Working Group 2. Decentralization: programme formulation and implementation , monitoring and evaluation, and participation

Local partnership as a key tool for participation and decentralization

The decentralization of decision making is not synonymous of the participation of the population. It can even be a brake if it reinforces certain regional or local powers by reducing the possibility of expression of the population and their local organizations. But it is also true that decentralization is an essential tool for a genuine participation of local actors in the development process. Through this, I would also like to present certain topics for reflection concerning the conditions which might guarantee such a local participation, in a decentralization context of the decision making powers. This will lead me to present certain tools which were conceived in that respect, and that have also proved their effectiveness, both locally and in a policy of partnership.

1. The difficulties and implications of local participation

The decentralization of the decision making powers opens important perspectives in terms of development, namely:

• it allows a better adaptation of national measures to the specificity of local contexts. Give the example of Cape Verde here.
• it allows the launching of a reflection process at the local level, through the acquisition of new competencies for development and the creation of new links among the local actors.
• for those two reasons, it carries innovations, initiatives and development.

However, very often, existing local or regional powers, have the tendency to want to concentrate in their hands, functions, other than their own function of decision makers, namely:

• those that come prior to the decision: the functions of reflection and propositions
• those that come after: the functions of financing and their execution.

Such a concentration of functions is contrary to any idea of participation and may actually brake development. Actually, the more the local and regional elected powers possess an in disputable legitimacy to assure the power of decision making they are responsible for, the greater the importance of the functions that come before and after the decisions. These decisions should be assumed by other local actors and their execution too.

• The participation of local organizations (women farmer organizations, local ONGs, cultural associations etc.) in the reflection and propositions that come before the decision, is an enriching powerful factor and can enrich t he development processes.
• The participation of specialized institutions in the financing, allows the draining of funds other than public ones, often very limited (local savings, immigrants, companies, etc.)
• The participation of local organizations and companies in the execution of the projects, optimizes local competencies which at times are technical, but also in terms of the management of the project- efficiency in the realization, etc.

b) The need for a territorial approach

The segmentation that is most often found in rural societies, leads each group or institution to have a limited and sectarian view of reality according to their economic, social and cultural situation.. Those views are often divergent, opposed and conflict-ridden.

However, rural development cannot be conceived without a full approach at the level of each territory. This supposes a confrontation, as wide as possible, of the points of view of the different types of actors and existing interests at the level of a territory, for a consultation of objectives around a common strategy of local development (indispensable to ensure the effective participation of local partners). Namely, the participation and the taking of the interests of the poorest populations into consideration (women, young people, and the poorest of the poor) is of fundamental importance for social cohesion and rural development.

2. Local partnership as a participation tool in a decentralization context

However, local partnerships are not a sufficient solution in themselves, nor a uniform one:

• in order for a local partnership to be able to function, a professional team of local animators formed locally in the midst of the local partnership is essential. Specific support programmes must also be prepared, at least in an initial phase of several years.
• local partnerships take on very diversified forms according to specific local contexts, as can be seen in the LEADER programmes of the European Union.

3. What is the support policy that facilitates local partnerships: the experience of LEADER in Europe

An integrated rural development programme for European rural areas undergoing difficulties and facing the need to look for alternatives to agriculture. This programme ought to therefore, be able to come up with solutions to apply at the local level for each rural micro-region. From this perspective, the programme was created following these guidelines:

• Forming of local partnerships as representatives of the entities who organize the programme (European Commission and the Ministry of Agriculture)
• Drawing up of a local action plan for the local partnership, on the basis of a development strategy prepared with the largest number of local actors possible
• Global negotiation of this action plan between the partnership and the Ministries of agriculture
• Global financing of the plan and local management by the local partners

An overview of this programme and of its main results, namely in terms of:

• innovation and local development
• mobilization of hidden energies (culture, traditions, local know-how, etc.)

An overview of the extension of the method in the countries of the South and the East.

b) Some teachings in terms of support policy

• The articulation among the different levels: local, regional, national and transnational
• The importance and the limits of subsidiarity
• The articulation between the procedures and the amount of leeway
• The role of the networks and the animation units

Designing community based development

When properly designed, community based programs can be highly effective in managing natural resources, providing basic infrastructure or ensuring primary social services. Participation in community based development depends on reversing control and accountability from central authorities to community organizations. Successful design requires understanding local needs, building on the strengths of existing institutions, and defining the changes needed in external agencies to support community action.

Working Group 3. Reform of institutions and the new role of the State

Reform of institutions and the new role of the State: a note on globalization and State institutions

Nowadays, national states are submitted to growing political, social, economic and cultural tensions. Tensions that are having historical cosecuences on our way of life and are born from the changes and conflicts having to do with globalization. Tensions that affect the internal affairs of our countries and make us reconsider the basic rules and structures of our State and it's Constitution. In the past years, the State reforms have tried to assimilate the changes due to globalization through new public policies and intense, profound institutional and constitutional changes.

At present, the notions of State, Constitution and Globalization are encountered ones that when confronted in political, social and every day life make even more evident a fundamental contradiction that has characterised the international political economy since it's birth. What we must ask ourselves today is the viability of the permanence and growth of the present system of transnational States that emerged with capitalism.

Here are some key questions that can help illustrate this idea: Can a "unified world market" develop itself with a world that is divided by States? And on the other hand, can nation-states -meaning a complex cultural community and not just a unit under the will of a minority group- survive as such without being a State with a well defined territory and with institutions capable of building the necessary social structures in order to assure the productivity of the community? And last but not least, is a minimum social unit of national reach possible in a State that is experimenting a progressive decentralisation process due to globalization that is causing regional internalisation and that differentiates, within the country, consumption and every day habits? These and other questions always remind us of the difficult relation between economy and politics. But they are also the questions that have helped prepare the ground over which we have meditated and then built the projects of State reforms that are being implemented world wide.

When we talk about globalization, we talk about a world wide, unequal but overwhelming redefinition of new productive and social relations determined by great scientific innovations and their translation into useful technology. In other words, globalization must be seen as a process that despite being a world phenomenon, and a unifying one, is also extremely unequal in space and time, a carrier of opportunities (as Polanyi would say) that, however, can only become a reality through political actions taken at the right time and place by the State.

As Massimo Salvadori (1997) has said, globalization implies overcoming the international system that began quite a long time ago but has accelerated with the downfall of the bipolar system that regulated the world's economy for fifty years and implied having a nation-state ruled world system. However, the new world context, still in formation, does not seem to need such a system if we take into account it's multivariable and omnicomprehensive character, present in the financial, commercial and productive areas, but that also, and in a substantial way, has influenced culture and all the different kinds of ways we understand and explain the world today.

Today, as in the past, one can assure, that the impetuous productive forces of the scientific and technical revolution on their own, are not enough of a reason to determine the disappearance of the transnational State system in which we have lived; however the growing transformation of popular and mass culture into a planetary culture, introduces new forces with an unprecedented capability to destroy national cultural boundaries. It is possible that this internalisation of the global culture is what is behind the difficulty found to consolidate the so called "third wave of democratisation" (CF: Diamond, 1997).

9. What seems to be a fact of today's world despite the way one sees things, is that globalization has significantly affected the traditional way nation-states organise themselves in different areas (Cf. Streek,1996. Ayala,1997). Here are some examples:

• The independence of national policies. This independence is decreasing constantly because the strategic relations between politics, markets and agents have grown, become more and more complex, and increasingly tend to be mediated by internationalisation.
• The sensibility of internal politics to international economic and political changes is also on the rise due to the over exposition of internal affairs to global trends that know nothing of world divisions.
• Basic governability conditions are more dependant of what happens in other States. Something quite obvious when one remembers the short term international capital investment and stock market investments that travel from one country to another and influence the local economy, monetary and financial system. Another example is migration, a phenomenon that is not only changing the face of States but also the configuration of it's regions. Migration is an ingredient that has great influence on any decentralisation strategy.
• Last but not least, the traditional way of understanding the notion of sovereignty is now submitted to growing demands and practical criticism because it is no longer useful as the basic notion over which a State can make economic decisions nor foreign policies. The existence of terms like "Fragmented sovereignty" or even "apparent sovereignty" (Salvadori, ob.cit), resume this problem that has quit being a hypothesis and has become a dynamic and influential reality that affects the life of nations and their states.

Les Chambres d'agriculture: Modèle de représentation et outil de participation des agriculteurs

La participation des agriculteurs au développement passe par la nécessité pour eux de disposer d'une institution capable de :

• les représenter et faire connaître leurs points de vue
• leur fournir les informations pour accédre dans de meilleures conditions aux marchés et aux biens et services de production.
• pour leur procurer les appuis leur permettant de renforcer leurs capacités de gestion. Les chambres d'agriculture représentent un modèle pour remplir ces fonctions.

Restructuration des institutions rurales: principes et méthode - Leçons des expériences FAO

L'objectif de cette restructuration est d'adapter les institutions aux nouvelles politiques économiques et de leur donner une meilleure efficacité. Elle porte sur trois volets complémentaires :

• la restructuration des institutions publiques.
• le renforcement des organisations professionnelles.
• la privatisation des activités que l'Etat n'aura plus à assurer.

• l'analyse institutionnelle et l'élaboration du schéma directeur de restructuration.
• le plan détaillé de restructuration.
• la mise en oeuvre de la restructuration.

• la mise en place et l'appui technique aux nouvelles structures comprenant la formation du personnel redéployé dans la nouvelle organisation.
• la reconversion du personnel excédentaire par l'aide à la création d'activités dans le secteur privé
• le transfert des activités aux opérateurs privés qui s'accompagne d'une action de renforcement des capacités de ses opérateurs.

