Pelajaran Desentralisasi Dr Indonesia

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Comparative Decentralization Lessons from Pakistan, Indonesia, and the Philippines

Author(s): George M. GuessSource: Public Administration Review, Vol. 65, No. 2 (Mar. - Apr., 2005), pp. 217-230Published by: Blackwell Publishing on behalf of the American Society for Public AdministrationStable URL: http://www.jstor.org/stable/3542555 .

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GeorgeM.GuessOpenSocietyInstitute

ComparativeDecentralizatione s s o n s f r o mPakistan, Indonesia, a n d t h e Philippines

Thisarticleprovidesan analytic rameworkoguideregimes hatare designingor implementingdecentralizationrograms. t s based on a comparison f threeAsian cases of fast-track ecen-tralization.The rameworkuggests hatregimescontemplatingevolutionmust ace fundamentalissues of (1) background upport, 2) cultureand institutions,nd (3) technicaldesignand se-quencing. tcanbe usedby regimes ocompare herelative ifficultyf fundamentalchallenges odecentralizationwiththeirown capacityand potential or effectiveresponse.The hreeregimesresponded imilarlyo thefirst woissuesanddifferednhowtheyperformedechnical ctivitiesoimplementhedecentralizationrograms.Withinhis echnicalequence, heregimesvariedwidelyinperformance.nthat hePhilippine rogramhas attainedbetterperformanceo far,the differ-ent responsesof thatregimeare significant.More research s required o explaindifferencesntechnicalperformancenthePhilippinesnd othersimilarprogramsand to attributemeasuresofdecentralizationuccessto thesedifferences.

IntroductionRegimes that are contemplatingdecentralizationpro-gramsare often reluctant o take the political risk of un-knowntechnicalconsequences n designand mplementa-tion.Regimesknowthatpolicies are often based on myth,and decisions on imperfect information.Policy makerswould like to eliminatemythsand reduceuncertaintybe-fore proceedingwith programssuch as decentralization.In 1996, policy makersat the AlbanianMinistryof Inte-rior asked me to provide comparativeregional informa-tion on how to preventfiscal transfersfrom acting as adisincentive to local revenue mobilization. Without this

information,which was unavailableat the time, the min-istry's state secretary or local governmentwas reluctanttopushfor devolution.Other egimeshavealso found hem-selves at this point, and they need an empiricallybasedguide or framework or the successful design andimple-mentationof decentralization.Considerable advice hasbeen provided by internationaldonors, consultants,anduniversitypersonnelon decentralization.But at this stage,regimesneed morethantechnical advice on single issuessuch as fiscal transfersor tax policies.This article provides a preliminary but empiricallygroundedframework or regimes that are contemplatingdecentralization.This framework,which is based on the

experiencesof Pakistan, Indonesia,and the Philippines,predictsthatregimes will face both generalbackgroundchallenges (top support,decision capacity,and politicalculture)andspecifictechnicaldesignissues.Theyneedtorespond o intense criticism hatneither heregimenorthecountrycan meet these decentralization hallenges.Theframeworkprovidespreliminaryanswers to these critics.

ToDecentralizer Notto Decentralize?Regimesare advisedthatdecentralizations an efficient

programhatcanimproveperformance. fficiency s averybroadcategory n theliteratureGuess,Loehr,andVazquez1997, 10-26) that ncludesactivitiesranging rompoliticalrepresentationo service results.The notionof an efficientlocalgovernments that t canprovidemoreresponsiveandinnovative ervicesand, n turn,canbe held moreaccount-able foroperationsby localvoters hannationallyprovidedDr.GeorgeM. Guess is director f research,Open Society nstitute,ocalGovernmentnd Public erviceReformnitiative,udapest,Hungary. revi-ously,he waspublicbudgetingpecialistorthePakistan iscalDecentrali-zationproject, inancedby theAsianDevelopment ank 2001-02), andtechnicalbackstopor heIndonesiaLocalGovernmentinancial rameworkproject 2001-02), financedby the U.S.Agencyfor Internationalevelop-ment.E-mail: [email protected].

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operations.Regimes design and implementprogramstodecentralizeuthorityndpower olocallyautonomous nits(asopposed o a deconcentration f centralgovernmenter-vices locally or administrative ecentralization)or a vari-ety of reasons.The most common are related o policy ortechnicalconcerns: o generate ocal pressure or nationalorprovincial tatemodernization;oprovide hepublicwithcheaper,better-quality,and greaterservice coverage; toachievebudgetsavingsby cuttingthe centralprovisionoflocal services;to widen political support or andincreasethe level of trust n the central egime; o increase ocalpar-ticipationnplanning ndbudgetingoproduce ervicemixesconsistentwith local preferences; o producefewer whiteelephantor incompletecapitalordevelopmentprojects; ohold the country together; o permitregionalor local ex-perimentationn programdesign;andto prevent he disin-tegrationof the centralgovernment Burki2001;Richburg1998).A relatedrationale ordecentralizations economic andfiscal: Decentralizeddecision makingis crucial for effec-tive organization n that it promotesinternalcompetitionandentrepreneurialalent(North1990, 81). Fiscal decen-tralizationallows local governments o financecapitalin-vestmentson theirownthrough esponsible ong-termbor-rowingin privatemarkets.This strengthens he autonomyof local governmentsand the fiscal condition of centralgovernmentsby reducing he needforgrants romthe statebudget or loans from international inancial institutionsbackedby sovereignguarantees USAID 2002, 1). In ad-dition,resolvingverticalfiscal imbalances n intergovern-mentalsystems by devolvingauthority llows aclosercor-respondence etweenrevenuemeansandexpenditure eeds(Shah 1994, 40). A slightly differentrationale ocuses onthe macropoliticalbenefits for democraticstability andresponsiveness,thatis, expansionof the governingcoali-tion to increase the inclusiveness of the centralregime.Governing oalitionsmaywant o increase heir egitimacyby expandingtheir base of supportandby reducingcon-straintson their policy freedom. Autocraticregimes are

