Implementing Decentralized Local Governance: A Treacherous Road with Potholes, Detours, and Road Closures

Abstract

During the past two decades, a silent revolution in public sector governance has swept across the globe aiming to move decisionmaking for local public services closer to the people. The countries embracing and adapting to this silent revolution have had diverse motives and followed even more diverse approaches. Shah and Thompson attempt to present a stylized view of the motivations and approaches used to strengthen local governance.

The quest for the right balance - that is, appropriate division of powers among different levels of government - is not always the primary reason for decentralizing. There is evidence that the decentralization decision may have more to do with short-term political considerations than the long-run benefits of decentralization. To take stock of progress worldwide, the authors take a comparative look at developments in political, fiscal, and administrative decentralization for a selected group of countries. Most of the decentralization literature deals with normative issues regarding the assignment of responsibilities among different levels of government and the design of fiscal transfers. The process of decentralization has not received the attention it deserves as the best laid plans can fail due to implementation difficulties. The authors revisit major controversies regarding preferred approaches to obtaining a successful outcome. Key approaches examined are big push versus small steps, bottom up versus top down, and uniform versus asymmetric decentralization.

Finally, the authors evaluate Indonesia's 1999 "big bang" decentralization program. The program should be commended for its achievements over a short period of time. However, incentives are lacking for local governments to be accountable and responsive to their residents.

This paper - a product of the Poverty Reduction and Economic Management Division, World Bank Institute - is part of a larger effort in the institute to disseminate ideas in strengthening responsive, responsible, and accountable public governance.