Working Group 4. Fiscal Decentralization, regional equity, macroeconomic management and rural growth

Fiscal federalism and macroeconomic governance: for better or for worse?

A large number of countries around the globe are re-examining the roles of various levels of government and their partnerships with the private sector and the civil society with a view to creating governments that work and serve their people. This rethinking has led to a resurgence of interest in fiscal federalism principles and practices but at the same time invited much controversy and debate. In this debate, perceived potential of a federal system for macroeconomic mismanagement and instability has invited most intense interest.

A common conclusion arising from this debate is that a decentralized governance structure is incompatible with prudent fiscal management. This paper reflects upon the debate on the "dangers of decentralization" for macroeconomic governance by providing a synthesis of theoretical and empirical literature as well as presenting new evidence on this subject. An overall conclusion of the paper is that the decentralized fiscal structures have shown a greater promise in improved macroeconomic governance in view of the greater attention paid by these structures to create an authorizing institutional environment and operational incentives that ensure that institutions of self-discipline, citizen-voters and markets impose a strong discipline on governments. Centralized fiscal structures typically lack such attention to institutional design and instead focus on direct controls which experience has shown to be ineffective.

Thus surprisingly, in all aspects of macroeconomic governance, decentralized fiscal systems, in spite of greater challenges, do better. For example, monetary management is better in decentralized federal systems due to greater independence granted to their central banks. Similarly, decentralized federal systems do better on fiscal policy coordination and debt management due to multiple checks typically introduced through fiscal rules, gatekeeper committees, no bailout provisions, transparency of budgetary rules and accountability and enhanced voter and market discipline.

The paper distills the following important lessons for reform of fiscal systems in developing countries from a review of past experiences.

• Monetary policy is best entrusted to an independent central bank with a mandate for price stability. Political feasibility of such an assignment improves under federal systems (decentralized fiscal system).

• Fiscal rules accompanied by "gate keeper" intergovernmental councils/committees provide a useful framework for fiscal discipline and fiscal policy coordination. In this context, one can draw upon industrial countries' experiences with 'golden rules', Maastricht type guidelines and 'common budget directives' to develop country specific guidelines. To ensure voluntary compliance with the guidelines, appropriate institutional framework must be developed. Transparency of the budgetary processes and institutions, accountability to electorate and general availability of comparative data on fiscal positions of all levels of government further strengthens fiscal discipline.

• The integrity and independence of the financial sector contributes to fiscal prudence in the public sector. To ensure such an integrity and independence, ownership and preferential access to the financial sector should not be available to any level of government. In such an environment capital markets and bond rating agencies would provide an effective fiscal policy discipline.

• To ensure fiscal discipline, governments at all levels must be made to face financial consequences of their decisions. This is possible if the central government does not backstop state and local debt and the central bank does not act as a lender of last resort to the central government.

• Societal norms and consensus on roles of various levels of governments and limits to their authorities are vital for the success of decentralized decision making. In the absence of such norms and consensus, direct central controls do not work and intergovernmental gaming leads to dysfunctional constitutions.

• Tax decentralization is a pre-requisite for subnational credit market access. In countries with highly centralized tax bases, unrestrained credit market access by subnational governments poses a risk for macro stabilization policies of the national government as the private sector anticipates a higher level government bailout in the event of default and does not discount the risks of such lending properly.

• Higher level institutional assistance may be needed for financing local capital projects. This assistance can take the form of establishing municipal finance corporations run on commercial principles to lower the cost of borrowing by using the superior credit rating of the higher level government and municipal rating agencies to determine credit worthiness.

• An internal common market is best preserved by constitutional guarantees. National governments in developing countries have typically failed in this role.

• Intergovernmental transfers in developing countries undermine fiscal discipline and accountability while building transfer dependencies that cause a slow economic strangulation of fiscally disadvantaged regions. Properly designed intergovernmental transfers on the other hand can enhance competition for the supply of public goods, fiscal harmonization, subnational government accountability and regional equity. Substantial theoretical and empirical guidance on the design of these transfers is readily available.

• Periodic review of jurisdictional assignments is essential to realign responsibilities with changing economic and political realities. With globalization and localization, national government's direct role in stabilization and macroeconomic control is likely to diminish over time but its role in coordination and oversight is expected to increase as regimes and subnational governments assume enhanced roles in these areas. Constitutional and legal systems and institutions must be amenable to timely adjustments to adapt to changing circumstances.

• Finally, contrary to a common misconception, decentralized fiscal systems offer a greater potential for improved macroeconomic governance than centralized fiscal systems. This is to be expected as decentralized fiscal systems require greater clarity in the roles of various players (centers of decision making) and transparency in rules that govern their interactions to ensure a fair play.

Fiscal decentralization and rural development in China

Decentralization has become a trend in many areas in the world. All previously centrally-planned economies, and many other developing countries are decentralizing political powers, fiscal resources and economic decision-making authority to local governments. China is no exception. In 1979 the government initiated a series of reforms. Major programs included the "household responsibility system," which replaced the collective farming system; price reforms, which increased or liberalized agricultural procurement prices; enterprise reforms, which delegated partial autonomy to the state-owned enterprises; and fiscal decentralization, which introduced a tax-sharing system between central and local governments and increased local governments' autonomy in determining their expenditure structure.

Since 1979 China has been one of the fastest growing economies in the world. Many scholars have studied the impact of the household responsibility reform, price reform and enterprise reform on China's economic growth. This study attempts to assess the impacts of fiscal decentralization and other reform measures on rural development, including economic growth, consumption, and general social and living standards.

It is often argued that fiscal decentralization will contribute to rural development because fiscal decentralization encourages local governments to use existing resources more effectively and allocate resources more efficiently than before. However, local governments in China directly invest in and operate profit-making enterprises which provide them with revenues, and China's pricing structure still favors industrial output over agricultural products. Therefore local governments may use its resources to invest in industrial projects rather than for rural development programs which have much longer-term pay-offs. Whether fiscal decentralization in China have had a positive impact on China's rural development is an empirical issue.

We use two panel data sets in this study. The first is a province-level panel, covering 28 provinces for the period from 1970 to 1993, and the second is a county-level panel, including 10 counties each from three provinces for the period from 1970 to 1995. The major findings are:

• Fiscal decentralization reduces real budget revenues of county governments, but increases those of provincial governments. Thus decentralization has benefited mainly provincial governments. Political decentralization and the adoption of the household responsibility system have impeded the abilities of both the provincial and the county governments to collect taxes.

• Fiscal decentralization contributes to economic growth at the county level, but not at the provincial level. With county data, the estimates for fiscal decentralization in the national income regression is positive, but not significant, while that in the agricultural income regression is positive and significant. This suggests that, to have a positive effect on economic growth, fiscal resources and decision-making powers should be decentralized to the county government rather than to the provincial government. Many provinces in China are much larger than most countries. Provincial governments may therefore not be particularly knowledgeable about or responsive to conditions and needs at the local level. Moreover, because of price distortions and the government's role as investor in the Chinese economy, more autonomy may encourage provincial governments to invest in industries which duplicate others, protect provincial industries, and under-invest in agricultural projects.

• Political decentralization and the household responsibility system positively affect economic growth at the county level. Political decentralization and the household responsibility system both provide private actors with more scope for initiative, which stimulates economic growth.

• Except for senior high school enrollment at the provincial level, fiscal decentralization has insignificant effects on various indicators of development and rural development at the provincial and county levels.

• The household responsibility system has positive effects on the numbers of doctors and nurses at the provincial level. No other decentralization measures have positive and significant effects on indicators of development at the provincial or county levels.

These results suggest that, while decentralization has a positive effect on economic growth, overall it has a detrimental impact on many aspects of economic development.

There is a lesson to be learned from China's experience with decentralization. To ensure that decentralization has desirable effects on rural development in China, reforms of government's role in the economy are required. The government should withdraw from owning and operating profit-oriented economic activities, and instead concentrate on providing public goods. Finally, to be truly effective, decentralization should be carried out to the lowest level of government feasible - the county in China.

Working Group 5. Institutional capacity

Institutional capacity and decentralization for rural development

Decentralization is once again receiving favorable consideration by governmental and non-governmental agencies at least in part because efforts to achieve rural development through more centralized means continue to lag. But there is still much lack of clarity in both the advocacy and evaluation of decentralization.

One of the distinctions that should be made is between deconcentration and devolution can be better understood. The paper shows how the latter represents decentralization in two directions (or dimensions) rather than just one, though movement in one direction is more decentralization than none.

The paper also considers the difference between institutions and organizations, suggesting in what ways "institutional capacity" is more than "organizational capacity," analyzing some of the elements of institutional capacity. How the different sectors -- public, private and voluntary -- contribute to institutional capacity is then addressed.

Local institutional capacity is elaborated by identifying analytically the different the levels at which decision-making and activity can occur, ranging from the individual to the international level. Three levels of "local" institutional capacity are identified, based on opportunities they create for collective action.

With this analytical background, several issues relating to institutional capacity for decentralized rural development are discussed: the implications of how such capacity is initiated, what kinds of incentives are involved, how accountability can be maintained, and whether literacy is a prerequisite for effective decentralization.

The distinctions made concerning different kinds of decentralization, between institutions and organizations, among sectors and across levels, should not be reified. Real social, economic and political phenomena seldom fall neatly into rigorous categories. But such categories enable us to think more systematically and critically about the roles, functions and performance of different social, economic and political aggregations. Although some of the analysis in this paper may seem fairly abstract, being general, it grew directly out of efforts to understand very concrete problems of rural development planning and implementation.

Throughout our discussions in this Consultation, we should continually remind ourselves that decentralization is not a single thing. We should avoid making broad or gross generalizations about decentralization. It is best understood as a rubric under which are clustered many different, and even different kinds of, arrangements for making and implementing decisions.