typically held in place by small groups of backers whokeep themin power(Bueno de Mesquitaand Root 2002,31); this increasestheir longevity,but risks populardis-contentand theoppositionof international onors.Decen-tralizingpowerto thelowertiers of governmenthas beenameans of enlistingnew supporters,which partlyexplainsthe recent devolutionprogram n Pakistan.1Six majorperformancendicators recommonlyused tomeasureprogram uccess orfailure.Table1 employstheseand other well-knownmeasures o evaluate hree cases ofdevolutionmplementation. irst, ocalgovernmentshouldincrease heirown-source evenues.Dependenceoncentraltransfers houlddecreaseand helocalproportion f budgetfinancingshould ncreaseafterdecentralization. hismea-suresthe sufficiencyof local revenues o financebudgets.Second, with combined formula-basedransfersand newlocal sourcesofrevenues,ocalgovernmentshould ncreasetheir unding tability.The basis forallocating entral rans-fers is often opaqueandnegotiated.Coupledwith centralrevenue hortfalls,hebudget ystemproduces udden und-ing cutoffsthatnegativelyaffect ocal services.Third, ocalgovernmentbudgetautonomyshould increase.In contrastto centralcontrolsandextensiveearmarks f localfunding,decentralizationhouldgive local officials ncreased uthor-ityto shift funds oimprove ervicedelivery.Fourth,decen-tralization hould be associatedwithimproved ervice de-livery.Servicessuch as health,education,andwatersupplyshould be of higherqualityanddeliveredat lowercosts tomorecitizens,that s, technicalandallocative fficiency,re-spectively.Fifth, the performance f services and the de-centralizationrocess tself shouldbemonitored ndevalu-atedby citizen groups throughsurveysand social audits.This should lead to greateraccountability ndresponsive-ness of elected andappointedofficials to local citizens.Fi-nally,decentralizationhould ead togreaterocalauthorityto hire andfireappointed fficials,meaninggreater espon-siveness of local governments o citizen needs. Officialswould no longerbe appointedrom thecenterandpaidforby the localgovernmentsWinklerandHatfield2002).

Table1 ComparativeDecentralization erformanceShareof subnational SNG sets taxown-revenuesntotal base and raterevenues**percent)

Philippines 42.8

Pakistan

Yes

YesNo

5.0Indonesia 25.4

SNGauthorityosetbudgetpriorities

Yes,butcentralgovernmentstill armarksYesNo

SNGmayor/council elected

Yes

Nazim bycouncilMayor bycouncil

SNG candesign/implementrg-staffingorservicereqsYes

NoNo

Dedicated ndrule-basediscaltransfer/tax

Yes

YesNo

"*Source:overnmentinance tatistics earbook001 (Washington, C: nternationalonetary und).With heexception f Pakistanorwhich ocalstatistics avenotyetbeenreported,hemeasures f local revenue ufficiency ereobtainedby dividing otalrevenues nd grantsby revenuesromother evelsof national overnmentndsubtractinghisamount rom100 percent.SNG= Subnationalovernment.

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ImprovedserviceoutcomesNA

NANA


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Regimes are regularlyprovidedthese argumentsandmultiple measuresfor decentralization.They know it isefficient to decentralize,but majorinefficiencies can re-sultfrompoorly designedand mplementedprograms.Forinstance,they could lose theirelected or appointed obs,andthecountry oulddescend nto(perhaps reater) haos.What shouldtheydo?

ComparativeethodologyTo provide applied lessons to policy makerswho aredeciding whether or how to engage in decentralization,comparative ield lessons areneeded from similarcases.The matched-case method of comparison that Xavier(1998) uses to compareMalaysianandAustralianbudgetreforms is useful for this purpose.Thatmethod was usedin this researchto select countries with similarintergov-ernmentalstructures hat have institutedsimilar reformprogramsundersimilarregionalconditions.Classificationof the similaritiesallows one to holdconstant hekey fac-torsexpectedto influencereform,reducing heproblemofmultiple causation,which otherwisebesets comparativeanalysis. By picking decentralizationcases with similarkey variables,this studyfocused on the measures,condi-tions,andvariables hat aredifferent.Focusingon the dif-ferences of matchedcases allows for a morerigorousex-amination of factors that may account for variationindecentralizationprogramresults.2

BackgroundndContext nMatchedProgram asesThethreeprograms resimilarnthat heyare"fast rack."None of them was donordriven,andinternational onorssuchas theAsianDevelopmentBankandtheU.S. AgencyforInternational evelopment ontinue oplaycritical up-portingroles. Forthepurposesof matchingcases,these aresimilar egional xamplesof once-centralizedtates hathaveevolvedintofederalgovernance ystems.Throughhis evo-lution,all threecountrieshavemaintained elativestability.All threehaveenforcedmacroeconomicdiscipline,whichtendsto ensurepoliticalstabilityby stabilizingprices,em-ployment,andbudgetdeficits(Guess,Loehr,andVazquez1997, 39). Stabilitycan be used as a resourceby centralregimes oreallocate"policy atitudeor"agencyautonomy"to its counterpartsn lower-tiergovernments Peters1978,168).Inpoliticalandeconomicstability,hePhilippineswasrankedenthmoststableandIndonesia ighteenth yEurasia/LehmanBrothersEconomist 003, 100).Economicgrowthremains trong nbothcountries,withgrossdomesticprod-uct increasesof 5.8 percentand 3.9 percent,respectively,from the same quartern 2002. In the contextof relativestability,all threeregimeshaveattemptedo reallocateau-

