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Supporting Rural Local Governments in Practice:
Issues for Consideration
Leonardo Romeo, Roger Shotton and Laura Kullenberg
- Introduction
- Programme strategy and tensions
- Political dimensions
- Implications for decentralized service and infrastructure delivery
- Implications for political accountability
- Local planning and politics
- Program implementation
- Institutional capacity
- Reform of institutions and the role of the state
- Fiscal decentralization, regional equity and rural growth
- Design of intergovernmental fiscal transfers
- Decentralization and provision of rural infrastructure and services
- Decentralization and natural resources management
- Conclusion
- Programme strategy and tensions
These comments are based on the practical experience of a donor involved in a number of decentralization pilot programmes in a wide range of countries. The thoughts are forwarded, from the point of view of a practicioner, to share with this conference some of the challenges, questions and issues that have come up through our field experiences in the past several years. We do not pretend to have conclusive answers, but we do offer emerging questions from the field operations that we hope the working groups can discuss and consider throughout the week.
Over the past five years UNCDF has designed programmes that provide capital budgets and technical support to local governments and deconcentrated state authorities in more than 15 less developed countries. These programmes are now in various stages of implementation, providing continuous field information that we have used to modify our approach, model and assumptions. While the design of these specific UNCDF projects may be different from other donors—and there are critical differences in many cases—we do think most of the issues emerging will be common to many donors and governments engaged in supporting decentralization policy and programmes.
These projects, called local development funds (LDFs) are of a pilot nature, averaging from $3–$9 million over three to five years. They can be characterized as practical experiments in decentralized financing and planning of rural development. They provide technical assistance and direct capital resources in the form of budgetary planning ceilings to rural authorities at district council or commune level, and transfer typically $1–$5 per capita. These programs often precede implementation of national decentralization programmes or investments by larger donors, such as the World Bank. Critical to our ability to fund such pilot programs is UNCDF’s mandate to provide capital assistance in the form of small grants, which also facilitates the direct channeling of resources to local levels.
The intent is to promote decentralized planning and financing of rural development and institution building at the local level. UNCDF’s particular focus has been to enhance the capacity of local government to finance and manage capital budgets with a strong emphasis on inclusive participatory planning at the local level. Many agencies are doing similar things. A key feature of these programmes is that we work within and not parallel to the national and local planning system for public investments.
It is important to underscore the fact that given UNCDF’s central mandate is poverty reduction, there is a basic assumption underlying the focus on governance: decentralization improves governance and improved governance has an impact on poverty reduction. We agree with the concerns that the jury is still out on the strength of this link. (Top)
Programme strategy and tensions
UNCDF shares the view of many donors who see improved local governance as the key to rural development. But more specifically we believe in direct support to decentralized local government institutions. We have found that this is a critical but often neglected entry point, and one which is frequently controversial. It often differs from the approach taken by other donors (the European Union and the World Bank Social Action Funds). It raises strong contrary views from some of our development partners, particularly in the NGO community, who raise questions about the legitimacy and accountability of local governments to the rural poor.
For us this strategy is often problematic because of the chronic tension between our twin programme objectives of expeditious delivery of goods and services for poverty reduction, on the one hand, and of local institution building, on the other. (Top)
In designing our programs we have found it necessary to use a methodological framework for assessing "local state institutions", which goes beyond the "deconcentration/devolution" dichotomy. Specifically we need to look at two dimensions: the local institutional topography of the state and the political commitment to transfer power, resources, autonomy and the like to local institutions. While the latter gets a lot of attention, the significance of the former (for the scope and limits of decentralization) is often neglected. To give an example, contrast these two extremes:
- • A Ugandan district council, governing 500,000 people
or more, with several hundred employees (many at the graduate
level), a budget of several million dollars, clear statutory
fiscal and legislative powers and responsibilities and so on.
- • A Malian commune, governing 10–15,000 people, with one or two low-grade employees, a budget of several thousand dollars, a limited mandate and fiscal autonomy constrained by the "unicite de caisse" principle.
Clearly, while both countries rank high on political commitment to devolution, the actual scope for decentralization of functions and fiscal responsibilities varies dramatically, as does the expected benefits of decentralization. By illustration we could refer to variations in service delivery and political accountability. (Top)
Implications for decentralized service and infrastructure delivery
The range of infrastructure and service delivery functions that can be decentralized is more limited (both "horizontally" and "vertically") where the planning area is smaller. The mandated responsibilities are fewer and weaker and the available technical capacities are much more limited.
The extent to which investment planning can be horizontally integrated, and integrated with the budgeting process, is more limited where local line departments are not under the control of the local authority. (Top)
Implications for political accountability
It is common to refer to two sorts of accountability that are critical for effective local government: accountability of local civil servants to elected local leaders and accountability of local elected representatives to their constituents. We have found that the challenges vary.
The main challenge in the Malian context (small-scale commune, with most technical staff at the higher departmental level) is to devise mechanisms by which communes can access technical services of the deconcentrated state, and hold bureaucrats to task for service provision. By contrast a bigger challenge in the Ugandan context (where bureaucrats are under the control of district authorities) is to secure accountability of the more remote district representatives to local constituents.
