Comparative Decentralization Lessons

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Comparative Decentralization Lessons from Pakistan, Indonesia, and the Philippines

Author(s): George M. GuessReviewed work(s):Source: Public Administration Review, Vol. 65, No. 2 (Mar. - Apr., 2005), pp. 217-230Published by: Blackwell Publishing on behalf of the American Society for Public AdministrationStable URL: http://www.jstor.org/stable/3542555 .

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GeorgeM.Guess

OpenSocietyInstitute

ComparativeDecentralizatione s s o n s f r o m

Pakistan, Indonesia, a n d t h e Philippines

Thisarticleprovidesan analytic rameworkoguide regimes hatare designingor implementingdecentralizationrograms. t s based on a comparison f threeAsian cases of fast-track ecen-

tralization.The rameworkuggests hatregimescontemplatingevolutionmust ace fundamental

issues of (1) background upport, 2) cultureand institutions,nd (3) technicaldesign and se-

quencing. tcanbe usedby regimes ocompare herelative ifficultyf fundamentalchallenges o

decentralizationwiththeirown capacityand potential or effectiveresponse.The hreeregimes

responded imilarlyo thefirst woissuesanddifferednhowtheyperformedechnical ctivitiesoimplementhedecentralizationrograms.Withinhis echnicalequence, heregimesvariedwidelyinperformance.nthat hePhilippine rogramhas attainedbetterperformanceo far,the differ-

ent responsesof thatregimeare significant.More research s required o explaindifferencesn

technicalperformancenthePhilippinesnd othersimilarprogramsand to attributemeasuresof

decentralizationuccessto thesedifferences.

IntroductionRegimes that are contemplatingdecentralizationpro-

gramsare often reluctant o take the political risk of un-

knowntechnicalconsequences n designand mplementa-tion.Regimesknowthatpolicies are often based on myth,and decisions on imperfect information.Policy makers

would like to eliminatemythsand reduceuncertaintybe-

fore proceedingwith programssuch as decentralization.

In 1996, policy makersat the AlbanianMinistryof Inte-

rior asked me to provide comparativeregional informa-

tion on how to preventfiscal transfersfrom acting as a

disincentive to local revenue mobilization. Without this

information,which was unavailableat the time, the min-

istry's state secretary or local governmentwas reluctant

topushfor devolution.Other egimeshavealso found hem-selves at this point, and they need an empiricallybased

guide or framework or the successful design andimple-mentationof decentralization.Considerable advice has

been provided by internationaldonors, consultants,and

universitypersonnelon decentralization.But at this stage,

regimesneed morethantechnical advice on single issues

such as fiscal transfersor tax policies.This article provides a preliminary but empirically

groundedframework or regimes that are contemplatingdecentralization.This framework,which is based on the

experiencesof Pakistan, Indonesia,and the Philippines,

predictsthatregimes will face both generalbackground

challenges (top support,decision capacity,and political

culture)andspecifictechnicaldesignissues.Theyneedto

respond o intense criticism hatneither heregimenorthe

countrycan meet these decentralization hallenges.The

frameworkprovidespreliminaryanswers to these critics.

ToDecentralizer Notto Decentralize?Regimesare advisedthatdecentralizations an efficient

programhatcanimproveperformance. fficiency s averybroadcategory n theliteratureGuess,Loehr,andVazquez

1997, 10-26) that ncludesactivitiesranging rompoliticalrepresentationo service results.The notionof an efficient

localgovernments that t canprovidemoreresponsiveand

innovative ervicesand, n turn,canbe held moreaccount-

able foroperationsby localvoters hannationallyprovided

Dr.GeorgeM. Guess is director f research,OpenSociety nstitute,ocalGovernmentnd Public erviceReformnitiative,udapest,Hungary. revi-

ously,he waspublicbudgetingpecialistorthePakistan iscalDecentrali-zationproject, inancedby theAsianDevelopment ank 2001-02), andtechnicalbackstopor heIndonesiaLocalGovernmentinancial ramework

project 2001-02), financedby the U.S.Agencyfor Internationalevelop-ment.E-mail:[email protected].

Comparativeecentralizationessons217



operations.Regimes design and implementprogramsto

decentralizeuthorityndpower olocallyautonomous nits

(asopposed o a deconcentration f centralgovernmenter-

vices locally or administrative ecentralization)or a vari-

ety of reasons.The most common are related o policy or

technicalconcerns: o generate ocal pressure or national

orprovincial tatemodernization;oprovide hepublicwith

cheaper,better-quality,and greaterservice coverage; to

achievebudgetsavingsby cuttingthe centralprovisionoflocal services;to widen political support or andincrease

the level of trust n the central egime; o increase ocalpar-

ticipationnplanning ndbudgetingoproduce ervicemixes

consistentwith local preferences; o producefewer white

elephantor incompletecapitalordevelopmentprojects; o

hold the country together; o permitregionalor local ex-

perimentationn programdesign;andto prevent he disin-

tegrationof the centralgovernment Burki2001;Richburg

1998).A relatedrationale ordecentralizations economic and

fiscal: Decentralizeddecisionmaking

is crucial for effec-

tive organization n that it promotesinternalcompetitionandentrepreneurialalent(North1990, 81). Fiscal decen-

tralizationallows local governments o financecapitalin-

vestmentson theirownthrough esponsible ong-termbor-

rowingin privatemarkets.This strengthens he autonomyof local governmentsand the fiscal condition of central

governmentsby reducing he needforgrants romthe state

budget or loans from international inancial institutions

backedby sovereignguarantees USAID 2002, 1). In ad-

dition,resolvingverticalfiscal imbalances n intergovern-mentalsystems by devolvingauthority llows aclosercor-

respondence etweenrevenuemeansandexpenditure eeds(Shah 1994, 40). A slightly differentrationale ocuses on

the macropoliticalbenefits for democraticstability and

responsiveness,thatis, expansionof the governingcoali-

tion to increase the inclusiveness of the centralregime.

Governing oalitionsmaywant o increase heir egitimacy

by expandingtheir base of supportandby reducingcon-

straintson their policy freedom. Autocraticregimes are

typically held in place by small groups of backers who

keep themin power(Bueno de Mesquitaand Root 2002,

31); this increasestheir longevity,but risks populardis-

contentand theoppositionof international onors.Decen-

tralizingpowerto thelowertiers of governmenthas beena

means of enlistingnew supporters,which partlyexplainsthe recent devolutionprogram n Pakistan.1

