1. Decentralization in operations: Comoros and Madagascar

2. ComorosMadagascar Political context  Permanent crisis. Comoros is world leader in Coup d’Etats  Secession of Anjouan: In 1997 the second largest and poorest island separated from the federation  Since 2002, the country has four presidents resulting in a conflict over resources and competencies  History of pre-colonial, colonial and post-colonial decentralization  Push for decentralization after the democratic transition of the early 1990s: Commune elections in 1995 and provincial elections in 2000  Provinces played a critical role in the political crisis of 2002. After the change of government in June 2002, provinces were suppressed Fiscal framework  Lowest revenue/GDP ratio and highest customs/revenue ratio in the region  Anjouan is administered separately  Very low revenue/GDP-ratio (12%) and high share of customs and VAT on domestic revenue  Communes represent 3-4% of total government finance; some urban communes gained from decentralization, most rural communes did not Political and Fiscal Context

3. ComorosMadagascar AAA  Permanent crisis management  Facilitation of fiscal decentralization negotiations in December 2002 (together with the IMF)  Decentralization ESW and policy dialogue centered around the strengthening of communes Lending  Emergency Credit (EERC) in 2001 to support the set-up of a decentralized state: The EERC allocated the credit amount to the three islands; decentralization component was allocated 30%  Social Fund works at the community level  Governance project finances capacity building and the set-up of cadastres at the commune level  Social Fund and rural development project support communities World Bank Response

4. Comoros Emergency Credit (EERC) Objective: (i) Support the transition out of the secessionist crisis (ii) mitigate distress of the poor Management: (i) Activities were determined by the three islands (ii) Ministry of Plan was implementing agency (iii) Anjouan managed its own activities Decentralization: (i) Pre-determined allocations by components (Poverty reduction, decentralization, national reconciliation) and islands: Anjouan 50%; Grande Comore 32%; Moheli 18% (ii) The decentralization was mainly used for the payment of salary arrears and the rehabilitation of administrative buildings

5. EERC Performance Outcome: (i) Uses of funds produced largely positive results. (ii) Country adopted a new constitution; Anjouan had overcome its isolation (iii) New lines of confrontation emerged in June 2002 after the election of Union and island governments Credit Performance: (i) Credit was ranked marginally satisfactory because it reached the best possible outcome under the difficult circumstances. (ii) The decentralization sub-component was rated marginally unsatisfactory because of the high prevalence of cars and administrative overheads Lessons : (i) Bank can play an important role in transition out of crisis (ii) Bank should not overestimate its role. Decentralization processes are very complex and, in a crisis context, even more difficult to implement.

6. Madagascar Decentralization ESW Results: (i) Madagascar remains a structurally centralized country (ii) Parallelism between deconcentrated and decentralized agents hampers service delivery (iii) Local government finance is marginal but communes are more effective in revenue collection than deconcentrated intermediaries

7. Madagascar Decentralization ESW Recommendations: 1)The decentralization strategy should focus on communes and consider suppressing the regions as well as postponing the set-up of provinces 2)Communes need to be fully in charge over local government affairs (i)Communes should be in charge of raising their own revenues (ii)Transfers need to arrive on time; (iii)Transfers should be substantially increased to rural communes 3)Improve service delivery within the deconcentrated framework: (i) Creation of clear reporting rights between statistical services at the province and central level (ii)Investing in the analysis, treatment and verification of data at the province and district level