tonomyandauthorityhroughdecentralizationrograms.Despite recent terrorist-control roblemsand internalcriticismfroma vibrant ocal press, the Pakistaniregimecontinues to governthroughcivil serviceandmilitary n-stitutions,with reasonablesuccess. Recent changes andsecuritythreatssince September11 have kept PresidentMusharraf's egimein powerandhave increasedsupportfor devolution.Fearof regionalfragmentationn light ofgrowingpovertyand nequality-partlyattributableopoorlocal services-has been high among all three regimes.Pakistan'sprogram bandoned econcentratedubnationalgovernance onsistingof provinces,divisions,anddistrictsandcreatedthreenew levels of countrywideelected gov-ernment:districts(96), tehsils, or towns (337), andunioncouncils (6,022). The program mplementsthe intent ofthe May2000 local governmentplan.The operatingprin-ciple is to transferpowerdownward o citizengroupsanddistrict-levelgovernments o provideandfinanceneededbasic services thatwere not being providedby eithertheprovincesor the centralgovernment(NRB 2000, 9). Animpetus orthedevolutionprograms that hecentralgov-ernment-the National ReconstructionBureau-rightlyfeared hatpopulardissatisfactionwithitsperformancewasgrowingandthatthis threatened he state'slegitimacytohold the nation, four large and dissimilarprovinces,to-gether.Powerwas formallytransferredo thenew districttier of governmentnAugustof 2001. In 2002, it was esti-matedthe districtsgeneratedan averageof 5.0 percentoftheirown revenues(table 1). Thatis, 95 percentof theirfunds were still providedfrom transfersand shared rev-enue sources.3

The Philippinedecentralizationprogramhas been de-scribedas one of the most farreachingin the developingworld. A long traditionof political-administrativecen-tralismexisted in the Philippinesthatwas initially chal-lengedby theconceptof local autonomy,enshrined n theConstitutionof 1987 and laterin the Local GovernmentCode of 1991 (RepublicAct 7160). This was the fifth at-temptsince 1946 to empowerthe fourlevels of local gov-ernmentwith political andadministrative uthority YapandSator2001, 1).Theprogrambeganwiththeimplementation f theLo-cal GovernmentCode in 1991 (Galang2001, i) and ex-pandedthe responsibilitiesand authorityof the 76 prov-inces, 1,540municipalities, 6 cities,and42,000 barangays(precinctsorwards).Themajorchangewastheexpansionof city, municipality,and barangay urisdictionover theplanningandprovisionof hospitals,social welfare,envi-ronmental rotection, ublic nfrastructure,ndzoning.Thecenterwould henceforthsupportor superviserather handictateorcontrol ocalactivities ntheseareas Miller1999,15).An internalrevenueallotment ormula ransferbasedlocal financingon population(50 percent),equalizationComparativeecentralizationessons219


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(25 percent),andland area(25 percent)(Miller1999, 15-16). In 1999, the allotmentactuallyexceededthe costs ofdevolved functions and other mandates.Reflecting highlevels of regimesupport or thereform, his led to adecen-tralization arity-a centrally undedsurplus orlocalgov-ernments.The Indonesian"big bang"devolutionprogramcom-menced nJanuary f 2001, implementing wo laws signed

in 1999 (Aim,Aten,and Bahl2001). Ithas been describedas "one of the fastest and most comprehensivedecentrali-zation initiativeseverattemptedby any country" USAID2002, 1). The program ransferredpowerover core localservices primarily o the 268 districtsand,to a lesser ex-tent, the 31 provincesandroughly350,000 villages. Theprogrambroadlyexpandedlocal authorityover new ser-vice facilities andsectors.Toensurethat ocal units actu-ally performcore functions consistentwith minimumser-vice standards,Law 25/2000 providedtechnical criteriafor local service quality, sufficiency, and cost. This ser-vice-monitoringsystem now has to be tested and imple-mented.The Indonesiangovernmentand nternational o-norscontinue o support heprogram,withpositiveresults.The Pakistaniand Indonesianprogramsare similar n thatboth devolvedauthority o local governments, argelyby-passing the provinces and shifting large groups of civilservantsto the districts to provide them with technicalcapability.To summarizeprogramsimilarities,all three countriesdevolved authority or programsthat were formerlytheresponsibilityof higher-tiergovernments.The three re-gimes (Philippines,Pakistan,andIndonesia)decided to gofull speed aheadon reformsby (1) devolvingmajorfunc-tions, (2) assigningrevenueauthorityandblock grantfi-nancing,(3) transferring adres of central andprovincialofficials andpositions to administer he decentralization,and(4) organizing ocal electionsfor councilsandmayorsto hold local administrations ccountable.All are financ-ing the devolution and new responsibilitieswith entitle-ment sharesof higher-tierrevenues(Pakistan's"divisiblefund/localfund").All transferred ubstantialnumbersofadministratorsndtheirpositionsfromhigher-tier overn-ments to providethe technicalresources for implementa-tion (70,283 in the Philippines,two million in Indonesia,and about700,000 in Pakistan).Of course, the pathswere not completely similar,andthere wereminordifferences n implementation.First,thelegalbasisfor local governments xistedinthePhilippinespriorto the reform.This meant thatIndonesianand Paki-stanipolicy makershad a bigger job ahead. On the otherhand,duringthe 1947-58 period,Pakistani ocal govern-ments operatingunder administrativedecentralizationi-nanced95 percentof theirneedswith own-source evenues.Following hispostpartition eriod, ocalgovernmentswere