Six majorperformancendicators recommonlyused to

measureprogram uccess orfailure.Table1 employstheseand other well-knownmeasures o evaluate hree cases of

devolutionmplementation. irst, ocalgovernmentshould

increase heirown-source evenues.Dependenceoncentral

transfers houlddecreaseand helocalproportion f budget

financingshould ncreaseafterdecentralization. hismea-

suresthe sufficiencyof local revenues o financebudgets.Second, with combined formula-basedransfersand new

local sourcesofrevenues,ocalgovernmentshould ncrease

their unding tability.The basis forallocating entral rans-

fers is often opaqueandnegotiated.Coupledwith central

revenue hortfalls,hebudget ystemproduces

udden und-

ing cutoffsthatnegativelyaffect ocal services.Third, ocal

governmentbudgetautonomyshould increase.In contrast

to centralcontrolsandextensiveearmarks f localfunding,decentralizationhouldgive local officials ncreased uthor-

ityto shift funds oimprove ervicedelivery.Fourth,decen-

tralization hould be associatedwithimproved ervice de-

livery.Servicessuch as health,education,andwatersupplyshould be of higherqualityanddeliveredat lowercosts to

morecitizens,that s, technicalandallocative fficiency,re-

spectively.Fifth, the performance f services and the de-

centralizationrocess tself shouldbemonitored ndevalu-

atedby citizen groups throughsurveysand social audits.This should lead to greateraccountability ndresponsive-ness of elected andappointedofficials to local citizens.Fi-

nally,decentralizationhould ead togreaterocalauthorityto hire andfireappointed fficials,meaninggreater espon-siveness of local governments o citizen needs. Officials

would no longerbe appointedrom thecenterandpaidfor

by the localgovernmentsWinklerandHatfield2002).

Table1 ComparativeDecentralization erformance

Shareof subnational SNG sets tax

own-revenuesntotal base and raterevenues**percent)

Philippines 42.8

Pakistan

Yes

Yes

No

5.0

Indonesia 25.4

SNGauthorityo

setbudgetpriorities

Yes,butcentral

governmentstill armarks

Yes

No

SNGmayor/

council elected

Yes

Nazim bycouncil

Mayor bycouncil

SNG candesign/

implementrg-staffingorservicereqs

Yes

No

No

Dedicated nd

rule-basediscaltransfer/tax

Yes

Yes

No

"*Source:overnmentinance tatistics earbook001 (Washington, C: nternationalonetary und).With heexception f Pakistanorwhich ocalstatistics avenotyetbeenreported,hemeasures f local revenue ufficiency ereobtainedby dividing otalrevenues nd grantsby revenuesromother evelsof national overnmentnd

subtractinghisamount rom100 percent.SNG= Subnationalovernment.

218 Public dministrationeview March/April005,Vol. 5,No. 2

Improved

serviceoutcomes

NA

NA

NA



Regimes are regularlyprovidedthese argumentsand

multiple measuresfor decentralization.They know it isefficient to decentralize,but majorinefficiencies can re-sultfrompoorly designedand mplementedprograms.For

instance,they could lose theirelected or appointed obs,andthecountry oulddescend nto(perhaps reater) haos.What shouldtheydo?

ComparativeethodologyTo provide applied lessons to policy makerswho are

deciding whether or how to engage in decentralization,

comparative ield lessons areneeded from similarcases.The matched-case method of comparison that Xavier

(1998) uses to compareMalaysianandAustralianbudgetreforms is useful for this purpose.Thatmethod was usedin this researchto select countries with similarintergov-ernmentalstructures hat have institutedsimilar reform

programsundersimilarregionalconditions.Classification

of the similaritiesallows one to holdconstant hekey fac-

torsexpectedto influencereform,reducing heproblemof

multiple causation,which otherwisebesets comparativeanalysis. By picking decentralizationcases with similar

key variables,this studyfocused on the measures,condi-

tions,andvariables hat aredifferent.Focusingon the dif-ferences of matchedcases allows for a morerigorousex-amination of factors that may account for variationindecentralizationprogramresults.2

BackgroundndContext nMatched

Program asesThethreeprograms resimilarnthat heyare"fast rack."None of them was donordriven,andinternational onorssuchas theAsianDevelopmentBankandtheU.S. AgencyforInternational evelopment ontinue oplaycritical up-portingroles. Forthepurposesof matchingcases,these aresimilar egional xamplesof once-centralizedtates hathaveevolvedintofederalgovernance ystems.Throughhis evo-

lution,all threecountrieshavemaintained elativestability.All threehaveenforcedmacroeconomicdiscipline,whichtendsto ensurepoliticalstabilityby stabilizingprices,em-

ployment,andbudgetdeficits(Guess,Loehr,andVazquez1997, 39). Stabilitycan be used as a resourceby central

regimes oreallocate"policy atitudeor"agencyautonomy"to its counterpartsn lower-tiergovernments Peters1978,

168).Inpoliticalandeconomicstability,hePhilippineswasrankedenthmoststableandIndonesia ighteenth yEurasia/LehmanBrothersEconomist 003, 100).Economicgrowthremains trong nbothcountries,withgrossdomesticprod-uct increasesof 5.8 percentand 3.9 percent,respectively,from the same quartern 2002. In the contextof relative

stability,all threeregimeshaveattemptedo reallocateau-

tonomyandauthorityhroughdecentralizationrograms.

Despite recent terrorist-control roblemsand internalcriticismfroma vibrant ocal press, the Pakistaniregimecontinues to governthroughcivil serviceandmilitary n-

stitutions,with reasonablesuccess. Recent changes and

securitythreatssince September11 have kept PresidentMusharraf's egimein powerandhave increasedsupportfor devolution.Fearof regionalfragmentationn light of

growingpovertyand nequality-partlyattributableopoorlocal services-has been high among all three regimes.Pakistan'sprogram bandoned econcentratedubnational

governance onsistingof provinces,divisions,anddistrictsandcreatedthreenew levels of countrywideelected gov-ernment:districts(96), tehsils, or towns (337), andunioncouncils (6,022). The program mplementsthe intent ofthe May2000 local governmentplan.The operatingprin-ciple is to transferpowerdownward o citizengroupsanddistrict-levelgovernments o provideandfinanceneededbasic services thatwere not being providedby eitherthe

provincesor the centralgovernment(NRB 2000, 9). An

impetus orthedevolutionprograms that hecentralgov-ernment-the National ReconstructionBureau-rightlyfeared hatpopulardissatisfactionwithitsperformancewas

growingandthatthis threatened he state'slegitimacytohold the nation, four large and dissimilarprovinces,to-

gether.Powerwas formallytransferredo thenew districttier of governmentnAugustof 2001. In 2002, it was esti-matedthe districtsgeneratedan averageof 5.0 percentoftheirown revenues(table 1). Thatis, 95 percentof theirfunds were still providedfrom transfersand shared rev-enue sources.3

The Philippinedecentralizationprogramhas been de-scribedas one of the most farreachingin the developingworld. A long traditionof political-administrativecen-tralismexisted in the Philippinesthatwas initially chal-

lengedby theconceptof local autonomy,enshrined n theConstitutionof 1987 and laterin the Local GovernmentCode of 1991 (RepublicAct 7160). This was the fifth at-

temptsince 1946 to empowerthe fourlevels of local gov-ernmentwith political andadministrative uthority YapandSator2001, 1).

