Rector, President of the Senate, Dean of the Economics Faculty, distinguished guests, ladies and gentlemen
Thank you very much for this great honour that you have bestowed on me today for the work I did before joining the EBRD. I feel truly unworthy. When Virginia Gheorghiu, Romania’s wonderful representative at the EBRD Board, told me about it, I was in a state of shock. Perhaps the university had got the wrong Chakrabarti! There are four of us, all unrelated I hasten to say, in British public life. But it turned out to be true and here I am.
And I am lucky enough to be here in ASE’s 100th anniversary. Happy birthday to this distinguished institution! EBRD owes you a lot – about half of our Romania team was educated here, as were many of the government and private sector counterparts I have been meeting. So, not just EBRD, but Romania too is indebted to ASE.
So, let me say something about me, about public service, and about this region and EBRD.
Why public service?
My father and wife are academics, public servants in the wider sense. My mother was a teacher working in the more deprived areas of London, another public servant. So I guess public service runs in the blood! It is certainly something that gives me enormous satisfaction, even when the going gets tough.
And, because the environment for public service can be tough, and because some of you may be thinking about your future careers, I’ll start by making the case for public service and what can be achieved by dedicated public servants.
You certainly would not choose public service to become rich and famous! Only in Singapore is there recognition of the importance of public service when it comes to pay salaries that rival the private sector. That’s certainly not the case in the UK. For a long time, the pay has been miserly, particularly in central government. And the only way to become a household name is when the media report a public service failure.
So the reward for public service is something intangible. Indeed, public service should only attract those who get their kicks from making something work that the markets cannot or will not provide.
Einstein put it rather well:
Only a life lived for others is a life worthwhile.
Or as Gandhi put it:
If you want to find yourself, first lose yourself in helping others.
When public service gets it right
You always have to remember, as a public servant, that your reward comes from making public services more responsive and accountable to the public. I have no doubt forgotten this maxim at times. But it was at the centre of my thoughts when, in the early days of the Blair administration, I came up with the idea of Public Service Agreements – “PSAs” as they are known. The idea was very simple. I felt there were transparency and accountability gaps in the provision of public services in the UK. Citizens paid for public services with their taxes and then simply trusted public service leaders to deliver. There was no pressure on performance from citizens or from internal management. Not surprisingly, most British public services performed badly.
By the 1980s, Mrs Thatcher’s answer was ideological – privatisation. And this worked in many cases where the service should never have been in the public sector, e.g. with BT, the telephone company. But the ideological approach to improving performance was no answer where the service had to be provided by the state, e.g. defence, or there was social consensus that it should be provided very largely by the state, e.g. health services.
That is where the idea of Public Service Agreements came in. Tony Blair, a Prime Minister motivated more by “what works” than ideology, was interested in incentives and better management. For a young economist turned executive like me, this was a godsend. I pushed forward the idea that government would publish targets for public service outcomes, eg waiting times in hospitals or literacy and numeracy levels for schools, and be held accountable by Parliament, on behalf of citizens. Blair created a Delivery Unit and held periodic stocktake meetings with Cabinet Ministers to check performance against their PSAs. This new approach – PSAs - played an important role in improving UK public services over a decade and a half. Difficulties faced by public servants in further improving services in the UK today are not so much one of incentives, but funding pressures as budgets are squeezed.
When public service gets it wrong
Looking back, the PSA initiative seems obvious. So why did public servants not think of it before? And why was it such a struggle to get it agreed at the time? This brings me to the issue of when public servants prevent change, when they forget what Einstein and Gandhi said, or forget what motivated them in their youth to take up public service.
Public service is at its worst when those who work in it – politicians and civil servants – start to redefine its objectives for personal and party gain, or in the interests of the provider and not the citizen. Too many politicians have short time horizons, avoiding any action that might hinder their re-election. Public service reform that improves public services is a long-term game, out of sync with the electoral cycles of many politicians. And a reform like PSAs, which makes public service performance transparent and accountable, is potentially dangerous for that reason. And many public service leaders have little experience of other ways of working that might improve the performance of services they manage. They are also hardly likely to want the greater public scrutiny, including being held to account in Parliament and by the media, that PSAs created. When you hear politicians or public service leaders making a virtue out of doing nothing despite the situation demanding action, you should ask whether their instinct for political survival has defeated their love for public service.
The importance of leadership and courage in public service
So, given the difficulties stacked against public service reform, why are there times when breakthroughs can be made? For me, this is the story of leadership and courage, both from politicians and public service leaders. For my PSA initiative, it would never have flown without the courage of a Prime Minister like Tony Blair. He backed the idea when many of his Ministers were against and when he knew that, initially, it would make clearer to the public just how bad UK public services were.
But you need courage from civil servants too. I was still young enough not to be too concerned about my career. Moreover, even earlier in my career, I had a ringside seat as my boss, the Permanent Secretary of the UK international development department, put it on public record that he objected to the aid financing of a project – the Pergau Dam in Malaysia – because it was both bad economics and linked to the sale of arms by the UK to the Malaysian Government. His courage in doing that was a salutary lesson to a young civil servant like me. We are trustees of public money and, although we work for the government of the day, we must have and use the right to speak up when we feel there is abuse of that trust. And it led to a great reform: the Blair administration made it illegal to provide aid funds for any other primary purpose than development.
