APCoP/ESCAP/ADB/UNDPRegional Conference on Public

Sector Management in Support of the MDGs

Delivering Services at the Local Level: Decentralization, Local

Governance and Implementation

Paul Smoke, New York University

UNESCAP

Bangkok, 13-15 June 2012

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Outline• A. Introduction: Decentralization and

Service Delivery • B. Trends and Evidence• C. Snapshots of Selected Cases• D. Diversity of Objectives, Forms, Context,

and Starting Points• E. Designing Integrated

Decentralization/Local Government Reform• F. Common Weaknesses/Challenges• G. Need for an Implementation Strategy

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A. Introduction

• Decentralization is only one avenue for delivering local public services, but it has become an increasingly important one globally

• Local governments are the locally elected representatives of the people: with an appropriate framework and incentives they should provide a direct accountability link to citizens

• Local governments are also generally backed by the powers and resources of the state

• Other key service delivery actors include central government agencies, parastatals, private firms, NGOs and local communities

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Functional Assignment• The mix of service responsibilities across actors

should depend on scale, capacity and other factors that must generally be considered on a case by case basis

• There is broad agreement that clarity of functional assignment among levels of government and actors is in general critical for accountable service delivery

• If functional clarity is insufficient, service provision may be fragmented

• Some areas may be served in an ad hoc way by multiple providers while others may be neglected

• Service delivery systems can be highly complex/problematic (e.g. Kenya on next slide)

The Planning, Budgeting and Service Delivery System in Kenya

Main GoK Players:•Office of President

•Prime Minister•Parliament

Provincial/District Administration/Development Committees

Sectoral Ministries(>25)

Ministry of Local Government

(ODPM)

Ministry of Finance

Ministry of Statefor Planning and

National Development

Community Development

Trust Fund (CDTF)

Local Authority Service Delivery

Action Plans(LASDAP) and Budgets

PDP/DDPSectoral Programs

LG/CDD

Provincial andDistrict DevelopmentPlans (PDP/DDP) and

Budgets

Multiple NGOs/CBOs and GoK technical

support

ParliamentaryConstituencies

Constituency Development Fund

(CDF) and Plans

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Requirements for Effective Local Governments

• This presentation focuses on the appropriate roles of subnational governments and their relationship to other governmental and nongovernmental actors in the system

• What local governments can reasonable be expected to do depends on the context in a particular country

• A central premise is that local governments can only deliver services effectively and sustainably if certain systems, procedures and capacities are adequately developed

• Achieving this result involves an often time consuming process and cannot be expected to occur rapidly in most countries

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B. Trends and Evidence

• Decentralization of the public sector became increasingly common globally in the 1980s, although it has taken highly diverse forms

• Motivated in part by inadequate impact of centralized approaches to economic and social development

• Political, economic and technological changes have also driven the decentralization trend (origins differ in specific countries and historical trajectory is important)

• Intersects with domestic political agendas (decentralization is fundamentally a political phenomenon)

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Inconclusive Empirical Evidence

• Empirical literature on the effects of decentralization is mixed and inconclusive – “Macro” literature (mostly quantitative) focuses on

econometric analysis of broad trends from cross- or intra-national comparisons; data challenges abound; general findings based on a few variables help little with crafting specific policies

– “Micro” literature (mostly qualitative but more recent quantitative, e.g. randomized experiments) focuses on detailed case studies, but broader relevance unclear because of the great variety in context, the focus of cases and (at least with respect to qualitative work) conceptual frameworks (discipline based) and methods (collection/use of evidence)

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Recent Trends• Increasing attention to use of a more developmental

and contextualized approach as opposed to a normative framework driven “sink or swim approach”

• Increasing attention to political economy analysis and development partner adherence to Paris principles

• Expanding focus on performance/incentives and the related concern of data collection, management and analysis; critics worry that the focus on outputs and outcomes will lead to neglect of systems and processes that must be in place for sustainable performance

• Some reframing of decentralization as broader than the passive assumption of central functions (e.g. local economic development)

• In some countries there have been various elements of both formal and informal recentralization

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C. Snapshots of Selected Cases

• Cambodia: a very poor post-conflict country in early, very modest politically expedient decentralization (more or less devolution) that is in the process of being scaled up in uncertain ways

• Indonesia: a formerly deconcentrated system under strong central control was rapidly/significantly decentralized under a “big bang” reform that unfolded in the wake of a major political and economic crisis

• Kenya: strong colonial era local governments weakened by post-independence centralization but new (2010) constitution mandates a robust but different form of decentralization that is still taking shape

• Uganda: A major political shift generate a shared consensus for strong local government that somewhat dissipated over time and has been offset by shifting political dynamics that allowed some recentralization

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Cambodia: a very poor post-conflict country in early decentralization

• Positive Features: elements of a reform strategy (start simply at lowest level); pro-poor transfers; local elections; efforts to develop pro-poor governance mechanisms (public financial management, participatory planning, etc.); strong donor support for consolidated local funding with government contributions; system expanded (2009) to other subnational levels

