. Firstly, the anorexicfamily requires that governments takeon additional tasks. Where once childrenand extended family looked after theyoungest and oldest family members,this is now often done by crches andcare homes, which are subsidised with

public funds. Similarly, other tasks onceperformed by families themselves arenow outsourced to the welfare state.The public sector has expanded to ac-commodate these new responsibilities.Meanwhile, young couples are no longerworried about their old age: they knowthat they will receive specialist supportin the event of unemployment, sicknessand old age. This causality cuts bothways, of course. Because the public sec-tor is expanding to offer a large safetynet of specialist care, families can affordto be smaller. Conversely, because fami-

lies are becoming smaller, they require abig public sector safety net.

An open economy

There are other factors that affectoptimal government intervention. Forexample, there are macro-economicas well as micro-economic risks. In ourglobalised economy, export and importaccount for an increasing proportionof GDP. For Belgium, this trend is verymarked. In an open economy such as

ours, the effectiveness of governmentpolicy seems to be diminishing steadily,not least because multiplier effects areflowing abroad. In a groundbreakingarticle, Rodrik10 has suggested that coun-tries with more open economies havebigger public sectors. Small, extremelyopen economies such as Austria, theNetherlands, Norway and Belgium havethe worlds largest ratios of public expen-diture to GDP. Figure 6, which analysesan international sample of 66 countries,bears out this finding.

Old Family Anorexic Family

14

Relationship between family size and government

Governm

entratio(1999)

Family size (1999)

2 2.2 2.4 2.6 2.8 3 3.2 3.4

70

60

50

40

30

20

10

0

Denmark

Netherlands

Belgium

Spain

y = -15.735x + 84.691

R2 = 0.3546

Figure 5: Relationship between family size and government ratio (Eurostat)



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An explanation for this correlation canbe found in the risk-avoidance behaviourof society. Citizens demand (and get)a bigger public sector as compensationfor the greater external risks associatedwith an open economy. In the globalisedworld economy, the overall volatility ofeconomic production will be less thanthe volatility of production in an indi-vidual country, due to the law of largenumbers. However, when a countryor region enters the world economy,the search begins for the comparative

advantages in which the country willspecialise. As a result, the productionstructure in an open economy will beless diverse. Because the rest of theworld cannot offset shocks in a particularcountry, a stabler world economy meansnothing to that countrys citizens: all thatmatters is the stability of the specialiseddomestic production. Higher public ex-penditure, subsidised by compulsory so-cial security, can offer a way of stabilisingconsumption. In this way, public spen-ding provides a form of social securityfor societies subject to external shocks

and mitigates risk. A typical example ofthis is unemployment benefit.

GDP per capita

According to prevailing economic litera-ture on endogenous growth theory, thethird and final adjustment factor is GDPper capita. It is assumed that countrieswith a higher GDP per head of popu-lation also display greater productiveand allocative efficiency, due to factorssuch as a better educated work force,

greater capital intensity and technologi-cal progress.

In search of optimal government size

To work out the optimal level of govern-ment intervention, we will compare thecollective tax burden and GDP growthof 23 similar OECD countries. We haveopted for a long-term perspective (aver-age values over the period 1988-2004)to eliminate any short-term fluctuati-ons. Using statistical analyses, we haveadjusted for differences in preference

on government intervention (familysize); the need for economic stabilisation(openness); and the countrys producti-vity level. According to this benchmark,the Belgian public sector is structurally,and over the long term, 3.9% too big(see Table 1).

There are a few things to note at thisjuncture. Our standard is based on theperformance of an economy in terms ofgrowth, not in terms of the redistributionof income and wealth, which is nonethe-

less a laudable social objective. Also, weare working with statistical data on thecollective tax burden in the broad senseof the term, including non-fiscal receipts.For some countries, such as Norway, thisfigure could be pushed up much higherdue to profits from natural gas and oilproduction.

Towards a viable benchmark

By taking things a few steps further,we can use the above findings to de-vise a concrete policy for Belgium. For

15

Government as buffer against external shocks

Government as percentage

Governmen

tshareinGDP

40

35

30

25

20

15

10

5

0

0 20 40 60 80 100 120 140 160 180 200

BelgiumNetherlands

Denmark

y = 0,057x + 14,174

R2 = 0,2114

Spain

Figure 6: Government as buffer in an open economy (Penn World tabel, data 2004)

Table 1: Optimal government ratio (De Witte and Moesen, 2007, p. 15)

Long-term

collective tax*

(1988-2004)

(1)

Long-term

benchmark

size

(2)

Change in

long-term size

(3) = (2)-(1)

Collective

tax burden

in 2005**

(4)

Change in

size

(5) = (2)-(4)

Belgium 47.593 % 43.660 % -3.933 % 46.400 % -2.740 %

* collective tax burden in the broad sense

** collective tax burden in the standard sense



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instance, it is inaccurate to comparethe structural benchmark of 43.7%(column 2) with the actual tax burdenof 47.6% (column 1), since the latteris the average for the whole period1988-2004. It makes more sense to usethe collective tax burden from a recentyear, e.g. 2005, as a stepping stonetowards a concrete policy. For Belgium,the collective tax burden (as broadlydefined) was 49.1%. Compared withthe structural benchmark of 43.7%, this

implies a reduction of 5.4% of GDP.However, it is questionable whether thiscould be achieved in a single legisla-ture. Let us therefore take a milderreference: the collective tax burden inthe standard sense, excluding non-fiscalreceipts. In this scenario, Belgium wouldhave to reduce its government size by2.74% of GDP.