We would add a third sort of accountability—lower-level local authorities to higher levels. This has several dimensions that refer to the obligation to account for the use of resources mainly coming through fiscal transfers and to comply with higher-level policy priorities. Obviously the need for this kind of accountability is greater than the local government unit. (Top)
A natural tension exists between local planning and local politics. Planning practices attempt to introduce better informed, more transparent and more rational decision-making, but they not only conflict with the practice of patronage; they also reduce the discretion of local leaders and constrain the "mode" and the "tempo" of their decisions. They limit the autonomy of politics.
Since decentralized planning reduces local political discretion, it may have been introduced as a way to avoid or limit real political decentralization.
There is also a tension between local planning and participation. When participatory mechanisms are incorporated into planning procedure, the result is often a surge in demand for social infrastructure and welfare subsidies and scarce resources. Local politicians are unable to control the demand they have unleashed because they knew how damaging any successive attempt to control would be to their status. (Top)
Our experience highlights some of the challenges of introducing participation in local planning. This is an issue of both techniques and institutions.
In encouraging local participation we face real difficulties in devising mechanisms that are sustainable and replicable, institutionally and financially. Nongovernmental organizations can afford to mount intensive participatory rural appraisal exercises in limited areas, but these can rarely be imitated. In general, we find that techniques for community-level participatory project identification have not been adequately related to local public sector planning.
While a lot of attention has been given to grassroots project identification, little has been given to increasing the capacity of local planning authorities for project selection, appraisal and preparation. Equally deficient has been the effort to combine grassroots proposal identification and selection with that of local planners submitting ideas for grassroots screening and feedback.
Less attention was given to building the institutions for participation in public affairs than to participation in project cycles. Yet the sustainability of the improved planning procedures is highly dependent on the setup and functioning of a local planning authority that combines the legal responsibility of local authorities with the control functions of civil society organizations. The strategies to achieve this combination again vary by context, particularly on the representativeness of the local authorities (elected versus nominated) and the relations between authorities and technical agencies. (Top)
Building local capacity is key to the success of any national decentralization strategy. Given the systemic nature of this capacity, the magnitude of the task may often appear overwhelming. What our experience suggests is the need for an approach that is institutional, focused and long-term.
By institutional we mean that the main responsibility for building local capacity must be assumed by higher levels of government and mandated by a specific national policy. Two issues emerge in this connection. National, regional and provincial staff may not have the resources to build capacity and this may call for a wider range of actors. NGOs and national associations of local authorities have a potentially important role to play in this respect. Also, government staff leading the capacity-building effort may lack the appropriate incentives if the cost and financing of the extension, which may initially be covered by external financing, is not taken over by national governments in the long run.
By focused we mean that, despite the systemic nature of the local capacity, a realistic strategy should identify specific entry points and limit itself, initially, to building the local capacity required for these entry points. In our programs we focus on capacity for local capital programming and therefore develop the local planning, project and financial management capacities.
By long-term we mean that the current three to five year frame of the programs we support is clearly inadequate. Capacities for local planning and project implementation depend on changes in attitudes and social interaction and negotiation abilities as much as on acquired skills. This makes it impossible to substitute intensive training for actual on-the-job experience.
Capacity-building strategies are also dependent on specific contexts. One critical issue is the nature and stability of the local civil service. If municipal employees are hired and fired whenever there are any changes in local political representatives (as in Nicaragua), the efforts to build local capacity are greatly frustrated. Equally problematic is the situation where all local civil servants are centrally deployed, leading to higher turnover and lower degrees of local loyalty.
Also, capacity building and the introduction of innovative practices in countries with traditions of local government (for example, Bangladesh) may face the additional challenge of fighting entrenched procedures and outmoded practices. (Top)
Reform of institutions and the role of the state
We recognize the provision and production distinction and try to design and implement accordingly. But we also have to deal with the limitations.
In many countries, despite apparently favorable central government policy on privatization, at the local government level there is often resistance: local civil servants are worried that the politicians use this policy to benefit cronies, and politicians are worried by the implications of laying off government staff. In many rural areas (Ethiopia and northern Uganda) the only source of supply capacity (for engineering, technical, construction and management functions) lies in NGOs or in government departments (the private sector often finds higher returns in urban areas). This poses the following challenges:
- • Devising ways of accessing government agency services
(by local governments or communities) on as close to a contractual
basis as possible—though government regulations often prohibit
this and allow only payment of staff travel costs.
- • Devising arrangements and incentives to bring in NGOs as service providers when these NGOs are often quite skeptical about collaborating with local governments. (Top)
Fiscal decentralization, regional equity and rural growth
The extent and pattern of feasible fiscal decentralization also depends on the local institutional topography of the state. Thus where there are only development committees rather than corporate local government bodies (for example, as in Bangladesh at the thana level, or in Malawi), there is only scope to decentralize development budget funds for local discretionary intersectoral allocation. Recurrent budgets are inevitably channeled down through the line agencies, thereby undercutting the scope for local intersectoral management.
