Capacity development in the context of Decentralisation

1
Capacity development in the context of
Decentralisation

• Support for the Review of Intergovernmental
  Financing Arrangements

Capacity Development Showcase Port Moresby, 13
November 2008
2
Why sub-national is so important
3
National government has a limited service
delivery role

• Operates 1 hospital in each province
• 120 school inspectors
• majority in districts
• Provincial Works Offices
• mainly deal only with national highways
• Provincial and district treasuries
• Police, Prisons, District Courts
• Some regional offices
• Dept Agriculture Lands Labour
• (Recentralisation of service delivery would
  involve massive change management)

4
Most service delivery is a sub-national
responsibility

• Province-level key responsibilities
• Health program coordination and distribution of
  drugs
• Secondary schools maintenance, supply of basic
  educational materials to all levels (subsidy or
  in kind)
• Maintain 60 of PNGs road network (includes
  district roads)
• Village court supervision, training, audit
• District-level key responsibilities
• Operation of all government health facilities
  including transport
• Outreach patrols
• Agricultural extension patrols
• Pay village court allowances
• LLG-level key responsibilities
• Aid post operations and maintenance
• Primary and elementary school maintenance

5
Achieving MDGs can only happen if problems of
sub-national service delivery are addressed
6
MDGs and provincial service delivery
7
Money is not everything
but it is essential!
While sub-national funding for service delivery
remains inadequate, it is unlikely that MDGs will
improve The challenge building the capacity of
the intergovernmental financing system to fund
service delivery properly
8
Reforming intergovernmental fundinga systems
perspective

• Relates to more than just organisational issues
  at provincial level
• Involves
• Distribution of tasks and roles between levels of
  government
• Impacts on line and central agencies
• Monitoring and accountability systems
• National and Provincial budget processes
• Systems for managing expenditure of money
• Flow-on effects to human resource management

9
Review of Intergovernmental Financing
Arrangements chronology

• 2002initial ToR for review, scoping paper
• 2003background papers development of interim
  arrangements (function grants)
• 2004-2005background papers continue, broad
  proposals put to Governors
• 2006Alternative broad proposals put to Treasury,
  design process begins, Organic law amendments
  drafted
• 2007Policy finalised, Ordinary Act drafted
• 2008Organic law amendments passed,
  implementation begins

10
Key factors in success

• Adopting a systems approach
• Capitalising on opportunity
• Information, information, information
• A good policy process
• Managing the political dimensions
• PNG ownership of process
• Role of TA

11
Intergovernmental financing as a system

• Allocating tasks to different levels of
  government
• Needs to be matched to capacity and staffing
• Also reflects efficiency (subsidiarity)
  principles
• Allocating funding to match the tasks
• Vertical balance (between national and
  sub-national)
• Sharing funding fairly between different
  sub-national units
• Horizontal to each according to its needs
• Monitoring and accountability
• These components provide the framework within
  which more conventional approaches focus on
  individual and organisational capacity
  development

12
Opportunity for reform

• Fiscal pressure driving reform
• 2001 fiscal crisis
• Reform-minded government
• 2002 cabinet budget decision recommends review of
  grant formula
• Independent Commission
• NEFC set up in 1998 but role unclear
• Constitutional office so independent of
  government
• Flexible TA (ASF) seconded from PSRMU

13
A good policy process

• Identify the problem first
• Make sure it really is the problem, not just
  another symptom
• Tendency is to start with a solution in search of
  a problem
• Gather information to understand the nature of
  the problem (evidence-based approach)
• Find out how other countries address the same
  problem
• Develop options and evaluate them
• Consult with stakeholders at every step of the
  processespecially Treasury

14
Information, and more information

• Provincial internal revenues
• Revealed gross imbalance need for more
  equalisation
• Provincial functions and responsibilities
• Revealed decentralisation of functions had been
  travelling in opposite direction to funding
  hence vertical imbalance
• Cost of service delivery
• Revealed even more imbalance poorest provinces
  have highest costs
• Provincial expenditure
• Revealed problems with provinces spending what
  little they have

15
Legitimacy and advocacy

• Credibility of NEFC rested on quality of
  information and capacity of leader to communicate
• Almost three years spend developing ownership of
  the need for more equalisation, based on costs
  rather than kina-per-head
• Found graphic ways to represent the equalisation
  problem
• Information products
• plain English guide to new system, DVDs
  (currently playing on national TV)

16
The pig is being divided very unfairly
Equalisation A new way to cut up the pig
17
Political dimensions - design

• Design needed to include hold harmless no
  province gets less
• 73 MPs need to vote twice for OL changes
• 20 MPs come from SHP and Morobe (relatively
  rich provinces)
• Consultation in advance allowed design and
  advocacy (language) to be adapted to reflect key
  stakeholders concerns
• Eg., make the link between provincial funding and
  district-level service delivery more obvious
• Challenge to overcome bureaucratic instincts to
  treat politicians like mushrooms!

18
Political dimensions - process

• NEFC as honest broker independent, and
  therefore not on either side
• Started with Governors then took their
  demands back to Treasurer
• Secured fiscal commitments, then designed system
  to fit
• Briefed over 40 MPs between early 2006 and late
  2007
• Ongoing engagement at political level offers
• Opportunity to disarm potential barriers to
  change
• Opportunity to stimulate support from potential
  big winners
• Keep donors in the loop too!

19
PNG ownership

• Entry point opportunity offered by governments
  reform decision in 2002
• However, building ownership of equalisation took
  over two years
• PNG agency in control of policy process
• Autonomous, and therefore independent
• Strong PNG leadership
• Not pressured to follow a donor timetable
• Policy process allowed development of
• Understanding
• Acceptance of radical concept (equalisation based
  on need)
• Political will
• Common vision about implementation

20
Role of TA

• In-line, but mainly technical
• Technical consultants gathering information and
  helping formulate options (individual
  counterparts to one or more agency staff)
• Strategic management adviceon policy process and
  managing politics (senior adviser to Chairman)
• TA managed by informal team leader and agency
  head jointly, with agency head as clear leader
• TA had expertise in process and general issues,
  but not highly specialised detail
• Developing expertise in intergovernmental
  financing was a joint journey of discovery for TA
  and agency staff
• Avoided imposition of cookie-cutter solutions
  from other countries
• TA relationship to agency
• TA worked as part of team managed by NEFC
  Chairman (the Boss)

21
More money is only half the answer How to get
the money spent better?
22
Challenges of building capacity to spend better

• Expenditure management systems
• Very diffusedifficult to get a picture of how
  they actually operate
• Embedded in every agency (connective tissue of
  public administration)
• Need to understand how and why they operate the
  way they do
• Informal often different from formal
• Process reality vs prescribed process
• Sequencing very important
• Eg, cannot have accountability without clarifying
  responsibility first
• Political context is very important
• Governance and effectiveness may have to be
  traded off
• Good enough governance