1. 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
February 15, 2005
The World Bank

2. Decentralization: A World-Wide Phenomenon
Underway in over 85 countries
Political and economic rationales
Varieties
Deconcentration
Delegation
Devolution
Spans political/legal, fiscal, administrative…

3. 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
26.1% (23)
16.6% (14)
OECD Countries
33.8% (22)
18.7% (22)
32.3% (23)
32.4% (23)
19.1% (23)
Source: International Monetary Fund. Government Finance Statistics Year Book , various years, Country Tables

4. 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.

5. International Diversity

6. Percent of Countries with Elected Sub-national Governments
Democratization & Decentralization 1
0.9
Local
0.8
Governments
0.7
0.6
Regional
0.5
Governments
0.4
0.3
0.2
0.1
1960
1970
1980
1990
2000
2010
Sources: From 1965 to 1995, Henderson (2000), available at For 1999, World Bank World Development Report Cases in which Henderson and the WDR used different intermediate governments were dropped. Sample size: 43 countries , .

7. 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

8. But, good design is complicated
Decentralization spans
Political/Legal
Fiscal
Administrative
policies and institutions…

9. 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

10. 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

11. Key Challenge Promoting Decentralized Accountability

12. 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

13. 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?

14. 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 one’s feet”
Empowerment
Districts, villages, communities, and individual constituents

15. Political Decentralization: Critical 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?

16. 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

17. 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

18. Mechanisms to Strengthen Accountability (cont’d)
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

19. 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

20. 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 required—pastoral lands, irrigation
CBOs gain from partnership with LGs
Promote external linkages
Enhance effectiveness
Reduce costs (economies of scale and transactions costs)

21. 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

22. 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

23. Further Resources Decentralization Thematic Group Website
Sign-up for Decentralization TG
Decentralization & Local Financial Management Course
March 29-30, 2005
Decentralization Core Course
AskGov

24. Q&A