Decentralization should be seen not simply in "division of labor" terms, where certain subjects are delegated to local decision-makers without any further involvement or interest "from above." The corollary of this view would be that local people should have no voice at all in matters decided at "higher" levels. Instead, different mixes of local knowledge and more generalized knowledge are needed at lower and higher levels.

Local decisions can benefit from generalized knowledge just as central decisions can be improved upon by considering local knowledge. The institutions and philosophy that should guide decentralized rural development are ones of partnership. Specialization and expertise can be valuable but not in isolation from the expression of needs, values, aspirations and solutions from the communities where development programs are supposed to make improvements.

Decentralization and local capacity: some thoughts on a controversial relationship

This note seeks to present some basic premises and hypotheses for discussion regarding the relationship between policies of state decentralization and the development --or existence-- of the local capacity required to implement such policies. It is largely based on research projects dealing with countries in Latin America.

Countries initiate decentralization reforms for a variety of --many times overlapping-- reasons. While the specific form taken by these is likely to be strongly associated with the nature of the underlying factors motivating decentralization, the question of whether local capacity exists or can be developed is likely to be an important one in any case. After all, decentralization means that certain functions previously performed by national bureaucracies will be performed by a given combination of public and private agents at the local level.

From the point of view of policy-makers at the center the expected benefits of decentralization are clearly dependent on whether local governments --and more broadly speaking local institutions-- are "up to the (new) job". Whether the local level has, or can develop quickly enough, the necessary capabilities will remain a critical question in the minds of most policy-makers.

Is lack of capacity a binding constraint for a successful process of decentralization? Does decentralization lead to stronger --more capable-- local institutions? What types of external interventions are most effective in promoting the development of local capacity? These are some of the controversial questions underlying the debates on decentralization reforms and, not surprisingly, the ones being presented to us today.

Relative to other sub-topics within the decentralization literature (particularly dealing with fiscal issues), my humble interpretation is that this is an area in which conclusions that can be generalized are difficult to come by. This note is thus organized in the form of "generalizations", with references to some of the empirical evidence coming from a few research projects I have been involved with over the last three years. Four such generalizations are discussed.

First, that what appears to some analysts and policy-makers as lack of capacity, might in fact be the reflection of a conflict in the objective function used, on the one hand, by those analysts/policy-makers and, on the other hand, by the local people. With some examples from Colombia I illustrate that what in many cases is perceived to be lack of local capacity could in fact be interpreted as (1) a conflict between local and national preferences; or (2) an inadequate design of incentives in a principal-agent relationship.

Second, it is sometimes assumed that there exists a close correlation between the size of the subnational entity and its capacity. The argument is that small units (local governments, communities) will never have the capacity required to perform certain functions. I briefly discussed the evidence collected in a study on this subject in Colombia which does not support the view that scale is an intrinsic barrier to an effective service delivery of services at the local level. It's not that we didn't find areas in which scale presented a problem in terms of the municipio's capacity to deliver these services. But, interestingly, we found that many of them were coming up with "market" or "bottom up solutions".

Third, as a result of the trends towards decentralization, democratization and market reforms in most countries in Latin America there is a de facto re-definition of the boundaries and relationships between the state and society, particularly at the local level. State-business-civic partnerships have the potential to dramatically expand local capacity by (i) making more human and technical resources available for development initiatives; (ii) increasing the productivity of those resources; and (iii) creating new social assets that facilitate further partnerships at lower costs. Once again, I illustrate this point with a few examples.

Fourth, in Latin America decentralization has been associated with broader political reforms that, in a variety of ways, have attempted to expand democracy and citizen participation. While this remains a largely controversial topic even within Latin America, over the last few years we have seen an accumulation of evidence suggesting that political competition at the local level --together with a greater involvement by non-state actors in social programs-- is a strong motivator for local capacity development. Whether these trends constitute a sufficient --or even a necessary condition-- for the development of local capacity in other countries in Latin America and other parts of the developing world remains an open question which I hope we will be able to address during these consultations.

Decentralization, local capacity and regional rural development: experiences from GTZ-supported initiatives in Africa

Although decentralization processes in Africa differ in scope as well as in historical and political context, they have provided opportunities for a new approach towards rural development. The paper briefly reviews experiences from earlier integrated rural development projects, and subsequent efforts to develop a concept of "Regional Rural Development". Regional rural development promotes the development of a particular region by giving emphasis to the spatial dimension of development and the regional framework of action. Decentralization efforts in various African countries have now provided new opportunities for regional rural development activities that are essential for more successfully addressing poverty. Although the determination of governments in pursuing decentralization and the scope of decentralization arrangements vary, regional rural development can gain a new momentum, because the institutional conditions are more conducive to such an approach. In particular, local government institutions are in place and communities have better opportunities to participate in the design, implementation, and monitoring of development activities.

The paper presents experiences from programs in Africa, which are supported by German Development Cooperation (GTZ). The focus is on experiences at micro-level (communities) and meso-level (sub-region / district). Although a comprehensive approach towards regional rural development in the context of decentralization has not been elaborated yet, some practical experiences have been generated. Five examples of regional rural development measures in Africa are provided. Their aim is to develop workable models, in a specific region, adapted to local conditions, in line with national decentralization processes. Capacity-building measures for rural development are key areas of support. At micro-level, communities need to take the initiative and become the owners and managers of development projects. At meso-level, local government entities need to involve communities, develop regional "visions" and action plans, and effectively allocate resources. It is argued, that if locally compatible solutions are developed, then local government entities can turn into the driving force for development efforts in their region. A set of (8) criteria is suggested, against which the success of regional rural development in the context of decentralization can be assessed.

Sector investment programs (SIP) provide a particular challenge to decentralized rural development efforts. Although the SIP instrument is considered to have good potential to improve both the effectiveness of donor aid and the delivery of public sector services, there is a danger of counteracting or circumventing decentralization efforts. Sector investment programs induce a deconcentration of sectoral line ministries, but provide obstacles to a comprehensive decentralization. Cross-sectoral issues are not easily addressed. This could reduce the contributions to poverty alleviation. It is argued that linking of Sector Investment Programs with decentralization is the key to keep SIP programs manageable and achieve the desired impact of decentralization efforts.

Working Group 6. Decentralization and access to rural services

Decentralisation and rural development: the role of the public and private sectors in the provision of agricultural support services

Decentralisation is unlikely to prove a panacea for weak central government but decentralised government could do more to create an enabling framework for private sector provision of services previously provided by the state. The appropriate level of subsidiarity is an empirical question related to the size of a country, its resource endowments, the number of levels of government and the particular characteristics of different goods and services. Applying this to the decentralised provision of agricultural services, the key determinants appear to be the existence of economies of scale, the nature of any externalities or spillover effects, and the characteristics of rural communities. Although decentralisation reduces agro-ecological diversity it may accentuate divisions between 'gainers' and 'losers' in local communities through the public provision of certain services suggesting that many 'collective' goods assume the characteristics of 'club' goods at the local level. This makes private provision through farmers' associations and the payment of user fees economically rational. The paper concludes with an examination of ways in which local government can provide the enabling environment required for the private provision of agricultural services.

Decentralization and local government performance

The decentralization debate is both broad and often frustratingly imprecise. Arguments for and against decentralization frequently assume the character of sweeping, cross-disciplinary claims about the effects of administrative measures on the quality and efficiency of both government and social interaction. Partly as a result of this, the economic and political literatures on decentralization and whether it increases or decreases social welfare and efficiency are still very much inconclusive. This paper reviews some of the more important rationales for decentralization to date, examines their theoretical underpinnings, and then goes on to describe the elements of a new theory of decentralization which might take us far in our understanding of its effectiveness and implications. Lastly and most importantly, we review a large amount of new data on the effects of decentralization in Bolivia. We find strong evidence that devolving resources and power to local government has (i) increased the allocative efficiency of the Bolivian public sector, (ii) led to greater stability in cross-sectoral public investment patterns, (iii) led to more responsive, needs-oriented government locally than was ever achieved by the center, and (iv) very likely increased the cost-effectiveness of the public sector.

We begin providing a clear and analytically rigorous definition of decentralization which, because it is more restrictive than many in the literature, lends itself more readily to theorizing. We then move on to the political science literature on decentralization, concentrating on modern arguments of how decentralizing the state can lead to better and more efficient government. The fundamental objection to these arguments, and one which is generalizable for this literature, is that it simply assumes that central government will produce more standardized, less-differentiated outputs less suited to local preferences than local government. Although this is intuitively appealing, the lack of an explanation for how this comes about amounts to assuming away the problem. We can easily draw up a model where central government installs agents in each community to gather information and detect local needs and preferences, which data is then relayed at low cost back to the center. The paper outlines such a model and explains why, in theoretical terms and with moderate assumptions, the optimal governmental architecture in this context is not decentralization but rather hyper-centralization.

We then turn to the economics literature, beginning with the Tiebout model of "voting with your feet". We comment that the approach of a competitive equilibrium in locational decisions - though in some ways appealing - would seem to model the wrong dynamic. We note that a more useful mechanism would incorporate regular elections, and hold voters fixed relative to local administrations which change periodically. We then discuss information - the economics of which is still a fairly new field - as the central element in the central vs. local government debate. But we are wary of the potential of information as a rationale for decentralization. We explain that the main features of this approach do not concern information per se, but rather how it is put to use. As such, this argument is really about the incentives that governing agents face, and the relationship between this and the administrative architecture of government. In this vein, it can be shown that local government will enjoy advantages in allocative efficiency over central government to the degree in which local officials' professional incentives are more in line with the interests of the local population than the incentives of central government officials. This condition will obtain where local officials are fully accountable and responsible to the local population, and where electoral representation is sufficient to ensure that all groups have a voice in local affairs. We describe the model in detail and discuss the assumptions necessary for it to work.

