Implementing Decentralized Local Governance in South Asia and the World: A Comparative Review Anwar...
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Implementing Decentralized Local Governance in South Asia and the
World: A Comparative ReviewAnwar Shah, World Bank
[email protected] Workshop,
Singapore, August 8-9, 2010
THE VISION
Decentralization – what???
“If you do not know where you are going then every road will take you somewhere else”.
- Yogi Bera
Anwar Shah, World Bank
Emerging Vision of Local Government 20th versus 21st century
• Residuality principle• Ultra vires• Focus on government• Agent of central/provincial
governments• Dependent on higher govt
transfers • Accountable to higher
governments • Direct provider• Dependent on central directives• Rules driven, bureaucratic,
technocratic• Exclusive with elite capture• Overcomes market failures• Boxed in a centralized system
• Subsidiarity principle• Community governance• Focus on governance and growth• Primary agent for citizens and
gatekeeper for shared rule• Access to sustainable finance• Accountable to voters• Network facilitator• Autonomous• Strengthens voice, choice and exit
and results based accountability.• Inclusive and participatory• Overcomes market and
government failures• Global and local connectivity
Anwar Shah, World Bank
Interest-based Networks
Hope-based Networks
Other good Samaritans
Private (for profit) Providers
Community Associations
Regional Government
National Government
Local Government
(chair)
Local Govt as a leader/facilitator of Network Forms of Local Governance
Anwar Shah, World Bank
For South Asia it may be back to the future!
• “My idea of village swaraj (independent republic) is that it is a complete republic, independent of its neighbors for its own vital wants, and yet interdependent for many others in which dependence is a necessity”. Mahatma Gandhi as quoted
in Alok (2006) • Self-governing village communities in India in 1200
BC. Rig Veda as quoted in Alok (2006) • Self –governing urban local governments in
Harrapa and Mohenjo-Daro (Pakistan) in 2500 BC.
A disgruntled citizen’s perceptions about his government
• “Government is the coldest of all cold monsters – whatever it says it lies – and whatever it has -it has stolen.”
»Nietzche
Perceived Problems of Government in South Asia
• Too remote• Too arrogant• Too bureaucratic• Too big• Too inefficient, ineffective• Too unaccountable• Too opaque• Too corrupt
Why governments do not deliver?
Mandate
Authorizing Environment
Outputs, reach, outcomes
Operational capacity
But sometimes there are ulterior political motives..
Motivation Countries/Regions Motivation Countries/Region
Political & economic transformation
Central and Eastern Europe, Russia
Improving service delivery
Chile, Uganda, Cote D’Ivoire
Political crisis due to ethnic conflict
Bosnia-Herzegovina, Ethiopia, Yugoslavia, Nigeria, Sri Lanka, South Africa, Philippines
To centralize Turkey, European Union
Political crisis due to regional conflicts
Indonesia, Madagascar, Mali, Senegal, Uganda, Mexico, Nepal, Philippines
Shifting deficits downwards
Eastern and Central Europe, Russia
Enhancing participation
Argentina, Brazil, Bolivia, Colombia, India, Pakistan, Philippines
Shifting responsibility for unpopular adjustment programs
Africa
Interest in EU Accession
Czech Republic, Slovakia, Hungary, Poland
Prevent return to autocracy
Latin America
Political maneuvering Peru, Pakistan, Afghanistan, Bangladesh
Preservation of Communist rule
China
Fiscal crisis Russia, Indonesia, Pakistan
Globalization and information revolution
Most countries
Safeguards against arbitrary dismissal of local governments have improved.
• 1 Constitutional/legislative safeguards against dismissal of LG council by CG; 0.5 - LG can be dismissed under certain circumstances; 0 - LG can be dismissed in an arbitrary manner
Scorecard on Political Decentralization
Region --Component
AFR
EAP
ECA
LAC
MNA
SA
ALL
Constitutional safeguards L L M M L M M
Elections -Council M M M H L H M
Elections - Head L L M H L M M
Participation L L M M L M L
Recall provisions M L M H L H M
Contestability
Security of existence
L
L
L
L
M
L
H
M
L
L
H
L
M
L
Overall L L M H L M M
“Taking stock” of reforms in DTEs: Political decentralization
Progress made: • Legal status of local government• Popular election of local councils and their heads
Where accountability is incomplete: • Low participation and contestability in elections• Lack of provisions for popular recall of local
officials • Disbandment of local councils by higher level
governments
Good progress: Latin America, C. and E. EuropeLittle progress: C. America, Middle East/N. Africa
Revenue Autonomy-Taxes• Tax autonomy important for
accountability
• Local governments have very limited access to own source revenues, even on immobile bases
• Tax base sharing rarely practiced
Perceptions on intergovernmental finance are generally negative
• Federal/Central View: Giving money and power to sub-national governments is like giving whiskey and car keys to teenagers.