Theprogrambeganwiththeimplementation f theLo-cal GovernmentCode in 1991

(Galang2001, i)and ex-

pandedthe responsibilitiesand authorityof the 76 prov-inces, 1,540municipalities, 6 cities,and42,000 barangays(precinctsorwards).Themajorchangewastheexpansionof city, municipality,and barangay urisdictionover the

planningandprovisionof hospitals,social welfare,envi-ronmental rotection, ublic nfrastructure,ndzoning.Thecenterwould henceforthsupportor superviserather handictateorcontrol ocalactivities ntheseareas Miller1999,15).An internalrevenueallotment ormula ransferbasedlocal financingon population(50 percent),equalization




(25 percent),andland area(25 percent)(Miller1999, 15-

16). In 1999, the allotmentactuallyexceededthe costs of

devolved functions and other mandates.Reflecting highlevels of regimesupport or thereform, his led to adecen-

tralization arity-a centrally undedsurplus orlocalgov-ernments.

The Indonesian"big bang"devolutionprogramcom-

menced nJanuary f 2001, implementing wo laws signed

in 1999 (Aim,Aten,and Bahl2001). Ithas been describedas "one of the fastest and most comprehensivedecentrali-

zation initiativeseverattemptedby any country" USAID

2002, 1). The program ransferredpowerover core local

services primarily o the 268 districtsand,to a lesser ex-

tent, the 31 provincesandroughly350,000 villages. The

programbroadlyexpandedlocal authorityover new ser-

vice facilities andsectors.Toensurethat ocal units actu-

ally performcore functions consistentwith minimumser-

vice standards,Law 25/2000 providedtechnical criteria

for local service quality, sufficiency, and cost. This ser-

vice-monitoringsystemnow has to be tested and

imple-mented.The Indonesiangovernmentand nternational o-

norscontinue o support heprogram,withpositiveresults.

The Pakistaniand Indonesianprogramsare similar n that

both devolvedauthority o local governments, argelyby-

passing the provinces and shifting large groups of civil

servantsto the districts to provide them with technical

capability.To summarizeprogramsimilarities,all three countries

devolved authority or programsthat were formerlythe

responsibilityof higher-tiergovernments.The three re-

gimes (Philippines,Pakistan,andIndonesia)decided to go

full speed aheadon reformsby (1) devolvingmajorfunc-tions, (2) assigningrevenueauthorityandblock grantfi-

nancing,(3) transferring adres of central andprovincialofficials andpositions to administer he decentralization,and(4) organizing ocal electionsfor councilsandmayorsto hold local administrations ccountable.All are financ-

ing the devolution and new responsibilitieswith entitle-

ment sharesof higher-tierrevenues(Pakistan's"divisible

fund/localfund").All transferred ubstantialnumbersof

administratorsndtheirpositionsfromhigher-tier overn-ments to providethe technicalresources for implementa-

tion (70,283 in the Philippines,two million in Indonesia,and about700,000 in Pakistan).

Of course, the pathswere not completely similar,and

there wereminordifferences n implementation.First,the

legalbasisfor local governments xistedinthePhilippines

priorto the reform.This meant thatIndonesianand Paki-

stanipolicy makershad a bigger job ahead. On the other

hand,duringthe 1947-58 period,Pakistani ocal govern-ments operatingunder administrativedecentralizationi-

nanced95 percentof theirneedswith own-source evenues.

Following hispostpartition eriod, ocalgovernmentswere

weakenedby increasing ocal partisanship ndintrusions

from the centralbureaucracyShah 2003). This suggeststhatPakistan ada localgovernmentraditionhatwasshort

circuitedandis now being reconnected.Thus, the differ-

ence betweenPakistanandthePhilippines s narrower till.

Second, while the Philippinereformfocused largely on

fiscal devolution and not on politicaldecentralization, n

all-at-oncesequencewas followed in Pakistanand Indo-

nesia-fiscal andpoliticaldecentralization.Third,higher-tieradministratorseployedto local units are to be tempo-

rary nPakistan ndhavebeenpermanentn thePhilippines.

Majordeploymentsare still to be made inIndonesia.Nev-

ertheless,the programsaresubstantially imilar for com-

parativepurposes.

Challengeso Decentralizationesignand Implementation

The proposedpolicy framework uggests thatregimesface three types of constraints n the implementationof

decentralization:(1) background upportand local tech-

nicalcapacity, 2) cultural-institutionalssues,and(3) tech-

nical design and sequencingissues (figure 1). Each con-

straint houldbe recognizedby policy makersas a trigger

point for review, course corrections,or possibly haltingdecentralizationprograms.The threeregimes studiedre-

spondedeffectively and similarlyto the first two sets of

constraints.Theirperformancesdifferedin how they re-

spondedto the thirdset of constraints: echnical designand sequencingof activities. Regime responses allowed

comparisonof similarcasesrespondingdifferently o tech-

nical sequencingchallenges.Withimpactdata(whichwedo not have), one could attributedevolutionprogramre-

sults to differencesin regime abilities to respondto cul-

tural hallengesand odesigneffective echnical equences.

Using theproposed rameworko compare he threedevo-

lutionprograms acingcommonconstraints,one cancon-

firm or rejectthe importanceof the constraintsand focus

on the successesand ailures nresponse otheseconstraints

and measuretheir effects on programresults.

Background Conditions

Opponentsoftenargue heseconditionsmust be imme-diatelypresent or decentralizationo succeed.Withoutop-

Figure1 Challengesand Constraintso

Decentralizationmplementation

1. Background 2. Cultural/ 3. Technicalsupport institutional design/

(Regimeupport/ , (Politicalulture/ - sequencinglocaltechnical civilsociety/ (Similarities/capacity) institutional differences)

rules)

220 PublicAdministrationeview* March/April005, Vol.65, No. 2



level supportandlocal technicalcapacity, t is argued,de-

centralization rogramsmust fail. Infact,background on-

ditionsare variablesrather hanconstants,andtheycan be

met with supportingpublic statementsby the regimeand

effective egalaction for nstance, heauthorization f laws

andregulations).

Top-Level Regime Support

For successfulimplementation, egime support4houldexist inthree orms: 1) the authorization f legalandregu-

latoryframeworks, 2) the provisionof adequate ocal fi-

nancing,and(3) the authorization f oversightandcontrol

structures.While sustained egimesupport xists in all three

cases, problemsremain.

First,as indicated,organic aws have beenpromulgatedin all three countries and supportedby the respectivere-

gimes. Possibly the strongest supporthas been provided

by PresidentMusharraf,who made the devolution hecen-

terpieceof his governancereforms,widening regime sup-

port in the face of majornationalsecurity threats and a

long legacyof corruptandpoorlydelivered ocal services.

Second, regime support s typically measurable n finan-

cial supportprovidedto local units. One of the greatestthreatsto devolutionand local governmentreform is the

failure to providesufficient resourcesto meet needs and

local aspirations(Cochrane 1983, 6). In Pakistan,local

governmentshave been given new statutorysources of

revenue.They now have the independenceto decide on

tax rates and fee levies. By contrast,the Indonesianor-

ganic laws (22 and25/1999) did not assign new revenue

powersorborrowingauthority o local governments.This

jeopardizesthe link between costs incurredand servicesdemandedby local citizens (Alm, Aten, and Bahl 2001,

7). Third,central authorities(regimes)demonstratesup-

portfordevolutionby emphasizingsupervisionandover-

sight of the programsover bureaucraticendencies to in-

terfere and control. In all three cases, major oppositionfrom central(in the Philippines)andprovincial(in Paki-

stan andIndonesia)authoritieshadto be overcome.Even

afterovercoming opposition long enough to promulgate

organic laws, transitory eadershipwith vacillating sup-

portthreatened he program n the Philippines.The Phil-

ippine Departmentof Health hadeight changesof leader-ship during 1991-2001, which held views rangingfrom

recentralization to continuing support for the reform

(Razon-Abad2001, 7-8).

