1. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 1 Kuno Schläfli Policy Advisor for Decentralization and Local Governance Swiss Development Cooperation How SDC approaches Learning as a Precondition for Change “Sustainable Municipal Finances” (Fiscal Decentralisation)

2. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 2 Learning Project « SMF » of the DLGN 1 of 6 learning projects prior to F2F in Sarajewo 8 case studies peer review 8 teams 60 members involved Parallel: Analysis on “international state of the art” by consultants

3. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 3 Three domains of self-assessment Consultants moderate process: three streams of reflection:  Donor Grants and Fiscal Transfers  Own Revenues and Borrowing  Building Capacities

4. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 4 E-Moderated discussion on Donor Grants and Fiscal Transfers Questions asked (ex. Donor Grants and Fiscal Transfers): Do you agree that SDC is rather funding own pilots than supporting nationally defined formula based grant systems? Do you know of exceptions to this statement? Please share your experience. B) What are the main reasons why SDC has little experience in supporting performance based grant systems? C) What are the main reasons why SDC has limited experience in providing technical assistance to establish or adjust intergovernmental fiscal transfer systems?

5. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 5 Preparation of the Debates at the F2F in Sarajevo Consolidated reply on the three debates Parallel analysis on “international state of the art” Consultants compare SDC practice (case studies) and “state of the art”:

6. Main Results of the Comparison of SDC experiences with internat. “state of the art” Matthias Boss / Katharina Walker March 7, 2011 Donor Support to Sustainable Municipal Finance - Comparing experiences of SDC and the international state-of-the-art

7. Lessons Learnt & Conclusions Role of context factors 7 Context factors important for design and results Political circumstances the most important Support to municipal finances is effecting: Interests Power relations Political landscape SDC needs to acknowledge that by supporting municipal finances it always interferes in domestic politics.

8. Lessons Learnt & Conclusions Own revenues 8 Required is conducive legal framework SDC’s experience exist but is limited. SDC should put more focus on supporting municipalities’ own revenues because of its potential to improve: local autonomy downward accountability

9. Lessons Learnt & Conclusions Intergovernmental fiscal transfer systems 9 International trend towards supporting formula based equalization transfer systems. No SDC experiences. SDC should move away from providing conditional grants to local governments to supporting overall national transfer systems (commitment to Paris Declaration). SDC should access knowledge form the Federal Finance Administration on issues of fiscal transfer systems.

10. Lessons Learnt & Conclusions Donor grants 10 Move away from project funding to providing local governments with general development grants. Trend towards formula based grants which have performance criteria attached to them (PBGS). SDC should engage in basket funding of (performance) formula based grant systems to local governments. SDC should only engage in piloting if mandated by governments in the frame of policy cycle management.

11. Lessons Learnt & Conclusions Borrowing 11 Mostly in transition countries donors support sub- national governments’ access to loans. (i) Support to the framework for local government bond issuance (ii) Support to local government development banks SDC has no such experience. SDC should explore ways of drawing on Swiss experiences with linking small municipalities to the capital market.

12. Lessons Learnt & Conclusions Borrowing 12 Mostly in transition countries donors support sub- national governments’ access to loans. (i) Support to the framework for local government bond issuance (ii) Support to local government development banks SDC has no such experience. SDC should explore ways of drawing on Swiss experiences with linking small municipalities to the capital market.

13. Lessons Learnt & Conclusions Capacity Building 13 Need to build capacities at all government levels (system development). Network development for advocacy/lobbying, service provision to members. SDC should work within the given national structure of capacity development instead of working with NGOs or non-mandated institutions. SDC should engage in providing capacity development voucher or grants to local governments.

14. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 14 Consultations at the F2F Consultation of recommendations: Acknowledge that supporting municipal finances means interfering in /influencing domestic policies When providing financial support to LG, SDC should strive to work on-system. Try to influence the criteria used in the formula to have SDC values reflected (democracy, (gender) equality, poverty targeting, sustainable resource management) Only engage in pilots if clear links to national steering platform on fiscal decentralisation exists to feed in experiences.

15. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 15 Consultations at the F2F (cont.) Consultation of recommendations:  Advocate for multi-stakeholder platforms (gov. Partners, LG, civil soc.). Include elected legislative structures!  Support LG in their capacity to prove credit worthiness (access to credit institutions)  Focus on supporting municipalities’ own revenues because of its potential to improve a) local autonomy, and b) downward accountability.  work within the given national system of capacity building  Demand orientation for CapDev! (vouchers, grants based on municipal caDev plans).

16. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 16 Discussion-Workshop at the F2F DLGN Shareweb: www.sdc- decentralization.net/en/Home/Community_Affairs/CommunityActivities/F2F_Sarajevo_2011 www.sdc- decentralization.net/en/Home/Community_Affairs/Community Public blog F2F Sarajevo: www.dlgn-f2f2011.ch/?page_id=710 www.dlgn-f2f2011.ch/?page_id=710 What you find here:  8 Recommendations with comments and discussion  Methodology  Consolidated replies of e-discussions  Video feedbacks from participants of the F2F  Personal Learning’s Next steps

17. Federal Department of Foreign Affairs FDFA Swiss Agency Development and Cooperation SDC 17 Next Steps Production of a Learnbook (interactive tool) Introduction, distribution, thematise in events, trainings Institutionalize shared “best practice” as “thematic standard”