What are the policy implications?

Under previous legislatures, the goldenstandard in public finances was achie-ving a balanced budget, rather thancontrolling spending. The advantage ofthis was a steady fall in interest rates,

generating an interest bonus of ap-proximately 4% of GDP over the period1999-2007. However, achieving atechnically balanced budget meant fre-quent recourse to budgetary alchemy,some of the less flattering examplesof which were: the transfer of pensionfunds based on a capitalisation systemfrom (semi-)public institutions; the saleof government buildings; and the secu-ritisation of tax arrears. That said, publicfinances were at least prevented fromslumping into substantial deficit, whichwas not the case in some EU countries.

Today, it makes sense to agree on anexplicit norm for expenditure in thenext legislature. A year-on-year rise inspending of 2.58% is both defensibleand feasible, for a number of reasons:

- This percentage is based on an analy-sis which says that the optimal sizeof the Belgian government is calcula-ted from the perspective of econo-mic growth. Within four years, theexpenditure ratio will have fallen by2.7%: exactly the level by which thecurrent expenditure level exceeds thetheoretical norm in a mild scenario.

- It will keep the real policy space intact(the Planning Bureau puts inflationat an average of 1.9% a year), whilstalso offering some space for additio-nal policy initiatives (around 1/3 ofthe predicted real growth of 2.1% ayear). Obviously, new projects andactivities can also be financed byreformulating existing expenditure.

- Assuming (i) that a balanced budgetis taken as the basis and (ii) a policyis pursued in which the overall taxburden remains constant, the publicfinances will display a surplus of2.7% at the end of the legislature.If the collective tax burden remainsconstant, the progressivity of directtaxation, in this case income tax, canbe neutralised (known as bracketcreep). Naturally, internal shifts bet-ween direct and indirect taxation andsocial security contributions will alsoremain possible.

Finally, we would like to correct twomisunderstandings.

- A reduction in expenditure ratio is of-ten associated with a drop in absoluteexpenditure. This is incorrect. For the

expenditure ratio to fall, it is enoughfor nominal expenditure (the numera-tor) to rise less quickly than nominalgrowth of GDP (the denominator).

- In addition, it is often intuitivelyassumed that a fall in the expen-diture ratio will automatically leadto a decline in the quality of publicservices. This is also erroneous. In theproposed scenario, an adjustmenthas been made for inflation and a(small) part of real growth transferred

to expenditure. Real policy potentialtherefore remains intact, and couldeven increase slightly. Moreover,various studies have shown that Bel-giums government machinery couldmake significant efficiency gains. Inother words, it is possible to maintainthe same level of service quality whilereducing nominal public spending.

(edited by Peter Spyns, Office for Po-licy Research and Foresight studies 11)

Wim Moesen and Kristof De WitteK.U.Leuven, Faculty of Economicsand Applied EconomicsNaamsestraat 69, 3000 Leuven([email protected])

Vocabulary

multiplier effect: refers to the fact that, say, a rise in one of the autonomous components of total demand can

lead to an even greater increase in economic activity.

comparative advantage: this theory (attributed to Ricardo) states that a country must specialise in goods/services

that it can produce more cheaply than other countries.

ceteris paribus: other factors remaining the same or unchanged (often used when studying the effect of one vari-able while keeping the others unchanged).

endogenous growth: endogenous growth is growth from the inside outside due to technical developments/inno-

vations, etc.

allocative efficiency: related to the allocation of (scarce) products or services among users, the allocation of

available production factors among all institutions and the choice of an optimal set of outputs produced in the

most efficient way for society. Research into allocative efficiency looks at whether scarce resources are being fairly

allocated among institutions that perform public tasks or among citizens who may use the service.

16



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9 The underlying theoretical and empirical model is set out in Kristof De Witte and Wim Moesen,Sizing the Govern-ment, Department of Economics, K.U.Leuven, June 2007, mimeo, 17 p

10 Dani Rodrik, (1998), Why Do More Open Economies Have Bigger Governments?, Journal of Political Economy,University of Chicago Press, vol. 106(5), pages 997-1032, October. (http://ideas.repec.org/a/ucp/jpolec/v106y1998i5p997-1032.html)

11 The original text (in Dutch) can be found at: http://workforall.net/Moesen-optimale-overheids-uitgavenquote.pdf

17



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> Central theme: From Europe

18

Belgian STI policyviewed from

abroad



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12 A peer review is an assessment/evaluation performed by individualswith the same expertise, background and/or occupation.

13 See also p. 8 of this issue

19

Belgium risks missing out on opportunities in the increasingly globalised world

of Science, Technology and Innovation (STI) due to a lack of joint vision and

objectives. This stark warning comes courtesy of the Peer Review12 on STI po-

licy in Belgium.

The Peer Review is part of the OpenMethod of Coordination (OMC) of theEUs Scientific and Technical ResearchCommittee (CREST). Under the OMC, theMember States formulate joint objecti-ves and activities on STI policy, throughmethods such as comparison and mutuallearning. Joint action plans are develo-

ped for meeting these objectives andthere is reporting on policy progress andoutcomes.

Recommendations

Four experts from Spain, Germany, Swit-zerland and Denmark - the peers - exa-mined the STI system in Belgium, intervie-wing various stakeholders in the process.The aim of the exercise was to formulaterecommendations for making policy me-chanisms in Belgium more efficient, ratherthan evaluate the policy mechanisms inplace. The report highlights the need tofocus on human capital (more and bettertrained researchers) and to encourage the

transfer of research and technology. Policydevelopment mechanisms are the othermajor area in which attention is requiredand challenges need to be addressed. Ina global world, we need to examine howdecisions taken by the different entitiesof Belgiums innovation system hangtogether.