weakenedby increasing ocal partisanship ndintrusionsfrom the centralbureaucracyShah 2003). This suggeststhatPakistan ada localgovernmentraditionhatwasshortcircuitedandis now being reconnected.Thus, the differ-ence betweenPakistanandthePhilippines s narrower till.Second, while the Philippinereformfocused largely onfiscal devolution and not on politicaldecentralization, nall-at-oncesequencewas followed in Pakistanand Indo-nesia-fiscal andpoliticaldecentralization.Third,higher-tieradministratorseployedto local units are to be tempo-rary nPakistan ndhavebeenpermanentn thePhilippines.Majordeploymentsare still to be made inIndonesia.Nev-ertheless,the programsaresubstantially imilar for com-parativepurposes.Challengeso Decentralizationesignand ImplementationThe proposedpolicy framework uggests thatregimesface three types of constraints n the implementationofdecentralization:(1) background upportand local tech-nicalcapacity, 2) cultural-institutionalssues,and(3) tech-nical design and sequencingissues (figure 1). Each con-straint houldbe recognizedby policy makersas a triggerpoint for review, course corrections,or possibly haltingdecentralizationprograms.The threeregimes studiedre-spondedeffectively and similarlyto the first two sets ofconstraints.Theirperformancesdifferedin how they re-spondedto the thirdset of constraints: echnical designand sequencingof activities. Regime responses allowedcomparisonof similarcasesrespondingdifferently o tech-nical sequencingchallenges.Withimpactdata(whichwedo not have), one could attributedevolutionprogramre-sults to differencesin regime abilities to respondto cul-tural hallengesand odesigneffective echnical equences.Using theproposed rameworko compare he threedevo-lutionprograms acingcommonconstraints,one cancon-firm or rejectthe importanceof the constraintsand focuson the successesand ailures nresponse otheseconstraintsand measuretheir effects on programresults.Background Conditions

Opponentsoftenargue heseconditionsmust be imme-diatelypresent or decentralizationo succeed.Withoutop-Figure1 Challengesand ConstraintsoDecentralizationmplementation1. Background 2. Cultural/ 3. Technicalsupport institutional design/(Regimeupport/ , (Politicalulture/ - sequencinglocaltechnical civilsociety/ (Similarities/capacity) institutional differences)rules)

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level supportandlocal technicalcapacity, t is argued,de-centralization rogramsmust fail. Infact,background on-ditionsare variablesrather hanconstants,andtheycan bemet with supportingpublic statementsby the regimeandeffective egalaction for nstance, heauthorization f lawsandregulations).Top-LevelRegime Support

For successfulimplementation, egime support4houldexist inthree orms: 1) the authorization f legalandregu-latoryframeworks, 2) the provisionof adequate ocal fi-nancing,and(3) the authorization f oversightandcontrolstructures.While sustained egimesupport xists in all threecases, problemsremain.First,as indicated,organic aws have beenpromulgatedin all three countries and supportedby the respectivere-gimes. Possibly the strongest supporthas been providedby PresidentMusharraf,who made the devolution hecen-terpieceof his governancereforms,widening regime sup-port in the face of majornationalsecurity threats and along legacyof corruptandpoorlydelivered ocal services.Second, regime support s typically measurable n finan-cial supportprovidedto local units. One of the greatestthreatsto devolutionand local governmentreform is thefailure to providesufficient resourcesto meet needs andlocal aspirations(Cochrane 1983, 6). In Pakistan,localgovernmentshave been given new statutorysources ofrevenue.They now have the independenceto decide ontax rates and fee levies. By contrast,the Indonesianor-ganic laws (22 and25/1999) did not assign new revenuepowersorborrowingauthority o local governments.Thisjeopardizesthe link between costs incurredand servicesdemandedby local citizens (Alm, Aten, and Bahl 2001,7). Third,central authorities(regimes)demonstratesup-portfordevolutionby emphasizingsupervisionandover-sight of the programsover bureaucraticendencies to in-terfere and control. In all three cases, major oppositionfrom central(in the Philippines)andprovincial(in Paki-stan andIndonesia)authoritieshadto be overcome.Evenafterovercoming opposition long enough to promulgateorganic laws, transitory eadershipwith vacillating sup-portthreatened he program n the Philippines.The Phil-ippine Departmentof Health hadeight changesof leader-ship during 1991-2001, which held views rangingfromrecentralization to continuing support for the reform(Razon-Abad2001, 7-8).Local Technical CapacityThe most immediate issue is whetherthe newly em-poweredtierof local governmentcan absorb ts new rev-enue-raisingandexpenditureassignments. Opponentsofdecentralizationoften focus on the lack of local capacityto opposeorderailtheprogram.There s widespreadcon-

sensus in Pakistan that without the requiredskills, sys-tems,andresources within helocalinstitutions)hecoun-trywidedecentralizationanddevolutionprogramwill re-main largely unimplementable(Khan 2002, 4). Manor(1999) suggests that countries devolving after initiallydeconcentratingervices(that s, administrative ecentrali-zation)have anadvantage n that thisprovidesa technicalfoundation for autonomousdecision making.Consistentwith thisconclusion, he threecountryprograms sed threesimilar mechanisms to reduce the absorptive-capacityproblem.First,based on newly assignedtasks,skills andsystemshave been or are being transferred rom higher-tiergov-ernments o local governments.About two million centralstaffwill be transferredn Indonesiaandmore than70,000havebeen transferredn thePhilippines.Positions,people,equipment,andoperatingnormshaveall been transferredto enablelocal units to perform heirassignedtasks moreeffectively.Second, reportingand controlsystemshadtobe shifted romcentral o localaccountability. epartmentalstructures, outineapprovalprocessesfor licenses andper-mits, andbudgetandaccountingreportsall had to be re-routed o serve ocal needs ratherhan he controlandcom-pliance rules of the centralgovernment.In Pakistan, orinstance,the NorthwestFrontierProvincerestructured 6departments,downsizingandrefocusingthem accordingto a new distribution f functions.This enablesprovincestomonitor, egulate,andsupervise ocal districtoperationswithoutcontrolling heir affairs(WorldBank2002a, 10).Third,initial resistanceto decentralizationwas strongin all three countries,based on the argument hat localswere not to be trustedwith central funds and should bemonitoredclosely. Pakistanhas initiated at least four re-forms n the name of empowering ocalgovernments incethe 1950s.All were incompletereforms and were largelyreversedby laterregimes,whichargued ora lack of localtechnicalandpolitical capacities.InIndonesia,similarar-gumentshave been raised aboutthe local capacityto ab-sorb fiscal and technical resources. Several internationalevaluationsconcluded herewaslittleadvancepreparationfor decentralizationnd hat ocalgovernmentswere argelyunpreparedor theirnew tasks(Alm,Aten,andBahl2001,5). Coupledwith the traditionof "waitingfor the centralgovernment o act"(Alm, Aten, andBahl, 2001, 9), top-level supportwas neededto overcome theperception hatcapacity problemswere so severe as to jeopardize he en-tirerationale or the program.Cultural-Institutional Issues