The paper then turns to new evidence from a dramatic case of decentralization which is particularly suitable for empirical work - Bolivia. We outline the important features of Bolivian decentralization, and move on to the data. Devolving power and resources to independent local governments does seems to change the composition of public spending and investment considerably. Local governments significantly increased investments in Health, Education, and Civil Works projects compared to the central government before the reform, while investing less in Industry & Tourism, Hydrocarbons and Communication. We note the important role of smaller, poorer and more rural municipalities in bringing about this result. We then examine recent municipal spending in several sectors compared to objective social and demographic indicators of need, and find that municipalities treat social expenditures as investments in human capital, with the familiar characteristics of decreasing marginal returns. Taken together, these results point to a highly rational model of local decision-making where the fundamental criterion is need, and governmental outputs are conceived of as the equivalent to productive capital, with the marginal investment going to those municipalities where return is highest. This directly contradicts claims that local government is too poor, too ignorant, or too prone to interest-group capture to operate efficiently, necessitating the guiding hand of national government which is technocratic, capable, and generally knows what to do. Here we begin to see evidence of the opposite: local government has a deep understanding of its task, and has the capability and the incentive structure to produce the public outputs that people want.

Lastly, the paper examines data from over 350 hours of interviews carried out by the author in a series of case studies in nine Bolivian municipalities. We focus on the interactions between social, political, and institutional variables in a dynamic context, with a richness of detail which econometric studies cannot approach. We examine a number of the tenets of conventional wisdom concerning local government, only to find that they are directly contradicted by the evidence, and examine possible explanations for this. We conclude that this data supports a view of local government in full accord with the previous findings, and with the theoretical model based on representation and accountability which is outlined above.

In its conclusion, the paper proposes an ordinal ranking of the most important problems facing local government, lists the minimum conditions necessary for decentralization to work, and makes general suggestions for reorienting aid programs aimed at institution-building.

Working Group 7. Decentralization and Natural Resource Management

Designing and scaling-up productive natural resource management programs: decentralization and institutions for collective action

Introduction

Sustainable management of natural resource systems requires:

1. locally adapted resource-conserving technologies;
2. coordinated action by groups or communities at the local level; and,
3. supportive external government and NGO institutions working within an enabling policy environment and in partnership with resource users.

Most successes to date consist of small islands of accomplishment; scattered projects working with small numbers of communities. At the heart of these successes are community-based institutions consisting of resource users working together for individual benefit. The challenge lies in implementing programs that achieve sustainable results at a grassroots level through beneficiary participation, while at the same time, operating on a large enough scale to have an impact at the national level.

Practical guidance is provided for program planners on how to design community-based NRM programs that can be scaled-up. It is based on a review of programs that have achieved some degree of success in this sphere. Recommendations are put forward on policy preconditions, program strategies, structure of program implementing agencies, and appropriate financing mechanisms (see page xi).

NRM, institutions for collective action, and decentralization (Chapter 2, page 3)

Forming and strengthening local institutions is itself a strategy of decentralization to create local capacities for handling authority and responsibility. In addition, through an analysis of the essential characteristics of long-enduring institutions, it is also found that government decentralization of fiscal, political and administrative authority and control to local institutions and local government is an essential precondition in creating the enabling conditions for large-scale evolution of collective action.

Preconditions: Fostering an enabling environment for effective NRM programs (Chapter 3, page 15) and socio-psychological and environmental factors contributing to the supply of successful institutions (Chapter 4, page 23)

• Sound macroeconomic policies.
• Investment in rural infrastructure.
• Policies governing property rights and legal status of local institutions

In addition, planners need to be aware that the propensity of individuals voluntarily to organize themselves into institutions is related to:

• Existing levels of local organizational capacity.
• Extent and rate of environmental degradation or impending crisis that is apparent to resource users.
• Perceived levels of resource tenure and physical security that affect the extent to which individuals discount future benefits.

Program strategies for catalyzing the supply of local institutions (Chapter 5, page 27)

• "Entry point" subprojects that result in positive financial and/or economic returns act as strong incentives for collective action - this is the "carrot" for organization formation.
• Benefits that accrue quickly, locally, transparently, and as equitably as possible given resource constraints, add further impetus for continuing collective action - this keeps the "carrot" appetizing.
• Reducing delays between subproject identification and implementation to ensure benefits accrue quickly.

Catalytic agencies are required to organize individuals into institutions for collective action. The process of social organizing should include intensive face-to-face approaches with individuals over a period of time; information-sharing, awareness raising, building rapport, participatory micro-level planning, and so on. Participatory micro-level planning techniques are particularly useful in:

• Stimulating demand for NRM.
• Identifying appropriate entry-point activities.
• Resolving potential conflicts that might undermine the viability of natural resource management.

Asymmetric costs and benefits mean that adoption of NRM technologies and institution formation will require appropriate financial incentives and subsidies. The joint products nature of NRM goods means that the decision to use credit or matching-grants for subproject financing is not obvious. The probability of success of using individual or group loans is affected by wealth of target population, inequality of income distribution, gestation period before returns start accruing to individuals, discount rate of individuals, extent of social cohesion, and so on. If the probability of success of using credit is less than 80 percent, then matching grants are proposed. The share of matching-grant provided by the program is determined by the beneficiaries ability and willingness to contribute to a given subproject. This encapsulated in a formula that includes wealth, income inequality, demand, social cohesion, capital cost of subproject, financial profitability relative to economic returns, and so on. (see the section on Structuring financial incentives for adoption of NRM technologies and institution formation., page 31, for more detail).

Paths to scaling-up of participatory approaches (Chapter 6, page 41)

• Clustering social organizing inputs in "nodes" of 1,000 ha watersheds, or a handful of villages, produces an "impact zone" that can help to stimulate demand by acting as visual demonstrations of program benefits, and as training areas for new institutions.

• Farmer-to-farmer exchanges used in conjunction with the nodal approach are a cost-effective means of rapidly replicating the program and creating new nodes.

• Communications campaigns using culturally appropriate media are highly effective at raising awareness about the program objectives, incentives and potential benefits.

• Structuring the participatory process can improve program planning and coordination between service providers. It also assists in defining an exit strategy so that catalytic agencies reduce their involvement with institutions over time and move on to new geographical areas.

• Limiting the range of subproject interventions supported by the program focuses the participatory process on outcomes; makes the program less complex to administer because of standardization of subprojects, technical assistance, production of operational manuals, etc. It is also more transparent to beneficiaries.

• Standardizing matching grants for agro-ecological areas encourages transparency and reduces the time taken by catalytic agency to negotiate appropriate beneficiary contributions.

• Transferring responsibilities for implementation, procurement, and operation, to institutions rapidly builds internal capacity as individuals "learn by doing"; reduces the burden on catalytic agencies for day-to-day management enabling them to work with a larger number of communities; and, reduces the cost and time required for subproject implementation by 30 - 70 percent.

• Creating and capitalizing a maintenance fund during subproject implementation increases the probability of investments continuing to be maintained after construction. It is preferable to "contracts" between institutions and implementing agency.

• Mobilizing administrative and political support through Cabinet Resolutions at state and federal level are required to persuade sectoral line ministries to provide technical assistance, budgetary allocations, and acknowledge community rights over use of common pool resources. This reduces the time spent negotiating individual agreements with each ministry and department.

Program Management And Implementation (Chapter 7, page 52)

1. Multidisciplinary agencies consisting of single unified authorities providing holistic inputs, including a cadre of social organizers, and technical personnel specialized in integrated management of natural resources;

2. Single sector agencies specializing in motivating and catalyzing resource appropriators relying upon other agencies to provide technical inputs for the detailed design and implementation of subprojects.

Donor agencies usually rely upon the creation of multidisciplinary project implementation units with staff recruited from different line ministries. This is effective for the implementation of isolated projects but not sustainable in the long-run; governments rarely continue to support them after the end of the project period because they are not considered to be statutory public institutions.

A program approach that is based on a sector-wide strategy and policy framework offers more potential for long enduring systemic change. But this requires improved coordination and collaboration between line ministries. Good practice for promoting this include:

• Develop a policy framework spelling out the long-term vision and strategy for achieving program goals; and, respective roles, responsibilities, systems and procedures of different public sector agencies.

• Get Cabinet/Council of Ministers approval of policy framework.

• Create apex working and learning groups to ensure that the policy framework is implemented and coordination occurs at multiple layers.

• Review and restructure public sector agencies to identify quick wins in efficiency and responsiveness to clients and also develop a phased strategy for implementation of reforms.

In the absence of any proven model for the formation of local institutions for collective management of natural resources, program implementing agencies need to closely monitor their progress to adapt program approaches. In essence, three types of monitoring activities are required:

• Assessing efficacy of participatory processes and sustainability of the institutions;
• Monitoring and evaluating social, environmental, and economic impact;
• Tracking physical and financial performance.

Design of decentralized financial instruments for subproject financing (Chapter 8, page 61 )

• Government ownership of the program.
• Strengthened government capacity to implement the program.
• Community authority and control over decision-making, implementation, procurement, operation and maintenance.
• Quick accrual of initial subproject benefits through local level approval and disbursal mechanisms.

Adapted versions of Demand Driven Rural Investment Funds (or Local Development Funds as used by UNCDF) are proposed in preference to a Social Fund because they vest the investment programming functions (the power to reject/select subprojects) in existing local government institutions rather than in specially created quasi-governmental, or non-governmental, agencies. They are also designed to introduce or improve decentralized, participatory planning procedures and to build the capacity of local governments and other local institutions to design and manage local projects. An example is provided in the main document on how complimentarity can be achieved between the catalytic implementing agency, local government and financial instrument (see page 62).

