dr. anwar shah (3)

8/2/2019 Dr. Anwar Shah (3)

1/54

Implementing Decentralized LocalGovernance in South Asia and the

World: A Comparative Review

Anwar Shah, World [email protected]

GINI Workshop,Singapore, August 8-9, 2010
mailto:[email protected]:[email protected]


2/54

THE VISION

Decentralization what???

If you do not know where you are going then

every road will take you somewhere else.- Yogi Bera


3/54

True decentralization: Community empowerment to thinkglobally but act locally.


4/54

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


5/54


6/54

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.


7/54

THE CHALLENGE


8/54

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


9/54

Perceived Problems ofGovernment in South Asia

Too remote

Too arrogant

Too bureaucratic

Too big

Too inefficient, ineffective

Too unaccountable

Too opaque

Too corrupt


10/54


11/54


12/54


13/54


14/54

Why governments do not deliver?

Mandate

AuthorizingEnvironment

Outputs,reach,

outcomes

Operational

capacity


15/54

Goals of decentralization reformsA governmentthat works and serves.


16/54

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


17/54

THE RESPONSE:

The Silent Revolutionof the 1990s


18/54

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


19/54


20/54


21/54

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


22/54

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


23/54


24/54


25/54

Higher tax autonomy


26/54

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


27/54


28/54

Intergovernmental transfers mostly formulabased and unconditional ..But ?


29/54


30/54

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.


31/54

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.


32/54

Somewhat greater freedom toborrow


33/54

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


34/54

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


35/54

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


36/54


37/54

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)


38/54

Greater freedom to hire and fire

Scorecard on Administrative


39/54

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


40/54


41/54

Decentralization reforms in South Asia have been celebrated


42/54

Decentralization reforms in South Asia have been celebratedwith great fanfare but did they bring about F.A.I.R. Local Govern.


43/54


44/54

Will d t li ti b


45/54

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


46/54

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


47/54

THE IMPACT: Thezone of our ignorance

Fi l D d fi l


48/54

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.


49/54

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


50/54

LESSONS


51/54

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.


52/54

..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.


53/54

Epilogue

REFORM IS ETERNAL, WEDO NOT ALWAYS

SUCCEED BUT WE MUSTKEEP TRYING.


54/54

dr. anwar shah (3)

Documents