Transcript 3 - Katrin Plangemann

Decentralization and
Subnational Management
in LAC:
Lessons from experience
Overseas Development Institute Seminar:
Strengthening Sub-National Governance
for Poverty Reduction: Innovations and
Impact
Kathrin A. Plangemann
The World Bank
September 11, 2008
London, UK
Decentralization in LAC:
The Basics
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Decentralization: Transfer of authority and
responsibility for governance and public service
delivery from a higher to a lower level of government
•
•
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Deconcentration
Delegation
Devolution
Privatization
Rationale and Stages:
• Political: Creation of new levels of government/elections of
local authorities as part of regional democratization process
• Fiscal: Decentralization of revenue/expenditure management;
intergovernmental transfers, debt
• Service delivery: Enhancing service outcomes across sectors
• Private sector development: Subnational investment climate
Why decentralize?
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Benefits
Greater responsiveness to citizens’ needs
Allocative efficiency
Increased transparency through civil society participation and
clearly defined constituencies
Creation of public goods (additional mobilization of public and
private resources).
Potential costs and risks
Loss of economies of scale and control over scarce financial
resources by the central government, resulting in increasing fiscal
pressure
Higher difficulty for coordination of national policies.
Unequal distribution of resources/horizontal imbalances
Weak administrative/ technical capacity adversely affecting service
delivery
Risk of additional fiscal pressure or over-indebtedness of
subnational governments
Capture by local elites (Patronage, Corruption)
Variations across LAC:
Who’s got the money?
Subnational expenditure share in total
(Source: IMF GFS)
100%
90%
80%
70%
60%
50%
40%
30%
20%
46%
45%
35%
25%
10%
23%
8%
0%
Argentina Brazil
(2001)
(1998)
Bolivia
(2001)
Peru
(2001)
Mexico
(2000)
Chile
(2001)
Further variations due
to:
 Vertical and
horizontal
imbalances
 Discretionality in
allocation of
resources (e.g.
earmarking)
 Sectoral variations
From Fiscal Decentralization to
Subnational Public Management
Subnational Debt
Intergovernmental Transfers
Expenditure Management
Revenue Management
Fiscal
Decentralization
From the design of fiscal
federalism to greater support
to Subnational Public
Management:
• Public expenditure management
(FM, PBB, Procurement, Public
investment, tax administration);
• Civil service;
• e-Government;
• Justice
• M&E
• Broader GAC agenda
Decentralization and Subnational
Management Support in LAC
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Development Policy Lending on Decentralization:
• Peru, Bolivia; Colombia, Nicaragua (decentralization
components)
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Development Policy Lending to subnational levels:
• Mexico, Argentina (Cordoba, Santa Fe, Catamarca)
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Investment lending:
• Chile, Brazil, Peru, Argentina
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Subnational SWAP (Sector Wide Approach):
• Brazil (Ceará, Minas Gerais)
• Argentina (San Juan, others in preparation)
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AAA (Analytical and Advisory Activity):
• Bolivia, Ecuador, Dominican Republic, Chile, Argentina, Peru
• Increasingly direct support to subnational governments
• (e.g. FFS Mexico, Argentina, others)
Increased LAC lending for
subnational public management
3000
2000
1500
858
1000
486
11
Approval Year
119
30
616
60
190
Amount
20
06
20
07
20
08
*
0
20
01
20
02
19
98
0
348
20
03
20
04
20
05
500
19
99
20
00
Committed Amount
(in million$)
2466
2500
9
8
7
6
5
4
3
2
1
0
Number
* Until August 2008
(WB Projects with Sub-national government administration as major
sector AND Public Sector Governance as major theme)
Number of Projects
WB LAC Sub-national Government Administration - Public
Sector Governance projects
What worked, what didn’t
Evaluation of effectiveness of Bank support to
decentralization in 20 countries between
1990 and 2007 showed:
 Bank support most effective:
• design of intergovernmental legal framework
and transfer system,
• subnational public expenditure management
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Bank support less effective:
• clarification of roles and responsibilities of
different levels of governments,
• Improvements of own-source revenue
mobilization
IEG: Recommendations
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Invest in timely analytical work prior to lending
Seek more realistic and pragmatic loan design,
after an assessment of the political economy
Improve coordination of sectoral decentralization
Combine policy-level support with TA for
subnational capacity-strengthening
Encourage a more results-based approach to
decentralization with greater M&E
N.B.: Impact of Bank support higher when:
• Prior consensus given on decentralization reforms
• Greater incentives for subnational institutional reform
• Improved donor coordination
Emerging issues
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From a focus on the overall fiscal decentralization
framework to a greater focus on service-delivery
across sectors, including on federal level nonpriority issues
Towards a greater subnational M&E culture:
results-based management and budgeting
Greater focus on spatial issues (e.g. upcoming
WDR) to unbundle territorial development issues
Private Sector Development / Investment climate,
particularly in MIC
Addressing the different needs of increasingly
confident and innovative subnational governments
through new custom-made mechanisms: FFS
Accountability and Capacity
for Service Delivery
National Policy makers
“Supply Side”
VOICE
COMPACT /
MANAGEMENT
Local Policy Makers
CLIENT POWER
Clients / Citizens
Public / Private Providers
“Demand Side”
From World Bank (2004) World Development Report:
Making Service Delivery Work for Poor People
Framework for Monitoring Local Government
Performance
Are intermediate processes
consistent with local good
governance?