The peers believe that Belgium needsto move the globalisation of STI up thepolicy agenda in order to fully exploit thechallenges and opportunities associatedwith it. Without wanting to underminethe institutional structure and the divisionof responsibilities for STI13, they sug-gest that joint objectives should be set at

Belgian level, for which all governments

are responsible. To further optimise thepolicy mix and bring it into line with theinternational framework, a common visionshould be developed. This could be sup-ported by knowledge exchange platforms.

The peers also recommend devotingmore attention to the evaluation of policy

mechanisms. This should not be limitedto the traditional ex-post assessments.Interim evaluations of the policy measuresare needed so that adjustments can bemade in good time. Transparency, interna-tional openness and mutual learning arecomponents that could help to strengthenthese evaluations. In addition, we need tomove away from the traditional analysisof a measures direct output - such as thenumber of publications in internationaljournals as the direct result of a researchprogramme - towards an analysis of ef-fects and long-term impact, such as theinfluence on Flanders economic fabric.

Merit

Generally speaking, the merit of thisreport is the fact that it makes a numberof recommendations that look beyondBelgiums institutional structure. Howe-ver, this is also one of its downsides as itmeans that some of its recommendationsare practically and legally impossible toimplement, making them nothing morethan a theoretical exercise.

The document will be helpful for furtherpolicy developments at Flemish go-vernment level and also for developinginitiatives with other Belgian governmentsaimed at fostering mutual cooperation oreven the coordination of policy initiatives

and instruments. It identifies a number

of weaknesses in our current system andhighlights the challenges facing us nowand in the future.

Bart LaethemEntrepreneurship, Science Popularisationand International Cooperation Team

The globalised Science, Technology andInnovation (STI) landscape

As the boundaries of scientific research shift,

conducting such research is becoming increasingly

complex. Experts from different scientific disciplinesare increasingly having to pool their forces to find

solutions to problems or challenges. Moreover, they

are often working on cross-border issues such as cli-

mate and energy. In response to these changes, the

research world is increasingly organising itself into

international networks and cooperation groupings.

The European Union strongly encourages and sup-

ports this through its development of the European

Research Area.



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20

Efficiency and

effectiveness in the

public sector: measure,

analyse, improve



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Findings such as these are guaranteed tocreate great press and public attention.A trimming down of the civil service isoften advocated as a response. Sup-porters point to immediate gains in ef-ficiency, while opponents fear a declinein quality. However, the precise meaningof the term public sector is not alwaysclear. What exactly do efficiency andeffectiveness mean? How can they bemeasured? And how can this informa-tion and further research contribute tobetter performance?

Public sector defined

The concept public sector is often used

as a blanket term. Kuhry and Van derTorre (2002) make a distinction betweenthe public sector in legal, financial andfunctional terms.- In the legal sense, the public sector

comprises the government and orga-nisations governed by public law.

- The public sector in the financial sensealso includes private organisationsthat are mainly financed by the publicmeans, such as non-profit organisa-tions in the education and healthcaresectors.

- Finally, there is the public sector inthe functional sense, the so-calledquaternary sector: all organisationsin the fields of public administration,

social security, law and order, educa-

tion, healthcare and social and culturalservices, regardless of legal status andfinancing source.

The distinction between public andprivate sector is sometimes vague: isa non-profit organisation part of thegovernment or not? How private is aneducation system if the bulk of its costsare borne by the government?

A government operates at three levels:execution, guidance and condition-sha-ping (Kuhry and Van der Torre, 2002).In its executive role, the government isdirectly involved in the provision of ser-vices to the public. Its second role is to

guide, monitor and subsidise executingagencies. Thirdly, the government alsooperates in a condition-shaping capacity.

Efficiency and effectiveness

When considering public sector per-formance, a distinction is usually madebetween resources deployed (input,means), activities (throughput, proces-ses), performance (output, products)and effects (outcome, consequences)(see Figure 7).

Public sector performance can be relatedeither to input to achieve the output, oralternatively to the effects achieved as

a result of the output. The relationship

between input and output indicates theefficiency. The relationship between out-put and effects achieved indicates theeffectiveness of the production process.

Efficiency is the measure of resour-ces used (personnel, capital, material)to achieve a particular performance(product, service). An example wouldbe the number of man hours needed tomaintain 1 km of cycle paths.

Efficiency is a relative concept: a per-formance is called efficient if it uses fewresources as measured against a certainbenchmark, such as a standard or a simi-lar organisation. The best organisations

act as a kind of reference: a benchmarkon which less efficient organisations canjudge themselves.

Effectiveness indicates whether or nota particular output achieves a particu-lar effect or goal. An example wouldbe carrying out maintenance work oncycle paths (output) in order to preventaccidents (effects). In this context, adistinction should be made betweendirect and indirect effects or objectives.A direct effect relates to and is measura-ble against a concrete end product. Anexample of a direct objective in the edu-cation sector would be gaining a schoolleaving certificate. Indirect effects refer

to deeper, underlying social objectives.

> Central theme: Government efficiency

21

Studies are regularly published which examine the Flemish governments performance from

a national and/or international perspective. A recent example is the OECD report on the

structure and working of Belgiums governments (OECD, 2007). Compared with Belgiums

other governments, it rates the Flemish government relatively highly. A study on the global

productivity of European governments (Moesen, 2004) came to the same conclusion. Howe-

ver, compared with Europes top performers, there is a 12-15% potential for improvement.

