 Decentralization of Public Sector  (Dr. Christopher Gan)

Decentralization of the Public Sector - Definition  Decentralisation can be defined as the transfer of responsibility for planning, management and resource raising and allocation from the central government and its agencies to the lower levels of government  Decentralisation is closely linked to the concept of subsidiarity, which proposes that functions (or tasks) be devolved to the lowest level of social order that is capable of completing them

Decentralization of the Public Sector - Definition (Source: L.D. Smith, FAO, 2001)  The transfer of responsibility for planning, management, and resource raising and allocation from the central government to: (a) field units of central government ministries or agencies, (b) subordinate units or levels of government, (c) semi-autonomous public authorities or corporations, (d) area-wide regional or functional authorities, or (e) organizations of the private and voluntary sector

Enablement and Enabling Policies Government to intervene less with public programmesinstead Government to create incentives for other actors to make their most effective contribution to basic infrastructure & services (Source: A.H.J. (Bert) Helmsing, “Decentralisation and Enablement: Issues in Local Governance,” Institute of Social Studies, The Hague, The Netherlands)

Enablement Model (Source: A.H.J. (Bert) Helmsing, “Decentralisation and Enablement: Issues in Local Governance,” Institute of Social Studies, The Hague, The Netherlands) Central Government Basic Services NGO’s CBO’s Private firms Other Public sector Local Government

Decentralizing Enablement Central Government Basic Services NGO’s CBO’s Private firms Other Public sector Local Government Local Government

Enabling Policies (Source: A.H.J. (Bert) Helmsing, “Decentralisation and Enablement: Issues in Local Governance,” Institute of Social Studies, The Hague, The Netherlands)  Enablement implies: different relationships between central and local government (decentralisation with public reform) different relationships between government – other service delivery actors: regulation new institutional arrangements (partnerships with other actors) organisational changes within government

Forms of Decentralization (Source: Vito Cistulli, FAO, 2002)

Forms of Decentralization  Political Political decentralization is associated with increased power of citizens and their representatives in public decision-making The most obvious manifestations of this type of decentralisation are elected and empowered sub-national forms of government ranging from village councils to state level bodies Devolution is considered a form of political decentralisation.  Administrative Administrative decentralization is the transfer of responsibility for planning, financing, and managing certain public functions from the central government and its agencies to field units of government agencies, subordinate units or levels of government, semi-autonomous public authorities or corporations, or area-wide, regional, or functional authorities

Forms of Decentralization  Administrative decentralization may take the following forms:  Deconcentration  Consists of redistribution of decision-making authority and financial and management responsibilities among different levels of the central government. This form is often considered the weakest form of decentralization;  Delegation:  Through delegation central governments transfer responsibility for decision-making and administration of public functions to semi-autonomous organizations not wholly controlled by the central government, but ultimately accountable to it (e.g. sub-national housing authorities, transportation authorities, regional development corporations); and  Devolution:  In a devolved system, local governments have clear and legally recognized geographical boundaries over which they exercise authority and within which they perform public functions (e.g. raising revenues, investment decisions). It is this type of administrative decentralization that underlies most political decentralization.

Forms of Decentralization  Fiscal Fiscal decentralization is associated with the authority of the decentralized units to make expenditure decisions with funds either raised locally (e.g. user charges, co-financing with users, property taxes, borrowing, etc.) or transferred from the central government  Market Market decentralization is the most decentralized form in as much as decision-making power is transferred from public to private organizations

Forms of Decentralization  (i) Privatization allowing private enterprises to perform functions that had previously been monopolized by government, or contracting out the provision or management of public services or facilities to commercial enterprises, or still financing public sector programmes through the capital market and allowing private organizations to participate; and  (ii) Deregulation consists of transferring services provision or production activities previously owned or regulated by the public sector to competing private organizations (e.g. electricity or broadcasting provided by various and competing companies).

