What Makes Decentralisation in DevelopingCountries Pro-poor?

JOHANNES JUTTING, ELENA CORSI ,CELINE KAUFFMANN, IDA M CDONNELL,

HOLGER OSTERRIEDER, NICOLAS PINAUDand LUCIA WEGNER

Decentralisation has been advocated by donors and development

agencies as an instrument to ensure broader participation of citizens as

well as to improve local governance leading to poverty reduction from

the bottom up. On the basis of a comprehensive review of nine case

studies documented in the literature, this study questions this assumption.

According to our findings, a clear link between decentralisation and a

reduction in poverty cannot be established. Two important policy lessons

emerge from this study. First, in an environment where the central state

barely fulfils basic functions and is not interested in giving power and

resources to local tiers of government, decentralisation should not be a

priority for donors as it could be rather counter-productive. Second, in

countries that fulfil basic prerequisites, decentralisation could be a

powerful tool for poverty reduction.

La decentralisation a ete mise en avant par les partenaires au

developpement comme un instrument permettant d’assurer la

participation des citoyens a la definition des politiques publiques

ainsi que l’amelioration de la gouvernance locale, debouchant ainsi sur

une approche participative de la reduction de la pauvrete. Sur la base

d’une revue systematique de neuf etudes de cas de reference sur le sujet,

cet article remet en cause cette hypothese. Nous concluons en effet qu’il

est impossible d’etablir un lien clair entre decentralisation et reduction

de la pauvrete. Des lors, ce travail aboutit a deux recommandations

importantes. Tout d’abord, dans un contexte ou l’Etat central parvient a

The European Journal of Development Research, Vol.17, No.4, December 2005, pp.626–648ISSN 0957-8811 print/ISSN 1743-9728 online

DOI: 10.1080/09578810500367649 q 2005 Taylor & Francis

Johannes Jutting is Senior Economist at the OECD Development Centre, Paris; CelineKauffmann, Nicolas Pinaud and Lucia Wegner are Economists at the OECD DevelopmentCentre, Paris; Holger Osterrieder is Programme Officer at the United Nations DevelopmentProgramme Mauritania; and Elena Corsi is Executive Assistant at the Europe ResearchCenter, Harvard Business School. Email: Johannes.Jutting@oecd.org.

peine a remplir ses missions essentielles et est reticent a confier des

responsabilites et des ressources aux echelons locaux de gouvernement,

la decentralisation ne saurait faire figure de priorite pour les bailleurs.

Par contre, dans des pays qui remplissent les conditions minimales pour

avancer sur la voie de la decentralisation, cette derniere peut constituer

un puissant instrument de reduction de la pauvrete.

INTRODUCTION

Decentralisation has been a major concern of developing countries, the international

development community and researchers for two decades. The debate has mainly

centred on two principal questions: first, what are the main driving forces and reasons

for decentralisation and how can one maximise its overall benefits [e.g.Oates, 1972;

Manor, 1999; Fukasaku and Mello, 1999; Dethier, 2000]? Second, what is the

impact of decentralisation on selected variables of interest like ‘corruption’ [e.g.

Fisman and Gatti, 2002], ‘government responsiveness to local needs’ [e.g. Faguet,

2004], ‘delivery of public services’ [e.g. Litvack and Seddon, 1999; Lieberman,

2002] and ‘political stability’ [e.g. World Bank, 2000]? Interestingly, and despite its

being a ‘hot topic’ for some time now, it is only recently that decentralisation’s

relationship to poverty has received attention [e.g. Crook and Manor, 1998; Von

Braun and Grote, 2002; Crook, 2003; Vedeld, 2003; Asfaw et al., 2004]. The

economic literature on poverty has long ignored the potential importance of

decentralisation in achieving poverty reduction objectives like promoting

opportunities, empowerment, participation, security, and rights for the poor and

excluded at the local level [Von Braun and Grote, 2002].

The objective of this paper is to help fill this gap and identify the determinants

of pro-poor decentralisation processes. Up to the present, the study by Von Braun

and Grote [2002] seems to be the most advanced and in-depth treatment of the

impact of decentralisation on poverty. Based on a rigorous review of the literature

and cross-country comparisons, the authors conclude that decentralisation serves

the poor, but only under specific conditions. They recommend that these

conditions should be analysed within a framework that tackles political, fiscal and

administrative decentralisation simultaneously, while also taking into account

country-specific conditions and different types of decentralisation policies. This

study follows these suggestions by reviewing various case studies addressing the

impact of decentralisation on poverty under a common framework in order to

distil patterns of pro-poor decentralisation policies.

The implementation of decentralisation is usually motivated by the following

two arguments, which are highly relevant for poverty reduction:

. Decentralisation can lead to an increase in efficiency. Decentralisation can be

a tool for central authorities to better identify people’s needs and preferences.

