This book is designed to address the challenges of Performance Budgeting in support of the Millennium Development Goals and in particular, how it applies to development issues in the Least Developed Countries. The United Nations Capital Development Fund supports the work of local governments in LDCs to plan, prioritize, implement and finance socio-economic infrastructure investments. UNCDF’s approach emphasizes achieving sustainability in the local development process through requiring the local planning, budgeting, management, andmonitoring of public expenditures.

This Guide is intended as a contribution to addressing how to improve delivery of basic public infrastructure and related services. Over the past decade UNCDF has built up a portfolio of Local Development Programmes in the LDCs, primarily in Africa and Asia. Although these LDPs operate in very different national contexts, they all embody a common strategy: they aim to promote more effective, efficient, equitable and accountable infrastructure and service delivery through rural local governments, by twinning innovations in funding mechanisms with other “capacity development” innovations in planning, budgeting, delivery and accountability arrangements.

This paper argues that good, local-level mechanisms for environmental governance are not only likely to lead to productive natural resource management practices that improve the productivity of local rural economies and increase economic growth, but also to increase awareness of the importance of environmental issues, enhance local responsibilities and accountability and, finally, strengthen local democracy.

This report - like the case studies it synthesizes - is founded on three assumptions: firstly, that poverty in Asia is still – and despite rapid urbanization - primarily rural (in numbers and in incidence); secondly, that rural local governments (LGs), despite their many weaknesses, have a potentially key role to play in the basic infrastructure and service delivery (ISD) which effective poverty reduction requires; but, thirdly, that the challenges for improving ISD through rural LGs are qualitatively much greater than through urban LGs, and that both these challenges - and also the opportunities – for making rural LGs more effective are poorly understood and documented.