English

Abstract

In line with the new public management (NPM), a public service agency (PSA) is considered as an alternative to replace the government-led public service delivery in a more efficient and effective way. At the same time, a PSA mechanism can deliver public service with better quality. To meet these ends, a PSA is granted with operational flexibility and autonomy particularly in managing finance and personnel. However, the PSA system has not yielded the expected benefits in Indonesia. On the contrary, PSAs have been regarded to cause financial burdens to the Government of Indonesia. This paper explores the current conditions of three key institutional bases of PSAs in Indonesia including PSA governance, financial management and performance management. The notable challenges related to the three dimensions in the Indonesia’s PSAs include the weak PSA governance structure, and an inappropriate balance between flexibility and autonomy on the one hand and accountability and performance on the other in managing a PSA. Focusing on these challenges, this paper draws the following policy suggestions for Indonesia to improve the efficient operation of the PSA system: rebuild the PSA governance on a firm and clear legal base, absorb diverse stakeholders and outside experts in the PSA governance decision-making; monitor and evaluate the PSA’s financial flexibility and autonomy through vigilant internal and external monitoring mechanisms; redesign performance appraisal to set up right appraisal structure, process, and performance criteria; and link the results of performance appraisal to relevant rewards and punishment. Keywords: New Public Management, public service agency, autonomy, flexibility