Decentralization

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Key Issues in Decentralization An Overview
Presented to PREM WBI Core Course on Public
Sector Governance Anticorruption
Presented by Kai Kaiser Decentralization
Thematic Group Public Sector Group kkaiser_at_worldba
nk.org
February 15, 2005

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Decentralization A World-Wide Phenomenon

• Underway in over 85 countries
• Political and economic rationales
• Varieties
• Deconcentration
• Delegation
• Devolution
• Spans political/legal, fiscal, administrative

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Decentralization Trends
Subnational Expenditure Shares Subnational Tax Shares
Developing Countries
1970s 13.0 (48) 10.4 (43)
1980s 13.2 (43) 7.7 (35)
1990s 13.8 (54) 9.3 (28)
Transition Countries
1990s 26.1 (23) 16.6 (14)
OECD Countries
1970s 33.8 (22) 18.7 (22)
1980s 32.3 (23) 18.7 (22)
1990s 32.4 (23) 19.1 (23)
Source International Monetary Fund. Government
Finance Statistics Year Book , various years,
Country Tables
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Differences Across Regions
Subnational Share of Expenditures
Subnational Share of Revenues
Note Simple average of most recent observations
in available countries. Numbers in parenthesis
indicate number of countries represented.
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International Diversity
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Percent of Countries with Elected Sub-national
Governments
1
0.9
Local
0.8
Governments
0.7
0.6
Regional
0.5
Governments
0.4
0.3
0.2
0.1
0
1960
1970
1980
1990
2000
2010
Sources From 1965 to 1995, Henderson (2000),
available at http//econ.pstc.brown.edu/faculty/he
nderson/. For 1999, World Bank World Development
Report 1999-2000. Cases in which Henderson and
the WDR used different intermediate governments
were dropped. Sample size 43 countries
,
.
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Positive or Negative Outcomes?

• If designed well, decentralization can
• Move decision making closer to people
  (subsidiarity principle)
• Enhance efficiency and responsiveness of service
  delivery
• Competition Horizontal Innovation/Learning
• Enhance State Legitimacy/Accountability
• Improve economic growth
• Potentially alleviate poverty

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But, good design is complicated

• Decentralization spans
• Political/Legal
• Fiscal
• Administrative
• policies and institutions

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Decentralization Design Principles

• Comprehensiveness
• Finance Follows Function
• Accountability/Capacity
• Variety of Mechanisms
• Local Taxing Power
• Clarity
• Sectoral/Decentralization Laws
• Credibility
• Equity/National Standards/Incentives
• Keep it Simple!
• Avoid Fudging or Excessive Complexity

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Common Dangers

• Elite capture (by ethnic/racial/social groups)
• Opaque or arbitrary decision-making
• Constituents, villagers, communities unable to
  hold representatives accountable due to
  incomplete information
• Corruption
• Patronage politics
• Excessive discretion to reward friends, punish
  rivals
• Central civil servants over-rule local
  representatives
• disparities in experiences across localities
  may be significant

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Key ChallengePromoting Decentralized
Accountability
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Dimensions of Accountability

• Top-Down/Upward
• Federal vs. unitary country
• Financing Administrative Arrangements
• National Priorities
• Downward and horizontal
• Citizenry and community
• E.g., County Councils
• Executive/Bureaucrats
• E.g., County Commissioner Country Council
• Frontline providers

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Allocative Efficiency (Subsidiarity)

• Matching local needs and preferences with local
  public expenditure patterns
• Assumes
• Substantial fiscal autonomy
• Political decentralization
• Are elections held?
• How are candidates selected?
• Intra-party hierarchical control mechanisms?
• What do elections mean?

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Benefits of Political Decentralization

• Greater voice and choice
• Individual constituents influence decisions which
  affect their lives
• Subnational/local governments respond dynamically
  to constituent concerns
• Exit possibilities
• voting with ones feet
• Empowerment
• Districts, villages, communities, and individual
  constituents

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Political DecentralizationCritical Assumptions

• Representative elected bodies
• Each local representative has a mandate to
  articulate needs of an identifiable constituency
  and can be held accountable to such
• Periodic Elections
• Clearly defined jurisdictions within which local
  governments can legislate and provide services
• Clearly assigned local powers and functions
• Legal, political, and functional space
• Inclusive local decision-making
• Does not systematically exclude most vulnerable
  groups (e.g., poorest, specific social or ethnic
  groups)
• Mandated Representation?

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Mechanisms to Strengthen Accountability

• Reduce capture
• Specify secret ballots and/or recorded votes as
  basis for decisions
• Clearly defined meeting times and decision rules
  (simple majority, 2/3, secret ballot, etc.)
• Participatory planning and budgeting
• Make realizations (e.g., block grants)
  transparent
• E.g. Uganda

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Mechanisms to Strengthen Accountability

• Improve transparency
• Public LG meetings, citizen fora
• Publicize voting records
• Mobilize own source revenues
• Financial disclosure (improved budgeting)
• E.g., Annual Review Reports
• Freedom of Information Acts and/or other public
  disclosure laws (assets, affiliations)
• Monitoring by vigilance committees, NGOs, CBOs,
  media
• Media

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Mechanisms to Strengthen Accountability (contd)

• Reduce corruption
• Chief administrator should report to entire
  elected body
• Implementation orders by council resolution
• Ensure multiple signatories for funds release
• Financial management and accountability systems
• Ensure political autonomy
• Central civil servants must not have power to
  intervene/ override LG decisions on behalf of
  higher levels
• Establish framework for intergovernmental
  dialogue and dispute resolution

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From Local Government to Local Governance

• Broaden decision-making by empowering other
  stakeholders and civil society
• Promote Client Power
• Encourage Contracting-Out
• Community Based Organizations (CBOs) to partner
  with or lobby local governments as appropriate
• Use LG-CBO partnerships to leverage service
  provision, and foster information flows and
  two-way accountability
• Works best where LGs are well designed and
  governance processes in place
• Ownership

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Improving Local Governance through LG- CBOs
Partnerships

• LGs gain from partnerships with CBOs
• Stretch service provision
• Extending reach of service provision,
  implementation
• Deepen the role of citizens with local activities
• Higher level collective action requiredpastoral
  lands, irrigation
• CBOs gain from partnership with LGs
• Promote external linkages
• Enhance effectiveness
• Reduce costs (economies of scale and transactions
  costs)

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Stretching and Deepening

• Example of stretching
• CBOs serve as contractors for education works and
  water supply (e.g., Ghana)
• Technical capacity important.
• Examples of deepening
• Porto Alegre (Brazil), collaborate with CBOs
  across a number of sectors
• Social mobilization and collective action
  capacity much more important than technical
  capacity voice in design crucial and improves
  cost-sharing

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Strategic Considerations

• Strategies
• Decentralization Objectives?
• Champions
• Early design has long-run implications
• Sequencing/Priorities (esp. w/ low starting
  capacity)
• Monitoring Evaluation / Base-lining /
  Diagnostics
• Managing Change/Long Run Process
• New modes of operating
• Expectations
• Credibility that LGs can deliver services?
• Capacity, Accountability, Resources?
• Phasing

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Further Resources

• Decentralization Thematic Group Website
• Sign-up for Decentralization TG
• Decentralization Local Financial Management
  Course
• March 29-30, 2005
• Decentralization Core Course
• AskGov

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QA