Intermediates/
Process
Inputs
Fiscal revenue
and spending
patterns
Is spending
adequate or propoor?
Public Financial
Management
Outcomes
Governance
(Voice/Client
Power)
Outcomes
Service Delivery
Perceptions/
Outcomes
Citizens/Firms
Is access and
quality being
achieved, e.g., at
some minimum
standard?
WB 2007: Actionable Governance Indicators: Decentralization
Monitoring Subnational
Public Management PEFA
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Widely used monitoring framework among
different donors
Indicators allow diagnostics of areas of public
expenditure and financial accountability
28 Performance Indicators + 3 for donors,
including on issues such as intergovernmental
transfers
Used for measuring subnational governments PEM
performance
Allows benchmarking between subnationals
Territorial
development/investment
climate: What is new?
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Especially in MIC, move away from specific support
mechanisms towards one level of government and towards
an integrated territorial/spatial support
Increasing demands to provide support to subnational
economic development, and reduction of horizontal
inequalities
Need to integrate public sector strengthening with private
sector development and subnational investment climate
strengthening for greater subnational competitiveness,
subnational ICAs, DB etc.
Innovative practices in Mexico (Guerrero), Brazil (Sao Paulo),
and Argentina (Corrientes)
The new kids on the block
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Increasingly sophisticated subnational governments, in some
cases with high natural endowments are increasingly
confident and eager to access markets and Bank financing
Innovative and reform-minded subnational government
create demonstration effects for public sector management to
be taken up and replicated at the central level (Argentina,
Brazil)
Greater demand for demand-driven, customized, advisory
services, with donors as just in time service-providers (e.g.
FFS on subnational issues, e.g. Mexico, Chile)
Stronger pressures for donors for selectivity in addressing
subnational needs: Supporting richer, reform-minded
subnational governments vs. poorer, less-reform-minded
governments?
DFID support for
innovation through MGPR
DFID’s Markets and Governance for
Poverty Reduction Trust Fund
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Governed by tripartite Coordination Group (DFID,
WB, IADB) and in LAC, by cross-sectoral group
Since 2006, Grants approved for US$6,873,900
7 tranches, covering 47 proposals
Overarching Goals:
• Reduce poverty and inequality and promote social
inclusion; and
• Develop good practices based on lessons learned.
DFID support for
innovation through MGPR
DFID’s Markets and Governance for Poverty Reduction
Trust Fund
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Two programs:
•
Latin American Markets and International Trade (e.g.
Regional Municipal Scorecard Program on regulatory
environment)
•
Public Sector Management and Political Systems (e.g.
Strengthening of Statistical capacity, HD governance)
Objectives PSMPS:
•
Expand the use of political analysis and practical
approaches, such as demand-side work with civil
society, including unions, political parties, etc., to build
constituencies for reform; and
•
Reinforce subnational governance, e.g. strengthening of
political economy analysis to inform operations.
DFID Support for Subnational
Management in Peru
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DFID support for fiscal decentralization in Peru:
Municipal mining royalties management (US$ 155k):
Objective: Increase the social accountability of municipal
governments and improve their responsiveness to the
demands of the local population to enhance the quality and
sustainability of municipal investments financed with the
mining royalties.
DFID funds allowed:
• Monitoring of royalty flows and municipal investment
• Dissemination of information through civil society groups
• Promotion of discussion of use of public funds
• Greater competition among municipal governments
encouraged by close media monitoring
• New accountability mechanisms, including feedback to
mayors on public investment management
DFID Support for Subnational
Management in Brazil
DFID support for Bank on subnational Governance
related activities (US$ 200k annually):
 Analytical work: contribution to Good Governance
AAA and governance “drill-downs” in social sectors;
 Strengthening FM, auditing and carrying out PEFA
assessments in four states;
 High-level dialogue on public expenditures:
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Major PSM conference on cutting-edge reforms in Brazil
on OECD experiences with Finance, Planning and all state
governments
Conference by Budget Secretariat on Budgeting for
Subnational Governments and support to RBB
Impact of DFID-financing:
The case of Brazil
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Brazil:
• Sharing good practices and building communities of
practitioners across subnational governments,
• Strengthening demand for PSM reform, e.g. RBM/RBB
• Greater use of M&E, e.g. PEFA assessments.
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Bank:
• High-level dialogue: Access to key policy-makers, allowing
Bank positioning as key institution on PSM, resulting in
more subnational requests for PS support
• Agenda-setting: quality of expenditure at center of dialogue
• Increased flexibility (e.g. short-term availability of
consultants),
• Increased responsiveness to client needs (products/process)
DFID-Bank Collaboration:
Achievements and Opportunities
• Fostering innovation, piloting new approaches and scaling
up interventions, including in areas that are traditionally not
supported by the Bank (e.g. entry-points into more
“political” areas)
• Tapping into OECD experiences, particularly for MIC
• Shift in Bank role from providing traditional development
solutions to more partner and service-provider on a
demand-driven basis, offering more tailor-made products
• Putting governance higher on the agenda, including support
to greater transparency and accountability through
improved participation and consultations
• Leveraging the role of the Bank as a catalyst and convening
power to bring together public and private stakeholders,
including strengthening of the South-South Dialogue
• Promoting donor coordination by harmonizing procedures
mobilizing additional support for follow-up projects
Thanks!
Questions?
[email protected]