The development budget in many countries is funded 80%–90% by donors; this raises major issues of donor coordination and commitment to supporting decentralization objectives and of reconciling government and the various donor financial monitoring procedures and expectations. In this respect we believe working models should be developed to provide both local authorities and other donors interested in decentralized financing with the tools to integrate different flows of funds in support of a unified local planning process, while satisfying donor accountability requirements. As a donor channeling funds to local authorities (and trying to pilot better IGFT systems), we are often caught between two objectives: trying to work through official central-local fiscal transfer mechanisms while aiming for expeditious local delivery.
For fiscal decentralization to promote rural growth local fiscal allocations must include a bias to efficient rather than to fair and equitable allocation of resources, a shift from the tendency to allow equal shares for all. Our experience is that the feasibility of such a shift depends on a number of factors:
- • Local planning capacities.
- • The legitimacy of local authorities and their ability to make and defend decisions that may be perceived as unfair by some constituents.
- • Faith that resources will be coming down in the future as well, so that everybody will get their turn sooner or later (this poses a problem for a short-term donor-funded project, if there is no prospect of longer-term funding of the same magnitude).
These, in turn, also depend to some extent on the institutional topography (for example, in some countries local government only has a mandate for basic social infrastructure, or is less equipped with the sort of technical planning capacity to allow or to defend efficiency-focused planning decisions—the contrast between Mali and Uganda). (Top)
Design of intergovernmental fiscal transfers
A key feature that distinguishes UNCDF-supported programmes from microprojects or social funds programs is the combination of decentralized planning with access to financing in the form of an Indicative Planning Figure (IPF), an annual or multi-annual allocation known and agreed ex ante. The virtues of the IPF are:
- • It constitutes a hard budget constraint essential
for a meaningful local planning exercise and for priority-setting.
- • It encourages mobilization of local matching resources and can be used to leverage additional external funding.
- • It undercuts perverse local patron-client relationships, which often characterize relations between different levels of government and, consequently, shifts the focus of local leaders’ accountability from seeking higher officials’ favors to obtaining local constituents’ consensus. (Top)
Decentralization and provision of rural infrastructure and services
The range and complexity of infrastructure provision that can be decentralized depends, once again, on the local government context. The mandate, the planning area, the relationship between local authority and line departments—all make a difference in this respect. For example, Ugandan district councils can be entrusted with a gamut, including hospitals, markets, technical schools and the like, while Bangladeshi union councils or Vietnamese communes can be entrusted with little more than the lowest tier of rural roads, tubewells and drainage, small irrigation schemes, primary schools and healthposts.
While in general the distribution of infrastructure provision responsibilities should be governed by the subsidiarity principle, the application of this principle often faces some constraints. Even the most local social infrastructure may require some form of joint provision in which higher levels of government typically assume responsibility for financing operating costs. The rationale for this is often strengthened by central authorities’ concerns with the maintenance of minimum service standards, as happened in Vietnam where provincial authorities recentralized the management of health and education, which was previously assigned to districts, to secure uniform levels of service. (Top)
Decentralization and natural resources management
While the principles of subsidiarity generally require community management of local natural resources, this does not mean that there is no role for local governments.
First, basic local transport and market infrastructure and improved extension and support services are critical. These, of course, are all preeminently activities undertaken by the state and may be the mandate of local authorities.
Second, supporting community natural resource management institutions also requires (decentralized) state financing of community activities, such as community irrigation schemes, watershed protection measures, and so forth. In preparing projects of this sort (Ethiopia and Malawi) two key issues emerge: how to adapt local participatory planning procedures to ensure that such proposals are adequately fed into the process and what are the appropriate terms of financing of such support, so as neither to discourage local initiative nor to undercut emerging microfinance institutions.
Third, and more problematic, improved natural resource management often requires greater access to microfinance. Clearly, local authorities have no comparative advantage in this area and should not be involved in the direct management of microfinance facilities. But in many rural areas there simply are no microfinance institutions, and there is often great pressure to relax this principle. An intermediate solution adopted in some countries (Cambodia and Ethiopia) is for local authorities to provide grant injections of loan capital as revolving funds for community savings (credit) groups (coupled with an extension service) to help develop embryonic village banks. More generally, a major challenge lies in devising arrangements by which local authorities can provide more direct support to farm and non-farm enterprises.
Finally, because of the frequent association of natural resources degradation with difficulties of local communities in enforcing common property management rules, local governments can also play an important supporting role, through enacting and enforcing local regulations on forest and pasture uses. (Top)
This is not meant to be only a list of worries about the limits of decentralization and these types of support programmes. It is uncertain what impact these new decentralization programmes and policies can have on poverty, rural development and governance. It is important to track these experiences carefully, to establish a strong link to policy dialogue and to bring findings and concerns to such forums as this one.
But we are also excited about the potential of these programmes. Already, many possibilities exist. For example, little is being done in the area of performance-based allocation systems—moving beyond simple grant financing to deliver services to looking at how transfers from the outside can improve mobilization and the use of local resources. Another area of interest is how and under what conditions local governments should be assisted in moving beyond providing only social infrastructure to other important areas such as natural resource development and promoting local economic development. In these cases donors can provide a useful service through pilot programmes that can help underwrite the risk of partner governments.