DECENTRALISATI ON I N DEVELOPI NG COUNTRI ES 627

Central state authorities usually lack the ‘time and place knowledge’ [Hayek,

cited in Ostrom et al., 1993] to implement policies and programmes that

reflect people’s ‘real’ needs and preferences. If properly managed,

decentralisation is seen as a way to improve allocative efficiency [Oates,

1972; Musgrave, 1983].

. Decentralisation can lead to improved governance. Decentralisation

enhances accountability and monitoring of government officials and

decision-makers. Unchecked authority and inadequate incentives encourage

‘rent seeking behaviour’ among government officials. Decentralisation

undermines these opportunities by creating institutional arrangements that

formalise the relationship between citizens and public servants. Political

decentralisation and especially the election of local officials by citizens,

together with a strong legal framework, can create local accountability,

thereby fostering officials’ legitimacy, bolstering citizens’ involvement and

interest in politics and deepening the democratic nature of the country’s

institutions [Crook and Manor, 1998; Manor, 1999; Blair, 2000].

Both arguments are highly relevant for poverty reduction concerns. Increased

possibilities for participation, improved access to services and a more efficient

provision of public goods at the local level are major components of most anti-

poverty programmes. Nevertheless, the linkages might not be so straightforward.

As for poverty itself, decentralisation is a multifaceted concept: its outcome

depends to a large extent on the form and type of decentralisation that one looks

at. Two basic concepts are distinguished: deconcentration and devolution. The

first aims at transferring responsibilities to field and subordinate units of

government where field units basically remain under the hierarchical authority of

central state authorities and have no distinct legal existence from the central state.

In contrast, devolution refers to a transfer of competencies from the central to

distinct legal entities, for example area-wide regional or functional authorities,

non-governmental and private organisations. These legal entities have a wide

autonomy in decision making.

Addressing the issue of pro-poor decentralisation is timely as donors are

increasingly looking for tools to strengthen the poverty focus of their

programmes and policies. With respect to decentralisation and poverty a recent

report from the Development Assistance Committee (DAC) concluded that ‘there

is an urgent need to examine more systematically the conditions under which

decentralisation benefit[s] the poorest section of the population within local

governments [. . .]’ [OECD, 2003].

This paper is organised as follows: the following section introduces a

framework on the linkages between decentralisation and poverty. In the third

section the outcomes of the literature review are reported and characteristics of

THE E UROPEAN J OURNAL OF DEVELOPMEN T R ESEARCH628

success and failure highlighted. The determinants of pro-poor decentralisation

processes are presented and discussed in the fourth section, while the final section

concludes by presenting some policy implications for donors.

DECENTRALISATION AND POVERTY OUTCOMES: A SIMPLE

FRAMEWORK

The relationship between decentralisation and poverty is quite complex and

depends on the specific definition of both terms. For the purpose of this study,

decentralisation is defined broadly as embracing the transfer of power and

resources from higher tiers to lower tiers of government. The scope and type of

the decentralisation process is addressed by looking at the actual implementation:

whereas devolution is the most far-reaching form of decentralisation,

deconcentration basically only includes the transfer of administrative power.

Poverty is defined in its multidimensional sense focusing particularly on

empowerment and on the access to social services. Both aspects are supposed to

be directly influenced by decentralisation while an income effect would only

materialise at a later stage (Fig. 1).1 Empowerment is measured by looking at

‘effective participation possibilities for all groups of the society’ as well as ‘local

government’s capacity to implement pro-poor policies’. This distinction stems

from the consideration that the participation of the poor in decision-making does

not necessarily imply that local governments will have the power and resources to

implement pro-poor policies or that the voice of the poor will be heard [Mosse,

2001]. Local governments’ capacity to decide and implement pro-poor policies

largely depends on the design of the decentralisation process and it is related to

factors such as local governments’ human and fiscal resources, type of functions

devolved and the extent of elite capture [Bardhan and Mookherjee, 2000].

In theory, an effective devolution of power should increase the incentives and the

capacity of the poor to actively participate in decision-making, to decide and lobby

for their interests [Manor, 1999], bringing about their ‘empowerment’ as well as pro-

poor policies. As the capacity of citizens to monitor local officials and politicians is

higher in a decentralised system, there are opportunities for an increase in

transparency and thus for a reduction in corruption and an overall improvement in

local governance [Manor, 1999; Blair, 2000; Crook and Sverrisson, 2001].

Decentralised forms of government can equally bring about efficiency gains,

especially in service delivery as local officials are supposed to have a better

knowledge of local needs and preferences [Hayek in Ostrom et al., 1993].

Two sets of conditions are crucial determinants for the realisation of the

described positive effects of decentralisation on poverty outcomes as mapped out

in Fig. 1 [Jutting et al., 2004]: (1) country specificities (size of the country, level

of economic development, degree of democracy and capacities) and; (2) the

design of the decentralisation process itself. The latter is dependent on the

DECENTRALISATI ON I N DEVELOPI NG COUNTRI ES 629

interaction of political factors (commitment to a real devolution process, policy

coherence, donors’ involvement); administrative factors (anti-corruption

measures, division of functions, building local capacity); and fiscal factors

(type and amount of resources devolved).