Local Technical CapacityThe most immediate issue is whetherthe newly em-

poweredtierof local governmentcan absorb ts new rev-

enue-raisingandexpenditureassignments. Opponentsof

decentralizationoften focus on the lack of local capacityto opposeorderailtheprogram.There s widespreadcon-

sensus in Pakistan that without the requiredskills, sys-tems,andresources within helocalinstitutions)hecoun-

trywidedecentralizationanddevolutionprogramwill re-

main largely unimplementable(Khan 2002, 4). Manor

(1999) suggests that countries devolving after initially

deconcentratingervices(that s, administrative ecentrali-

zation)have anadvantage n that thisprovidesa technical

foundation for autonomousdecision making.Consistent

with thisconclusion, he threecountryprograms sed threesimilar mechanisms to reduce the absorptive-capacity

problem.First,based on newly assignedtasks,skills andsystems

have been or are being transferred rom higher-tiergov-ernments o local governments.About two million central

staffwill be transferredn Indonesiaandmore than70,000havebeen transferredn thePhilippines.Positions,people,

equipment,andoperatingnormshaveall been transferred

to enablelocal units to perform heirassignedtasks more

effectively.Second, reportingand controlsystemshadto

be shifted romcentral o localaccountability. epartmentalstructures, outineapprovalprocessesfor licenses andper-

mits, andbudgetandaccountingreportsall had to be re-

routed o serve ocal needs ratherhan he controlandcom-

pliance rules of the centralgovernment.In Pakistan, or

instance,the NorthwestFrontierProvincerestructured 6

departments,downsizingandrefocusingthem accordingto a new distribution f functions.This enablesprovincestomonitor, egulate,andsupervise ocal districtoperationswithoutcontrolling heir affairs(WorldBank2002a, 10).

Third,initial resistanceto decentralizationwas strongin all three countries,based on the argument hat locals

were not to be trustedwith central funds and should bemonitoredclosely. Pakistanhas initiated at least four re-

forms n the name of empowering ocalgovernments ince

the 1950s.All were incompletereforms and were largelyreversedby laterregimes,whichargued ora lack of local

technicalandpolitical capacities.InIndonesia,similarar-

gumentshave been raised aboutthe local capacityto ab-

sorb fiscal and technical resources. Several international

evaluationsconcluded herewaslittleadvancepreparationfor decentralizationnd hat ocalgovernmentswere argely

unpreparedor theirnew tasks(Alm,Aten,andBahl2001,

5). Coupledwith the traditionof "waitingfor the centralgovernment o act"(Alm, Aten, andBahl, 2001, 9), top-level supportwas neededto overcome theperception hat

capacity problemswere so severe as to jeopardize he en-

tirerationale or the program.

Cultural-Institutional Issues

Opponentsof decentralization ftenargue hat(1) cen-

tralist cultures value centrallydirectednepotismandpa-

tronagemore than issue-based local politics; (2) the lack

of intermediary rganizationsorexercisingcitizens'voices




will preventocalaccountability; nd(3) weakinstitutional

systemswill rejectuniversalnormsandrulesthatare rrel-

evantto local culturalpracticesin such obvious areas as

tax assessmentandauditing.Such culturaland nstitutional

issues constitutea second set of challenges to which re-

gimes contemplatingdecentralizationmustrespond.

Political Culture

Indevelopingcountries,politicalcultures often viewedas a threat or constraintrather han as an opportunity o

build on the achievementsof decentralization.Political

culture consists of those shared values and attitudesthat

affect institutionalandpolicy decision making (Inglehart

1988). It is whatdetermineshowpeoplebehavewhentheyarenot being watched.It can also be recognizedas "the

way things are done aroundhere"(Economist2002, 53).

Opponentsof decentralizationarguethatculturallyrein-

forcedsystems are not easily changeable n the shortrun.

Thecommoncultural eature s centralistdecisionmakingand

populardistrustof

frequentlycorruptgovernments.The trickis to distinguishthose elementsof the politi-cal culture thatgenuinely deterprogramresults and can

only be changedin the mediumtermfrom those thatare

distinctivebutcan be modified or builtupon to facilitate

programresultsin the shortrun. Some culturalpracticesdo not reallyaffect the courseof decentralization ndcan

be changedonly in thelong term,such as rote educational

practices,nepotismin civil servicehiring,and staff loyal-tiestogroupsandfamiliesoverformalorganizations. hese

areimportant nd distinctive-but theymaynot be impor-tant to program mplementation.More important or de-

centralizationarepracticesthatdirectlyaffect centralorlocal government ystemsand arechangeable n the short

term.For example, distrustof government(revenuecol-

lections), familyand tribal oyalties (budgeting ordevel-

opmentprojects),andperemptoryor arbitrary owerover

underlings auditing)wouldaffect decentralizationmple-mentation.Persistentadministrative racticessuch as the

generation f statistical eportsbudget eportshatareoften

unread)andcentralizedexpenditurecontrols(to preservehierarchicalpower within ministries)can be changedby

modifyinginternal ncentives.Forexample,statisticalre-

portingcan be converted nto useful analysisfor budget-ing andauditing;passive line managementcan be turned

into active program mplementationby giving them tar-

gets andenforcing expenditure ontrolsthatalreadyexist.

Culturemay be turnedfrom a static obstacle to the dy-namicfoundationon whicha decentralization rogram an

be built.5

Civil Society

Culturalandcivil society issues are relatedin that re-

gimes governing n centralizedculturesgenerallyrepress

thedevelopment f intermediaryivil societyorganizations,such as themedia,unions,citizenassociations,andpoliti-cal parties.Opponentsof decentralization rgue hat f the

goal is democraticdecentralization nd the clustersof in-

terestsaremissing or of the wrongkind, it is difficult to

developrepresentative oliticalparties n anybutthe nar-

rowest sense, that is, corporatistpartiesrepresenting he

stateandindustry.Withoutsustainingorganizationso fa-

cilitategovernance,devolutionprogramsarelikely to de-teriorate nto chaos andrevert o centralism.