• Problematic Features: development of functional assignments and local revenue system stalled; generally low capacity; evidence of local elite capture in certain areas; still poor donor coordination of decentralization and local governance assistance; potential major issues in system expansion to higher subnational levels

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Indonesia: a large country with areas of wealth/capacity that rapidly decentralized• Positive Features: substantial functional assignment

and autonomy; redistributive transfers; strong pro-poor mechanisms (CDD); nongovernmental partnerships; competitive local elections in many areas; human resource and debt capacity in wealthier areas; emerging interest in performance based grants and further reforms, e.g. property tax devolution

• Problematic Features: decentralization rapid and non-strategic; weak local revenues; lack of cooperation among key ministries; poor local government/CDD coordination; modest efforts to develop transparency and citizen engagement; donor coordination inadequate despite considerable effort; lending framework not developed; some recentralization in recent years

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Kenya: long history of local government that declined and is being reformed

• Positive Features: intergovernmental fiscal system reform relatively coordinated; relatively strong local revenues; transfers linked to adoption of reforms, including participation; competitive local elections; capacity in some areas; new constitution (2010) dramatically restructures/empowers local system

• Problematic Features: local government reform efforts have been slow and fragmented; poor coordination between (deconcentrated) districts and local governments; local government lending mechanism became dysfunctional; lack of clarity in some new constitutional provisions and concerns as arising as more clarity emerges

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Uganda: strong post-conflict consensus for local governance that has weakened

• Positive Features: decentralization fairly home grown; strong constitutional empowerment of local governments; strong pro-poor focus and support mechanisms; development transfers create incentives; increasingly competitive local elections; participatory planning and oversight/review mechanisms improving; donor support for decentralization coordinated to some extent

• Problematic Features: weak and poorly structured local revenues; excessive creation of new local governments; recurrent transfers have become too conditional and a number of other recentralizing reforms have been adopted in recent years

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D. Diversity of Objectives, Forms, Context and Starting Points

• Decentralization is a complex public sector reform that is adopted for different reasons and takes nontrivially different forms across countries

• Appropriate design depends on the priority objectives (governance, development, service delivery, equity, etc.) being pursued and the context of a particular country

• Various forms: deconcentration, devolution (often seen as the “gold standard”), delegation; quite often mixed systems

• Various integrated dimensions: administrative, fiscal and political

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Diversity (continued)

• Multiple levels/tiers/spheres of government and administration with varying formal and informal roles in different countries: intermediate, local and community

• Broadly incorporates most aspects of national public sector reform: fiscal, civil service, PFM, sectoral (service delivery)

• Different drivers: orderly well framed program of public sector reform vs. political and/or economic crisis

• Diverse states of supply and demand side development (subnational government and civil society)

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Variation in Starting Points and Implications

• Reinventing/strengthening elected local governments that have not been functioning well; improving or replacing existing systems and procedures

• Transforming existing local administrative units of the central government into elected levels of subnational government; realigning accountability structures with reformed or new systems and procedures

• Creating subnational units of administration and governance where they have not previously/recently existed; deciding on what level(s) to empower and how to build new systems and procedures

• Bottom Line: The search for “best practice” is elusive and can be damaging in the context of such diversity; a country can adapt but rarely directly replicate what another country has done

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E. Designing Integrated Decentralization/LG Reform

• Traditional reform approaches based on fiscal federalism were highly focused on only one part of the intergovernmental system

• Over time there was an increasing recognition of the need for more integrated approaches, but these are quite demanding

• The reality is that integrated design has been challenging to realize in practice

• Many challenges and weaknesses in decentralization design remain, and more attention is needed to try to overcome them

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System Design Elements I• Enabling National Framework

– Constitutional/legal/administrative• Structural Features

– Number of levels– Role: Administration or government– Degree of hierarchy/independence

• Fiscal Dimensions– Clear assignment of service functions/ revenues

(some subnational autonomy)– Appropriate/sufficiently stable vertical share of

resources– Appropriately structured shared taxes/transfers– Fiscal responsibility and borrowing framework

(where relevant)

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System Design Elements II• Political Dimensions

– Elections and other types of accountability mechanisms

– Transparency in subnational processes and decision

– Sufficient autonomy to facilitate responsiveness to citizens

• Administrative/Managerial Dimensions– Institutional relationships appropriately defined– Planning, budgeting & public financial

management (PFM) systems and procedures – Civil service system (degree of local control)– Contractual framework for partnering with

private sector/NGOs

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Realities• Decentralization reform is too often approached

in a fragmented way:– Fiscal without administrative and political: resources

without institutional and governance authority and capacity– Administrative without fiscal and political: responsibilities/

autonomy without resources/governance structures– Political without administrative and fiscal: decision making

structures without institutional and fiscal structures to perform functions that respond to citizen demand

• Civil society/community approaches are often rather separate from formal decentralization