DECENTRALISATION AND POVERTY: LESSONS FROM SELECTED

COUNTRY EXPERIENCES

The following evaluation is based on reported evidence in the literature on how

decentralisation affected poverty in terms of access to services and

empowerment. The countries selected are thus countries where decentralisation

has taken place and for which evidence on the impact of the reform on poverty

has been collected. Particular attention is given to those countries considered as

having achieved decentralisation. Countries in which decentralisation is an

FIGURE 1

DECENTRALISATION AND POVERTY: BACKGROUND AND PROCESS CONDITIONS

THE E UROPEAN J OURNAL OF DEVELOPMEN T R ESEARCH630

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tral

go

ver

nm

ent

–

Definitionofcategories

:—

***:decentralisationwithanoverallpositive

impact

onpovertyreported

.—

**:decentralisationwithsomepositive

impactsonpovertyreported

.—

*:decentralisationwithmixed

impact

—-:

dec

entr

alis

atio

nw

ith

no

posi

tive

(or

neg

ativ

e)im

pac

ton

pover

tyre

port

ed.Source:

bas

edo

nJu

ttin

get

al.

,2

00

4.

TA

BL

E2

DE

TE

RM

INA

NT

SF

OR

SU

CC

ES

SF

UL

PR

O-P

OO

RD

EC

EN

TR

AL

ISA

TIO

N

Countr

yS

core

(fro

mT

able

1)

Poli

tica

lfa

ctors

Adm

inis

trat

ive

fact

ors

Fis

cal

fact

ors

Boli

via

***

–D

ecen

tral

isat

ion

by

des

ign;

–P

oli

cyco

her

ence

;–

NG

Oin

volv

emen

tuse

of

par

tici

pat

ory

met

hods.

–S

taff

trai

nin

gan

dce

ntr

alst

ate

support

;–

Cle

ardiv

isio

nof

funct

ions,

yet

stro

ng

centr

alre

gula

tion;

–A

nti

-corr

upti

on

mea

sure

s.

–S

table

tran

sfer

s(c

ondit

ional

and

unco

ndit

ional

)an

dlo

cal

tax-r

aisi

ng

capac

ity;

–Y

et,

incr

easi

ng

condit

ional

tran

sfer

san

dce

ntr

alst

ate

contr

ol

over

expen

dit

ure

s.In

dia

(Ker

-al

a)***

–D

ecen

tral

isat

ion

by

des

ign;

–P

oli

cyco

her

ence

;–

Sea

tsre

serv

edin

loca

lbodie

sfo

rw

om

enan

dlo

wer

cast

es,

use

of

par

tici

pat

ory

met

hods,

tran

spar

ency

,in

stit

uti

ons

of

dir

ect

dem

oc-

racy

(pet

itio

ns,

refe

rendum

).

–S

trong

supp

ort

from

cent

ral

gover

nm

ent;

–S

taff

trai

nin

g;

–P

eopl

e’s

Cam

pai

gn

for

Dec

entr

alis

edP

lan-

nin

g

–S

table

tran

sfer

san

dlo

cal

tax-

rais

ing

capac

ity.

India

(Wes

tB

engal

)

***

–D

ecen

tral

isat

ion

by

des

ign;

–P

oli

cyco

her

ence

;–

Sea

tsre

serv

edin

loca

lbodie

sfo

rw

om

enan

dlo

wer

cast

es,use

of

par

tici

pat

ory

met

hods,

inst

ituti

ons

of

dir

ect

dem

ocr

acy

(pet

itio

ns,

refe

rendum

).

–C

lear

div

isio

nof

funct

ions;

–Y

et,

centr

ally

defi

ned

dev

elopm

ent

pro

gra

mm

esan

dce

ntr

alst

ate

contr

ol

over

hea

lth.

–S

table

tran

sfer

san

dlo

cal

tax-

rais

ing

capac

ity.

Phil

ippin

es***

–D

ecen

tral

isat

ion

by

des

ign;

–P

oli

cyco

her

ence

;–

NG

O’s

par

tici

pat

ion

indec

isio

ns-

mak

ing

and

monit

ori

ng;

use

of

par

tici

pat

ory

met

hods,

inst

rum

ents

of

dir

ect

dem

ocr

acy

inpla

ce(p

etit

ions,

refe

rendum

)

–S

taff

trai

nin

g-

som

ere

gio

ns

stil

lla

ckca

pac

ity;

–Q

uit

ecl

ear

div

isio

nof

funct

ions

-st

ill

stro

ng

pre

sence

of

centr

alst

ate

inhea

lth

expen

dit

ure

s;–

Eli

teca

ptu

re;

–A

nti

-corr

upti

on

mea

sure

s(w

atch

dog

gro

ups)

.