Indevelopingsocieties, neitherautonomous ocal gov-ernmentsnor powerfulcivic organizationsexist. Never-

theless, repressed ocal and civic traditionsmay exist, as

in Pakistan,which the decentralizationprogram an reac-

tivate orenergize.Conditionsof repressedcivil society or

"nascent social capital"-norms, trust,and networksfa-

cilitating coordinated action (Putnam 1993, 167)-canserve as the foundation or successful nstitutional hanges

requiredby a decentralizationprogram.Manor ound that

even under conditionsofrepressed

civilsociety-for

in-

stance, in Cote d'Ivoire duringthe 1980s-the psycho-

logical impactof decentralizationprogramscan catalyze

greaterparticipationand associational activity at lower

levels (1999, 57). In his view, decentralizationprogramscan makeentirely adequateachievements n the absence

of lively civil society and can make up for them in the

shortterm. The absence of full civil society need not be

an obstacletoprogrammplementation.6 ecentralization

programsneed to identify these useful culturalpracticesandbuildonthem,rather hanrelyingon systemsimposedfrom the outside,often from a combinationof poorlyde-

signed donorprogramsand importedconsultants. Evenin EasternEuropeand the former Soviet Union, where

civil society did not formallyexist, local partyorganiza-tions provided eadershipskills to members thatare now

beingputto use in thedevelopmentof civic institutions n

thatregion(Jacobsen2000). Based on these conclusions,the Pakistani egimeincludedcivil societycreationaspartof its devolutionprogram.

Institutional Systems and Practices

Institutionsare the formal andinformalrules, the sys-

tems (personnel,budgeting,procurement)and incentivestructures tax codes, assignmentsof intergovernmental

functions), that shape the behaviorof organizationsand

individuals North1990;BurkiandPerry1998, 11).Manyof these practicesseem immutableand runcounterto the

Westernvalues thatarecentral o devolution: ransparency,

accountability,due process, andmajorityparticipationn

public decisions. Local partiesandelite groupsoften op-

posemodem nstitutional aluesas"imperialistic"nd"im-

posedoutsider"valuesto thosethatprevail ocally.Never-

theless, obstructionist institutional practices can be

222 Public dministrationeview March/April005,Vol. 5,No.2



thePakistanidevolutionwas tocircumvent hecorrupt nd

ineffectiveprovincialgovernmentsandto give powerand

fundingto the new local tier.

Nevertheless,the overallapproachof the NationalRe-

constructionBureauhasbeentop-downplanning,withan

emphasison rules, laws, andregulations romthe bureau

and the provincial levels. Very little emphasis has been

given to the needed local managementflexibility to de-

liver theneeded services.By contrast, hePhilippine egalandregulatory pproach as beenmorefacilitativeand ess

commandandcontrol.Conflicts of law have been recog-nized and an institutionalmechanismproposed o remedythe problem.Indonesian aws havenot assignedclearex-

penditureand revenueroles for local governments.The

laws also excluded the provincesfrom the devolution of

authority.Of the threecases, the Philippineshave givenmost attention o the developmentof the legal andregula-

toryframework.

The thirdset of regimeactivitiesfocuses on theresolu-

tionof localcapacity

weaknesses.Regimescontemplatingdecentralizationhave to deal with this twice: initiallyas a

background ssue, andlateras an operational ssue to be

remediedby technicalassistance,training,andimprovedincentives.All threeregimes dealt with this issue by cor-

rectlydefiningit as a short-termssue thatcould be rem-

edied by a promise of supportand by deployinghigher-tier staff to local units. The Philippines and Indonesia

required ocal units to pay for salaries out of fiscal trans-

fers. None of the programsrequired ocal civil services,which createdtension with centralandprovinciallevels.

Only the Philippineshas madesignificantstrides n mod-

em performance-based apacity building.Pakistan's ca-pacity building is largely in-house and derived from ar-

chaic colonial-era institutions and practices. The

Philippineshas given themost attention o this issue frominitiationof theprogramn 1992. Forexample, texempted20 percentof the localdevelopment und fromcentralear-

marks.While Indonesiadeployedabout two million staffto localunits,thegovernmentof Indonesiadidnotprovidethemwith any incentivesfor capacitybuildingor the ap-

plicationof skills to new local systems.It was found that the fourthstep followed by the re-

gimes was toestablishfacilitationnetworks o supportandsustainthereform.Without ocal supportgroupsand citi-zen participation,decentralizationreform typically re-mains unimplemented egislation. In Pakistan,a militarygovernmentwith an initially shortoperating ife initiatedthe reform. It was directedby the NationalReconstruc-tion Bureau with little or no civil society or associational

backing.This was due to the rapidplanningrequirement,the knowledgethat the provinceswould attempt o derail

the reform,the recognitionthatmost districtswere tech-

nically deficient and could not make sound evaluations,

and the absence of any real civil society or independent

professional sector in Pakistan.The Local GovernmentOrdinance(SBNP 2001) establishedcitizen communityboardswith entitlements to 25 percentof local develop-mentbudgets.Thisinstitutionalmechanismwas anattemptto break he lock on local politicsby traditional lites and

partiesand to create a nascentcivil society organization

responsible for developmentprojects. Civil society has

beenrepressedand s still weakin Pakistan.Pakistanheldlocal elections (fornazims,ormayorsandcouncils) earlyin the program(2000 and 2001), and this generatedex-

cessive local demands hatthreatened hecapacityof new

districts to respond.

By contrast,the Philippineshad a large civil societystructure o drawupon;thegovernmentof thePhilippinesdevelopeda broadsupervisorygroupthatincludedrepre-sentatives romcivil society andprofessionalgroups.The

supervisorygroup ncluded heDepartment f Interior ndLocal Government,Departmentof Budget and Manage-

ment,Departmentf

Finance,Civil Service

Commission,the EconomicandDevelopmentAuthority,andthe Com-mission on Audit.Associations includedthe Association

of LocalBudgetOfficers.Indonesiareliedon several ocal

government associations, including APPSI-provincial,APEKSI-localand district,andAPKASI-mayors.Thesehavebeen important upporters,buttheyhavenot servedas devolutionprogramadvocatesso far.Partof this mayoccur in the shakeoutperiodwhich, unlike Pakistanand

Indonesia, he Philippineshas alreadyexperienced.In the fifth step, regimesfocused on the establishment

of amonitoringystem otrackprogressand omakecourse

correctionsduring mplementation.nfact,onlyonecoun-

trydidthis;the othertwo madelargely symbolicmovestocreatemonitoringand evaluationsystems. The National

ReconstructionBureauin Pakistanplanned a full-scale

implementationwithoutpilotprograms. t madeno effortto establishanymonitoringsystem,perhapsout of the ex-cessive hubristhat it could simply dictateprogrameffec-

tiveness. By contrast, n 1992 the PhilippinesestablishedtheRapidFieldAppraisal ystemtogenerateneedsassess-

mentsand oprovide eedbackonimplementationrogress.Thiswas alsoconsistentwithitsdemand-driven,apacity-

buildingapproach,which attempted o avoid failed sup-ply-driven rainingapproaches. ndonesiamadeno majorefforts in this area,otherthan the 1994-95 District Au-

tonomyPilotProgram,whichwas used to assess local ca-

pacity to execute newly devolved tasks priorto the pro-gram.Negativeconclusionsgenerated ythisprogramwerenot utilized by the governmentof Indonesia in programplanningor implementation.