Aactivities

Mmeans/

resources

Pperformance

Eeffects

EFFICIENCY EFFECTIVENESS

Figure 7: The production process at government institutions14



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Examples in the education sector wouldbe empowering citizens and providing awell educated workforce.

Measure, analyse, improve

Measuring public sector efficiency is noeasy task, not least because the valueof a performance cannot usually beexpressed in monetary terms, as it canin the private sector. For that reason, wegenerally use what are known as physi-cal production indicators. Examples

in an education context would be thecertificates gained, the number of pupilsand the number of lessons given. Howe-ver, when it comes to purely collectiveproducts such as public administration,it is not clear what the performanceprovision actually entails. This makes itdifficult to construct appropriate produc-tion indicators. An alternative method isto calculate the ratio between resourcesdeployed for public administration andthe total production of the country orregion.

What complicates the measurementis that performance indictors must beproperly adjusted for quality differen-

ces. Otherwise, a smaller group size inan educational setting, for example,would lead to a drop in the perfor-mance measured, or better educatedteachers to a rise in cost! Often, such anadjustment is not possible. In this case,a solution is to include a series of qualitymeasures alongside the non-adjustedperformance indicators. These qualitymeasures may be both objective, e.g.the percentage of buses that run ontime, and subjective, e.g. satisfactionamong bus users.

Although difficult, measuring the ef-ficiency and effectiveness of specificpublic services is important (Israls e.a.,

2001). In the private sector, market

Sources

Bouckaert, G. and T. Auwers (1999), Prestaties meten in de overheid,Bruges: Die Keure.

Israels, E., A. Matheeuwsen, M. Roelofs and F. Roijackers (2001),Efficintie meten bij de overheid, Openbaar bestuur, 2001-11, pp. 25-28.

Kuhry, B. and A. van der Torre (2002), De vierde sector, The Hague:Sociaal-Cultureel Planbureau.

Moesen (2004), De kwaliteit van de overheid te lande en in euroland,K.U.Leuven.

OECD (2007), OECD Reviews of Human Resource Management inGovernment: Belgium: Brussels-Capital Region, Federal Government,Flemish Government, French Community and Walloon Region, OECD,Paris, 13/07/2007, 134 p.

forces work to ensure efficiency gains,but in the public sector there is muchless market pressure to achieve optimalperformance.For example, key goals in the publicsector are often different from thosein the market sector and the means ofachieving them more tightly regulated.A companys aim is profit; a businessunit that fails to make enough profitcan be closed down. By contrast, publicbodies often have no choice aboutwhether or not to supply particular ser-

vices; their primary concern is achievingspecific social and/or statutory goals.Whether this entails (excessively) highcosts can seem less important.Moreover, with some public sectorproducts there is no freedom of choicewhatsoever. If you want a new passport,you have to go to your own municipaloffices, regardless of how cheap orexpensive the passport is or how long ittakes to issue.

Measuring (in)efficiency and(in)effectiveness can help to build up abetter picture of the relationship bet-

ween a) resources and performance andb) performance and effects. Identifyingbest practices and the factors underlyingefficiency differences between govern-ment institutions can lead to efficiencygains in a particular government sector.

In some cases, the legislature hasalready taken action on efficiency andeffectiveness issues in individual sectors.For instance, the Flemish governmentsets minimum standards for quality assu-rance in welfare facilities, covering such

aspects as user focus, social acceptabilityand effectiveness and efficiency. Howe-ver, as yet there is still no legal basis fora systematic and periodic measurementand inspection framework for efficiencyand effectiveness in the public sector.

Marc CallensResearch Centre ofthe Flemish Government

22

14 Bouckaert, G. and T. Auwers (1999), Prestaties meten in de overheid, Bruges: Die Keure, p.17



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Boosting knowledge,

creating prosperity


23

The knowledge economy is one of the cornerstones of our society. Our great economic

prosperity and development is derived for a large part from technical knowledge. Indeed,

technical knowledge is increasingly coming to dominate the three traditional produc-

tion factors of labour, nature and capital. Knowledge unlocks innovation, which in turns

spawns new products or services, thereby enabling further economic growth.

That is why encouraging research and development - or R&D for short - is so essential.

It also explains one of the planks of theEUs 2000 Lisbon Strategy: to ensurethat Europe is the most knowledge

intensive economy in the world by2010. Encouraging R&D is thereforehigh on both the national and inter-national agenda. But this comes at aprice, of course. In 2005, in Flandersalone, companies, organisations andthe government invested over 3.6billion in R&D, 2.1% of gross domesticproduct15.

With so much money involved, thekey priority is that it should be usedefficiently. In this context, the efficiencyand effectiveness of the whole R&Dvalue chain is of relevance: from policychoices and investment decisions,through administrative processes and

research to exploitation of results and

e-FRISiency:an asset for Flanders

measurement against critical perfor-mance indicators (CPIs).

IWETO weighed in the balance

An important part of streamlining theR&D value chain is the managementof research information: on projects,researchers, research institutions, resultssuch as publications and patents, exper-tise, equipment, financing sources andso on. Having accurate, up-to-dateresearch information is critical at everystage of the R&D value chain: whenmaking policy decisions, planning andconducting research, implementing and

optimising administrative processesand measuring and evaluating researchfindings.

