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.
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
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.
Decentralization and Poverty
Reduction
• Countries in which
decentralization had
positive impact on
poverty reduction
• Bolivia
• China
• Ghana
• India (West Bengal
• Mexico
• Philippines
• South Africa
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
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
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
Decentralization and Poverty
Reduction
• Characteristics of Positive Reformers
(con’t)
• Decentralization generally supported by the
government capable to carry out reforms
with transparency, participation and policy
coherence
• Adopted their decentralization programmes
by design
Decentralization and Poverty
Reduction
• Characteristics of Positive Reformers (con’t)
• 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
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
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%)
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)
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
Decentralization and Poverty
Reduction
• Characteristics of “Somewhat Negative”
Performers
• Two categories of these Countries
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–
–
–
Either low income with low Gini index
(Uganda and Vietnam)
Higher income with higher Gini index
(Brazil and Paraguay)
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
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
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
Decentralization and Poverty
Reduction
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•
•
•
•
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
Decentralization and Poverty
Reduction
• Determinants of Pro-Poor Decentralization
– Country Background
– Design of Process
Decentralization and Poverty
Reduction
• Country Background
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Country Size
Quality of Infrastructure
Corruption Perception Index
Gini Index
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
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
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
Decentralization and Poverty
Reduction
• Design Process Factors
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Financial Resources at the Local Level
Local Human Capacity
Political Commitment at the National Level
Donor Involvement and Support
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
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
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
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
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