The essential attributes required of a decentralized financial instrument are:

• Democratic and representative local government bodies responsible for subproject approval to be accountable to resource appropriators and transparent in their operations (using culturally appropriate mechanisms of accountability rather than imposed western values).

• Geographic targeting is required because the common pool resource aspect of NRM necessitates participation of all resource appropriators in an institution for collective action to: (i) receive program inputs and benefits; and, (ii) avoid the problem of free-riders undermining the authority and control of the institution.

• Community procurement of goods and services as part of the strategy to build local organizational capacity and as a pathway for scaling-up.

Advance payments and verification of the use of funds to minimize delays of disbursal, facilitate local procurement of good and services, and ensure quick accrual of benefits.

Recommendations

• Scaling-up community-based NRM programs requires strengthening local organizational capacity.

• Joint products provided by NRM programs necessitate the involvement of external implementing agencies for awareness raising, catalyzing group formation, soliciting commitment from all appropriators, and identifying subproject interventions through participatory micro-level planning.

• Decentralization policies and programs can stimulate the voluntary evolution of local institutions for collective action.

• Program strategies used by agencies need to include incentives for group formation and strengthening, and also private incentives for adoption of new technologies.

• Scaling-up can be achieved by utilizing de-concentrated catalytic agencies working in nodal areas and employing effective communications campaigns.

• NRM programs cannot be viewed as isolated endeavors; they need to be part of the rural development agenda and systemic, enduring, change is required in the structure and operation of government agencies to make them more client responsive and effective.

• Piloting programs on a small scale to fine-tune program strategies, incentives, and also to build the capacities of implementing agencies is essential before attempting to scale-up.

• Monitoring and evaluation systems must be in place before piloting to learn from experiences and enable adaptive programming.

• Potential dangers of decentralization in terms of transparency, accountability, and capture of benefits by local elites, mean that monitoring of participatory processes and effectiveness of local institutions must be given greater priority than previously.

Working Group 8. Decentralization and the provision of rural infrastructure

Decentralized structures for providing roads: a cross-country comparison

This paper aims at investigating through a set of case studies, whether an optimal structure for provision of roads exists. The analysis is based on a two-dimensional provision structure, mainly a combination of fiscal and functional forms and degrees of decentralization. The study is unique in its attempt to develop a conceptual framework for understanding both the influencing factors (institutional and economic) of the structure of decentralization for the road sector and for evaluating empirically the impact of decentralization on road service delivery. The study is also interesting in that it makes a distinction between the three types of road activities--construction, maintenance and administrative works--and the desirability of decentralizing their provision.

The paper is organized as follows. Section two introduces the general and extended theoretical frameworks of the study. Section three provides a framework for the analysis of the optimal structure of road service provision. Section four presents the data set that will be used for the analysis. Section five studies the relationship between decentralization and road service delivery and discusses the impact of decentralization on road performance for various activities. Further, it looks at the dynamics of decentralization for eight countries that have varying degrees of fiscal and functional decentralization for road works. This provides an understanding of the forces that derive decentralization and the potential tradeoffs that governments can make to reach optimal road service levels. The sixth section is a longitudinal analysis of the road provision experience of Korea, which has been selected because of its rich experience with decentralization in the road sector. Section seven presents the findings from a case study conducted for Germany. The analysis in this section is different in that it develops both vertical and horizontal measures of decentralization. Finally, based on the analysis conducted in sections three to seven, section eight will attempt to develop guidelines for optimal provision of road services for various road activities.

Summary and policy conclusions

• Maintenance functions are best provided locally. If both resource and preference costs are considered, local government should have more than forty but less than seventy percent of fiscal responsibility. If only resource cost efficiencies are considered, there should be complete decentralization.
• To minimize resource costs, construction should be either completely centralized or completely decentralized. The efficiency of construction is more sensitive to the degree of competition in award contracts than to the degree of decentralization.
• Administrative activities are more efficiently provided by local units similar to local maintenance units. At early stages of decentralization, it is more costly to administer a growing number of road agents, making the optimal level more than fifty percent but less than eighty percent local fiscal responsibility.

There are a number of exceptions to these general results. The USA is a case in point; highly decentralized in all road functions and operating efficiently. In fact there is evidence that when decentralization was deepened, the level of cost efficiency improved even further (Walzer et al, 1989). This result supports the classical fiscal federalism argument that local governments are closer to the point of demand and are, therefore, more efficient providers of road services. Similarly, consistent with public choice theory, decentralization of administrative functions is considered desirable because it leads to larger efficiency gains in terms of resource cost savings. For all three road functions, but especially for construction, the analysis results suggest two solution points: fiscal centralization or complete decentralization. Economies of scale and technological effects make the central government a good provider of road construction services (in terms of financing and not necessarily producing the works through force account), while ability to match supply to demand makes decentralized units more efficient. These results indicate that there are definite benefits to decentralization for activities that are more localized in nature such as road maintenance, and lesser benefits from decentralized construction and administration of roads which do have the potential for large externalities.

A number of examples in developing countries show that the existence of competition can make a real difference. Real efficiency gains can be made when contractors are allowed to implement the actual maintenance works, leaving the central government agency to focus exclusively on planning and monitoring maintenance. Likewise, private contractors may have greater flexibility in responding to seasonal fluctuations in the demand for maintenance than the central government. Harral and Faiz (1988) note, as well, that where maintenance has been a largely ignored activity, contractors can form an effective lobby for increased or continued funding of routine maintenance activities. But it is important to bear in mind that efficiency gains from contracting will occur only if there is adequate supply of contractors and real competition among those vying for the right to conduct the maintenance activity. In some cases, such as the experience of France in contracting out, it is evident that at the central government level collusion is not as problematic as at the local level.

There is some evidence that services are decentralized to pass on the costs of provision to local governments. The case study in Germany showed that while state governments benefited from increased levels of decentralization in terms of lower unit costs of providing roads, local governments initially picked up (at low levels of decentralization) the difference in cost since they showed, at the same time, higher unit costs. This transfer of costly functions does have a long term benefit; at high levels of decentralization both state and local governments show low unit costs indicating that there may be efficiency gains at higher levels of decentralization that override the initial increase in costs.

Finally, in the countries studied, earmarking of intergovernmental transfers characterized much of fiscal decentralization: this feature was found in Argentina, Brazil, Colombia, Germany, and the Philippines. Whether ear-marking improves performance or not is not quite clear. Consistent with evidence, we find revenues ear-marked in developing countries more often disappear probably because they are connected in ways that are not actually desirable locally. In Germany, ear-marking has proven useful for keeping uniform road quality standards across the country but it has also brought about large cost inefficiencies. Whether ear-marking accompanied with fiscal decentralization is desirable or not depends again on the specific country objectives. In Germany we see that the equity objective overrides the efficiency objective.

This paper has provided empirical evidence and guidance in the selection of optimal structures for providing road services. A companion paper examines the same issues econometrically with a larger data set (cross-country panel, time series, and state and local data) and qualifies some of the findings in this paper (see Humplick and Moini-Araghi, 1996).

Download full paper: Decentralized structures for providing roads: a cross-country comparison (Word 6, .ZIP, 199K)

Management devolution and the sustainability of irrigation: results of comprehensive versus partial strategies

This paper examines the effects of irrigation management devolution programs in three countries on the sustainability of irrigation financing, infrastructure and productivity of irrigated agriculture. Largely driven by government fiscal shortages and a common inability to raise sufficient revenues from collection of water charges, an increasing number of governments around the world have adopted programs to devolve responsibility for irrigation management to water users associations (Johnson, et al. 1995). Consistent with more general structural adjustment strategies adopted from the 1980s to the present, irrigation management transfer has been supported by the major international development banks (EDI 1996; Arri‘ns, et al. 1996).

It is expected that decentralization and devolution of water resources management will increase water user participation in decision-making and investment and that this will in turn improve management incentives, accountability, agricultural and economic productivity and cost recovery (World Bank 1993). Devolution generally includes efforts to organize water users associations, train future managers, make essential structural repairs and negotiate and formalize agreements between water users and the government.

In as much as the reforms are normally motivated by financial pressures and driven by donor deadlines, devolution policies tend to be adopted before a clear strategy for implementation has been identified. There is a significant knowledge gap about actual results of irrigation management transfer--especially which strategies work and what are the necessary pre-requisites.

At the heart of the theory of devolution is the argument that local, common users of a resource, who are empowered as a group to take over management of the resource, have the incentive to manage more efficiently and sustainably than does a centrally-financed government agency. This, however, is subject to the qualification that certain pre-conditions must exist, such as existence of local management capacity and an effective regulatory framework.

This paper focuses on the basic organizational elements which are included in devolution itself. Two questions are addressed. First, what is the essential set of elements (rights, responsibilities and powers) which should be included in irrigation management devolution? In other words, is there a critical mass of elements that should be included in a devolution program so that it will result in an effective and sustainable result, and if so, what are these elements? The second question is, what are the outcomes of devolution efforts which do and do not contain this essential set of elements?

This paper argues that the following five characteristics are essential for any irrigation management devolution program, if the objective is to produce sustainable improvements in the performance of irrigated agriculture. Were any of the characteristics are missing, the results will be correspondingly sacrificed:

1. a sustainable water right vested in a legally recognized WUA,
2. an agreed irrigation service,
3. balance between responsibility and authority devolved,
4. devolution of integrated management responsibility,
5. adequate incentives and sanctions to ensure accountability.

The paper examines three cases of irrigation management devolution, each of which varies in the extent to which devolution contains the above set of elements. The three cases are from the USA, Colombia and Sri Lanka, and represent what is herein referred to as comprehensive, partial and minimal types of devolution, respectively. For each case, the social and institutional contexts and process and outcomes of devolution are examined. Tthe main outcomes examined are management efficiency and financial viability, quality of the water service, sustainability of irrigation infrastructure and agricultural and economic productivity of irrigation.

