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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
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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
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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
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(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)
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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
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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
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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-
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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
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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-
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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
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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
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(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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