–S

table

and

pre

dic

table

tran

s-fe

rs:

fixed

shar

eof

gro

ssre

ven

ues

(inte

rnal

reven

ue

allo

tmen

t);

–T

ransf

ers

not

bas

edon

spec

ific

regio

nal

nee

ds

and

uneq

ual

dis

trib

uti

on;

–L

Gpow

erto

crea

teow

nre

ven

ue

and

levy

taxes

,fe

esan

doth

ers;

–L

arge

fisc

alau

tonom

y,

yet

incr

easi

ng

dep

enden

ceon

tran

sfer

s.

TA

BL

E2

–Continued

Countr

yS

core

(fro

mT

able

1)

Poli

tica

lfa

ctors

Adm

inis

trat

ive

fact

ors

Fis

cal

fact

ors

Ghan

a**

–D

ecen

tral

isat

ion

by

des

ign;

–S

om

epoli

cyin

coher

ence

;–

Par

tici

pat

ory

pla

nnin

gpro

cedure

s,in

stit

u-

tional

ised

rela

tionsh

ips

bet

wee

nel

ecte

dan

del

ecto

rate

.

–C

entr

alst

ate

inte

rfer

esin

loca

lpoli

tics

and

appoin

ts30%

of

loca

las

sem

bly

mem

ber

s;–

Eli

teca

ptu

re.

–P

oli

cyin

coher

ence

lim

its

loca

lre

sourc

es.

South

Afr

ica

**

–D

ecen

tral

isat

ion

by

des

ign;

–P

arti

cipat

ory

met

hods,

NG

Oin

volv

emen

t,

acti

ve

pre

ss;

Cen

tral

ised

stru

cture

of

poli

tica

lpar

tyre

duce

sdow

nw

ard

acco

unt-

abil

ity.

–S

taff

trai

nin

g;

–E

xce

ssiv

ere

gula

tion

of

loca

lfu

nct

ions

and

shar

edar

eas

of

auth

ori

tyli

mit

slo

cal

auto

nom

y;

–A

nti

-corr

upti

on

mea

sure

s.

–S

table

and

pre

dic

table

tran

s-fe

rs,

yet

lim

ited

;

–H

igh

LG

reli

ance

on

loca

lta

xes

,yet

som

epro

ble

ms

of

loca

lta

xev

asio

n.

Ugan

da

*–

Dec

entr

alis

atio

npar

tial

lyby

def

ault

and

par

tial

lyby

des

ign;

–In

crea

sing

centr

alst

ate

com

mit

men

t;–

Som

epoli

cyin

coher

ence

,al

soby

donors

;

–S

eats

rese

rved

inlo

calbodie

sfo

rw

om

enan

dad

opti

on

of

par

tici

pat

ory

met

hods.

–S

om

etr

ainin

gfo

rlo

cal

staf

f;–

Rec

ent

effo

rts

from

the

gover

nm

ent

toin

crea

seL

Gca

pac

ity;

–Q

uit

ecl

ear

div

isio

nof

funct

ions,

yet

stro

ng

centr

alst

ate

inte

rfer

ence

by

sect

or;

–S

trong

elit

eca

ptu

rew

ith

rece

nt

effo

rts

tore

duce

it.

–L

oca

lre

sourc

esst

emm

ing

most

lyfr

om

tied

tran

sfer

s;–

Dec

entr

alis

atio

na

chal

lenge

tolo

cal

tax

coll

ecti

on.

Guin

ea–

–D

ecen

tral

isat

ion

by

def

ault

;–

Cen

tral

opposi

tion;

–P

oli

cyin

coher

ence

,al

soby

donors

;–

No

acco

unta

bil

ity

and

no

bott

om

up

dec

isio

nm

akin

gpro

cess

es;

–In

form

atio

non

LG

acti

vit

ies

lim

ited

by

languag

epro

ble

ms.

–N

oca

pac

ity

buil

din

gef

fort

s;–

No

clea

rdiv

isio

nof

funct

ions

and

lack

of

know

ledge

on

who

does

what

;S

trong

centr

alst

ate

contr

ol

(apriori

contr

ol)

.

–L

imit

edre

sourc

es;

–L

imit

edan

dra

ndom

centr

al

tran

sfer

s;–

Loca

lta

xev

asio

n.

India

(Mad

hya

Pra

des

h)

––

Dec

entr

alis

atio

nby

def

ault

;–

Res

ista

nce

from

bure

aucr

acy;

Par

tici

pat

ory

mea

sure

sin

pla

cean

dse

ats

rese

rved

inlo

cal

bodie

sfo

rw

om

enan

dlo

wer

cast

es.

–S

taff

trai

nin

g;

–U

ncl

ear

div

isio

nof

funct

ions;

–S

trong

elit

eca

ptu

re.