The Flemish government and Flemishuniversities were aware of the impor-tance of research information as farback as the early 1980s and set up theInventory of Scientific and Technolo-gical Research in Flanders (IWETO).A that time, IWETO16 was the firstresearch information system of its kind.Today, however, it no longer meetsthe standards expected of a modernresearch information platform: infor-mation is gathered retrospectively andonly supplied at intervals, the quality

has declined and the information is no

longer always up-to-date. Also, theinformation gathering process takes alot of time and energy, as it is treatedas a separate task at each of institutionsinvolved in the project, and the scopeof the information collected is limited:core data such as publications, patentsand doctorates are not included. Lastly,IWETO does not exchange data withother information systems.

Flanders Research Information Space

Needing a new system for managingresearch information, EWI launched theFlanders Research Information Space

programme (FRIS)17. The FRIS conceptcreates a virtual research informationspace covering all Flemish players in thefield of economy, science and innova-tion. Within the space, research infor-mation can be stored and exchangedin a transparent and automated way.A key feature is that data can be col-lected at the point of creation: in theoperational processes of data providers.For example, information on a researchproject can be found in the assessmentprocess for a funding application. Col-lecting information at the operationalprocess level offers major advantages.The data are accurate and up-to-datebecause they are being used in an ope-

rational process. Also, it is not necessary



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to establish a parallel data gatheringprocess, so data providers are spared alot of administrative work.

The three key concepts of the FRISprogramme are simplici ty, transparencyand openness. The development ofFRIS has three strategic goals:

1. Speeding up the R&D value chain

Using an open architecture createsopportunities for cross-border coopera-tion and the development of researchnetworks. Industrial players will beable to find partners for innovation

projects more quickly. Using interna-tional standards enables policy playersto position themselves in relation toother governments and to comparethemselves with other countries. Thissignificantly enhances the internatio-nal profile of research projects andinstitutions.

2. Administrative simplification

By creating a highly efficient dataenvironment, all desired informationis entered once and can be reusedinstantly by all competent parties. Thisadministrative simplification meansthat the budget for scientific researchcan be put to optimum use. It allows

researchers to focus entirely on theirarea of expertise, namely conductingscientific research. A quick calculationof the combined wage costs of Flan-ders 20,000 or so researchers showsthat each percentage of their workingtime spent on administrative formalitiescosts around 9.5 million: public moneythat could otherwise have been spenton research.

The institutions where research isconducted are also keen to see thenumber of research information sur-veys reduced and the whole processstreamlined. Each year, they must fulfilvarious reporting obligations towards

their funders, mostly in connection withinternational obligations on researchinformation (e.g. EuroSTAT18 and theOECD19). Different surveys often usedifferent definitions or classifications, sothat existing data cannot be re-used.

3. Measuring for better policy-making

Better consolidation and aggregationof data will allow the government todevelop more effective policy, evaluateit more accurately and adjust it morequickly. Scientific institutions need con-solidated information in order to makeappropriate research choices and usetheir resources efficiently. Transparent

Figure 8: Schematic representation of the Flemish Research Information Space (FRIS)

Funding bodies

Research institutions

Data Centres

University colleges

Universities

FRIS

ClassificationsThesauriTaxonomies

OAI

OAI

OAI

CV

IWETO

Data

marts

Crossroads BankServices

data registration should enable citizensand the government to check wherepublic R&D money has been spent.Each of these strategic objectivescontributes to the central objective ofgreater research efficiency.

Opportunities

There are a number of opportunitiesfavouring implementation of the FRISprogramme; indeed, the time is ripefor such an initiative. The technologyfor exchanging data between institu-tions is available (web services, service

oriented architecture), and all Flemishuniversities use the European researchinformation standard (CERIF, see inset),which makes it easy to collate datafrom various institutions and exchangedata with other CERIF systems.

There are also successful examples ofinformation systems that operate onthe principle of data exchange betweenplayers: the Crossroads Bank for SocialSecurity (CBSS), the Flemish CrossroadsBank for Enterprises (VKBO) and theFlemish governments data sharingplatform (Magda). The EducationDepartment also has a project in thepipeline to set up a Higher Education

database along the same lines as theFRIS programme.As part of the review of annual re-porting legislation for universities, anexercise is under way to simplify and

streamline the supply of statistical data,the main aim being to cut down on ad-ministrative work. The universities alsowant to use reporting as a full-blownpolicy instrument, which dovetailsperfectly with the principles of the FRISprogramme.

Next steps

The first half of 2008 will see thelaunch of a new research portal, whosefirst service will be an upgraded versionof IWETO whereby universities supplyCERIF2006-compliant data based on

a fully automated process. This newprocedure will allow universities tosupply data much more frequently thanbefore, with no extra administrativework.

This service is only the first part of theFRIS programme. Over the comingmonths and years, the research portalwill roll out a range of new services aspart of the research information space(see Figure 8). The possibilities arenumerous: a white guide (who doeswhat?), library of publications by aparticular researcher (digital library), aservice for updating and reusing resear-chers CVs and provision of information

on patents, to name but a few.

Implementing FRIS calls for somethingother than a simple project-basedapproach. FRIS is not about develo-

24



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ping one application: it is a changeprogramme, in which the involvementof Flemish government players is key.Openness and integration bring changeaplenty in their wake and the success ofFRIS will depend entirely on cooperati-on between the players concerned. Wewould therefore urge all stakeholders tocontribute to this ambitious programmeand play their part in making this fresh[fris = fresh in Dutch] new approacha success.

Geert Van Grootel, Kris Maison

and Pascale Dengis

Statistics and Indicators Team

CERIF: the Common European Research Information Format

CERIF was developed to provide a generic vision of an R&D information model. Two key principles underpin the project:

- Information on publicly funded research projects must be made public, in accordance with the principle of opengovernment.