Opponentsof decentralization ftenargue hat(1) cen-tralist cultures value centrallydirectednepotismandpa-tronagemore than issue-based local politics; (2) the lackof intermediary rganizationsorexercisingcitizens'voices

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will preventocalaccountability; nd(3) weakinstitutionalsystemswill rejectuniversalnormsandrulesthatare rrel-evantto local culturalpracticesin such obvious areas astax assessmentandauditing.Such culturaland nstitutionalissues constitutea second set of challenges to which re-gimes contemplatingdecentralizationmustrespond.Political Culture

Indevelopingcountries,politicalcultures often viewedas a threat or constraintrather han as an opportunity obuild on the achievementsof decentralization.Politicalculture consists of those shared values and attitudesthataffect institutionalandpolicy decision making (Inglehart1988). It is whatdetermineshowpeoplebehavewhentheyarenot being watched.It can also be recognizedas "theway things are done aroundhere"(Economist2002, 53).Opponentsof decentralizationarguethatculturallyrein-forcedsystems are not easily changeable n the shortrun.Thecommoncultural eature s centralistdecisionmakingandpopulardistrustof frequentlycorruptgovernments.The trickis to distinguishthose elementsof the politi-cal culture thatgenuinely deterprogramresults and canonly be changedin the mediumtermfrom those thataredistinctivebutcan be modified or builtupon to facilitateprogramresultsin the shortrun. Some culturalpracticesdo not reallyaffect the courseof decentralization ndcanbe changedonly in thelong term,such as rote educationalpractices,nepotismin civil servicehiring,and staff loyal-tiestogroupsandfamiliesoverformalorganizations. heseareimportant nd distinctive-but theymaynot be impor-tant to program mplementation.More important or de-centralizationarepracticesthatdirectlyaffect centralorlocal government ystemsand arechangeable n the shortterm.For example, distrustof government(revenuecol-lections), familyand tribal oyalties (budgeting ordevel-opmentprojects),andperemptoryor arbitrary oweroverunderlings auditing)wouldaffect decentralizationmple-mentation.Persistentadministrative racticessuch as thegeneration f statistical eportsbudget eportshatareoftenunread)andcentralizedexpenditurecontrols(to preservehierarchicalpower within ministries)can be changedbymodifyinginternal ncentives.Forexample,statisticalre-portingcan be converted nto useful analysisfor budget-ing andauditing;passive line managementcan be turnedinto active program mplementationby giving them tar-gets andenforcing expenditure ontrolsthatalreadyexist.Culturemay be turnedfrom a static obstacle to the dy-namicfoundationon whicha decentralization rogram anbe built.5Civil Society

Culturalandcivil society issues are relatedin that re-gimes governing n centralizedculturesgenerallyrepress

thedevelopment f intermediaryivil societyorganizations,such as themedia,unions,citizenassociations,andpoliti-cal parties.Opponentsof decentralization rgue hat f thegoal is democraticdecentralization nd the clustersof in-terestsaremissing or of the wrongkind, it is difficult todeveloprepresentative oliticalparties n anybutthe nar-rowest sense, that is, corporatistpartiesrepresenting hestateandindustry.Withoutsustainingorganizationso fa-cilitategovernance,devolutionprogramsarelikely to de-teriorate nto chaos andrevert o centralism.

Indevelopingsocieties, neitherautonomous ocal gov-ernmentsnor powerfulcivic organizationsexist. Never-theless, repressed ocal and civic traditionsmay exist, asin Pakistan,which the decentralizationprogram an reac-tivate orenergize.Conditionsof repressedcivil society or"nascent social capital"-norms, trust,and networksfa-cilitating coordinated action (Putnam 1993, 167)-canserve as the foundation or successful nstitutional hangesrequiredby a decentralizationprogram.Manor ound thateven under conditionsof repressedcivil society-for in-stance, in Cote d'Ivoire duringthe 1980s-the psycho-logical impactof decentralizationprogramscan catalyzegreaterparticipationand associational activity at lowerlevels (1999, 57). In his view, decentralizationprogramscan makeentirely adequateachievements n the absenceof lively civil society and can make up for them in theshortterm. The absence of full civil society need not bean obstacletoprogrammplementation.6 ecentralizationprogramsneed to identify these useful culturalpracticesandbuildonthem,rather hanrelyingon systemsimposedfrom the outside,often from a combinationof poorlyde-signed donorprogramsand importedconsultants. Evenin EasternEuropeand the former Soviet Union, wherecivil society did not formallyexist, local partyorganiza-tions provided eadershipskills to members thatare nowbeingputto use in thedevelopmentof civic institutions nthatregion(Jacobsen2000). Based on these conclusions,the Pakistani egimeincludedcivil societycreationaspartof its devolutionprogram.Institutional Systems and PracticesInstitutionsare the formal andinformalrules, the sys-tems (personnel,budgeting,procurement)and incentivestructures tax codes, assignmentsof intergovernmentalfunctions), that shape the behaviorof organizationsandindividuals North1990;BurkiandPerry1998, 11).Manyof these practicesseem immutableand runcounterto theWesternvalues thatarecentral o devolution: ransparency,accountability,due process, andmajorityparticipationnpublic decisions. Local partiesandelite groupsoften op-posemodem nstitutional aluesas"imperialistic"nd"im-posedoutsider"valuesto thosethatprevail ocally.Never-theless, obstructionist institutional practices can be