• Provincial and Local View: We need more grant monies to demonstrate that “money does not buy anything”.
• Citizens: The magical art of passing money from one government to another and seeing it vanish in thin air.
Ironically these perceptions are well founded in reality as most transfers are of “manna from heaven” or pork barrel variety lacking any incentives for local
accountability in service delivery performance.
But access to credit is almost non-existent in South Asia
• Access to credit – limited or non-existence due to
-Low development of financial markets
-Tax centralization• Central policy focus on prohibitions or
administrative controls• First steps for credit market access
– Tax decentralization– municipal credit rating agencies– Municipal finance corporations
Scorecard on Fiscal Decentralization - 1
Region --Component
AFR
EAP
ECA
LA
MNA
SA
ALL
Rate and Base Autonomy L L L M L L LRevenue Adequacy L M L H L H MSelf financing M L L M L H MMunc Services control H H H H M H HHealth, Education & W L H H L L L MLocal planning
Local procurementL
L
L
L
H
L
M
L
L
L
L
L
L
LFormula transfers M H H H L H H
Scorecard on Fiscal Decentralization -2
Region --Component
AFR
EAP
ECA
LA
MNA
SA
ALL
Results based finance L L L L L L LDomestic borrowing L M M H H H MDomestic Bonds L L M M L L LForeign bank borrowing L L L M L L LForeign bonds L L L L L L Lcapital finance assistance
Range of functionsL
L
L
M
L
M
L
M
L
L
L
L
L
LOverall L M M H L L M
“Taking stock” of reforms in DTEs: Administrative decentralization
• Ability to hire, fire and set terms of employment of local staff
• Ability to contract own taxing and spending responsibilities
• Authority to pass bye-laws in their spheres of responsibility
• Local governments have regulatory authority for municipal services in most countries.
• Significant progress in transition countries (but not in developing countries)
Scorecard on Administrative Decentralization
Region --Component
AFR
EAP
ECA
LA
MNA
SA
ALL
Human Resource Management
L L H H L L L
Contracting out/ partnerships
L M H H L M M
Bye-laws M M H H L H M
Overall L L H H L L M
Decentralization reforms in South Asia have been celebrated with great fanfare but did they bring about F.A.I.R. Local Govern.
Will decentralization be sustained?
More likely if • broad societal consensus • grassroots support• Big bang Less likely if• Gradual and incomplete e.g back-tracking with
opposition by central bureaucrats (Bangladesh, India, Kenya, Pakistan, Sri Lanka); by national politicians – Argentina, Pakistan and Philippines
Local Capture?
• Greater risk when civic participation low, especially since ability to “vote with one’s feet” low in DTEs.
• Particular problem where high inequality of land ownership as I Pakistan
• Endogeneity of civic participation?
• Non-party elections
Fiscal Dec and fiscal management – empirical evidence
Fiscal performance Impact of Fiscal Dec
Quality of debt manag. Positive but insignificant
Quality of FP and Inst. Positive significant
Eff. Revenue Collection Mixed but insignificant
Prudent use of taxes Positive significant
Growth of public exp. Negative but insig.
Control of deficit Negative but insig.
Growth of public debt Positive but insig.
PSM Positive but significant
GDP growth Positive but insig.
Impact of Decentralization on Service Delivery (empirical evidence)
Positive Negative
Municipal services Pakistan, Bolivia, Colombia, Brazil, Indonesia
Education and Health
Argentina, Bolivia, Nicaragua
Social protection Albania
Access to the poor Bangladesh, India, Brazil
Argentina, Uganda
Impact on corruption India, China, Bangladesh, Colombia, Cote d’Ivoire, Indonesia
Russia
Lessons
• Decentralization to intermediate levels (states or provinces) in large countries could pose a potential threat to internal peace and political stability. True decentralization means localization.
• Localization - a key to local economic development.• Decentralization as a means to an end and not an end
itself.• Decentralization is a long and difficult process. Requires
a long term holistic vision, patience and persistence. All pieces must fit together.
• “Big bang” vs small steps: Long period of consensus building but big bang in implementation
• Top down approaches likely to fail.
……..Lessons (2)
• Localization is not a gamble but a “no-regrets” approach
• No unique model. Custom tailoring a must.• A more nuanced approach to cost recovery
desirable.• Capacity constraints less binding than commonly
believed and are excessively used to stall reforms.
• Reforming government organization and culture is the key to the success of decentralization policies.