- It must be possible to exchange information on research projects across national borders, research being a supremeexample of international information.

The model enables the various research information objects - researcher, project, research organisations, publications, finan-cing, equipment, etc. - to be kept in their full context. Thus, for instance, we can establish the relationship between a project,

its financing source and the generated output. Or answer the question: Who does what at which institution and where doesthe funding come from?

This information can be used by e.g.:

- researchers (to find partners, identify rivals, establish cooperation networks, etc.);- research policy staff (to estimate performance and output);- research managers (to develop a research strategy and establish priorities);- publishers (to find reviewers and potential authors);- intermediary organisations (to trace inventions and ideas that could lead to knowledge transfer);- the media (to communicate R&D results in a socio-economic context);- the general public.

All information is internationally compatible, regardless of language or characters. The model can easily be expanded. TheCERIF2006 version includes some major improvements, such as the introduction of a semantic layer.

This data model was developed with the support of the European Commission in two phases: from 1987 to 1990 and from

1997 to 1999. The EU recommends, but does not require, that Member States use this standard. Since 2002, follow-up and

management of the CERIF standard have been the responsibility of EUROCRIS (www.eurocris.org), a non-profit organisation

set up to promote current research information systems (CRISs).

25

15 Totale O&O intensiteit in Vlaanderen 1993-2005: 3% nota. Policy Research Centre for R&D Indicators, 19 March 2007.

16 www.ewi-vlaanderen.be/iweto17 www.ewi-vlaanderen.be/fris

18 ec.europa.eu/eurostat

19 www.oecd.org



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26

Policy-makers essential aim in developing any regulation is to have a positive impact on

society. A regulatory impact assessment or RIA charts the possible effects of a planned

policy measure, in a structured way. By describing the intended objective of the policy

measure along with the anticipated positive and negative effects compared with alterna-

tives, an RIA allows us to assess the necessity and effectiveness of a given regulation.

RIA rules



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27

The ultimate aim of RIAs is better regula-tion. In the past, too many governmentdecisions and regulations evolved inan unstructured way. Nowadays, thereis a growing realisation of the need tostrike a careful balance between thelikely benefits of the regulation and thecosts for those involved (administration,companies, citizens and so on). An RIAhelps to highlight relevant factors andmoves the government in the directionof a balanced and considered solution.The RIA is thus a powerful instrument,providing a rational and analytical basisfor decisions along with transparency inthe regulatory process.

Where does RIA come from?

RIA is by no means a Flemish invention.It is generally accepted that high-qualityregulation plays an important role in aregions economic performance. HenceEuropes commitment to better regula-tion in the 2005 Lisbon Strategy, one ofthe planks of which is the Impact Assess-ment. The OECD also emphasised theimportance of RIA in its 1997 Report onRegulatory Reform. Regulatory impactanalysis of some kind therefore existsin most Western countries. Belgiumsfederal government has the Kafka test,for instance.

In Flanders, the Regulatory ManagementUnit (formerly the Regulatory Manage-ment Knowledge Cell) was tasked back

in 2001 with developing a system ofregulatory impact assessment. In theend, the Flemish government decidedto introduce the RIA from 1 January2005. Since then, the Flemish RIA hasundergone a range of changes. Follo-wing an evaluation in 2005, a distinc-tion was introduced between light andheavy RIAs, with the emphasis now onproportionality, i.e. taking into consi-deration the relative importance of theregulation concerned. In 2007, with aview to fewer but better RIAs, the scopeof application was changed so that RIAsare no longer used for certain types ofregulation.

Obstacles and opportunities

However, there is still ample scope forimprovement in the way that RIAs areused in Flanders. A frequent criticism isthat RIAs are difficult to reconcile withthe way Flemish regulation is developed.Usually, there is consultation at politicallevel to decide what form the regulationwill take. The RIA only takes place ata later stage, when the essence of theregulation is already fixed. However, anRIA is by nature an ex-ante assessment,an ongoing process that must occurbefore and during the drafting process.Currently, too many RIAs are still perfor-med ex post, simply to confirm alreadydrafted regulation, making them littlemore than an administrative formality.

This said, one positive thing to noteat the EWI Department is that therequirement to compile an RIA me-ans that more account is taken of theadministrative burdens that regulationwill cause, this being one of the aspectson which RIAs must report. In practice,this obligatory assessment encouragesregulators to think from the outset aboutways of reducing or indeed eliminatingadministrative burdens. The guaranteescheme for inconvenience during publicworks is a good example of this. As aresult of the RIA, a new draft regulationwas formulated involving much lessadministrative work.

The RIA will be re-evaluated at the endof 2007, although the Flemish govern-ment has said that it intends to continuethe system in 2008. At present, the im-pact of RIA may not be being fully felt.However, it is expected to gain groundslowly but surely and so bring about afundamental shift in attitudes regardingthe drafting of regulation, including inthe administration.

Tom Vandenbogaerde andAnn BourdeaudhuiEWI Legal Department




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What is the role of the OECD?

Elsa Pilichowski: The OECD is aninternational organisation, set up in theearly 1960s. It currently has 30 membercountries, and a number of others areinvolved as observers. The OECD sup-ports sustainable economic growth,encourages employment, works to raiseliving standards and safeguard financialstability and contributes to the economicgrowth of non-member countries andthe growth of world trade. The organi-sation is committed to democracy andthe market economy.To meet its objectives, the OECD col-lects large amounts of data, examines

trends, analyses and forecasts economicdevelopments, researches social changesand emerging patterns in areas such astrade, the environment, agriculture andtax systems as well as the topic we arediscussing today: public governance.Besides these core tasks, which aredictated by the 30 member countries,the OECD also engages in intensivedialogues with many of the worldseconomies.