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modified with the rightincentives.In Uganda,enforcingreadinesscriteria hroughperformance greementshas im-provedthereportingof healthand educationexpendituresatthelocal level and hasproduceda 60 percent ncrease nsocial expenditures eachingclients. Incremental hangesin core reporting-systemrules have producedsustainedmodificationof institutional ractices Brooke2002).Para-doxically,Cochrane 1983, 5) found that some of the mostauthoritarianegimes,whichguardedpower ealously,alsopromoted ocal governmentreform(such as Nigeria andPakistan).The currentPakistanidevolutionprogramwasinitiatedby amilitarygovernment.Thatregime,nowpartlylegitimatedby election results,has been attempting o setup incentivesto channellocal values andpractices nto aworkablesystemthatwill produceserviceresults and thepopular rustrequired or effective governance.Thebackground onditionsdiscussedpreviouslyreflectdeeper nstitutionalpractices hatcanimpedetheprogressof any devolutionprogram.They havebeen presentedbycautioussupporters ndopponentsof decentralization likeasdeepersystemicproblemsof values andattitudes.Whiletheycannotbe ignored nprogramdesign,theycan be con-verted o shorter-termssues. For a largenumberof decen-tralizationprograms, ncludingthe three cases examinedhere,neither nstitutionalhistorynordeepercultural raitsneed be viewed as constraints o devolution. Those fea-turesof local politicalcultureandinstitutions,such as thePakistani dministrativeradition f localgovernance,needto be builtuponto support esourceandtechnologytrans-fers thatareconsistent with an appropriate equencingofthe decentralizationprogram.Instead,many believe thelargerconstraints o successful decentralizationarepoorplanningand lack of financing(Cochrane1983,6). Theseconstitutea third set of challengesto which regimesmustrespond (figure 1).Technical Design and SequencingThe literature n thedesignof institutions ndicatestheimportanceof gettingincentivesrightandtakinginto ac-count culturalvalues(North1990, 137-38). Butverylittlehas been writtenon options for getting the technical se-quence rightforthe actual nstallationof institutions.Suc-cessful decentralization equirescreatingnew institutionsandbuildingon existing practices,with support rom re-gimes and intermediaryorganizations.The implementa-tionexperiences,orthe decisions and activitiespertainingto the threeprograms,suggest that researchshould focuson the technicaldesign and sequencingstage (figure 1).The questionsraised by the analyticframeworkare: (1)Howhavethe threeprogramsbeensequenced,and(2) whatdifferencehas thesequencemade to results?The matched-case approachallows one to review the similarities andattempt o linkthedifferences o program esults. Onedif-

ficultywiththecomparisons that, n mostprograms,morethanonestep s being implemented t eachstageand,withineach step, differences exist in the scope and intensityofactivities.This affects resultsand,to provide ully reliablepolicy lessons, requiresmoreprecise datathan are avail-able at this point.Similarities

From the programcomparison, t was found the threecountries ollowedanapproximate equenceof eight majoractivities.First,all three countriesbeganto considerdevo-lution after heyhadachievedrelativemacroeconomic ta-bility.Thisis widelyconsideredaprerequisitef decentrali-zation,andInternationalMonetaryFundprogramonditionsfocus on theestablishment ndmaintenance f stabilization(Guess,Loehr,andVazquez1997, 33). Pakistanbeganitstreasury ontroleffortsin earnest n 1999,and the currentregime'sintent s to integrateocal fiscal andtreasuryop-erations nto a singlecentralbankaccount.Effortsarebeingmade to strengthennternalcontrols and auditsystems atthe district evel to ensureproper pendingcontrols.Topre-vent threats o macroeconomic ontrol, ocal unitshave notyet been given short-term ash managementor long-termcapitalborrowingauthority.ThePhilippineDepartment fFinancehasbeenworkingsince 1992 on thesupervision flocaltreasury fficersandtheimprovement f internal on-trol andaccountingguidelines.Interest s growing n moresophisticated ost-accounting ystemsas well, with a pilotprogramnitiated n 2001. Indonesiahas shownmore nter-est in local borrowingandfinancingof infrastructure nddevelopment han n macroeconomic ontrol.There s stillno systemof fiscal-transfermonitoring.Of thethreecases,Indonesiaseems to have stressed macroeconomiccontrolover ocal finances heleast,whichcouldleadtounsustain-able local financingproblems aterin the form of arrearsand fiscaldeficits.Itwas foundthat n the secondstep,regimesfocused ontheestablishment f legalandregulatoryrameworks.Thistaskrefers to the promulgationof an organic aw and thedraftingof bylaws andoperatingregulations.While lawscan be in flux foryearsandsubject o revisionandrepeal,an important ndicatorof results is whetherintergovern-mentalroles and responsibilitieshave been assigned ac-cordingto sensible economic andpoliticalproximitycri-teria.Oftentheyarenot.InPakistan,ntralocal overnmentrelations are still not clearbetween the tehsil, union,anddistrict evels, andno mechanismexists to deal with con-flicts of law.The"economicconstitution"tepalsorequiresthe establishmentof a primary nstitutionalcoordinationand control mechanismat the central level (often at theministryof finance)thatcanplan,manage,and mplementthedevolutionprogram.Regulatory elationshipsbetweenprovinces and districts are also unclear. One motive for