Administrative Benefits from Decentralization  Improves administration of some services because of improved information  Provides opportunity to adapt technologies to local circumstances  Encourages innovations  Decreases risk from innovations

Economic Benefits from Decentralization  Optimalization through better informed decision  Enhances revenue mobilization Willingness to pay increases when services correspond to local demand  Improves allocative efficiency of government action: Makes the mix, level and quality of services provided by government more responsive to the differences that exist among communities

Economic Benefits from Decentralization  Improves accountability, responsiveness and legitimacy provides opportunity to more closely link the mix, level and quality of services provided with the “price” paid by local residents  Encourages experimentation and innovation in the provision of public goods and services  Promotes efficient and effective delivery of services  Increases “competitiveness” of government

Political Benefits from Decentralization  Increases democracy through direct participation  Educates citizens about the process of political decision and develops political skills  Provides good political school for national political leaders  Promotes national unity in a multiethnic  or multicultural environment

Possible Constraints to Decentralization  Weak administrative or technical capacity at local levels may result in services being delivered less efficiently and effectively in some areas of the country  Administrative responsibilities may be transferred to local levels without adequate financial resources, making equitable distribution or provision of services more difficult  Decentralization can sometimes make coordination of national policies more complex and may allow functions to be captured by local elites  Also, distrust between public and private sectors may undermine cooperation at the local level (Source: Vito Cistulli, FAO, 2002)

Possible Constraints to Decentralization  It must also be pointed out that decentralization may entail higher costs of enforcement of compliance with the regulations and, in some circumstances;  It may lead to increasing conflicts among various areas sharing the same natural resources, and also between hierarchical levels if coordination is not effective;  Sometimes, local organizations lack the necessary scientific knowledge to complement their indigenous experience and knowledge; and  Finally, decentralization may have initial high costs, which, in a first stage, can increase government spending

Conditions for Successful Decentralization – Where do we stand? (Source: Vito Cistulli, FAO, 2002) -  Sufficient financial resources to ensure the accomplishment of the tasks under the responsibility of the local and decentralized institutions;  Actual empowerment of decentralized institutions and enough power to influence the political system and the development activities;  Accountability mechanisms such as local elections to improve transparency and representation;  Legal framework clearly specifying the powers and responsibilities of local governments to avoid interference and overlapping with central government; and  Adequate capacities of local institutions to ensure the appropriate services

Conditions for Successful Decentralization – Where do we stand? (Source: Vito Cistulli, FAO, 2002) -  If decentralization is not accompanied by a real political will at the central level and actual transfer of legislative and policy powers (political dimension)  If local institutions are not provided with the responsibility of delivering and managing services at the local level (administrative dimension)  If mechanisms, authority, and responsibility for spending funds obtained either from direct taxation or from central government are not clearly defined (fiscal dimension) then most probably decentralization will not generate the advantages

Conditions for Successful Decentralization – Where do we stand? (Source: Vito Cistulli, FAO, 2002) -  Broad participation is needed for the decentralisation process to be successful Support for decentralisation must be deliberately and carefully mobilised among all critical actors and the private sector should be recognized as a critical partner in the process Decentralisation can facilitate empowerment and encourage creative local solutions  Not all government functions should be entirely decentralised Following the principle of subsidiarity, a function should not be decentralised to a lower level if it is critical in the achievement of central-level goals and its sustainability at the local level cannot be guaranteed, the capacity to perform the function does not exist or the function at this level is not cost-effective.

Conditions for Successful Decentralization – Where do we stand? (Source: Vito Cistulli, FAO, 2002) -  While decentralisation is primarily a political process, it will not be successful unless adequate provision is made to finance the devolved or deconcentrated responsibilities  More capacity and technical expertise needs to be provided in the areas of local revenue generation and financial assistance from the centre  The local community must be informed about the costs of services and service delivery options involved and the resource envelope and its sources - so that the decisions they make are meaningful

Final Thoughts Centralization and decentralization are not "either-or" conditions In most countries an appropriate balance of centralization and decentralization is essential to the effective and efficient functioning of government. Not all functions can or should be financed and managed in a decentralized fashion Even when national governments decentralize responsibilities, they often retain important policy and supervisory roles They must create or maintain the "enabling conditions" that allow local units of administration or non-government organizations to take on more responsibilities

Final Thoughts Decentralization does not always result in a more participatory approach to development management It does not always foster greater partnership with other stakeholders Also we cannot conclude that it always leads to more effective service delivery and hence to an improvement in the quality of life of people at the grassroots But it can be said that the right combination of all these elements strongly tends to result in more effective meeting of the needs of people at the local level and in improvements in the quality of their lives

Group Case Discussion - Decentralization of Education  Should education be decentralized?  Who should control education?  What are the structural and operational decisions?  Will the community have the same number of schools and students?  How is this reorganization different from before?  What are the conditions for decentralizing education?