The study lends support to the argument that in order for management devolution to produce effective and sustainable results it should be formulated as a comprehensive, integrated reform. Partial or incremental approaches do not put in place sufficient motivation or capacity for farmer organizations to intensify management and investment nor ensure the long-term sustainability of scheme infrastructure.

The basic steps in the process of devolution are, however, roughly similar in all three cases. water users associations were created, training was provided and physical repairs were made in conjunction with transfer. Transfer involved negotiation and agreements between the agency and water users in each case. It is apparent that the degree of comprehensiveness and consistency among the basic set of roles, rights and powers devolved was more important than the change process itself in defining the essential differences between the three cases. It was also found that all three cases contain the basic key pre-requisites for viable user-based management of resources. We conclude therefore, that, where the socio-economic pre-requisites to viable community managed resources are in place, the comprehensiveness and consistency of a devolution strategy is a vital determinant of successful outcomes.

Working Group 9. Design of intergovernmental fiscal relations and international finance institutions allocations for rural development

Design of intergovernmental fiscal relations and international finance institutions' allocations for rural development

This paper gather the issues in intergovernmental fiscal arrangements in developing countries with special referance to Pakistan and India. This paper highlights the reasons for, and designing of intergovernemntal fiscal relations, and the consequences of using different instruments of fiscal transfer on the behaviour and incentive of various government levels. This paper also discuss the sustainability for benefit taxes, and different mechanism to ensure financial control without undermining local autonomy.

The inter-governmental fiscal transfers take the form of revenue-sharing, grants,loans and debt servicing from the federal government to the provincial government, from provincial government to the local governments, from federal to local, and from local to local governments.

The intergovernemntal fiscal transfer from higher governemnt affects regional inequities, fiscal efforts, and decentralization process in the lower level governments. The impact varies significantly across states/provinces depending upon the revenue sharing formula. Backward areas may suffer as a consequence of the lack of innovation in the revenue sharing formula and the exclusion of important considerations like backwardness and ruralisation. If this imbalance on the recurring side is to be removed and horizontal equity across provinces ensured, it is important that development transfer to the provinces through the ADP should be based on an improved formula which takes into account regional imbalances so that the improvement in provincial finances can be sustained overtime.

The impact of the intergovermental transfers on the process of decentralisation will be maximum if the regulatory controls is released by the federal government and winding up of federal ministries in areas of overlapping with state government. Instead, inter-provincial coordination functions could largely be performed by the Planning Ministry/Commission. However, this process of decentralisation and devolution of functions will be incomplete if simultaneously the relationship between the provincial and local governments is also not altered. Strengthening of local governments is the most important but ignored step in the process of decentralisation. Without this, the goal of involving people in the management of their affairs will remain largely unfulfilled in developing countries.

The intergovernmental resource transfer impact the fiscal efforts of the states governemnt and there is the danger that the provinces may slacken further their fiscal effort and increase their current expenditure more rapidly to absorb any increase in the fiscal transfers.If this amount can be used in the development purposes the future tax capacity of the provinces would have been increased. An incentive mechanism may be instituted in the ADP allocations to the provinces whereby matching development grant are given to provinces equal to the additional revenues generated by them from their respective taxation proposals. This will ensure that the higher taxation is translated into higher level or better provision of services. The provinces will then find it politically more attractive to develop their own sources.

Two important instruments for fiscal transfers are 1) Divisible pool and 2) Grants. Important issues arises here, first what taxes and non-taxes should constitute the divisible pool and second, how this pool should be distributed among all governments.

Taxes in which the nominal and effective burden falls within a local jurisdiction have been defined as taxes of local origin. According to this definition some of the important federal taxes which are of a local origin are personal income tax, wealth tax and gift taxes. Important provincial taxes of local origin are motor vehicle tax, professional, trade and callings tax, entertainment tax, part of stamp duty, and land revenue.

This paper highlighte that if the efficiency principles are followed in the collection of resources, there would arise a financial imbalance in favour of the centre. If one level government collects the revenues and then it is transfer to the other government, the problems of sincerity in the efforts and the accountability arises. This situation is aggravated in developing countries wherever there is an overlap in fiscal powers, higher governments preempts the common taxes. In some cases higher level government have shown a tendency to ride on the back of a lower level of government i.e. imposing a surcharge on taxes of lower government.

In case of disbursment of resources equity criteria must also be used. In desighing of the fiscal transfer the important criteria fiscal autonomy, fiscal capacity, fiscal need, certainty, efficiency, simplicity, and incentives are discussed. These cataria may be in conflict with each other and therefore a grantor may decide his priorities while comparing policy alternatives.

For the apportionment of divisible pool following formulae have been discussed in the literature. a) Population formula, b) Derivation formula, c) Inverse-income formula d) distance formula, e) index of backwardness formula and f) minimum responsibilities formula.

In countries where natural resources are skewdly deposited, if only population or collection formulea are used it will left very few for the backward areas. Therefore, in order to have equitable distribution of resources it is necessary that backwardness must be given high weight in the allocation of divisible pool.

The second instrument of revenue transfer comprises of grants which include, block grant, matching grant, specific or categorical grant and deficit grant. These different types of grants have diffrent implications on the revenue and xependitures pattern of developing countries.

Matching specific grants may give an incentive to the local government to generate own resource to attract matching grant. However, the benefits of the matching grant are regressive in nature as the richer local councils have more access to matching grants. This grant also tackle the problem of benefits externalities. Matching grants are more effective than the block grant. This happens because the block grant has only income effects but the matching grants have both income and substitution effects. The matching requirements of conditional grants often induce to neglect activities that do not receive Federal funds in favour of those that are Federally supported. The deficit grant which balances the budget of lower governments has a natural tendency to impact adversely on the fiscal efforts of the sub-national government.

The sustainability of benefit taxes implies smooth flow of revenues during the changes in the level of economic activity and the ability of the tax structure to increase yield to meet new social needs as population growth, urbanization and changing technology and changes in the existing supply of services.

For any tax proposal to be sustainable, the built-in-elasticity/buoyancy is the most important characteristics. In this regard it is very important to know whether the growth in any tax can be attributed to an expanding tax base or whether it is primarily the consequence of improved fiscal efforts arising from improvement in tax administration, broadening of effective tax base and discretionary changes in tax rates. This will help the policy maker to make taxes buoyant and that can be sustained into the foreseeable future. This also requires an identification of the tax base of each major taxes and its actual and potential growth. The fiscal effort can only be sustainable if the tax base is diversified, frequent escalation resorted to in tax rates, and scope for improvement in tax administration should be exploited to the full extent.

The financial autonomy of the lower/local government has also been discussed and different proposals have been suggested that can be grouped in five categories. The first relates to the status of the local councils followed by proposals to reduce the control of provincial/state governments on the local government. Third enunciates proposals to strengthen inter-agency coordination. Fourth suggest reforms of internal administrative structure of the local councils and fifth makes the proposals for strengthening of the training of local council employees.

Regarding the decentralization program the paper discussed that a large-scale handing over of existing facilities of a service is likely to cause a significant dislocation. Also the large services with enormous employment and levels of recurring expenditure, total decentralization may be well beyond the institutional and financial capabilities of local councils to absorb in the short run. The paper argues that the financial arrangement that could be used to implement the decentralization program should consist of specification of shares (increasing over time) of the local councils in the provincial ADP allocations for sectors which are being decentralized.

For decentralization it can be suggested that the technical capability of the local government department be strengthened to provide the necessary extension services, especially to smaller urban and rural councils. In addition, financial information systems and project monitoring and evaluation activities will have to be strengthened at the provincial level to ensure successful implementation of the decentralization program. The recurrent cost implications of the decentralization program be worked out to ensure its sustainability.

Designing intergovernmental fiscal relations and international finance institutions allocations for rural development

In this paper we review some key issues related to the financing of rural development activities in developing countries. The first section very briefly summarizes various types of local own-source revenues typically available to rural local governments. The second section lays out options for intergovernmental transfer programs and raises some of the major issues often associated with designing them. The third section summarizes popular types of rural development programs funded by major international donor agencies and how they deal with intergovernmental and local fiscal concerns. We particularly focus on Local Development Funds (LDFs), a new type of local planning and financing mechanism recently developed and piloted by the United Nations Capital Development Fund (UNCDF). We believe that LDFs can alleviate some of the common problems of other approaches. Finally, based on our own experiences in many countries, the fourth section makes some comments and observations about the strategic design and implementation of general decentralization and intergovernmental fiscal reforms.

Working Group 10. Sequencing and design of decentralization strategies - Application to case studies

Patterns and processes of decentralization in Bangladesh: challenges and issues

1. Structure of the paper

1.1 Conceptualizing decentralization

1.2. Evolution of decentralized governance in Bangladesh

With this in view, the paper will examine and analyse the following core issues that were missing in major decentralization programs in Bangladesh:

1. Proper Sequencing of Decentralization Policies/ Strategies:
   • lack of comprehensive planning for decentralization;
   • absence of wider consultation with people before devising decentralization strategies;
   • lack of people's support in the reform process;
   • undemocratic and unrepresentative formation of reform commission;
   • bureaucratic hegemony in the reform process.