In the sixth activity,all threeregimes recognizedthe

need to providestablefinancing f local autonomywas tobecome a reality.All threeattempted o deal with the fi-

224 Public dministrationeview March/April005,Vol. 5,No. 2



nancing issue, but variedwidely in success. For current

services, Pakistan'sNational ReconstructionBureauand

Ministryof Financeagreedto pay the wage costs of the

devolutionfor the interimperiod-otherwise, local gov-ernments could not pay the salaries of deployed staff or

their own. Salariesnow account for about85 percentof

districtbudgets(WorldBank2002a, 4). There are also in-

novativeblockgrants romfederalministries suchas edu-

cation)to ensurefundingfor primaryandsecondaryedu-cationneeds at the local level.But there s still noagreementon theprovisionof stableannualamountsof fundingorits

basis (thatis, a performance ormula)from the National

Finance Commissionthrough heprovincial inance com-

missions. For fiscal year 2003, the central governmenttransferred .5 percentof totalgeneralsales taxreceiptsto

theprovinces Abbasi2002).But becauseof retained hares

and forecastingerrors,this percentagedoes not indicate

the actualyield for local governments.Indonesiancentral ransfersprovide25 percentof local

revenues.No othermajor

revenue ourcesareassigned

and,

giventhe absenceof anyreal tax base in most areas, ocal

own-source revenuesarerelatively high for the coverageof local needs (25.4 percent,see table 1).The assignmentof revenues has not been based on the local cost of ser-

vices estimates (that is, a target level of expenditures),which shouldhavebeen done first.This means the center

retainscontrolof revenues. In the Philippines,the earlyinternal evenueallotment,requiredby the 1987 Constitu-

tion,provided unds o localgovernmentunitsbutexcluded

the costs of the devolution.This deficiencywas remedied

by the 1994 "cost of devolved functions"mechanism in

health(WorldBank 1994).Workremains o be done in allthreecountriesonimproving hestabilityandperformancebasis of funding orlocal governments.Thelong gestation

periodin the Philippines suggests that fiscal stabilityis a

medium-termssue requiringa longershakeoutperiod.The seventh activity is restructuring nd streamlining

local offices to prepare hem for the performanceof their

newly devolved tasks. The NationalReconstructionBu-

reau has given considerablethoughtto this in Pakistan,andeffortshavebeen madeattheprovincialevelto stream-

lineoperations.Effortsatthedistrict, ehsil,andunion ev-

els havebeen moreintermittent,which could impedeser-vice delivery.The bureauhas notprovidedmethodological

optionsfor functional review or reorganization,nor have

regulatoryrelationshipsbetween provincialdepartmentsand corresponding local group offices (such as publicworks)been worked out clearly.In the Philippines, ocal

governmentunitswereauthorizedn 1991toestablish heir

ownstructuresonsistentwithlocal servicedeliveryneeds;in 1992 the Civil ServiceCommission ecommended local

governmentunitstructure, ndtheDepartment f Interiorand Local Governmentestablished an anti-red-tapepro-

gram.Indonesia has not forcefully attempted o restruc-

turelocal offices consistent withdecentralization equire-ments.Thus,thePhilippinesbeganearlyto improve ocal

governmentunitperformanceand has achievedthe most

in this area.All threeregimes recognizethat local institu-

tionalreformwill requirea medium- to long-termeffort.

Theeighthandfinalstepconsists of efforts o shiftplan-

ningandbudgeting orpublic-sectoractivitiesfrom nputs

to outputsandoutcomes. This is somewhatsurprisingbe-cause one would expect results budgetingto be first, as

core systems such as transfersanddevelopmentprojects

depend on their information.Instead,all regimes calcu-

lated thatexisting informationcould be used for results

purposes, orinstance, ine items to controloperationsand

maintenancexpendituresnd o gauge sufficiency orpres-ervationof capital stocks. As results-orientedbudgeting

requires mprovementsn analyticalskills and thegenera-tion of performance eporting nformation,t is more of a

medium-term ctivity,and hence last on the list of regime

priorities.In its short

programhistory,Pakistanhas done

much in this areaat theprovincial evel, and this servesas

a model for local reform.At the local level, efforts sup-

portedby the AsianDevelopmentBankto develop perfor-mance systems have been constrainedby the need to en-

sure consistency with past forms, accounting practices,manuals,and administrative ractices.There are no local

professionalpressuregroupsadvocating hangeshere(thecivil society constraint).The lead agency for reform,the

National ReconstructionBureau, s hamperedby inexpe-riencein this area,togetherwith a mostlyconsultantstaff

andtop-downchain of command.ThePhilippineprogram

utilized heAssociationof LocalBudgetOfficersandotherprofessionalassociations to changelocal practicesand to

upgradeanalyticalskills. The Philippinecentralgovern-menthad substantial xperienceat thecentral evel in per-formanceandprogrambudgeting.Despiteanemphasison

local borrowing consideredsophisticatedby most),Indo-

nesia has not yet focused on performancereportingand

budgeting.

Differences

Severalconclusionscan bedrawn rom hedifferencesn

program mplementation.The differencesappearedess inthe sequenceof activities han n theiractualperformance.As indicated ntable2, sevendifferences an benoted nthe

performanceof technical activities at the organizationalframework nd mplementationtrategyevels.

First,thesupervisory tructure ordecentralization ar-ied amongthe threecases. The Philippinesbeganwith a

broad-basedstructure hatincluded multiple representa-tive interests.This extended to the use of civil society in-

stitutions for feedback and guidance on the progressofthe reform.By contrast,the supervisorystructureof the

Comparativeecentralizationessons 225



Table Differencesn Decentralizationmplementation

Component

Organizationalframework

Supervisorytructure/civilsociety eedback

Legal/regulatoryframework

Capacity-building

Monitoringnd

evaluationystem

ImplementationLocal evenue

sufficiencyRestructureocaloffices

Performance

managementandbudgeting

Pakistan

Top-downand narrow

FewcomparativeinputsSomeemphasisNo

Weak

Marginal fforts

Superficialinterest

Philippines Indonesia

Broad-based Lessnarrom

Comparativeinputs

Strong mphasisYes

Strong-useffiscal ncentives

Someefforts

Strong mphasis

Comparatininputs

Strong mpNo

Weak

Marginal

Some nter

Pakistanreformhas been limited to the militaryregime'sclient institution, the National ReconstructionBureau,whichrepresents ew interestsand s staffedby manycon-

sultants n a loose accountabilitystructure.Pakistanhas aweak civil society network;the reformwas intended to

circumvent xistingpoliticalpartiesandprovincialauthori-

ties, which the militaryviewed as opponentsof the re-

form. As noted, the Local GovernmentOrdinanceautho-

rized anew setof civil societyinstitutions ordevelopment

projects,called citizen communityboards. There is still

fear these boardsmay entrench local moneyed interests

rather hanempowerthe poor,because it is the rich who

will have time todevelopthe technicalexpertiseto attract

district council funds (WorldBank 2002b, 23). As ex-

pected, citizen communityboards have not yet become

operationalandareexperiencingproblems n competitionwith otherlocally powerful groups.The scope of the In-

donesiansupervisory tructure alls betweentheother wo

programs-some representationat the top (the Office of

Decentralized Local Government),but more is needed

from civil society organizationssuch as the professional

municipalorganizationsAPEKSI andAPKASI.It is clear

that, after the establishment of macroeconomiccontrol,all threeregimesmade efforts to establishsupervisory n-

stitutions,but each variedin its emphasison representa-tion and the need for societal feedback.

