Decentralization and Poverty Reduction

1
Decentralization and Poverty Reduction

• Decentralization consists of a transfer of public
  functions from higher tiers to lower tiers of
  governance.
  
• It can be administrative, fiscal, political or a
  mixture of these.

2
Decentralization and Poverty Reduction

• Decentralization should have a positive impact on
  poverty by
  
• Making the voice of the poor better heard
• Improving their access to and the quality of
  public services
  
• Reduce their vulnerability

3
Decentralization and Poverty Reduction

• The reality of decentralization and poverty
  reduction
  
• Of 19 countries studied by OECD Development
  Centre, only one-third revealed that
  decentralization has actually lead to
  improvements in poverty reduction
• In majority of cases, decentralization had no
  impact at all.

4
Decentralization and Poverty Reduction

• Countries in which decentralization had positive
  impact on poverty reduction
  
• Bolivia
• China
• Ghana
• India (West Bengal

• Mexico
• Philippines
• South Africa

5
Decentralization and Poverty Reduction

• Countries in which there was no impact/negative
  impact on poverty reduction
  
• Brazil
• Burkina Faso
• Egypt
• Ethiopia

• Guinea
• India (Andhra Pradesh
• Malawi
• Mozambique
• Nepal
• Paraguay
• Sri Lanka
• Uganda
• Vietnam

6
Decentralization and Poverty Reduction

• In countries where the state lacks the capacity
  to fulfill its basic functions and in
  environments with high inequalities at the
  outset
• There is definite risk that decentralization will
  increase poverty rather than reduce it.
  
• The evidence is that the link between
  decentralization and poverty reduction is not
  straightforward and is largely influenced by
  country specificities, as well as process design

7
Decentralization and Poverty Reduction

• Characteristics of Positive Performers
• Bolivia, Philippines and India (West Bengal)
• Lower middle income countries
• Less indebted low income countries
• Literacy rate of over 80 percent
• Qualified as free by Freedom House

8
Decentralization and Poverty Reduction

• Characteristics of Positive Reformers (cont)
• Decentralization generally supported by the
  government capable to carry out reforms with
  transparency, participation and policy coherence
  
• Adopted their decentralization programmes by
  design

9
Decentralization and Poverty Reduction

• Characteristics of Positive Reformers (cont)
• Authorities visibly believed in the process and
  the ability to shape it
  
• Reforms inspired by desire to improve social,
  economic and political conditions
  
• All adopted a comprehensive approach concurrently
  undertaking political, fiscal and administrative
  decentralization
  
• There was real delegation of power to lower tiers
  of government, rather than just deconcentration

10
Decentralization and Poverty Reduction

• Characteristics of Somewhat Positive
  Performers
  
• China, South Africa, Mexico and Ghana
• Process fulfills only some criteria for an
  efficient, sustainable, transparent,
  participatory, equitable, and coherent process
  

11
Decentralization and Poverty Reduction

• Characteristics of Somewhat Positive
  Performers
  
• Rationale for decentralization has been mostly
  economic
  
• Central government functions have only been
  partially transferred
  
• Have a high literacy rate (above 70)

12
Decentralization and Poverty Reduction

• Characteristics of Somewhat Positive
  Performers
  
• Freedom House Index is very good Free except
  for China not free
  
• Have higher income than the worse performers, but
  also substantial inequality as measured by Gini
  indexes
  
• Ghana is exception to the inequality (Highly
  Indebted Poor Country)

13
Decentralization and Poverty Reduction

• Characteristics of Somewhat Negative
  Performers
  
• Paraguay, Brazil, Nepal, Vietnam, Egypt, Sri
  Lanka, Ethiopia, Burkina Faso, Uganda
  
• A group with both positive and negative elements

14
Decentralization and Poverty Reduction

• Characteristics of Somewhat Negative
  Performers
  
• Two categories of these Countries
• Either low income with low Gini index
• (Uganda and Vietnam)
• Higher income with higher Gini index
• (Brazil and Paraguay)

15
Decentralization and Poverty Reduction

• Characteristics of Somewhat Negative
  Performers
  
• Are generally unstable, emerging for civil wars
  or ethnic conflicts, or other political
  instability
  
• Overriding objective of the decentralization
  programme is political stability and maintenance
  of central control through deconcentration

16
Decentralization and Poverty Reduction

• Characteristics of Somewhat Negative
  Performers
  
• Decentralization Policies aimed at preserving and
  re-establishing national unity
  
• Have not pursued a comprehensive approach to
  decentralization, choosing deconcentration rather
  than devolution

17
Decentralization and Poverty Reduction

• Characteristics of Negative Performers
• Guinea, Mozambique, Malawi, India
  (Andrah-Pradesh)
  
• The reform process has been flawed
• Decentralization pursued by default
• All low income countries and HIPC

18
Decentralization and Poverty Reduction

• Characteristics of Negative Performers
• Literacy rate is under 50
• None qualify as free countries
• Infrastructure if poor
• Score on corruption index is bad (below 2.9)
• Gini index varies, no real trend is discernible

19
Decentralization and Poverty Reduction

• Determinants of Pro-Poor Decentralization
• Country Background
• Design of Process

20
Decentralization and Poverty Reduction

• Country Background
• Country Size
• Quality of Infrastructure
• Corruption Perception Index
• Gini Index

21
Decentralization and Poverty Reduction

• Difficult to establish common patterns for the
  four performance areas
  
• Possible to draw certain lessons social
  institutions and political structures impact
  decentralization
  

22
Decentralization and Poverty Reduction

• Positive and somewhat positive performers built
  decentralization process on existing and
  well-functioning local structures
  
• China with deconcentration of social services
  built decentralization on willingness of local
  governments to assume this responsibility

23
Decentralization and Poverty Reduction

• West Bengal with strong communist party with
  commitment to the poor
  
• Pro-Poor Decentralization Programmes in Malawi
  and Sri Lanka have been compromised by
  traditional power structures and local
  patron-client relationships
• Imbalance between new and traditional power
  structures led to increased elite capture and
  corruption

24
Decentralization and Poverty Reduction

• Design Process Factors
• Financial Resources at the Local Level
• Local Human Capacity
• Political Commitment at the National Level
• Donor Involvement and Support

25
Decentralization and Poverty Reduction

• Transparent and Participative Process
• Information Flows central to local governments,
  local to central governments, and local and
  central governments to citizens
  
• Participation beyond just elections, to include
  budget hearings, etc
  
• Role of Civil Society exercise pressure on
  governments and control their actions

26
Decentralization and Poverty Reduction

• Lessons for Donors
• Donor policies should be more coherent and their
  action better co-ordinated
  
• Donors should be more aware of the political
  economy of decentralization as a change process
  

27
Decentralization and Poverty Reduction

• Donor Lessons (continued)
• Donors should emphasise the instrumental
  character of decentralization to create an
  enabling environment for poverty reduction at
  local levels
• Donors should encourage transfer systems with
  incentives for improved effectiveness as well as
  help building sustainable local revenue
  generating powers

28
Decentralization and Poverty Reduction

• Donor Lessons (continued)
• Monitor that the central state does not intervene
  directly or indirectly in local politics and
  policy
  
• Monitor corruption and fiscal imbalance
• Be flexible (thus impact monitoring and learning
  by doing)
  
• Support policies to strengthen local governments

29
Decentralization and Poverty Reduction

• Donors Should Avoid
• The creation of parallel structures
• Considering decentralization a panacea that can
  be applied everywhere
  
• Considering decentralization as a unique reform
  one size does not fit all