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thePakistanidevolutionwas tocircumvent hecorrupt ndineffectiveprovincialgovernmentsandto give powerandfundingto the new local tier.Nevertheless,the overallapproachof the NationalRe-constructionBureauhasbeentop-downplanning,withanemphasison rules, laws, andregulations romthe bureauand the provincial levels. Very little emphasis has beengiven to the needed local managementflexibility to de-liver theneeded services.By contrast, hePhilippine egalandregulatory pproach as beenmorefacilitativeand esscommandandcontrol.Conflicts of law have been recog-nized and an institutionalmechanismproposed o remedythe problem.Indonesian aws havenot assignedclearex-penditureand revenueroles for local governments.Thelaws also excluded the provincesfrom the devolution ofauthority.Of the threecases, the Philippineshave givenmost attention o the developmentof the legal andregula-toryframework.The thirdset of regimeactivitiesfocuses on theresolu-tionof local capacityweaknesses.Regimescontemplatingdecentralizationhave to deal with this twice: initiallyas abackground ssue, andlateras an operational ssue to beremediedby technicalassistance,training,andimprovedincentives.All threeregimes dealt with this issue by cor-rectlydefiningit as a short-termssue thatcould be rem-edied by a promise of supportand by deployinghigher-tier staff to local units. The Philippines and Indonesiarequired ocal units to pay for salaries out of fiscal trans-fers. None of the programsrequired ocal civil services,which createdtension with centralandprovinciallevels.Only the Philippineshas madesignificantstrides n mod-em performance-based apacity building.Pakistan's ca-pacity building is largely in-house and derived from ar-chaic colonial-era institutions and practices. ThePhilippineshas given themost attention o this issue frominitiationof theprogramn 1992. Forexample, texempted20 percentof the localdevelopment und fromcentralear-marks.While Indonesiadeployedabout two million staffto localunits,thegovernmentof Indonesiadidnotprovidethemwith any incentivesfor capacitybuildingor the ap-plicationof skills to new local systems.It was found that the fourthstep followed by the re-gimes was toestablishfacilitationnetworks o supportandsustainthereform.Without ocal supportgroupsand citi-zen participation,decentralizationreform typically re-mains unimplemented egislation. In Pakistan,a militarygovernmentwith an initially shortoperating ife initiatedthe reform. It was directedby the NationalReconstruc-tion Bureau with little or no civil society or associationalbacking.This was due to the rapidplanningrequirement,the knowledgethat the provinceswould attempt o derailthe reform,the recognitionthatmost districtswere tech-nically deficient and could not make sound evaluations,

and the absence of any real civil society or independentprofessional sector in Pakistan. The Local GovernmentOrdinance(SBNP 2001) establishedcitizen communityboardswith entitlements to 25 percentof local develop-mentbudgets.Thisinstitutionalmechanismwas anattemptto break he lock on local politicsby traditional lites andpartiesand to create a nascentcivil society organizationresponsible for developmentprojects. Civil society hasbeenrepressedand s still weakin Pakistan.Pakistanheldlocal elections (fornazims,ormayorsandcouncils) earlyin the program(2000 and 2001), and this generatedex-cessive local demands hatthreatened hecapacityof newdistricts to respond.By contrast,the Philippineshad a large civil societystructure o drawupon;thegovernmentof thePhilippinesdevelopeda broadsupervisorygroupthatincludedrepre-sentatives romcivil society andprofessionalgroups.Thesupervisorygroup ncluded heDepartment f Interior ndLocal Government,Departmentof Budget and Manage-ment,Department f Finance,Civil ServiceCommission,the EconomicandDevelopmentAuthority,andthe Com-mission on Audit.Associations includedthe Associationof LocalBudgetOfficers.Indonesiareliedon several ocalgovernment associations, including APPSI-provincial,APEKSI-localand district,andAPKASI-mayors.Thesehavebeen important upporters,buttheyhavenot servedas devolutionprogramadvocatesso far.Partof this mayoccur in the shakeoutperiodwhich, unlike PakistanandIndonesia, he Philippineshas alreadyexperienced.In the fifth step, regimesfocused on the establishmentof amonitoringystem otrackprogressand omakecoursecorrectionsduring mplementation.nfact,onlyonecoun-trydidthis;the othertwo madelargely symbolicmovestocreatemonitoringand evaluationsystems. The NationalReconstructionBureauin Pakistanplanned a full-scaleimplementationwithoutpilotprograms. t madeno effortto establishanymonitoringsystem,perhapsout of theex-cessive hubristhat it could simply dictateprogrameffec-tiveness. By contrast, n 1992 the PhilippinesestablishedtheRapidFieldAppraisal ystemtogenerateneedsassess-mentsand oprovide eedbackonimplementationrogress.Thiswas alsoconsistentwithitsdemand-driven,apacity-buildingapproach,which attempted o avoid failed sup-ply-driven rainingapproaches. ndonesiamadeno majorefforts in this area,otherthan the 1994-95 District Au-tonomyPilotProgram,whichwas used to assess local ca-pacity to execute newly devolved tasks priorto the pro-gram.Negativeconclusionsgenerated ythisprogramwerenot utilized by the governmentof Indonesia in programplanningor implementation.In the sixth activity,all threeregimes recognizedtheneed to providestablefinancing f local autonomywas tobecome a reality.All threeattempted o deal with the fi-

