dr. anwar shah (3)
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Implementing Decentralized LocalGovernance in South Asia and the
World: A Comparative Review
Anwar Shah, World Bankashah@worldbank.org
GINI Workshop,Singapore, August 8-9, 2010
mailto:ashah@worldbank.orgmailto:ashah@worldbank.org -
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THE VISION
Decentralization what???
If you do not know where you are going then
every road will take you somewhere else.- Yogi Bera
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True decentralization: Community empowerment to thinkglobally but act locally.
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Anwar Shah, World Bank
Emerging Vision of Local Government20th 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 andgrowth
Primary agent for citizens andgatekeeper for shared rule
Access to sustainable finance
Accountable to voters
Network facilitator
Autonomous
Strengthens voice, choice andexit and results basedaccountability.
Inclusive and participatory
Overcomes market andgovernment failures
Global and local connectivity
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Anwar Shah, World Bank
For South Asia it may be back tothe future!
My idea of village swaraj (independent republic)
is that it is a complete republic, independent ofits neighbors for its own vital wants, and yet
interdependent for many others in whichdependence 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)
Selfgoverning urban local governments inHarrapa and Mohenjo-Daro (Pakistan) in 2500
BC.
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THE CHALLENGE
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A disgruntled citizens perceptions
about his government
Government is the coldestof all cold monsters
whatever it says it lies andwhatever it has -it has
stolen.Nietzche
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Perceived Problems ofGovernment in South Asia
Too remote
Too arrogant
Too bureaucratic
Too big
Too inefficient, ineffective
Too unaccountable
Too opaque
Too corrupt
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Why governments do not deliver?
Mandate
AuthorizingEnvironment
Outputs,reach,
outcomes
Operational
capacity
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Goals of decentralization reformsA governmentthat works and serves.
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But sometimes there are ulterior politicalmotives..
Motivation Countries/Regions Motivation Countries/Region
Political & economictransformation
Central and EasternEurope, Russia
Improving servicedelivery
Chile, Uganda, CoteDIvoire
Political crisis due toethnic conflict
Bosnia-Herzegovina,Ethiopia, Yugoslavia,Nigeria, Sri Lanka, SouthAfrica, Philippines
To centralize Turkey, European Union
Political crisis due toregional conflicts
Indonesia, Madagascar,Mali, Senegal, Uganda,Mexico, Nepal, Philippines
Shifting deficitsdownwards
Eastern and CentralEurope, Russia
Enhancingparticipation
Argentina, Brazil, Bolivia,Colombia, India, Pakistan,Philippines
Shifting responsibility forunpopular adjustmentprograms
Africa
Interest in EUAccession
Czech Republic, Slovakia,Hungary, Poland
Prevent return toautocracy
Latin America
Political maneuvering Peru, Pakistan,Afghanistan, Bangladesh
Preservation ofCommunist rule
China
Fiscal crisis Russia, Indonesia,
Pakistan
Globalization and
information revolution
Most countries
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THE RESPONSE:
The Silent Revolutionof the 1990s
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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
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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 MContestability
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
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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 localofficials
Disbandment of local councils by higher levelgovernments
Good progress: Latin America, C. and E. EuropeLittle ro ress: C. America Middle East/N. Africa
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Higher tax autonomy
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Revenue Autonomy-Taxes
Tax autonomy important foraccountability
Local governments have very limitedaccess to own source revenues,even on immobile bases
Tax base sharing rarely practiced
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Intergovernmental transfers mostly formulabased and unconditional ..But ?
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Perceptions on intergovernmentalfinance are generally negative
Federal/Central View: Giving money andpower to sub-national governments is likegiving whiskey and car keys to teenagers.
Provincial and LocalView: We needmore grant monies to demonstrate thatmoney does not buy anything.
Citizens: The magical art of passingmoney from one government to anotherand seeing it vanish in thin air.
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Ironically these perceptions arewell founded in reality as mosttransfers are of manna from
heaven or pork barrel varietylacking any incentives for local
accountability in service delivery
performance.
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Somewhat greater freedom toborrow
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But access to credit is almostnon-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
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Scorecard on Fiscal Decentralization - 1
Region --Component
AFR
EAP
ECA
LA
MNA
SA
ALL
Rate and Base Autonomy L L L M L L L
Revenue Adequacy L M L H L H M
Self financing M L L M L H M
Munc Services control H H H H M H H
Health, Education & W L H H L L L M
Local planning
Local procurement
L
L
L
L
H
L
M
L
L
L
L
L
L
L
Formula transfers M H H H L H H
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Scorecard on Fiscal Decentralization -2
Region --Component
AFR
EAP
ECA
LA
MNA
SA
ALL
Results based finance L L L L L L L
Domestic borrowing L M M H H H M
Domestic Bonds L L M M L L L
Foreign bank borrowing L L L M L L L
Foreign bonds L L L L L L L
capital finance assistance
Range of functions
L
L
L
M
L
M
L
M
L
L
L
L
L
L
Overall L M M H L L M
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Taking stock of reforms in DTEs:
Administrative decentralization
Ability to hire, fire and set terms ofemployment of local staff
Ability to contract own taxing and spendingresponsibilities
Authority to pass bye-laws in their spheres ofresponsibility
Local governments have regulatory authority formunicipal services in most countries.
Significant progress in transition countries (but notin developing countries)
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Greater freedom to hire and fire
Scorecard on Administrative
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Scorecard on AdministrativeDecentralization
Region --Component
AFR
EAP
ECA
LA
MNA
SA
ALL
Human ResourceManagement
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 MOverall L L H H L L M
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Decentralization reforms in South Asia have been celebrated
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Decentralization reforms in South Asia have been celebratedwith great fanfare but did they bring about F.A.I.R. Local Govern.
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Will d t li ti b
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Will decentralization besustained?
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 nationalpoliticians Argentina, Pakistan and Philippines
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Local Capture?
Greater risk when civic participation low,especially since ability to vote with ones
feet low in DTEs.
Particular problem where high inequality ofland ownership as I Pakistan
Endogeneity of civic participation?
Non-party elections
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THE IMPACT: Thezone of our ignorance
Fi l D d fi l
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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.
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Impact of Decentralization on ServiceDelivery (empirical evidence)
Positive Negative
Municipal services Pakistan, Bolivia,
Colombia, Brazil,Indonesia
Education andHealth
Argentina, Bolivia,Nicaragua
Social protection Albania
Access to the poor Bangladesh, India,Brazil
Argentina, Uganda
Impact on corruption India, China,Bangladesh,
Colombia, Cote
Russia
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LESSONS
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Lessons
Decentralization to intermediate levels (states orprovinces) in large countries could pose a potentialthreat to internal peace and political stability. Truedecentralization means localization.
Localization - a key to local economic development.
Decentralization as a means to an end and not an enditself.
Decentralization is a long and difficult process. Requiresa long term holistic vision, patience and persistence. Allpieces must fit together.
Big bang vs small steps: Long period of consensusbuilding but big bang in implementation
Top down approaches likely to fail.
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..Lessons (2)
Localization is not a gamble but a no-regretsapproach
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 stallreforms.
Reforming government organization and cultureis the key to the success of decentralizationpolicies.
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Epilogue
REFORM IS ETERNAL, WEDO NOT ALWAYS
SUCCEED BUT WE MUSTKEEP TRYING.
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