International democratic think-tankgeared to the market economy

How does your department fit into this?

Elsa Pilichowski: My department is

responsible for monitoring trends anddevelopments in public governanceand management. It focuses on publicbudgeting, regulatory reform, ethicsand integrity, e-government and publicservice personnel policy.Like many other OECD departments,in addition to cross-border analyseswe also conduct peer reviews. Theseare discussions and assessments by ateam consisting not only of OECD staffbut also peers: i.e. experts from othercountries, usually senior civil servants,who operate in the same field. Theyare appointed by their own country,and their task is to examine the countryunder review on the basis of their own

expertise and professional experience.All OECD countries have the chanceto take part in this process. The aim ofa peer review is not only to help thecountry think about its own policy andsystems; the exchange of experienceswith other OECD countries on specificsubjects is also important.

Belgium: an example for other OECDmember countries

What was the aim of the study onBelgium?

Elsa Pilichowski: The OECD Reviewsof Human Resource Management in

Government: Belgium: Brussels-Capital

Region, Federal Government, FlemishGovernment, French Community andWalloon Region20 - to give it its officialtitle - is one of our peer reviews, the firstof its kind on personnel management ingovernment. The OECD is very gratefulto Belgiums governments for theirwillingness to take part in this difficultexercise. In doing so, Belgium has set anexample for other OECD member states,especially as the issue is very sensitive inmany other countries.Our aim with this new type of review isto investigate whether governments aremanaging the size, skills and competen-cies of their workforce in a sustainablemanner and whether HRM systems

are performance oriented. With federalcountries such as Belgium, we examinethe relationship between HR rulesacross governments and within eachindividual government. Finally, we exa-mine whether the values promoted bygovernments are consistent with theirHRM principles and practices.

What methodology was used? Whatmakes this study different from others,such as those conducted by the Euro-pean Central Bank and the World Bank?

Elsa Pilichowski: The unique featureof the OECD study is its peer aspect.It builds, primarily, on the work of theOECD Public Employment and Manage-ment and Public Governance workingparties over the past 20 years. Boththese groups, which are made up of civilservants from OECD countries, wereable to comment several times on theinterim findings before the study wascompleted. Also, five OECD countriestook part in the full review: senior civilservants from Canada, Ireland, theNetherlands, France and New Zealandworked for weeks on the project. Aformer senior civil servant from Swedenwas also involved as a consultant. Du-ring the exercise, the whole team cameto Belgium several times on mission,where they held lengthy interviews withcivil servants from all the countrys go-vernments. They combined these frankdiscussions with literature and extremelyextensive documentation supplied by all

Belgian governments.

A Belgian professor has said that themost recent consolidated figures on ourcivil service staff date from 2001. Arethe figures still accurate?

Elsa Pilichowski: I have not heard thatstatement. We examined the figuresin great detail (they are included inAnnex 1 of the report), and if the datasupplied were inaccurate we could fallback on our analysis of the compensa-tion costs of employees of governmentdepartments. These were based on thenational accounts, which do containaccurate data. Also, we used a variety of

sources and I can assure you that theywere quite consistent. We thereforehave every confidence that our figuresare correct.That said, I have seen misinterpretationsrelating to the figures in press articles onthe OECD study. The figures are compli-cated and complicated to compare. Forexample, looking at the numbers it isnot possible to say definitely: there arefar too many civil servants in Belgium.Its far more complicated that that.

And are the figures for all OECD coun-tries comparable and reliable?

Elsa Pilichowski: This was the first timethe OECD had used the findings of itsnew government employment metho-

dology in a report. This methodologycompares personnel in similar organisati-ons and sectors across OECD countries,with the aim of assessing how may staffare employed in government-fundedservices, regardless of whether theseservices are provided by public or privateorganisations. Admittedly, the methodo-logy is complex and the OECD has notyet developed an easy way of unlockingthe data. Nonetheless, the individualfigures only make sense as part of abroader analysis of the cost of providingpublic services.To give a straight answer to yourquestion: despite a number of technicaldifficulties - as recorded in the footnotes

to the reports annexes - we believe that

> Interview with

Looking at the numbers it was

not possible to say definitely:

there are far too many civil ser-

vants in Belgium.

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we have accurate and comparable dataacross the different countries. However,those data only make sense if they areunderstood in the right way and viewedas a whole.

HR policy: similar difficulties acrossBelgiums governments

How different is Flanders profile fromthat of Belgiums other governments?Are we doing better? And what are the

specific weaknesses?

Elsa Pilichowski: The study is notabout whether governments provide

better services at lower cost. We werejust looking at where governments standin terms of the way they operate themachinery of government services. Inthat respect it doesnt make sense totalk about better or worse.What we can say is that Flanders hasworked hard to change its serviceculture and organisation. The traditionalcareer path in government is chan-ging. There is increasing emphasis onperformance and competency manage-ment. The story of HRM in Belgiangovernment is one of transition from acentralised, rigid and highly regulatedHRM system to one that is making anumber of attempts to decentralise deci-

sion-making. In this transition, Flandersis leading the way. However, in recentyears the federal government has alsoundergone some major reforms. Theother governments too are currently inthe process of reform.The reviewers were also struck by thesimilarities between Belgiums govern-ments in terms of HRM and in particularthe difficulties they are having to dealwith. They are problems largely specificto Belgium as a whole: the long-termincrease in staff numbers and compen-sation costs; blurred political administra-tive boundaries and the large numberof political appointees; inconsistencies

between regulation and actual practi-ces on the use of employment formats- in particular the use of contractualstaff; and the overregulation of HRMsystems.

