1. 1 DECENTRALIZATION & LOCALIZING THE MDGs Hachemi Bahloul Local Governance Policy Adviser UNDP Bratislava Joint Sub-Regional Communities of Practice Meeting October 31 & November 1, 2006 Bishkek

2. 2 What is decentralization? Transfer of authority for public functions from central GVT to subordinate or quasi-independent GVT organisations/private sector Political Political Administrative Administrative Fiscal Fiscal Market Market

3. 3 Administrative Redistributes authority, responsibility and financial resources for providing public services among different levels of GVT De-concentration: among levels of central GVT De-concentration: among levels of central GVT Delegation: central GVT => municipalities, semi- autonomous units which are ultimately responsible to it (housing or transport authorities etc.) Delegation: central GVT => municipalities, semi- autonomous units which are ultimately responsible to it (housing or transport authorities etc.) Devolution: central GVT => quasi-autonomous units of local GVT (legally recognised boundaries over which exercise authority) Devolution: central GVT => quasi-autonomous units of local GVT (legally recognised boundaries over which exercise authority)

4. 4 Fiscal Financial capacity to provide public services and authority to make expenditures Sources of local funding: Local taxes and user charges Local taxes and user charges Intergovernmental transfers (vertical and horizontal) Intergovernmental transfers (vertical and horizontal) Municipal borrowing Municipal borrowing

5. 5 Market Shift of responsibility for the performance of functions from public to private sector Privatization (contracting out provision of service to private sector/NGOs, PPP) Privatization (contracting out provision of service to private sector/NGOs, PPP) Deregulation allows competition among private suppliers for services previously provided by GVT/monopolies Deregulation allows competition among private suppliers for services previously provided by GVT/monopolies

6. 6 Why decentralization? Good governance Political stability: institutional mechanism for bringing opposition groups (geographically or ethnically divided) into formal bargaining Political stability: institutional mechanism for bringing opposition groups (geographically or ethnically divided) into formal bargaining Democracy: physical proximity enables the provision of services citizens want and need Democracy: physical proximity enables the provision of services citizens want and need Transparency and accountability: should be conducive to less corruption Transparency and accountability: should be conducive to less corruption Poverty and equity better representation of the poor in decision making better representation of the poor in decision making

7. 7 Why decentralization? Efficiency of public service delivery The centralized state failed to deliver basic services of health, education, water and sanitation, The centralized state failed to deliver basic services of health, education, water and sanitation, The best method for determining the level of services is at the local level [cf. Subsidiarity Principle] The best method for determining the level of services is at the local level [cf. Subsidiarity Principle] More efficient local management of services More efficient local management of services Fiscal advantages Better motivation and ability to raise taxes locally Better motivation and ability to raise taxes locally

8. 8 Impacts of decentralization Depends on design of decentralization Quality of public service delivery can be reduced – design and local capacity issues Quality of public service delivery can be reduced – design and local capacity issues Poverty reduction/equity depend on effective systems of horizontal equalization and better targeting of the poor by local authorities Poverty reduction/equity depend on effective systems of horizontal equalization and better targeting of the poor by local authorities Macro-economic stability affected due to reduced central GVT control over public resources (central deficit spending/municipal borrowing) Macro-economic stability affected due to reduced central GVT control over public resources (central deficit spending/municipal borrowing)

9. 9 Successful decentralization No single recipe, depends on political priorities, country circumstances (changing) No single recipe, depends on political priorities, country circumstances (changing) The system should mediate local and national interests The system should mediate local and national interests Cooperation and conflict is inherent Cooperation and conflict is inherent Trade offs are inevitable (economies of scale vs. allocative efficiency) Trade offs are inevitable (economies of scale vs. allocative efficiency) Appropriate mix of competencies at a given point in time is needed (the central GVT will always have an important role to play) Appropriate mix of competencies at a given point in time is needed (the central GVT will always have an important role to play)

10. 10 Fundamental principles (1) Clear vision/strategy/political will of GVT Clear vision/strategy/political will of GVT Constitutional, legislative and regulatory basis Constitutional, legislative and regulatory basis Clear assignment of competencies critical Clear assignment of competencies critical Not all competencies should devolved (econ. of scale, externalities) – some shared (educ.) Not all competencies should devolved (econ. of scale, externalities) – some shared (educ.) Staged devolution, depending on capacities Staged devolution, depending on capacities Revenue assignment follows devolution of competencies Revenue assignment follows devolution of competencies Explicit, stable and self-enforcing rules Explicit, stable and self-enforcing rules Continuous monitoring of process (response) Continuous monitoring of process (response)

