Decentralizing Governance: Emerging Concepts and Practices Dr. Shabbir Cheema Director, Asia-Pacific Governance Program, East-West Center, Honolulu, USA Presented at the First International Governance Conference, Governance Education Network, Islamabad, December, 2009

Table of Contents I.Context of Decentralized Governance II.Decentralization in Practice III.Lessons from the Global Experience

I. Context of Decentralization 1.First transformation: Democratization Today there is an upsurge in the popularity of democracy as a set of values With the exception of a few suppressive regimes, progress in Asia with some mature democracies and some rapidly consolidating democracies Reflected in elections, parliaments, freedom media, civil society engagement, independence of judiciary

I. Context of Decentralization 1.First transformation: Democratization How has democratization affected decentralization practice? Through a paradigm shift from government to governance – Where as in the past, government played a predominant role in the public goods, now governance is co-produced by three sets of actors – those from the government, civil society and the private sector. Civil society, local governments and the private sector are playing a much bigger role in urban shelter and services. This could not have happened without democratic political systems

I. Context of Decentralization 1.First transformation: Democratization How has democratization affected decentralization practice? (cont.) Through pressures from below for greater involvement of sub- national units and urban governments because of democratic institutional frameworks More focus on devolution and role of the civil society than deconcentration and delegation, which was the norm a few decades ago

I. Context of Decentralization 2. Second transformation: Urbanization More than half of the world's population in urban areas Emergence of megacities in Asia as Centers of economic development, innovation and technology as well as the centers of political power such as Seoul and Bangkok

I. Context of Decentralization 2. Second transformation: Urbanization How has urbanization affected decentralization practice? Pressures on urban governments to provide services and effectively manage cities due to rural – urban migration and population growth – the need to empower urban governments to raise their revenue base Proliferation of central government and provincial government agencies to provide services and subsequent issues of coordination The need for metropolitan-wide institutional arrangements and inherent conflicts with the constituent municipalities

I. Context of Decentralization 3. Third transformation: Globalization Greater and faster increase in exchange of goods, services and capital Greater mobility of individuals Supra-national institutions and global networks Driving forces of globalization – including increasing international trade and investment, rapid transmission of financial capital across national boundaries, the spread of innovations

I. Context of Decentralization 3. Third transformation: Globalization How has globalization affected decentralization practice? Creating new pressures on governments to decentralize though (1) Deconcentration of economic activities within the countries, (2) Pressures to enhance administrative and fiscal capacity of sub- national governments, and cities to facilitate the participation of individuals and enterprises to participate in the global market place

I. Context of Decentralization 3.Third transformation: Globalization How has globalization affected decentralization practice? (cont.) Because the urban leaders are on the forefront, their roles have become extremely important – which will contribute to greater decentralization.

I. Context of Decentralization 4.Fourth transformation: Information and Communication Technologies (ICT) Information and communication technology (ICT) is increasing access to knowledge and shrinking time and space Information societies are demanding new patterns of government organization and processes. Unequal access to ICT, digital divide among countries, appropriate organizational arrangements

I. Context of Decentralization 4.Fourth transformation: Information and Communication Technologies (ICT) How is ICT affecting decentralization practice in Asia? ICT can help to overcome the obstacles to decentralization in many way: improving transparency and accountability by providing new communication channels facilitating e-procurement to streamline purchasing and reduce administrative cost, e.g. Seoul Metropolitan Government

I. Context of Decentralization 4.Fourth transformation: Information and Communication Technologies (ICT) (cont.) Equipping local governments to facilitate information access such as city websites, databases, consultation platforms; ICT can reach people in remote areas leading to their involvement in local governments to make contributions towards decentralized policy-making ICT can facilitate broad based engagement of communities in local decisions and break barriers to participation and access.

 Many countries have been successful in designing and implementing different aspects of decentralization in their socio-economic and political context.  Let us take the examples of three countries that are significant players in the global economy and see how they designed specific decentralization policies – Indonesia, Brazil, and China. II. Decentralization in Practice

II: Decentralization in Practice: Indonesia In Indonesia, the largest muslim country in the world, following months of political protest and turmoil in 1998 a comprehensive new decentralization Law was introduced. Indonesia is divided into provincial regions, district regions, and municipal regions, all of which are autonomous. Under this law, the central government administrative authorities are all transferred to provinces, districts and municipality except for foreign affairs, defense and security, the judiciary, monetary and fiscal policy and religious affairs.