2. Democratic Ingredients in Decentralization Policy Packages:
   • over- emphasis on deconcentration in the decentralization plans;
   • bureaucratic expansion in the name of decentralization;
   • bureaucratic dominance remained intact even after decentralization;
   • inadequate power and authority to people's representatives;
   • bureaucratic guidance in the planning, budgeting and implementing development projects;
   • limited scope for reflecting people's needs and aspirations in the development programs;
   • inadequate/limited scope for proper representation;
   • restricted access of people to government goods and services and limited participation;

3. Development as a Core Agenda in Decentralization Designs:
   • excepting the Upazila scheme, most decentralization programs lacked necessary emphasis on development;
   • likewise decentralization programs lacked the thrust of pursuing rural development;
   • ongoing rural development programs were hardly integrated with development schemes;
   • inadequate resource (human and material) base to foster local development;

1.3. Present scenario

The government has kept its commitment for designing a new decentralization policy by forming a commission representative of different quarters and through consulting people and relevant stakeholders. The Local Government Commission (1997) recommended the introduction of a four tier decentralized local government. The main thrusts of the recommendations are: directly elected council chairmen at all levels; directly elected women at all levels; strengthening of councils in terms of authority, resource base, functional boundaries, local level planning, local budgeting and implementation; provision for bureaucratic accountability to local representatives at relevant levels; constitution of a permanent statutory Local Government Commission and a Finance Committee. However, the follow up looks disturbing and confusing. Once again the conventional procedure of scrutinizing the commission report by top ranking civil servants was maintained. Secondly, the government has proved to be indecisive in bringing about democratic changes in the four tiers of local government that was recommended in the commission report. This is evident in the local government bill relating to two lowest levels i.e. Union Parishad(UP) and Gram Parishad (GP) enacted in parliament recently. In this the local government bodies to be formed seem to have lost the spirit of the Commission recommendations pertaining to elected councils at all levels with sufficient powers and resources to promote local development. Also the reform process is becoming suspect due to the unclarity in the composition and functioning of the newly introduced lowest tier of local government, i.e. village council, which may not only provide the scope for bureaucratic maneauvering (' directing authority') but also political abuse of the system.

1.4. Future agenda

The dream of the people of this new nation cannot be ignored anymore to be experimented with conflicting and contrasting decentralized strategies. Rather the present conducive socio-political environment should be exploited to its maximum utilization for bringing about equitable development and social justice.

The key issues to be addressed for strategizing and designing a sustained decentralization policy:

• a strong political vision, wisdom and will to promote decentralization and development;
• policy change on the basis of a consensus;
• co-ordination of planning i.e. decentralization policy has to be part of the comprehensive planning of the country;
• sequencing in the appropriate manner;
• capacity enhancement of local elected representatives;
• effective cooperation/collaboration among and between different agencies engaged in local governance for rural development;
• enhancing of participation including gender, in the development process;
• effectuating accountability, transparency and local planning as key processes of local governance in the decentralization schemes;
• reflecting civil society concerns and views in planning, coordination and implementation of local government activities.

Bolivia: descentralización, participación popular y desarrollo rural

A partir de 1994 Bolivia ha vivido transformaciones estructurales que han descentralizado el poder político; han asignado mayores recursos y mayor capacidad de decisión a las instancias estatales descentralizadas (Prefecturas Departamentales) y autónomas (Alcaldías Municipales); han creado condiciones favorables para una creciente participación social en la gestión pública; y han redefinido los roles de las instituciones públicas en todos los niveles (Nacional, Departamental, Provincial y Municipal).

Estas transformaciones han comenzado con la promulgación de la Ley de Participación Popular (LPP) en abril de 1994, que inició el proceso descentralizador por la vía municipal. El proceso continuó en el nivel departamental con la promulgación de la Ley de Descentralización Administrativa (LDA) en Julio de 1995.

La División Político Administrativa de Bolivia define la existencia de 9 Departamentos, 111 Provincias y 311 Secciones de Provincia. Antes de la promulgación de la LPP y la LDA, prácticamente todas las decisiones sobre políticas de desarrollo, asignación de recursos y priorización de inversiones estaban concentradas en el Poder Ejecutivo Nacional. El rol de los Prefectos y Subprefectos -primeras autoridades políticas en los Departamentos y Provincias respectivamente- se reducía a representar al Presidente de la República y a preservar el orden público. En la inmensa mayoría de las Secciones de Provincia las autoridades no tenían ninguna función efectiva. La LPP y la LDA han cambiado radicalmente la situación ya que actualmente los Departamentos y las Secciones de Provincia -actualmente convertidas en muncipios- son los principales niveles de planificación y gestión pública.

Los cambios estructurales desencadenados por la LPP produjeron una profunda reorganización del Estado; reconfiguraron el escenario institucional y político; descentralizaron la gestión pública y la abrieron a la participación social;, en fin, ensancharon la democracia. Sin duda los efectos positivos de estos cambios son mucho mayores en las áreas rurales que en las urbanas.

Los cambios en la organización estatal, en la gestión pública y en la democracia son contundentes pero no son los únicos. Al mismo tiempo, de manera silenciosa y casi natural se han construido escenarios y se han generado condiciones favorables para impulsar el desarrollo rural. Esto muestra que la participación social, la descentralización del Estado y la gestión local tienen enorme potencial para generar procesos de desarrollo.

En el ámbito rural, los principales efectos de la descentralización por la vía municipal iniciada por la LPP son los siguientes:

• Territorialización del municipio. La LPP crea municipios territoriales urbano-rurales cuya jurisdicción es la Sección de Provincia. Estos municipios reemplazan a los anteriores estrictamente urbanos.
• Municipio: unidad básica de gestión pública. Los municipios se han convertido en la unidad básica de la gestión pública, y pueden convertirse en el principal escenario para el desarrollo local, particularmente en el área rural. Pero para pasar de la administración del Estado a la gestión del desarrollo, es necesario entender que el municipio no es sólo una porción de territorio sino también un espacio económico y que, además de administradores de infraestructura y servicios, los Gobiernos Municipales (GM) deben convertirse en los principales promotores del desarrollo en sus jurisdicciones.
• Mayor democracia e inclusión rural. La LPP fortalece la participación campesina e indígena al reconocer personería jurídica a sus organizaciones naturales y establecer mecanismos de control social sobre la gestión municipal. En relación a los municipios, su territorialización rompe la excluyente lógica urbana, les asigna recursos de coparticipación tributaria bajo el criterio de distribución per cápita, amplía sus competencias y responsabilidades y, redefine las competencias de los órganos públicos.
• El nuevo escenario es favorable para el desarrollo rural. Pese a que los temas rurales no son prioritarios en la agenda del país, la LPP mejora las condiciones para construir democracia e impulsar el desarrollo rural: crece la participación campesina en las decisiones locales; se redefinen los roles de los viejos actores (institucionales, políticos y sociales) y desde la base social surgen otros nuevos; se posibilita la toma de decisiones locales; se fortalece la capacidad de interlocución de lo local-rural; son posibles nuevos términos en las relaciones rurales-urbanas. En general se crean condiciones para fortalecer la capacidad de gestión local con participación campesina en la planificación, la asignación de inversiones y la gestión del desarrollo municipal.
• Limitaciones y riesgos. Las mayores limitaciones de este proceso se refieren a la débil capacidad de gestión que se expresa en dificultades para convertir las demandas en proyectos financiables, desconocimiento de fuentes de financiamiento y de los procedimientos para acceder a ellas, insuficientes recursos humanos mínimamente calificados. Otras limitaciones se deben a que no existe información fiable sobre el potencial productivo, lo que evita un manejo estratégico y sostenible de los recursos naturales. Finalmente, es incipiente la articulación de los municipios entre sí y con los niveles departamentales, lo que limita el abordaje de problemas que exigen inversiones de envergadura, que implican el manejo de recursos naturales en espacios supramunicipales, o que por su complejidad exigen capacidad técnica inexistente en el municipio.

Une decentralisation au rythme des populations: Les principes fondateurs de la décentralisation burkinabé

A. Objectifs

• Promouvoir le développement économique national à partir d'un développement local homogène et voulu par les bénéficiaires désormais acteurs.
• Lutter contre les disparités « régionales » à travers une réorganisation du territoire de l'Etat et la création de fonds conséquents (fonds de dotation, de solidarité, d'emprunts etc.).
• Accroître les capacités et les possibilités financières des collectivités locales.
• Soutenir la coopération décentralisée avec la création de structures d'incitation et de concertation.

• Renforcer la démocratie locale et la libre administration des collectivités en :
  • codifiant la répartition des compétences, des ressources et des moyens autour du principe de subsidiarité, de la concomitance, des blocs de compétences, du respect de l'intégrité territoriale et des sujétions imposées par la défense nationale;
  • rendant l'action de l'Etat plus positive et plus présente grâce à une déconcentration conséquente;
  • améliorant l'information et la participation du citoyen à la gestion de sa cité.
• programmer de manière conséquente et responsable la mise en oeuvre de la décentralisation sur une période de 20 ans.

B. Approche et caracteristiques

Une décentralisation articulée sur des principes de base et des impératifs :

• respect des diversités locales en respectant les contours de la société réelle;
• respect de l'unité et de la cohésion nationale;
• favoriser l'évolution progressive des structures sociales.
• une décentralisation entourée de balises juridiques et institutionnelles :
  • constitution (un chapitre entier consacre la décentralisation),
  • Cinq (5) lois, neuf décrets
  • Texte d'Orientation sur la Décentralisation(TOD) écrit sur la base d'un consensus national,
  • Commission Nationale de la Décentralisation (CND)(une administration de mission), un outil d'animation, d'mpulsion et de prospection ayant une assise confortable (Premier Ministère) et une dimension multisectorielle.

C. Strategie de mise en oeuvre

• géographique : couverture de tout le territoire en Collectivités Territoriales Décentralisées (CTD);
• chronologique : Programmation indicative sur 20 ans (horizon 2010);
• méthodologique : Négociation du transfert de compétences et ressources entre l'Etat et les Collectivités Territoriales Décentralisées (CTD).

