Implementing Decentralized Local Governance in South Asia and the World: A Comparative Review

1. Implementing Decentralized Local Governance in South Asia and the World: A Comparative Review Anwar Shah, World Bank ashah@worldbank.org GINI Workshop, Singapore, August 8-9, 2010

2. THE VISIONDecentralization – what???“If you do not know where you are going then every road will take you somewhere else”. - Yogi Bera

3. True decentralization: Community empowerment to think globally but act locally.

4. Emerging Vision of Local Government 20th versus 21st century Residuality principle Ultra vires Focus on government Agent of central/provincial governments Dependent on higher govt transfers Accountable to higher governments Direct provider Dependent on central directives Rules driven, bureaucratic, technocratic Exclusive with elite capture Overcomes market failures Boxed in a centralized system Subsidiarity principle Community governance Focus on governance and growth Primary agent for citizens and gatekeeper for shared rule Access to sustainable finance Accountable to voters Network facilitator Autonomous Strengthens voice, choice and exit and results based accountability. Inclusive and participatory Overcomes market and government failures Global and local connectivity Anwar Shah, World Bank

5. Local Govt as a leader/facilitator of Network Forms of Local Governance National Government Regional Government Local Government (chair) Private (for profit) Providers Community Associations Interest-based Networks Other good Samaritans Hope-based Networks Anwar Shah, World Bank

6. For South Asia it may be back to the future! “My idea of village swaraj (independent republic) is that it is a complete republic, independent of its neighbors for its own vital wants, and yet interdependent for many others in which dependence is a necessity”. Mahatma Gandhi as quoted in Alok (2006) Self-governing village communities in India in 1200 BC. Rig Veda as quoted in Alok (2006) Self –governing urban local governments in Harrapa and Mohenjo-Daro (Pakistan) in 2500 BC. Anwar Shah, World Bank

7. THE CHALLENGE

8. A disgruntled citizen’s perceptions about his government • “Government is the coldest of all cold monsters – whatever it says it lies – and whatever it has -it has stolen.” • Nietzche

9. Perceived Problems of Government in South Asia Too remote Too arrogant Too bureaucratic Too big Too inefficient, ineffective Too unaccountable Too opaque Too corrupt

14. Why governments do not deliver? Authorizing Environment Mandate Outputs, reach, outcomes Operational capacity

15. Goals of decentralization reforms –A government that works and serves.

16. But sometimes there are ulterior political motives..

17. THE RESPONSE: The Silent Revolution of the 1990s

18. Safeguards against arbitrary dismissal of local governments have improved. • 1 Constitutional/legislative safeguards against dismissal of LG council by CG; 0.5 - LG can be dismissed under certain circumstances; 0 - LG can be dismissed in an arbitrary manner

21. Scorecard on Political Decentralization

22. “Taking stock” of reforms in DTEs: Political decentralization Progress made: • Legal status of local government • Popular election of local councils and their heads Where accountability is incomplete: • Low participation and contestability in elections • Lack of provisions for popular recall of local officials • Disbandment of local councils by higher level governments Good progress: Latin America, C. and E. Europe Little progress: C. America, Middle East/N. Africa

25. Higher tax autonomy

26. Revenue Autonomy-Taxes • Tax autonomy important for accountability • Local governments have very limited access to own source revenues, even on immobile bases • Tax base sharing rarely practiced

28. Intergovernmental transfers mostly formula based and unconditional ..But ?

30. Perceptions on intergovernmental finance are generally negative Federal/Central View: Giving money and power to sub-national governments is like giving whiskey and car keys to teenagers. Provincial and LocalView: We need more grant monies to demonstrate that “money does not buy anything”. Citizens: The magical art of passing money from one government to another and seeing it vanish in thin air.

31. Ironically these perceptions are well founded in reality as most transfers are of “manna from heaven” or pork barrel variety lacking any incentives for local accountability in service delivery performance.

32. Somewhat greater freedom to borrow

33. But access to credit is almost non-existent in South Asia • Access to credit – limited or non-existence due to -Low development of financial markets -Tax centralization • Central policy focus on prohibitions or administrative controls • First steps for credit market access • Tax decentralization • municipal credit rating agencies • Municipal finance corporations

34. Scorecard on Fiscal Decentralization - 1

35. Scorecard on Fiscal Decentralization -2

37. “Taking stock” of reforms in DTEs: Administrative decentralization • Ability to hire, fire and set terms of employment of local staff • Ability to contract own taxing and spending responsibilities • Authority to pass bye-laws in their spheres of responsibility • Local governments have regulatory authority for municipal services in most countries. • Significant progress in transition countries (but not in developing countries)

38. Greater freedom to hire and fire

39. Scorecard on Administrative Decentralization

42. Decentralization reforms in South Asia have been celebrated with great fanfare but did they bring about F.A.I.R. Local Govern.

45. Will decentralization be sustained? More likely if • broad societal consensus • grassroots support • Big bang Less likely if • Gradual and incomplete e.g back-tracking with opposition by central bureaucrats (Bangladesh, India, Kenya, Pakistan, Sri Lanka); by national politicians – Argentina, Pakistan and Philippines

46. Local Capture? • Greater risk when civic participation low, especially since ability to “vote with one’s feet” low in DTEs. • Particular problem where high inequality of land ownership as I Pakistan • Endogeneity of civic participation? • Non-party elections

47. THE IMPACT: The zone of our ignorance

48. Fiscal Dec and fiscal management – empirical evidence

49. Impact of Decentralization on Service Delivery (empirical evidence)

50. LESSONS