Some people conclude from the studythat Belgiums administrations shouldreduce the number of civil servants,with the surplus entering the privatesector.

Elsa Pilichowski: Hopefully that is notthe only conclusion they take away from

the review. Other conclusions are just asimportant, if not more so, for the func-

tioning of Belgiums governments.There is indeed a problem with the sizeof the workforce, but that has more todo with its development over time thanwith the number of staff. The long-termincrease was something that particularlystruck the research team. Over the pastten years, the workforce has grownby 8%, especially in the communitiesand regions, with no correspondingreduction in the federal government.We could not see any real justificationfor the increase, which seemed to bepartly a result of the federalisationprocess. More civil servants have beentaken on, mostly to perform administra-tive tasks. All countries that undergo

institutional changes are likely to have topay for it. However, those costs shouldbe temporary and should decrease lateron. This is the message that the reviewteam wanted to convey as regards thenumber of civil servants.

Outsourcing services based on a clearstrategy

At the same time, the governmentshould be relying more on privatecompanies to perform tasks that it iscurrently performing itself.

Elsa Pilichowski: Belgium has a lowlevel of outsourcing of services by the

government to companies. In othercountries, most outsourcing is for lowskilled positions such as canteen andcleaning personnel. In this connection, itis important to consider the number ofcivil servants due to retire over the nextfew years. Although we do not have allthe necessary data, the number seemsto be higher than in the private sector,as is the case in most OECD countries.It is therefore an ideal time to thinkabout not replacing staff that leave and

outsourcing low skilled services.

Will this really be a better use of tax-payers money? After all, the privatesector is there to make a profit for itself,and will not necessarily act in the bestinterests of all?

Elsa Pilichowski: Certain conditions dohave to be met if a country is to benefitfrom outsourcing: internal capacitiesmust be built to manage contracts withprivate contractors. Outsourcing servicesmust be based on a clear strategy.In all OECD countries - and Belgium isno exception - low skilled workers arepaid better by the government than by

private companies. Outsourcing low skil-led jobs therefore has a disproportionateeffect on the payroll.

Education, for example, is financedlargely by the state and is of a veryhigh quality. Can private schools offerthe same level of quality for the samenumber of people?

Elsa Pilichowski: In this exercise,when we talk about outsourcing we arereferring to services (usually low skilled)supplied to government, not servicesprovided to citizens. The issue of privateschools and hospitals is a very complexone, and is not covered by the study.

Is it then reasonable to say that staffmade redundant by the government willbe able find jobs in the private sector?

Elsa Pilichowski: The question ofwhether staff made redundant will findjobs in the private sector is a differentissue altogether. Some of them probablywont.

Social employment: difficult to combinewith modern HR policy

Are you pleased at the debate currentlyraging in Belgium?

Elsa Pilichowski: It is interesting to see

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8% more civil servants over the

past ten years is partly a result

of the federalisation process



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that the Belgian governments have re-flected on a number of issues. They toldus that at least some of the conclusionshave been taken into account in the mo-dernisation plans21.The fact that the broad debate seemedto focus on the number of civil servantsis slightly disappointing. A number ofother issues are equally important, if notmore so: the politicisation of public ser-vices; inconsistent use of the contractualstaff system; overregulation; inconsistent

values promoted in documents andpractices.

The unions, amongst others, see it asthe job of government to offer employ-ment to the weaker members of soci-ety, known as social employment. Isthis a defensible and acceptable policy?

Elsa Pilichowski: Social employment isa respectable policy choice for govern-ments on condition that it is implemen-ted in a wholly transparent way. Andthe associated costs must be clear topolicy-makers.However, social employment is difficultto combine with modern HR policy

instruments, which are geared towardsmeasuring individual and collectiveperformance. Setting up parallel systems- one for social employment and onebased on performance - is more expen-sive. It also sends out confused mes-sages to staff and undermines the use ofmodern HR policy instruments.

A public manager has warned that in afew years time the administration willnot be able to recruit the personnel itwants, partly due to the wave of impen-ding retirements. He argues in favour ofa personnel policy based on skills ratherthan on qualifications as is currently thecase.

Elsa Pilichowski: Although morecomplicated, a skills-based system ismore suited to a modern HR policy. Inour knowledge economies, knowledgeis created and destroyed faster than inthe past. Governments need to adaptto this reality. Internal training policy ina knowledge economy is irreconcilablewith a qualification-based policy.This does not mean that a lifetime careerin public services is no longer possible.Even in OECD countries with the mostflexible systems, such a career is stillpossible. What it does mean is thatnew blood can be attracted at all levels,bringing new skills into the organisation.

Under this logic, staff need to becomemore mobile than is currently the case.So something that Belgium really doesneed to address is the fact that, as aresult of the federalisation process, a ca-reer in government is limited to a smallentity with a limited mix of people.

Belgium: unique in terms of the numberof employees in ministerial cabinets

Other people think the study recom-

mends limiting the number of staffemployed in ministerial cabinets, ashappens in other countries. Is thatpossible in Belgium and/or Flanders?Given that cabinet downsizing was oneof the objectives of the recent reform ofFlemish administration?

Elsa Pilichowski: Once again, its allabout transparency and costs. Thesituation in Belgium is unique in termsof the total number of people workingin ministeria

EWI-Review 3 / January 2008

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Transcript of EWI-Review 3 / January 2008