–L

imit

edre

sourc

es.

incomplete process have also been selected. A more comprehensive overview of

these and other country examples can be found in Jutting et al. [2004]

The selected case studies are evaluated in terms of the achievement of

decentralisation under the two areas of poverty outcomes identified in our

framework (Figure 1). There are four different categories: i) positive impact;

ii) somewhat positive impact; iii) mixed impact; and iv) no/negative impact. For

each category a score ranging from three stars (positive) to no star

(decentralisation with no positive (or negative) impact on poverty reported)

has been given (see footnote to Table 1). The summing up of the individual scores

for the two areas of poverty outcomes then leads to the overall classification

(column 6 in Table 1). While it would be useful to report hard evidence about

how many poor people have actually benefited in terms of improved access to

services such information is not available in a systematic comparable manner.

Table 1 should be interpreted with caution for the following reasons: first,

mainly peer-reviewed articles were selected to guarantee a minimum quality

standard for the studies included with the disadvantage that a lot of grey

literature, which is generally more recent, had to be excluded. In some cases the

decentralisation process has changed considerably since the publication of these

articles potentially leading to quite different poverty outcomes. Second, it is

possible that not all of the peer-reviewed articles available have been found so the

reported evidence might not give the full picture. Third, the use of different

methodologies/conceptual and analytical frameworks by the selected authors

partially limits cross-country comparisons. Despite these caveats, the table

provides very interesting general patterns of success or failures of decentralisa-

tion for poverty reduction.

That the positive performers (Bolivia and the Indian states of West Bengal

and Kerala) also adopted a comprehensive decentralisation approach,

concurrently undertaking political, fiscal and administrative decentralisation

might explain their relative success. The process went beyond deconcentration to

a real delegation of power to lower tiers of government, with support from central

government and the adoption of parallel policies to overcome eventual side

effects of decentralisation like increasing regional disparities.

The somewhat positive performers (South Africa, Philippines and Ghana) are

characterised by relatively successful decentralisation programmes, with an

identifiable impact on poverty. Local government’s autonomy is partially limited

by the central state’s detailed definition of local functions and procedures (South

Africa) or the presence of some central state appointees in the governing local

bodies (Ghana). This has reduced the capacity of local government to implement

locally decided policies, and had a negative impact on participation

(empowerment). In the case of the Philippines, the widespread corruption and

an unequal distribution of central state transfers limited local government

capacity to realise pro-poor policies. Nevertheless, in these countries,

DECENTRALISATI ON I N DEVELOPI NG COUNTRI ES 637

achievements which can be ascribed to decentralisation have been made. In

Ghana the construction of new roads and the provision of subsidises for the poor

have increased their access to services, even if part of these subsidies are captured

by the rich. Political participation of the poor has increased and recently local

governments seem to be responding more to local needs [Asante and Ayee, 2004].

South Africa reported some progress in housing, infrastructure and participation

even if the degree of progress achieved has been questioned [Heller, 2001].

The mixed and negative performers are characterised by uncompleted

decentralisation processes (Uganda where fiscal decentralisation lags behind),

limited delegation of powers (Madhya Pradesh) or failed decentralisation (Guinea

with no impact on poverty or possibly an adverse effect on it). Local government

mainly acts as an agent of central authorities, with no decision-making power and

scarce resources. When it does have power, the paucity of human and fiscal resources

and the lack of autonomy brought a negative impact on service delivery, as in the

case of Uganda’s health sector [Scott-Herridge, 2002].

The comparison of these nine case studies suggests that there is a link between

decentralisation and poverty; nonetheless this is quite complex. Furthermore, although

it appears that the chances of pro-poor decentralisation increase with the level of a

country’s overall development – all negative performers are least developed countries

(LLDCs) while most of the positive performers are middle-income countries –

important exceptions, such as the Indian states of West Bengal and Kerala, remain.

The study by Jutting et al. [2004] on a larger sample of countries suggests that country

characteristics are less important than the design of the process when looking at the

implementation and impact of decentralisation. Consequently, and following the

framework presented in Figure 1, the next section deals in more detail with the

different process conditions of decentralisation in the case study countries.

WHAT DETERMINES PRO-POOR OUTCOMES OF DECENTRALISATION

POLICIES?

In the following we compare the different experiences within and between the

groups of performers highlighting similarities and differences in the process of

decentralisation followed. In line with the framework presented earlier, the focus

will be on political, administrative and fiscal factors. Table 2 presents a summary

of the main findings.

Political Factors: Commitment, Policy Coherence, Transparency and

Participation Commitment

The first variable analysed in Table 2 (column 2) is the country’s commitment

to decentralisation, that is, if the decentralisation reform has been adopted

by design or by default. Decentralisation by design refers to countries that

decentralised believing that effective decentralisation could serve their policy

THE E UROPEAN J OURNAL OF DEVELOPMEN T R ESEARCH638

objective, be this poverty reduction, efficiency or widening democracy. All

positive and rather positive performers believed in the benefits of decentrali-

sation and were committed to delegating powers and responsibilities. Where

governments were committed, the process was better planned, resources and

functions were delegated and human local capacity was taken care of. As local

government received more powers and resources its ability to have a positive

impact on poverty increased. The most prominent case in this respect is probably

West Bengal where pro-poor decentralisation was possible thanks to the

commitment of the pro-poor communist party [Crook and Sverrisson, 2001].