• Lack of attention to role of/interaction with private sector

• An integrated approach is demanding and faces political economy & capacity obstacles

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Behavioral Changes, Capacity Development and Learning

• Central agencies: need to be willing give up some powers and learn to transform their role primarily to support and monitor rather than to manage and control subnational governments

• Subnational governments: must learn to deliver functions, raise revenue and work with each other; staff must learn to work with elected officials and both must learn to work with citizens

• Civil society needs to be willing and able to hold subnational governments accountable

• International donor agencies need to work together and follow government policy (but can usefully support policy development)

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F. Common Weaknesses/Challenges

• Reform often prompted by crisis or major political change, which affects how reform policy is developed

• Especially where crisis-driven, reforms are often adopted without sufficient consensus among those whose cooperation is required

• Tendency to undertake too two much too quickly or start too slowly and stall

• Two problematic types of reform: unworkably comprehensive or very limited and uncoordinated with broader agenda

• Limited or inappropriate capacity at all levels

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Common Weaknesses/Challenges II

• Weak reform coordination or reform led by single ministry seen as a rival by other key players

• Not uncommonly an unbalanced focus on either supply or demand side reform or poor coordination between them

• Commonly treat all subnational governments/administrations or classes of them (provinces, states, governorates, cities, municipalities, towns, etc.) as if they have similar capacity

• External support can be beneficial but also create or reinforce challenges for the recipient country

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Common Weaknesses/Challenges III

• Subnational government-community group relations commonly too often treated in a pro forma way and have little influence over local decisions; sometimes business associations are more influential

• Private sector partner procurement and relationships for service delivery and management functions are not uncommonly weakly developed and non-transparent

• Links with the informal sector both for service delivery and revenue generation are rarely well developed

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G. The Need for an Implementation Strategy

• Like many other public sector reforms, decentralization is often complex, contentious, and dependant on:– A level of capacity that does not broadly exist;– Sustained behavioral changes (noted earlier) that

are unlikely to occur easily or rapidly

• Thus, a deliberate strategy to implement fiscal decentralization (and an appropriate inclusive process for defining it) is as important its design

• Implementation has implications for both national and subnational governments

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Elements of Implementation • Diagnosing the Situation

– Understanding context and the (true) incentives of various key actors/stakeholders at various levels

– Taking stock of de jure reforms and the extent to which they can be realized and how

• Basic Strategy Decisions– Pure framework vs. developmental approach?– Rapid/comprehensive vs. gradual/incremental?– Standardized/uniform vs. asymmetric/tailored?

• Management Framework– Clear delineation/sharing of responsibilities of actors– Coordination of actors– Enforcement of compliance with responsibilities

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Elements of Implementation II

• Building Capacity – Governmental actors at all levels – General vs. targeted– Strengthen civic education/support mechanisms

• Coordinating external assistance: – Beyond individual ministry-donor relationships – Harmonizing donor approaches with country reality

• Monitoring/Evaluating– Understanding decentralization performance

(compliance, performance, satisfaction)– Publicizing information/results– Feedback for adjustment of problematic features

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A “Model” Strategic Approach?Entry Points and Sequencing

• Build on positive aspects of the system where success is more likely where feasible

• Use a clearly defined starting point consistent with the capacity and/or performance of subnational governments (may be asymmetric)

• Aspects of reform (administrative, fiscal, political) should be integrated (initially at a basic level depending on context)

• Link technical reforms to specific functions that are going to be undertaken, such as service delivery or revenue generation

• Further assumption of desired responsibilities/ behaviors should build progressively and according to clear criteria on earlier steps

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Political Agreements and Institutional Arrangements

• Work with willing partners in the early stages of decentralization reform rather than trying to force initial changes where there is likely to be considerable resistance

• The starting points for reform may be partially negotiated with local governments and other actors, placing some responsibility on them for what they agree to

• Establish a coordinating body to manage each step of the implementation process; international experience suggests that an effective body must have broad credibility (be as neutral as possible), be at a high level in the bureaucracy, and have authority to negotiate and enforce compliance with reforms as needed

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Creating Incentives • Provide strong positive/negative incentives for

local governments/other actors to achieve desired and agreed goals

• The coordinating body should oversee implementation to ensure that all parties—central, local, external—meet responsibilities as per the legal framework and agreements

• Adopt innovative mechanisms that may help to facilitate successful implementation:– Enforceable accountability mechanisms, such as

central contracts with local governments– Financial incentives for adoption of reforms and

improvements in performance, such as compliance or performance based grants

– Tournament based approaches that bring recognition (may be financial but need not be)

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Building Capacity

• Build capacity in a way that is well linked to the decentralization implementation strategy– Target capacity building to immediate functions/

tasks rather than provide only broad, generic classroom-based training

– Providing as needed periodic, on-site follow-up, troubleshooting and technical assistance

– Act on the need for both technical (training local governments to meet their responsibilities) and governance (training/facilitating citizens, elected officials and subnational staff to work with each other) capacity building