 The decentralization policy aims at improving public service delivery, increasing community participation and ensuring the accountability of local governments.  Decentralization has three key elements – Greater weight to devolution than de-concentration; Shift from vertical to horizontal responsibility, and Clear provisions for the allocation of funds from central to local governments. II: Decentralization in Practice: Indonesia

Assessments of the Indonesian experience show four positive impacts: Downsized central government and strengthened local administration. During the first three years of implementation, 2.2 million central government employees were reassigned to regional governments, along with control over 16,000 service facilities. Majority of public servants are under local governments management and supervision. Increased budget for regions. In the past budget for development controlled by central government was around 36% of state budget. In 2002, budget for development controlled by central ministries was only about 14%. II: Decentralization in Practice: Indonesia

Political participation and democratization. Until 2007 two- third of provinces have popularly elected the governors and three-quarter of district and cities have elected the mayors. Creative and good leadership produce some local innovations: a district mayor in Bali can offer free health care despite limited budget for health sector; a district mayor in Central Java reduce bureaucracy to get business permits by introducing one-stop service station and timed application process; a district mayor in Sulawesi introduced mobile government concept to increase agricultural productivity II: Decentralization in Practice: Indonesia

Brazil is a federal system with states having constitutionally guaranteed powers and resources. It is one of the most decentralized systems. One innovation of the Brazilian decentralization is decentralization of health and education services. Each of the three levels of government was involved in the health policy – The Federal government formulated national health policy, designed health standards, and provided general guidelines. II: Decentralization in Practice: Brazil

The states designed policies and controlled health service delivery. The municipalities are responsible for formulating, administering and executing programs of local health services. Each of the three levels of government participates in financing. Where specific responsibilities are assigned to state and local governments, they have significant autonomy is using the resources. II: Decentralization in Practice: Brazil

 For education policy The federal government withholds many powers of regulation. State and municipal government have the authority to establish their own education system and legislate on important aspects of basic education. Financing of education is shared among each of the three levels with the constitutional provisions for percentage of national tax revenue and state municipal revenue to be allocated to the basic education. II: Decentralization in Practice: Brazil

 While Brazil is one of the most advanced cases of decentralization, in some cases states and municipalities did not have adequate institutional capacities to perform their new tasks, especially those related to the management of finances. II: Decentralization in Practice: Brazil

II: Decentralization in Practice: China  Through the 1980s and the early 1990s, China implemented a series of reforms to decentralize its fiscal system so as to provide more incentives for local government to promote economic growth.  However, the decentralization led to widening fiscal disparity and shrinking central government revenues  In 1994, the government introduced the tax sharing reform in order to boost the central revenues and enhance intergovernmental transfers

 Compared to the decentralized fiscal system, China’s political system is rather centralized and can be described as a multidivisional-form hierarchy structure.  Many scholars attribute China’s remarkable economic performance since 1978 in part to the country’s fiscal decentralization II: Decentralization in Practice: China

 Decentralization is said to have stimulated local policy experiments and restrained predatory central interventions.  Fiscal decentralization is thought to have motivated local officials to promote development and harden enterprises’ budget constraints.  The locally diversified structure of the pre-reform economy is said to have facilitated liberalization. II: Decentralization in Practice: China

Study Group on Decentralized Governance, Kennedy School of Government at Harvard University Assessment of recent experience in Africa, Latin America, and Asia To assess diversity of ways in which decentralized governance is contributing to development objectives and challenges and designing and implementing appropriate decentralization programs III. Lessons from the Global Experience

 Three questions: How to devolve political and financial authority effectively? What conditions are required? How to develop local capacity? III. Lessons from the Global Experience

Each country needs different combinations of centralization and decentralization. There is no “one- model-fits-all” reform. Essential to determine the scope of decentralization ranging from administrative decentralization to political and fiscal decentralization Gradual pace of reform as a part of the comprehensive strategy of restructuring the state III. Lessons from the Global Experience

Decentralizing governance has many dimensions – political, economic and administrative. Some countries such as Indonesia and Brazil have made significant progress in political decentralization while others such as China have made progress in local economic development and entrepreneurship III. Lessons from the Global Experience

Evidence is mixed on the impact of decentralization on economic growth, public participation and service delivery The case for decentralization needs to made in the same way as the case for democratic governance i.e. as a means to an end and as an end in itself. Right ingredients, appropriate timing and a degree of experimentation III. Lessons from the Global Experience

Key determinants of local governments capacity to carry out their responsibilities – ability of local leaders to mobilize resources, political competition, introduction of new methods and skills for public administration, and demands and participation of civil society Local capacity building as one of the enduring lessons of experience to effectively implement decentralization programs – requiring intergovernmental coordination and shared governance III. Lessons from the Global Experience

Political devolution can have a positive impact on the accountability of government and sustainability of democratic process, provided it is undertaken in the context of an agreed constitutional framework Devolution must be accompanied by mechanisms and instruments to promote accountability such as transparent procedures for public procurement, participatory budgeting and auditing and promotion of ethics and civil society engagement III. Lessons from the Global Experience

Partnerships among government entities, the private sector and civil society are essential to make decentralized governance work Civil society engagement is a powerful instrument for decentralizing governance. CSOs can increase local support and legitimacy of government, and expand access to services. III. Lessons from the Global Experience

Need to mobilize political support and ownership at the national level National governments announce major decentralized governance programs through their policy statements but are reluctant to devolve resources to local governments III. Lessons from the Global Experience

Mind-set of national officials as a constraint Need for training and reorientation of at national and local levels III. Lessons from the Global Experience

 Decentralized governance can lead to further increasing disparities among different regions of the country that requires intergovernmental sharing of revenues based on criteria including level of development, cost of service delivery, backwardness etc. III. Lessons from the Global Experience