On the other hand, decentralisation for the negative performers has been the

result of international pressure (Guinea) or was seen as a means to consolidate

central power against ethnic or political rivalry, yet with no commitment from the

central government to effectively empower local government, delegate functions

or achieve pro-poor outcomes: decentralisation by default. It is of particular

importance that commitment concerns the central bureaucracy and not only the

political leadership (Madhya Pradesh); see also Ribot [2002].

Internal Policy Coherence

Most countries witnessed some form of policy incoherence because the central state

adopted policies that partially undermined the power of local authorities by

indirectly diminishing resources or functions. A typical example is the adoption of

sectoral policies and the use of sectoral funds by the central government to finance

interventions in health, water, sanitation and infrastructure while simultaneously

devolving these tasks to local government. This is less of a problem in the positive or

rather positive countries where they are surmountable limitations (e.g. Ghana);

however, they are real obstacles to pro-poor decentralisation in the others where such

incoherence hides an unwillingness to decentralise. Policy incoherence was reported

in Table 2 only when it had a particular relevance.

For many of the positive and rather positive performers policy coherence

implies also that decentralisation is part of a broader agenda of reforms

undertaken by the government. Most of them adopted prior and/or parallel to

decentralisation, economic liberalisation and democratisation reforms (e.g.

Ghana, South Africa, Philippines). In India (West Bengal) decentralisation

reforms have been linked to a comprehensive and unusually successful land

reform programme. These accompanying measures can help to counter the

adverse effects of decentralisation in terms of elite capture and corruption.

Transparent and Participative Process

In all the countries reviewed the decentralisation process has been democratic

(i.e. delegation of powers to locally elected institutions). Local government is

elected, even if in some cases local democracy suffers from a direct central state

interference in politics and a lack of democracy at the national level (Guinea) or

DECENTRALISATI ON I N DEVELOPI NG COUNTRI ES 639

is weakened by the presence of appointees from the central government in their

governing bodies (Ghana).

Contrary to the negative performers, positive performers have sufficient

information flows, thus citizens are informed about the activities of local

institutions and are more able to participate and to monitor local officials. For

instance, the media is very active in South Africa; it issues regular statements

about local government activities in India and Bolivia. It is also noteworthy that

in positive performing countries, it is the local government that provides

substantial information on decentralisation and public policy issues, which seems

to be a result of greater local capacity. In some of the negative performers, the

information is provided almost exclusively from the central government in an

effort to hold local government accountable and to assert its role in the political

process (e.g. Uganda).

Besides providing for local elections, positive and rather positive countries

have also created democratic procedures at the local level to allow for people’s

involvement in public affairs by other, institutionalised, means. This has

stimulated broader and more extensive involvement of previously excluded

segments of the population. Positively performing countries provide for the use of

participatory planning procedures, for example to determine the level of revenue

to be transferred to governments (the Gram Sansad performs this function in

India). India, since 1993, reserves seats in the local governments for specific

groups of the population (women and lower castes) and provides for the

institutionalisation of village assemblies charged with monitoring, and presenting

policy suggestions to, municipalities as well as decision-making at the local level.

In all negatively performing countries participation of the poor in local

institutions is low and elite capture high. This tends to reflect a top-down culture

of politics, and distrust towards the elected communal representatives. In spite of

efforts to provide adequate information on local government activities and the

introduction of some participatory institutions, citizens’ opportunities to

participate remain insufficient.

A strong civil society and the adoption of measures to include it in the process

of decentralisation seem to have further reinforced pro-poor outcomes of

decentralisation processes. Local civil society plays an important role for a

transparent and participative process, insofar as it can exercise pressure on the

governments and control their actions (e.g. South Africa). Yet this depends on

the organisational structure of civil society, its composition, its ‘civic-ness’, its

strength, independence of the state and its capacity to represent and promote the

interests of the poor and socially excluded [Narayana, 2005]. For example, in

Ghana elected assemblies are bound to encourage and support community self-

help groups. At the same time, these associations are largely dominated by the

elites, thus the provision does not empower the poor and the socially excluded

[Crook, 2003]. In South Africa civil society is facing serious financial problems.

THE E UROPEAN J OURNAL OF DEVELOPMEN T R ESEARCH640

The intervention of the state to support some groups is not always beneficial as it

erodes their independence [Friedman and Kihato, 2004]. On the other hand,

countries that are less successful in reaching pro-poor outcomes through

decentralisation are characterised by a weak, often elite-dominated civil society

(e.g. Uganda).