Second,as indicated n table2, decisionsof supervisoryinstitutionsmustbe guidedby sensible lawsrelating o tax,

budget,debt,participationn governance,and the assign-ment of functionalroles. Decentralizationaws mustbe in-

formedby a full understanding f whatcan go wrong in

publicandmunicipaladministration,swell ashow topro-videspeedyremedies orconflictswithother awsandregu-lations.Many aws have been writtenby generalists rom a

top-downplanningperspectivethat contain few insightson theneed to deliver ocal services.In thedevelopmentof

the LocalGovernmentOrdinance,hePakistani egime n-

cluded few internationalxamplesand did not solicit

internationalexperience-despite the intent of the

Asian DevelopmentBank's Fiscal Decentralization

TechnicalAssistanceproject 2001-02). Pakistanas-

signedroles to districtsbut ignoredlower-tier nter-

ve governmental elations,and it is still uncertainhow

to proceedwith provincial-localrelations.Both the

ss PhilippinesandIndonesiahave reliedheavilyon in-

ternational ndcomparativeocal legalexperience odraftandmodifytheir egal frameworks.As a result,the institutionalbase of the lattertwo programs s

ffortsstronger han n Pakistan.Third,regimes that wish to sustaintheir decen-

est tralizationreformsconcentrateheavily on capacity

building.ThePhilippinesbeganearly oprovide rain-

ing througha varietyof institutions, ncludinguni-

versities,nongovernmentalrganizations, ndprivatefirms. Indonesia also stresses capacity building and is

stronglysupportedn this by fundsfrom the U.S. Agency

forInternationalDevelopment.However,Indonesia rans-ferredabout wo million staff withoutpriorcapacity-build-

ing support.Pakistanhasrespondedmoreslowly,restrict-

ing training to the existing colonial-based institutions,which areknownmore for theirlegal focus than for man-

agement nnovationandtechnicalanalysis.ThePhilippine

governments transferring eopleandpositionsto districts

but with little prior trainingother than from theirprovin-cial offices. The Asian DevelopmentBank will provide

support or trainingandcapacitybuilding.But it appearsthat much of this supportwill be locally drivenandmaynot be consistent with international estpractices.

The finalkey element of the organizationalrameworkfor decentralization s monitoringand evaluation.This is

the fourthareaof majordifference ntechnicalperformance

amongthe threeprograms.The centralsupervisory nsti-

tution(orresponsibilitycenter)needs to establish a func-

tioningmonitoringand evaluation ystemtoprovide eed-

back on the performance ndprogressof the reform.This

information hould be used to make course corrections n

theprogram nd orcapacitybuilding odevelop ocalabili-

ties for institutionalandpolicy analysis.Todate,Pakistan

has not establisheda monitoringand evaluationsystem,

norhas the Indonesiangovernment.The Asia Foundationsupporteda three-year ffort thatbeganin 2002 calledthe

IndonesiaRapidDecentralizationAppraisal,but this ap-

praisalis external and not linkedto the Centerfor Local

Government nnovation.Only the Philippineshas recog-nized the importanceof this dynamiclearningelement to

the success of the devolution.

Importantperformancedifferenceswere also noted at

the implementation evel. Devolution of authorityunder

anycircumstances equires iscal support o achieve local

autonomy.This is both a frameworkand an implementa-

226 PublicAdministrationeview* March/April005, Vol.65, No. 2



tion issue. Fundingmust be provided orbothcurrent er-

vices and for capitaland development projects.Funding

normallytakes the form of transfersandcan includeper-formance conditions in exchange for local programdis-

cretion(blockgrants).Itmayalso take the formof author-

ity to collect and use fees andtaxes-broadening local tax

bases.All three countrieshaverecognizedthe importanceof providingnotonly funds,but also authorityo mobilize

local revenue sources to reduce dependence on centraltransfers.Local fundingalso needs to be linked to the ac-

tualcosts of services rather hansimpletallies of previous

budget expendituresunrelated to service requirements.Pakistanhas attempted o providerevenues,but hashadto

deal with provincialreluctance to partwith revenueau-

thorityover districts.Theprovincial inanceaward till has

not been approved, eopardizing ocal fiscal stability.The

governmentof the Philippines supportslocal fiscal au-

tonomy through ocal salary coverage and block sectoral

grants.This leaves the problemof coveringlocal services

with veryweak local tax bases (exceptin largercities).As noted,Pakistandevelopedcitizencommunityboards

withaccessto dedicated unds forspendingonlocal works

and generationof wider political interest in proposingneededprojects.The citizencommunityboardmechanism

hasnot beenfully implemented.Pakistanhas also consid-

ered methodologies for estimation of service costs, but

these havenot been implementedeither at the local level.

Thus,thebulkof local funds are still derivedfromcentral

transfers(National Finance Commission awards)based

on population,and financing is largely unrelated o ser-

vice requirements.

The Philippines nitiallymade a mistakein not cover-ing local salariesand devolutioncosts through heinternal

revenue allotment.This caused a majorpoliticalbacklash

against the reform. Since 1994, a new grant-loan link

framework has provided strong fiscal supportfor local

governments.The Philippinesalso providesfiscal incen-

tives in the formof a 20 percentadditionto the develop-ment fund for good performance. ndonesiaearmarks25

percentof central transfersfor local units, but it is still

unrelated o local needs or costs of services.Therelation-

shipbetween loans andgrants s notcoordinated,withper-

verse results such as poor cities borrowingandrichcitiesrelyingon grants.Fiscal sufficiencyis criticalandtakesa

long time to work out institutionallyandpolitically.The

Philippinesrequired ourto five yearsto do this.

Decentralization s also a matter of local governance.The qualityof governancewill be affectedby internalor-

ganizational fficiency.Structures ndsystemsneedto exist

thatdevelop policies implementedby managerswith suf-

ficient resources andauthority.Political and administra-

tiverelationships, speciallybetween elected orappointed

mayors,councils, and city departmentsneed to be clari-

fied and nstitutionalized. rocedures orcitizeninputsandaccess to permits,licenses, and otherdocumentsneed to

be transparent ndefficient to preventdelays andcorrup-tionopportunities.All threecountriesrecognizedearlyon

thatcapacityand structureproblemsexisted at the local

levels, which could deraildevolution. In Pakistan,efforts

havebeen madethrough he provincial ocal government

departmentso reorganizeand restructure perationsand

to transferthose models to districts,tehsils, and unionsthrough echnicalassistance.

