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BRIEF

Decentralization

June 6, 2013

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Decentralization transfers authority and responsibility of major government functions from central to sub-national governments — including local governments, civil society, and the private sector.

The community-driven development (CDD) and decentralization nexus can empower communities to exert influence over local governance and services. CDD and decentralization are both about empowering people at the local level.

The rationale for decentralization in the context of CDD includes economic efficiency, public accountability, and empowerment:
• It gives greater voice and choice to citizens to influence decisions that affect their lives.
• It allows local governments to respond dynamically to communities.
• It results in allocative efficiency by matching of local needs and preferences with patterns of local public expenditure (assumes substantial fiscal autonomy).

Community/local level checks and balances ensure both community-based organizations and local governments can be held accountable to their respective constituencies. Decentralization also provides a powerful impetus for enhancing the scaling up potential of CDD operations. By incorporating local governments in the CDD approach from the outset, and by building strong partnerships between local governments and community-based organizations, CDD projects can achieve scale and sustainability, while improving systems of local governance by building downward accountability towards citizens.

Benefits and challenges of decentralization

Much of the decentralization that has taken place in the past decade has been motivated by political concerns. For example, in Latin America, decentralization has been an essential part of the democratization process as discredited autocratic central regimes are replaced by elected governments operating under new constitutions. However, there is also a strong rationale for decentralization in terms of economic efficiency, public accountability, and empowerment.

In the context of CDD, the major benefits of decentralization are:
• Greater voice and choice of individual constituents to influence decisions which affect their lives, and of sub-national and local governments to respond dynamically to constituency concerns.
• Allocative efficiency — matching of local needs and preferences with patterns of local public expenditure (assumes substantial fiscal autonomy).
• Empowerment of districts, villages, communities, and individual constituents.

The underlying assumptions on which these potential benefits of decentralization rest include:
• Representative elected bodies: Each council member has a mandate to articulate needs of an identifiable constituency and can be held accountable.
• Inclusive local decision-making: Decision-making that does not systematically exclude the poorest, most vulnerable groups, specific social or ethnic groups.

Potential dangers and challenges of decentralization include:
• Elite capture
• Corruption
• Patronage politics
• Local civil servants feel compromised
• Impedes further decentralization
• Incomplete information
• Constituents not able to hold representatives accountable
• Opaque decision-making affecting accountability upwards and downwards
• Rationalizes reform delays and central claw back of power

Types of decentralization

Types of decentralization include political, administrative, and fiscal decentralization. Drawing distinctions between these various concepts is useful for highlighting the many dimensions to successful decentralization and the need for coordination among them:

Political decentralization transfers policy and legislative powers from central governments to autonomous, lower level assemblies, and local councils that have been democratically elected by their constituencies. To be effective, it requires regular elections, clearly defined jurisdictions and powers, and the appropriate legal, political and functional space.

Administrative decentralization places planning and implementation responsibilities in the hands of locally situated civil servants and these local civil servants under the jurisdiction of elected local governments. To be effective, it requires ability to make independent staffing decisions and ability to negotiate conditions of service (though the center may retain a useful role in training)

Fiscal decentralization accords substantial revenue and expenditure autonomy to local governments, including the power to levy taxes and user charges. To be effective, it requires linking pleasure of spending with pain of revenue generation, increasing revenue autonomy, building capacity to analyze data for budget decisions and establishing proper fiduciary controls.