UNCDF continues support of Lao PDR’s local governance and fiscal decentralization
  • March 25, 2016

UNCDF has been actively supporting the de-concentration and decentralization efforts of the Government of Lao PDR for over a decade. The National Governance and Pubic Administrative Reform Programme (NGPAR) is a multifaceted approach that has been adopted by the Government of Lao PDR, which consists of four interlinked projects.

UNCDF, in partnership with UNDP, has supported the NGPAR programme through the GPAR Strengthening Capacity and Service Delivery of Local Administrations (SCSD) project introducing two innovative performance-based grant mechanisms that have been embedded within the national treasury system. Since 2006, against a backdrop of a centralized government, UNCDF, working in partnership with the Ministry of Home Affairs and UNDP, developed (1) A capital grant system inclusive of “bottom up” community and citizen-led planning coupled with performance-based vertical transfers to construct local service infrastructures, and (2) a performance-based operational block grant to district administrations in support of service delivery and citizen participation in local governance.

The District Development Fund (DDF) has undergone continual innovation and is now in its fourth generation bringing much needed improvements to basic service delivery in rural and remote areas.  The success of DDF has resulted in its natural scale-up that is being implemented with joint government financing in seven provinces covering 53 districts. Climate adaptation and environmental variations of DDF have been introduced to two specific areas in Lao PDR (Saravane and Sekong).

Mr. Paul Martin, Regional Technical Advisor at UNCDF’s Bangkok Regional Office, explained: “UNCDF with the Government of Lao PDR have forged a successful partnership for over a decade focusing on development local governance systems and services. As a major component of this partnership UNCDF LDFP have been able to introduce various innovative financing systems to support local service delivery. Uniquely, DDF has introduced performance-based grants (PBGs) to develop a strategic vertical transfer mechanism. “

He continued: “The PBGs have proven to be self-sustaining, with the mechanism and performance measurements being embedded in the new national fiscal system and budget law. UNCDF are supporting a current endeavor of the government to upgrade the performance criteria to examine local impacts in the contest of fixed capital formation, local fiscal space, and household economies. These new innovations will assist to propel the localization of the SDGs into the national and subnational planning agenda.  

The DDF systems developed by UNCDF has been fully embedded within the national financial legislation and are used by national and subnational civil servants to directly finance people-centered local development plans.  UNCDF has designed and introduced DDF as an untied performance-based transfer mechanism allowing district authorities to discretionarily decide how to allocate their budget envelope on citizen-focused district priorities in participation of communities through a transparent selection process that is led by village chiefs. The performance aspect of DDF ensures transparency and accountability in the context of public financial management and participatory district planning.

Since 2012, which signifies the start of the UNCDF SCSD intervention, DDF has been used to provide financing to the realization of;  (1) 66 community-prioritized local service investments (2) 578 service outreach and extension interventions in education, health, public works and agriculture totaling $2.8M, which has benefitted and directly impacts the lives of a total of 1,220,644 people including 612,285 women across 225,780 local households in 2,410 villages  

In addition, DDF support has also an impact on the capacity development for over 2,280 government officials, of which 396 are women. By developing the capacity of local administrations DDF is investing in both actual MDG service provision and in the ability of the local government machinery to lead and manage local service delivery - a more sustainable approach. Through a series of trainings under DDF implementation, district officials are able to engage in a meaningful and participatory planning and budgeting process, meet local needs and address local priorities, finance a range of investments, and build up their long-term capacities to manage public expenditure and finance.