On the otherhand,therehas been little recognitionof

the complexity of this process or the need for a formal

methodology(suchas anorganizational fficiencyreview

or process reengineering)other thanpolitical logic. Re-

sults so far have been variable.In Indonesia,the central

government is implementing civil service reform and

slowly transferringreforms to local governments.The

Philippineshasadoptedanti-red-tapemeasuresand taken

steps to reform local governments.The difference is that

the latter has permitted ocal units to reformthemselves

consistent with Civil Service Commission guidelines.Pakistan and Indonesia have been more insistent on a

cookie-cutterapproach,hat s, a commonmodelprovided

by provincialor centralgovernmentplanners.The Phil-

ippine approachhas been more innovative and seems

likely to producesuccesses thatcan be replicated n other

local governments.

Finally,effective devolutionrequiresmeasurement nd

analysisof results. Funds should be allocatedon the basis

of performance ignals providedby the budgetingandfi-

nancialmanagementsystem. Informationon progressin

capacity building,local financing,service results,devel-opment projects,andthe overalldevolutionreform itself

is requiredfor managementand policy making. Perfor-

mance-monitoringystemsand the analyticalskills to op-eratethemarerequired.The mostcommon means of inte-

grating managementandfiscal performance nformation

is througha performance-basedbudgetingsystem. This

shouldbe consistent with the national chartof accounts,but based on a flexible systemto measureoutputsand out-

comes. As is known, many budget formatsand service

measures are available,as are means to achieve overall

objectives.While the legal basis for programandperfor-mancebudgeting s included in Pakistan'sLocal Govern-

mentOrdinance,ts implementationhas been impededbyan emphasison prior legal constraintsandsystems. Suc-

cessful models in Punjabprovincehavenot yet been fol-

lowed elsewhere. Indonesiahas shown less interest n per-formance-oriented udgeting hanin the establishmentof

borrowing ystemsto finance ocal infrastructure. y con-

trast,the Philippineshas a long historywith all forms of

performancer resultsbudgetingzero-based, erformance,andprogrambudgeting)andcontinuesto strengthenhese




mented differently in seven areas compared to Pakistan

and Indonesia. It can be concluded that all regimes need to

respond to potential gaps in support and deal with cultural

constraints to modem systems of administration and elec-

toral representation. Regimes must respond to local op-

portunities by building on existing cultural practices and

using them as support mechanisms for the more radical

institutional, fiscal, managerial, and political changes that

may be required for effective decentralization. Regimesthat effectively respond to these shorter-term issues, then,

need to follow the path of the Philippines, with (1) a broad

supervisory institutional structure, (2) substantial interna-

tional inputs into the development of the legal and regula-

tory framework, (3) innovative capacity-building exercises

and institutions, (4) strong interest in monitoring andevalu-

ation of the devolution program, (5) provision of sufficient

local fiscal autonomy, (6) efforts to streamline local gov-ernment operations, and (7) efforts to replace input bud-

geting and legal management with systems driven by per-formance incentives and

targets. Regimesthat focus on

these areas in sequence are likely to be more successful

than those that do not, illustrated by Pakistan and Indone-

sia at present.More research needs to be done on the determinants of

effective decentralization implementation. This three-stageframework offers a modest start. In the future, to provide

applied policy guidance to regimes contemplating designand implementation, research should focus on differences

in the performance of technical activities by similar coun-

tries and programs. Specifically, research questions should

ask, what factors are associated with variation in perfor-

mance of these activities? Armed with more precise data

and further lessons learned, it should then be possible to

measure the comparative program impact and link this to

differences in performance of technical activities. With this

applied information, regimes should have a better assess-

ment of the potential risks of their decentralization deci-

sions and how to minimize them.

Acknowledgments

Theauthor hanksRachelQuero,directorof DAI-Philippinesin Manila,for her supportandprovisionof materialson the de-centralizationprogram here.An earlierversion of this article

was presentedat the Association for Budgetingand Financial

Managementconferencein KansasCity,MO, October10-12,2002.

The opinionsexpressedin this articledo not necessarilyre-

flect those of the Open Society Instituteor the Local Govern-

ment andPublicServiceReform Initiative.

Notes

1. Conversely, here is a case againstfiscal decentralizationorforfiscal centralization), nd t is strongern transitional nd

developing societies than in industrialcountries. It is said

thatcentralizationavorsstabilization, conomicgrowth,and

regional equity (see Prud'homme1994; Guess, Loehr,and

Martinez1997, 1).

2. Differencesin decentralization efer to how well the activi-ties areperformed,hesequence nwhichtheyareperformed,andoverallprogramresults.Here,differencescan be noted

in how well the technicalactivities wereperformed.The se-

quenceof activityperformancewas similar n all threecases.

Dataon overallprogram esults are not yet available.

3. As the decentralizationprogramadvances and statisticsare

reportedmore systematically, he level of local own-source

revenuesshould ncrease.Thenew district ier has thepowerto set tax ratesandbases of such dedicated axes as theurban

immovableproperty ax. Districts also receive a dedicated

annualportionof the sales tax to increase local fiscal au-

tonomy.The NationalReconstructionBureauandMinistryof Finance have largely agreed upon the conceptof a divis-

ible pool of provincialresources(provincial inanceaward)to be sharedwith the districtson the basis of needs andper-formance.To a largeextent,districtscanestablishtheir own

currentanddevelopmentbudget prioritieswith inputsfrom

newly created civil society organizations or development

projectscalledcitizencommunityboards.

4. The relationshipbetweenregimetypes and the level of sup-

portfor decentralization s notexploredhere. Manor(1999)notes that,paradoxically,authoritarianegimesmay supportdecentralizationo increase theirbase of support.

5.In Ecuador,exchanging tighterreporting requirementsonoutlaysandadding nperformancemeasures orprovisionof

greatermanagement uthorityo transfer ndreprogramunds

during heyearwasviewed as a positiveincentiveby finance

ministryofficials. This wasaccomplishedby theincremental

reallocationof rewardsandrequirementshatalreadyexisted

within hebudget-executionystem.Thesmallchange nwhat

was viewed as a hopelessly centralistsystem produced m-

provements n budget management Guess 1993).

6. Onthe otherhand,the "wrong"kind of intermediary rgani-zations may exist. The threeregimes studied are gamblingthat in the medium-term,decentralizationwill reducesup-

portfor

unsupportive, egative ntermediary roupshat still

exist, to someextent, neachcountry.Warlords ndremnants

of al-Qaeda n the Pakistani ribalareas are unlikelyto en-

courage centrally sponsored government decentralization

programsthat could deprive them of indigenous support.Disruptionof establishedcorruptionnetworksby the devo-lution of formalgovernmentalcontrolsystems (such as in-

ternalaudit) n Indonesiamet the sameresistance.Regimes

recognize the threatof such organizations o sound gover-nance and the rule of law andattempt o reducetheirinflu-

ence by political co-option strategies.The appropriatemixofpoliciestoco-optormodifythebehaviorof negativegroups




(thatis, force andincentives)must be arrivedat by each re-

gime onthe basis of its own strategicandoperational onsid-

erations.

7. The relevantIndonesian ocal governmentassociations can

be identifiedby theirIndonesianacronyms:APPSI (provin-

cial), APEKSI(local anddistrict)and APKASI(mayors).

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