The New Public Management reform of state-funded social service nonprofit organizations and the changing politics of welfare in Hong Kong
| Author | Eliza W.Y. Lee |
| Published date | 01 September 2012 |
| Date | 01 September 2012 |
| DOI | http://doi.org/10.1177/0020852312444855 |
| Subject Matter | Articles |
International Review of
Administrative Sciences
78(3) 537–553
!The Author(s) 2012
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DOI: 10.1177/0020852312444855
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International
Review of
Administrative
Sciences
Article
The New Public Management
reform of state-funded social
service nonprofit organizations
and the changing politics of
welfare in Hong Kong
Eliza W.Y. Lee
The University of Hong Kong, Hong Kong
Abstract
What are the political impact and significance of New Public Management (NPM)
reform on social service nonprofit organizations (NPOs) in Hong Kong? Social service
NPOs have a long history as a significant part of Hong Kong’s ‘welfare mix’, not only in
their role as state agents in the provision of service, but also because of their political
and societal roles in affecting social policy making during the colonial era. The exercise
of such agencies under an authoritarian setting was made possible through a governance
regime historically formed under the peculiar situation of the old politics of welfare. The
NPM reform and the associated governance regime change is a significant part of the
new politics of welfare that has arisen with the dissolution of the old social pact. It
facilitates the transition of the governance regime from strategic partnership to execu-
tive dominance, which maximizes the flexibility of the state in containing social spending
and maneuvering the new distributive politics arising from the increasing societal
demand for social care.
Points for practitioners
The NPM reform of social service NPOs is closely tied to the change in the welfare
system and has significant impact on the environment within which these NPOs oper-
ate. The impact and significance of reform is also affected by the characteristics of the
political system and the preexisting relationship between the state and the nonprofit
sector. Social service NPOs assume multiple roles as state agents, political agents, and
societal agents. In Hong Kong, NPM reform unfavorably affects the space for NPOs to
exercise their societal agency. The fierce competition for resources also stifles the
development of newer organizations.
Corresponding author:
Eliza W.Y. Lee, Director, Centre for Civil Society and Governance, Associate Professor, Department of
Politics and Public Administration, The University of Hong Kong, HKSAR, China
Email: ewylee@hku.hk
Keywords
civil society development, Hong Kong, marketization, New Public Management reform,
politics of welfare, social service nonprofit organizations
Introduction
This article discusses the political impact and significance of the New Public
Management (NPM) reform of state-funded social service nonprofit organizations
(NPOs)
1
in Hong Kong. Hong Kong represents a major Asian welfare system that
has widely utilized NPOs to provide social service with large state funding. This is
illustrated by the fact that social service NPOs constitute one of the largest and
best-established NPO sectors in Hong Kong; also, the annual grant paid to the
social service NPOs (in the form of subvention and contracts) amounts to about 72
percent of the annual budget of the Social Welfare Department (SWD).
2
Hong
Kong also represents an Asian case of extensive NPM reform in the management
of these NPOs. The idea of reform was initiated by the SWD in the mid-1990s upon
the recommendation of consultancy reports, which recommend reforming the sub-
vention system, devising new monitoring mechanisms, and injecting competition.
Officially implemented in 2001, the reform measures amount to (1) increasing the
financial flexibility of NPOs through a decentralized one-line budget; (2) converting
the funding system from input to output control using a performance monitoring
system; (3) injecting competition through contracts and tendering procedures; and
(4) encouraging business sector management practices such as entrepreneurship. In
the public management literature, these reform measures are part of an NPM
reform trend, which is characterized by its trust in the superiority of the business
management practice and output-oriented approach to accountability (Hood,
1991, 1995). In the nonprofit management literature, they are also often discussed
under the rubric of marketization (Gronbjerg and Salamon, 2002; Young and
Salamon, 2002). All these terms are shorthand for a set of administrative doctrines
that began in the late 1970s under the broad influence of neoliberalism with the aim
of improving the efficiency and economy of public sector organizations through
market- and business-like practices.
Although some of the recent literature on NPM considers that this wave of
movement ‘has now largely stalled or been reversed’ in ‘some ‘leading edge’ coun-
tries’ (Dunleavy et al., 2006: 467), such a sign of reversal is apparently lacking in
the nonprofit sector. On the contrary, there is evidence showing that NPM-type
measures are alive and well for many ‘pioneers’ and ‘late-comers’ of reform, and
that the practice continues to deepen in the latest development of the state–
nonprofit relationship (Alexander et al., 2010; Bode, 2006; Smith, 2006). The per-
sistence of NPM measures testifies to the growing reliance of governments on the
nonprofit sector (as ‘third-party government’) to deliver services in the age of
shrinking resources and increasing demand for social care. However, in nonprofit
studies, there has been much debate on the impact of NPM reform. In particular,
538 International Review of Administrative Sciences 78(3)
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