International development as public service
That story links to the other constant in my life: the cause of international development, to which I have been committed during much of my public service career.
Perhaps it was my roots. Born in India, a poor country struggling to develop. Perhaps it was my reading. Michal Kalecki, a famous Polish economist focused on the problems of development in Eastern Europe and in other parts of the developing world, was my favourite author at university. Whatever the reason, I have always been interested in what makes economies and societies change and put themselves on the path to economic prosperity and political plurality.
My interest in both the economics and politics of development found voice after university when I had a fellowship to work in Botswana, on the border of South Africa. This was 1981 and apartheid in South Africa still in full swing. The economic and political development of countries bordering South Africa were stunted by the consequences of apartheid. Not only were trade and free movement of labour restricted, the human psyche was damaged throughout the region. I realised this the day I helped write the budget speech for the Botswana Finance Minister and he removed all my references to the pernicious effects of apartheid.
That episode used to come to mind a lot in the early 1990s when I started working on the problems of economic and political development in this part of the world. Sadly I never visited Romania in this period, but I certainly remember in my visits to Russia and the Visegrad 4 countries the unwillingness, even after the fall of communism, to speak openly about the past. The psychological damage had gone deep.
It took time for that damage to wash away. On some days, I wonder whether it has fully gone yet, sufficient to allow the EBRD’s countries of operation to speak more strongly than they do.
Despite that background, the two decades after the fall of the Berlin Wall has been an immense success. Of course, there have been ups and downs. But politically all of the countries in this region are more democratic than they were and economically much more prosperous. The UK Know-How-Fund, with which I was closely involved, played a key role. My favourite example is perhaps the creation – actually, the re-creation – of the Budapest Stock Exchange, in 1990. The day the stock exchange re-opened, there was only one equity listed – a small property company, I believe. In the following years, the stock exchange played a key role in the restructuring and privatisation process of a number of Hungarian companies. Including the larger ones, such as the oil and gas company MOL, or OTP Bank. But also of less visible enterprises, which would not have had access to capital markets and are now the backbone of the Hungarian economy. The Know-How-Fund is all about international development as public service.
And the EBRD, the institution I now have the privilege to lead, has played an enormously positive role. Through its projects, largely in the private sector, it has undoubtedly been part of the story of prosperity in the region. We have lent €83 billion over 22 years in more than 3,700 projects, of which €6.2 billion and more than 370 projects were in Romania. Without EBRD, because we undertake projects that commercial banks ignore, Rom Telecom may not have been able to invest into the expansion of its digital network to 600,000 new homes as early as in 1992. More recently, the German and Belgian retailers Kaufland and Louis Delhaize may not have committed the amounts that they
I have invested in Romania in the past 5 years, bringing modern retail formats and safe food to an increasingly large number of Romanian homes, while supporting local farmers. For a public servant like me, to join and lead the EBRD is a great honour. I truly believe this public institution has and can continue to make a difference.
The public service challenge in Eastern Europe
How will the EBRD continue making a difference? Well, back to the beginning. The best public institutions reinvent themselves for new challenges while staying true to their mandate. EBRD staff, although largely focused on private sector development, are public servants. The best public servants do not wallow in nostalgia. They innovate and tailor their products and services to the challenges of today and the future.
So that is what we are doing at EBRD. This region – and Romania is no different – has to find the levers for growth and jobs. If it doesn’t do so, then the long-term economic and political consequences could be grave. A generation of workless youth will create extraordinary pressures on any society.
To match up to this growth and jobs challenge, I and my public servant colleagues in EBRD want to invest more in SMEs and infrastructure, do more to bring in to the economic marketplace the women entrepreneurs, the young, and the underserved regions, push our green agenda beyond energy efficiency to other sectors, attract investment from other emerging countries as well as the traditional Western European market, and bring on board institutional investors from other parts of the world.
But re-inventing our investment, business development and financing is not enough. The good public servants of EBRD also need to be much more vocal and challenging of the governments of the region on policies. Structural reforms are sorely needed. But, politicians – as I said before – have been timid for fear of vested interests and the impact at the ballot box. They need to act to improve the investment climate, tackle corruption, and improve governance. All of those actions are important over the long-term for growth and jobs. The public servants of the EBRD will be pushing and supporting them to make the changes.
Its all about the future generations
Why should they do all that? Why should political and public service leaders in Romania and throughout this region take these difficult decisions? Because they only have to stand here and look at you. I am coming towards the end of my public service career. You are all about to start your working lives in the next few years. You are the future. The good public servant will want to do his or her best for you, to serve the future, not just the present.
So let me end by thanking you again for this honour. I am truly humbled. Like all honours, this reminds me of all the people I have worked with who did not get the chance to take the stage. What little I have learned and tried to do owes a lot to them. I thank them too as I accept this honour.
Thank you so much for listening. I hope some of you will also answer the call of public service. I wish you all good fortune!