Administrative Factors: Countering Corruption, Capacity Building and the Role

of the Central State

Elite capture and corruption

Table 2 underlines the emergence of elite capture and corruption when these

factors constituted an obstacle to pro-poor outcomes. In reality, there is no

example of the non-occurrence of elite capture or corruption across all nine case

studies. Community-based participatory approaches are not a panacea. Never-

theless, positive performers tend to be less marked by elite capture and corruption

than negative performers. At least, in these cases, there is an awareness of the

need for action and the countries concerned are putting in place measures to

counter corruption and to monitor administrative behaviour (e.g. inspectors and

social audit in India; investigating commissions appointed by the provinces in

South Africa; vigilance committees in Bolivia). In negatively performing

countries, decentralisation is often seen as part of a patrimonial agenda aimed at

preserving the monopoly of power and ensuring control over resources.

Capacity building

Most countries in the process of decentralisation experience some form of

interference from central government. This can be direct (e.g Guinea in local

politics) or indirect as a consequence of policy incoherence. Central governments

tend to legitimise their interference in local policies by pointing to a lack of capacity

in local government. In reality, this argument hides mainly their unwillingness to

delegate power. While all positive performers are characterised by strong local

human capacity, often it does not precede the decentralisation reforms. Table 2

shows that all positive performers invested in building local capacity. At the same

time, the literature gives evidence that local government capacity can increase as a

consequence of decentralisation [Rondinelli et al., 1989]. The devolution of powers

can generate ‘learning-by-doing’ processes which can help local government to

build up capacity through practice. Common to negative performers is the

considerable lack of pre-existing local human capacity and very little support from

the central state in favour of training during reform.

Central/local powers

A key issue which emerges from the review of the case studies is the role of the

central state in a decentralised system. While local government can be an

DECENTRALISATI ON I N DEVELOPI NG COUNTRI ES 641

important means for creating enabling environments for poverty reduction,

the overall responsibility for implementing pro-poor policies remains with the

central state. This is even more essential in environments with high inequalities

based on traditional social institutions, e.g. gender or caste. Recent research on

India suggests that giving power to local tiers of government is not sufficient to

increase the participation of marginalised groups, in particular women

[Narayana, 2005]. The central state has to ensure that existing social inequalities

are taken into account and are not re-enforced once decentralisation has started.

Indeed this seems to have been the case in Uganda where judicial reform

favoured local councils that often discriminate against women. To have a pro-

poor impact, decentralisation should be accompanied by complementary

measures such as investment in education or the promotion of land reform.

Whereas it is undisputed that for public goods with inter-jurisdictional spill-over

effects (e.g. vaccination), the central state should continue to take the lead in their

delivery with local governments playing a subsidiary role, the debate on the role

of the state is still not settled when it comes to those goods that are not

exclusively public such as health, education, water and sanitation.

While the case studies demonstrate that positively performing countries had a

clearer division of functions between the centre and the periphery, it does not

shed light on which functions should be delegated and to what extent.

Nevertheless, it seems that even in a decentralised system, the central

government has an important role to play.

Fiscal: Stable and Type of Resources

The last column of Table 2 shows that decentralisation has been successful, in

terms of pro-poor objectives, only when local governments disposed of sufficient

resources to fulfil their new tasks. A study on India found a significant correlation

between the health conditions of the rural poor, measured by the infant mortality

rate in rural areas, and fiscal decentralisation [Asfaw et al., 2004]. Lack of

resources and freedom in allocating them seem to have been a general problem

for those countries in which decentralisation did not bring about pro-poor

outcomes.

Basically, there are three ways in which local authorities can obtain resources:

through transfers from the central governments, by raising their own taxes and

from donors’ contributions. However, there are no data in the case studies for the

latter. In many of the positively performing countries, resources at the local level

have come both from transfers and local taxes (e.g. Bolivia). Independent and

substantial tax-raising powers seem to be a major criterion for successful pro-

poor decentralisation, e.g. China [Von Braun and Grote, 2002]. However, these

tend to increase regional inequalities from an economic and social point of view

as happened in China. Needs-based transfers from the central government are

helpful in targeting the poor [Bird and Rodriguez, 1999]. Transfers in general, as

THE E UROPEAN J OURNAL OF DEVELOPMEN T R ESEARCH642

long as they are transparent, stable and predictable, have a positive impact on

decentralisation as they can alleviate regional inequalities, enable local

government to achieve bottom-up, pro-poor policies while at the same time

grant that main services are delivered (e.g. Kerala). In Bolivia 20 per cent of the

budget is automatically allocated to local governments each year. However,

transfers should not be tied by the central government and constitute the only

funding of local policies as they will leave local governments with no decision-

making autonomy, e.g. Uganda [Scott-Herridge 2002]. An important element for

successful poverty-focused decentralisation is whether local governments have

the power to allocate resources. Limited or no ability to decide on expenditure is

an impediment to pro-poor decentralisation as it leads to poor local

responsiveness to local needs. While the central government can still follow

successful pro-poor policies (as is the case of Uganda), the benefits which might

stem from bringing governments closer to the people are not fully exploited.