De 33 communes en 1995, tout le territoire doit être couvert en l'an 2015 par 500 communes environ.

2. Mise en oeuvre basée sur la recherche du consensus :

Recherche-action ayant abouti à un :

• atelier gouvernemental (Conseil de Ministre),
• atelier national de capitalisation (250 participants représentatifs de la société burkinabé),
• groupe de Réflexion et d'Animation (GRA)/MATS (relais locaux dans toutes les provinces),
• collectif (stratégie de financement sous forme de fonds fongibles) permenttant une planification glissante,
• auto-évaluation assistée.

Decentralization in Indonesia

Part 1: The Indonesian decentralization policy and the District Autonomy Pilot Programme

There are two autonomous levels of government below the central level in Indonesia: the provinces and the districts. The villages or communities, although having some kind of local council, an own budget and the right to regulate their own affairs, are not perceived as a third autonomous level of government.

The Local Governments of the first and second level consist of the head of the Local Government and the DPRD, a kind of local parliament. The head of the Local Government has a double function. He is at the same time representative of the central government in the region and representative of the local population of the region. However, the head of the government is only truly accountable to the President, via the Minister of Home Affairs, and not to the local parliament.

Local Governments are allowed to issue and to pass local laws and regulations. They have a certain discretionary power over their own personnel and they have their own budget. This autonomy is however already limited by intensive control and supervisory functions of the central and the provincial government towards the lower levels of government.

The law provides for three different forms of decentralization: desentralisasi, dekonsentrasi and tugas pembantuan. Desentralisasi means transferring tasks from a higher level of government to a lower autonomous level; what is often called "real decentralization" or "political decentralization" in international literature. Dekonsentrasi means transferring tasks from a central ministry to its field offices or line agencies in the region. If tasks are implemented by Local Governments on behalf of the central government, it is called tugas pembantuan (co-administration). According to the law, the transfer of tasks in the form of desentralisasi has always to be accompanied by the transfer of personnel, money and the necessary equipment. The focus of local autonomy has to be on the second level.

Already from the law it can be concluded,

• that decentralization is always defined from the top and is seen as one form of implementing national development policy
• that political participation or democratization are not the primary goals of decentralization, but rather increasing efficiency and effectiveness of the government apparatus.

The way of transferring as well as the respective amount of tasks and functions which have been transferred to the Local Governments in the '70s and '80s differ considerably between the sectors. In general however it can be stated that

• deconcentration has been favored as opposed to decentralization by the sectors;
• most of the transfers happened from the central government to the province governments, so that the focus was in reality at the first not the second level of Local Governments;
• tasks which include important sources of revenues were seldom decentralized;
• only parts of the tasks were transferred; there is a tendency to decentralize only limited implementation functions while policy and strategy formulation as well as decisions about the allocation of money are mostly kept on higher levels;
• there is some confusion at local level regarding the question which of their tasks local governments are actually handling as decentralized, which as deconcentrated and which as co-administration tasks.

In view of the problems the Ministry of Home Affairs was facing in leading and furthering the decentralization process based on the incrementalistic approach stipulated in its own government regulations, in 1995 a radical new approach was chosen: the District Autonomy Pilot Programme (DAPP). The basic concept of the DAPP is simple and radical at the same time: all vertical line agencies at the second level, both from the technical departments as well as from the Provincial Governments have to be abolished, their tasks and functions, their personnel, their budgets and their assets have to be transferred to the apparatus of the autonomous district governments. Involving 26 districts initially, the stated aim of the government was to increase autonomy throughout the nation based on the results of this preliminary phase. The first two year pilot was to be a learning exercise to determine the best way to shape district autonomy and how to implement it properly.

Most Ministries and provincial Governors were supportive and cooperative, but some had deep reservations. Some government departments or agencies were even able to stay out of the initiative, arguing that they needed to maintain their presence in the district. Others sought to reduce the scope of the transfer of functions that were formerly undertaken in the departmental arms at the district level. The same is true for some of the provincial governments which tried to reduce especially the kind and number of income sources which had to be transferred together with the respective tasks. This tendency persisted even after the time of the formal announcement of the program when as a result of a "crash program" the necessary central and local government regulations had been issued and a set of responsibilities were formally devolved towards the pilot districts. Moreover, the principle that all functions and tasks transferred to lower levels must be accompanied by attendant resources, has been grossly breached, especially in relation to the development budget.

Based on the experiences so far, the Government of Indonesia is actually reconsidering its decentralization strategy and has delayed the extension of the programme to other districts. Especially the Ministry of Home Affairs is still very much concerned about the question in how far the decentralization measures developed in the framework of the DAPP can better be adjusted to the capabilities and the capacities of the district governments. The right sequencing and timing of decentralization in Indonesia is therefore still a demand and not yet solved satisfactory.

Part 2: Preliminary assessment of the design and the strategy of the District Autonomy Pilot Programme

The District Autonomy Pilot Program marks a significant departure from the pattern of delay and uncertain progress in realizing the objective of increasing regional autonomy at the second regional level, in accordance with stated national policies and general regulations. The initiative has been generally well received by the districts, but less so by some central sectoral departments and first regional levels. However, even some districts are currently frustrated with the slow pace of the transfers, and the lack of adequate financial resources to undertake the new functions. The top down approach to the design of DAPP accounts for some of this resistance and poor implementation, and points to a host of issues that have yet to be adequately addressed in the limited decentralization dialogue in Indonesia. Most crucial has been the missing link to ongoing efforts in fiscal decentralization. Missing was also a proper, more elaborated design of the central-local government relations based on a general clarification of the local autonomy concept. Tasks and functions which have been transferred in the form of "decentralization" for example have not been sufficiently distinguished from those which have been transferred in the form of "co-administration". As a result the scope of higher level intervention in autonomous tasks of local governments is not sufficiently defined and thus in practice still unlimited.

However, as a beginning, the DAPP cannot be faulted; even if it is rather modest in its scope and likely impact, it is after all fairly significant in symbolic terms and also significant in practice for certain sectors. A more thorough assessment needs to be made to determine whether it has been successful in terms of various evaluation categories and success indicators. If this assessment is indeed made with the Indonesian government's broad goals in mind, then it is likely that the DAPP will fall short of being a success. But if DAPP is viewed as one step toward meaningful regional autonomy, if it leads to a richer and broader dialogue, and if it generates a more pro-active stance from the regions themselves in voicing their views and needs, then DAPP will auger well for the future. What can in general be learned based on these experiences with the DAPP in Indonesia? In the following we point to some conclusions regarding the right sequencing, timing and design of decentralization measures and formulate open questions which have to be answered for each and every decentralization strategy:

1. There is obviously a need for more comprehensive approaches to decentralization. Pure administrative decentralization measures for example fall short if they are not complemented with the transfer of corresponding funds and with measures to increase the accountability of local governments towards the population. The devolution of more tasks, to give another example, will not automatically lead to more autonomy on local level, if other relationships between local and central governments remain unchanged: Control, planning and financing mechanisms as well as organizational development and personnel management can limit the room to maneuver of local governments to the extent that there is no real autonomy left. However, the question remains regarding the right degree of comprehensiveness: concepts which are too complicated and try to cover all aspects of decentralization will not only need too much time to be elaborated, they will also be too difficult to communicate to all relevant parties and will therefore fail in raising sufficient enthusiasm and support on the side of the implementing agencies of such a reform programme.
2. There seems to be a need for broader and more intensive intersectoral discussions on the contents and the strategy of a decentralization initiative and for an involvement of local government representatives in these discussions. On the other hand there is a need for a clear and strong leadership in decentralization in order to push through necessary reforms which run against strong own interests of central level stakeholders, and in order to keep coordination and communication to a feasible degree. The question is therefore who has to be involved in which form in the design and implementation of decentralization initiatives. Who has to take part in decision making about fundamental issues of decentralization and local autonomy and who has just to be consulted?
3. Incrementalism seems to be necessary if local conditions regarding the capacity and capability of local governments vary considerably. On the other hand there is a danger that certain parties will use the argument that some local governments are not yet be ready to receive certain tasks or functions to create unlimited delays in the implementation of decentralization. Additionally, allowing too great variation among jurisdictions of similar status could lead to an unhealthy fragmentation of responsibilities between different levels of government and among local governments. This raises the question if a basic set of tasks or functions could be defined which would have to be devolved to all local governments of the same level or type of jurisdiction while others could be defined as additional tasks which would have to be devolved according to capabilities and capacities. How to assess these capacities and capabilities properly would be the next question. Experiences in Indonesia show at least that there is a need for involving local governments in such kind of assessments.
4. Support from higher level government institutions in form of technical advice, guidance, training etc. seem to be crucial in order to enable local governments to fulfill their autonomous tasks properly. The danger is however that support functions are being implemented in a way which limits or even counteracts local autonomy. The question is therefore how to find the right mixture between guidance and support on the one hand and the application of local autonomy principles on the other hand.
5. A learning approach in form of experimentation and piloting in order to develop an appropriate decentralization process and local autonomy concept seems to be convincing. For that the concept has to be kept open for changes and adjustments; a too detailed concept may hinder the necessary openness. However, Indonesian experiences show, that the basic concept needs clarity to enable proper links to ongoing activities in the broad field of decentralization and to gain the support of key decision makers. Much more important in this context is, that a learning approach requires the ability and willingness of key stakeholders for self-reflection and criticism. An open and radical reflection of the experiences made during the testing including reflecting on the own role and failures is of the essence in a learning approach. However, the ability and willingness for self-reflection cannot be assumed in political-administrative systems. The opposite is true as long as there is no pressure from outside of the system itself. How this can be brought about is difficult to answer, but certainly the role of the civil society is key. Whether technical cooperation approaches can be useful in this context is another question.