11. 11 Fundamental principles (2) Local GVT should have the resources to finance the devolved functions Local GVT should have the resources to finance the devolved functions Need to design the right mix of user charges, taxes and central government transfers depending on functions assigned Need to design the right mix of user charges, taxes and central government transfers depending on functions assigned Vertical transfers are critical everywhere but should not eliminate the need for local taxes (political consequences of spending decisions) Vertical transfers are critical everywhere but should not eliminate the need for local taxes (political consequences of spending decisions) Earmarked transfers for delegated GVT functions Earmarked transfers for delegated GVT functions

12. 12 Fundamental principles (3) Block grants for devolved functions Block grants for devolved functions Horizontal transfers are essential for equity: should be based on simple, transparent and predictable rules (to avoid politicization) Horizontal transfers are essential for equity: should be based on simple, transparent and predictable rules (to avoid politicization) Local GVT debt can be a serious problem: there needs to be clear rules for municipal borrowing Local GVT debt can be a serious problem: there needs to be clear rules for municipal borrowing Need for an effective local administration => ability of local GVT to hire, fire and provide incentive packages Need for an effective local administration => ability of local GVT to hire, fire and provide incentive packages

13. 13 The role of central GVT Provides enabling environment (strategy, legislative, regulatory, intergovernmental transfer mechanisms etc.) Provides enabling environment (strategy, legislative, regulatory, intergovernmental transfer mechanisms etc.) Coordination at central level is essential Coordination at central level is essential Dialogue with local GVT (associations) on the process and problems Dialogue with local GVT (associations) on the process and problems Combination of supportive role (guidance) and monitoring/control role Combination of supportive role (guidance) and monitoring/control role Sets rules (elections, procurement) and standards for public service delivery Sets rules (elections, procurement) and standards for public service delivery

14. 14 The role of associations of municipalities Strong associations are critical for the success of decentralization Partnership with central GVT essential to ensure ownership of process (design of the process and joint problem solving) Partnership with central GVT essential to ensure ownership of process (design of the process and joint problem solving) Many things can go wrong: municipalities need to defend their interests Many things can go wrong: municipalities need to defend their interests Service delivery to municipalities: capacity building, guidance, problem solving (in some country act as key player in capacity building) Service delivery to municipalities: capacity building, guidance, problem solving (in some country act as key player in capacity building)

15. 15 The role of civil society Improved governance and public service delivery depends on a strong local civil society Expresses local needs and priorities which local GVT should respond to (planning, participatory budgeting) Expresses local needs and priorities which local GVT should respond to (planning, participatory budgeting) Holds local GVT accountable for its acts (corruption, efficient municipal management, quality and cost of services) Holds local GVT accountable for its acts (corruption, efficient municipal management, quality and cost of services) Partners in public service delivery Partners in public service delivery

16. 16 Decentralization & Localizing the MDGs  UN Millennium Summit (2005) all developing countries agreed to adopt and implement by 2006 National Development Strategies to achieve MDGs  MDGs are general objectives that should be tailored to suit national country specific challenges  National focus does not take into account the ‘local’ dimension (if aggregate targets are achieved, disparities across people and places can still persist)

17. 17 Decentralization & Localizing the MDGs  Real action on the MDGs will be attained through locally owned and driven strategies and plans which integrate the MDGs  Locally driven strategies and plans require decentralization (political, administrative, fiscal)  Localizing the MDGs makes local development strategies more consistent with national plans and sectoral priorities, thus contributing to improved delivery of public services

18. 18 Localizing the MDGs National MDGR and MDG plans other strategies and commitments Regional MDGR and MDG plans other strategies and commitments Local MDG focused assessment and MDG-linked development plans Disaggregated data Development priorities and actions Millennium Development Goals: global targets Community development needs and stakeholder interests

19. 19 1. Set core principles 2. Partner engagement and awareness-raising MDG-linked local development strategy 3. Baseline assessment 4. Setting priorities 5. Design and implementation of action plan/s 6. Monitoring and review Steps for MDGs-linked strategy development

20. 20 Obstacles to local implementation Lack of awareness of MDGs and understanding of their role as:  A tool for mobilizing all stakeholders around shared vision  A benchmarking tool to compare with other municipalities  A tool for local planning and development  A tool for aligning local, regional and national priorities

21. 21 Obstacles to local implementation Lack of a national enabling environment for effective local development n Poor alignment of national plans and policies with local priorities n No decentralization n Limited financial resources n Mentalities Capacity deficiencies at systemic, organizational and individual level

22. 22 THANK YOU!