Decentralization: A World-Wide Phenomenon

1. Decentralization of Functions International Conference on Governance and Accountability in Social Sector Decentralization Dana Weistdweist@worldbank.orgPRMPS 18 February 2004

2. Decentralization: A World-Wide Phenomenon • Underway in over 85 countries • Political and economic rationales • Varieties • Deconcentration • Delegation • Devolution • Great variation across countries, and across sectors within a country • Often complicated and evolving over time

3. Key Service Delivery Questions • Who is doing what? • How is it being financed? Answers to these questions often determine the equity, efficiency, and accountabilities of service delivery

4. Who is Responsible for What? • Public versus private sectors? • Which tier of the public sector? • Central or local government production • Contracting with other governments, private sector, community groups • Who • determines policy? • produces and provides services? • finances? • regulates, enforces, monitors, and evaluates?

5. How is it Being Financed? • Budget allocations • Government transfers/grants • Local taxes/charges/fees • Community charges/fees

6. Dilemma: Clinics Lack Medicine or Schools Lack Textbooks • What does the intergovernmental system have to do with it? • Discrepancy between responsibility and financing: local government responsible for providing services without resources • Insufficient funds: weak central or local revenue mobilization • Cash flow: Central Government slow to release needed funds • Weak budgeting: inability to forecast realistic costs • Leakage: corruption/malfeasance

7. Positive or Negative Outcomes? • If designed well, decentralization can: • Move decision making closer to people • Enhance efficiency and responsiveness of service delivery • Potential tool to alleviate poverty • But, design is complicated, since it spans fiscal, political, and administrative policies and institutions • Design + Accountability + Capacity

8. Enhancing Decentralization Design • Systematic approach that aligns • Responsibility with financing • Decentralization framework with sectoral approaches • Responsibility/decentralization of functions: organization, planning, personnel, infrastructure, resources, regulation • Intergovernmental finance: expenditures, revenues, intergovernmental transfers • Consistent legal framework

9. Changing Central Roles and Functions • Change role from “command and control” to policy guidance and facilitation • Establish government’s policy framework • Structure proper incentives for local governments • Stop delivering most public services • Central government plays a central role • Legal and regulatory frameworks • Setting standards • Coordination mechanisms • Accurate, timely and comprehensive information • Capacity building programs

10. Expenditure Responsibility • Considerations for assigning responsibility: public goods, externalities, subsidiarity, economies of scale, public sector competition • Ultimately, no single best assignment • Ideally, services should be provided at lowest level of government where benefits lie • Public provision does not imply public production • Clarity is critically important

11. Local Revenue Mobilization • Mix of local revenues needed • Striking variations in size and capacity • One size doesn’t fit all • Local revenue mobilization strengthens accountability • Local revenues often inadequate to carry out assigned functions

12. Intergovernmental Transfers • Rationales • Vertical imbalances • Horizontal imbalances (equalization) • Externalities (inter-jurisdictional spillovers) • Enhancing national objectives at the subnational level • Paying for national programs implemented by subnational governments • Transfers should be transparent and predictable (formula-based)

13. Strengthening Accountability • Do local services respond to local needs? • Citizens have meaningful opportunities for voice (e.g., elected councils, locally appointed officers, participatory budgeting and planning, local civic forums, surveys and report cards) • Citizens can assess performance of their leaders • Officials face incentives to respond • Civic and private partners are involved in service delivery • Fiscal responsibilities • Local tax collections • Discretion in budget allocations • Accountability to central government • Reporting on outcomes • Financial disclosure and reporting

14. Building Capacity • Build capacity concurrently with devolving responsibility • “Learn by doing” • Establish professional networks and other modes for peer learning and sharing experience • Central government capacity must be strengthened too