All of the negative performers are characterised by extremely limited

financial resources, that is to say, limited (or tied) transfers and limited or no local

tax-raising powers. Although it is certainly true that unrestricted power to decide

on expenditures or arbitrary decisions bears the risk of increased elite capture and

corruption and can be a threat to macroeconomic stability, e.g. Philippines

[Tanzi, 2000], freedom to decide how to spend resources is essential for effective

pro-poor decentralisation. Many authors underline the importance of the structure

of the transfer system and call for the establishment of monitoring instruments

[Bird and Rodriguez, 1999; Crook, 2003; Crook and Sverrisson, 2001].

The last column of Table 2 also highlights a common problem in local tax-raising

capacity, which is more evident in negatively performing countries due to the

phenomena of local tax evasion. This can be ascribed to a lack of tax-raising

legitimacy of local governments (e.g. Guinea and South Africa to a certain extent). In

Uganda, tax evasion is aggravated by the unwillingness of local authorities to impose

taxes (mainly those on the rich) and the recent reliance on private collectors that tend

to capture part of the resources [Francis and James, 2003].

CONCLUSIONS

This paper assesses the conditions under which decentralisation most likely leads

to pro-poor outcomes. Despite reviewing the literature for nine, regionally

dispersed, countries it is nearly impossible to find hard, measurable evidence of

the impact of decentralisation on poverty. It is hence difficult to establish a clear

link between decentralisation and concrete/measurable improvements in access

to services and empowerment. This is an important area for future research.

Nevertheless, reviewing the reported outcomes in the nine countries, and

linking them back to inputs and process, provides interesting patterns of pro-poor

decentralisation processes. It appears that the theoretical benefits of

DECENTRALISATI ON I N DEVELOPI NG COUNTRI ES 643

decentralisation for poverty reduction – increased efficiency and improved

governance for more demand-oriented social service provision – are far from

assured. On the contrary, while positive experiences in terms of improved access

to services and empowerment have been reported in some countries – notably

Bolivia and in some Indian states – the picture is rather gloomy in most African

countries. Reforms in African countries have been limited to administrative

deconcentration – with very little or no positive impact on poverty reduction.

The political economy of reform processes in countries characterised by weak

governance systems and capacities often makes a full delegation of powers and

resources unlikely. Hence, key factors of success for pro-poor decentralisation

seem to be a real devolution of power and resources while establishing

accountability systems. As decentralisation involves a redistribution of power

and can generate opposition from those who will be negatively affected by it, it

can only be effective and generate pro-poor outcomes if there is a strong

commitment from central government and political leaders: ownership and

objectives of the reforms are decisive. While there is potential for poverty

reduction through democratic decentralisation, there are also some hidden

dangers such as reinforcing local elites. Finally, the review of case studies

suggests that in a decentralised system the central state retains an important role

in leading and monitoring the reform process. Two important policy lessons for

donors can be taken from these findings:

1. Donors should be more aware of the political economy of decentralisation as a

change process. Decentralisation is a political process that will not produce

gains on all sides: as with all reforms it creates winners and losers. Hence, it

will be important to ensure that the winners become reform ‘champions’ and

that the losers have a forum where their complaints will be dealt with. Various

forms of compensation should be considered. Donors should promote reforms

on several levels within the government, including at the intermediate levels

that have an administrative and political role to play. Otherwise reforms will

not produce sustainable results. While planning entities might be more willing

to engage in decentralisation, the ministries of finance and/or internal affairs

may be more reluctant when it comes to managing the process.

2. Donors should emphasise the instrumental character of decentralisation in

creating an enabling environment for poverty reduction at local levels.

Decentralisation should be promoted as an important instrument for poverty

reduction, not as an end in itself. As the link between decentralisation and

poverty reduction is not straightforward, donors should work to straighten this

link by putting pressure on governments for pro-poor outcomes, constantly

monitoring the process and adopting flexible, impact-oriented (learning-by-

doing) and country-specific policies. In order to ensure effective monitoring,

THE E UROPEAN J OURNAL OF DEVELOPMEN T R ESEARCH644

the adoption of service delivery standards and pro-poor desired outcomes is

required.

In all, the basic conclusion from this study is that to achieve pro-poor

decentralisation, commitment from the national elite and the support of the

population is fundamental, while sound donor support could substantially help to

achieve the task. Where there is no support for decentralisation or the state is

collapsing, donors should redirect their efforts to build this support, or, in the

second case, focus first on state-building, as the role of the central state in the

decentralisation process is crucial.

ACKNOWLEDGEMENTS

The authors would like to thank three anonymous referees for their detailed and

most helpful comments on earlier versions of this paper. All authors write in their

individual capacities.

NO TE

1. In a more comprehensive review by Jutting et al. [2004] including 19 case study countries, none ofthe studies analysed income effects, while the majority looked at participation and access/use ofsocial services. A more comprehensive framework including the income dimension has beendeveloped by Steiner [2005].

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