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nancing issue, but variedwidely in success. For currentservices, Pakistan'sNational ReconstructionBureauandMinistryof Financeagreedto pay the wage costs of thedevolutionfor the interimperiod-otherwise, local gov-ernments could not pay the salaries of deployed staff ortheir own. Salariesnow account for about85 percentofdistrictbudgets(WorldBank2002a, 4). There are also in-novativeblockgrants romfederalministries suchas edu-cation)to ensurefundingfor primaryandsecondaryedu-cationneeds at the local level.But there s still noagreementon theprovisionof stableannualamountsof fundingoritsbasis (thatis, a performance ormula)from the NationalFinance Commissionthrough heprovincial inance com-missions. For fiscal year 2003, the central governmenttransferred .5 percentof totalgeneralsales taxreceiptstotheprovinces Abbasi2002).But becauseof retained haresand forecastingerrors,this percentagedoes not indicatethe actualyield for local governments.Indonesiancentral ransfersprovide25 percentof localrevenues.No othermajorrevenue ourcesareassignedand,giventhe absenceof anyreal tax base in most areas, ocalown-source revenuesarerelatively high for the coverageof local needs (25.4 percent,see table 1).The assignmentof revenues has not been based on the local cost of ser-vices estimates (that is, a target level of expenditures),which shouldhavebeen done first.This means the centerretainscontrolof revenues. In the Philippines,the earlyinternal evenueallotment,requiredby the 1987 Constitu-tion,provided unds o localgovernmentunitsbutexcludedthe costs of the devolution.This deficiencywas remediedby the 1994 "cost of devolved functions"mechanism inhealth(WorldBank 1994).Workremains o be done in allthreecountriesonimproving hestabilityandperformancebasis of funding orlocal governments.Thelong gestationperiodin the Philippines suggests that fiscal stabilityis amedium-termssue requiringa longershakeoutperiod.The seventh activity is restructuring nd streamlininglocal offices to prepare hem for the performanceof theirnewly devolved tasks. The NationalReconstructionBu-reau has given considerablethoughtto this in Pakistan,andeffortshavebeen madeattheprovincialevelto stream-lineoperations.Effortsatthedistrict, ehsil,andunion ev-els havebeen moreintermittent,which could impedeser-vice delivery.The bureauhas notprovidedmethodologicaloptionsfor functional review or reorganization,nor haveregulatoryrelationshipsbetween provincialdepartmentsand corresponding local group offices (such as publicworks)been worked out clearly.In the Philippines, ocalgovernmentunitswereauthorizedn 1991toestablish heirownstructuresonsistentwithlocal servicedeliveryneeds;in 1992 the Civil ServiceCommission ecommended localgovernmentunitstructure, ndtheDepartment f Interiorand Local Governmentestablished an anti-red-tapepro-

gram.Indonesia has not forcefully attempted o restruc-turelocal offices consistent withdecentralization equire-ments.Thus,thePhilippinesbeganearlyto improve ocalgovernmentunitperformanceand has achievedthe mostin this area.All threeregimes recognizethat local institu-tionalreformwill requirea medium- to long-termeffort.Theeighthandfinalstepconsists of efforts o shiftplan-ningandbudgeting orpublic-sectoractivitiesfrom nputsto outputsandoutcomes. This is somewhatsurprisingbe-cause one would expect results budgetingto be first, ascore systems such as transfersanddevelopmentprojectsdepend on their information.Instead,all regimes calcu-lated thatexisting informationcould be used for resultspurposes, orinstance, ine items to controloperationsandmaintenancexpendituresnd o gauge sufficiency orpres-ervationof capital stocks. As results-orientedbudgetingrequires mprovementsn analyticalskills and thegenera-tion of performance eporting nformation,t is more of amedium-term ctivity,and hence last on the list of regimepriorities.In its shortprogramhistory,Pakistanhas donemuch in this areaat theprovincial evel, and this servesasa model for local reform.At the local level, efforts sup-portedby the AsianDevelopmentBank to develop perfor-mance systems have been constrainedby the need to en-sure consistency with past forms, accounting practices,manuals,and administrative ractices.There are no localprofessionalpressuregroupsadvocating hangeshere(thecivil society constraint).The lead agency for reform,theNational ReconstructionBureau, s hamperedby inexpe-riencein this area,togetherwith a mostlyconsultantstaffandtop-downchain of command.ThePhilippineprogramutilized heAssociationof LocalBudgetOfficersandotherprofessionalassociations to changelocal practicesand toupgradeanalyticalskills. The Philippinecentralgovern-menthad substantial xperienceat thecentral evel in per-formanceandprogrambudgeting.Despiteanemphasisonlocal borrowing consideredsophisticatedby most),Indo-nesia has not yet focused on performancereportingandbudgeting.Differences

Severalconclusionscan bedrawn rom hedifferencesnprogram mplementation.The differencesappearedess inthe sequenceof activities han n theiractualperformance.As indicated ntable2, sevendifferences an benoted ntheperformanceof technical activities at the organizationalframework nd mplementationtrategyevels.First,thesupervisory tructure ordecentralization ar-ied amongthe threecases. The Philippinesbeganwith abroad-basedstructure hatincluded multiple representa-tive interests.This extended to the use of civil society in-stitutions for feedback and guidance on the progressofthe reform.By contrast,the supervisorystructureof the



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Table Differencesn DecentralizationmplementationComponentOrganizationalframeworkSupervisorytructure/civilsociety eedbackLegal/regulatoryframeworkCapacity-buildingMonitoringndevaluationystemImplementationLocal evenuesufficiencyRestructureocalofficesPerformancemanagementandbudgeting

Pakistan

Top-downand narrowFewcomparativeinputsSomeemphasisNo

WeakMarginal ffortsSuperficialinterest

Philippines Indonesia

Broad-based LessnarromComparativeinputsStrong mphasisYes

Strong-useffiscal ncentivesSomeeffortsStrong mphasis

ComparatininputsStrong mpNo

WeakMarginalSome nter

Pakistanreformhas been limited to the militaryregime'sclient institution, the National ReconstructionBureau,whichrepresents ew interestsand s staffedby manycon-sultants n a loose accountabilitystructure.Pakistanhas aweak civil society network;the reformwas intended tocircumvent xistingpoliticalpartiesandprovincialauthori-ties, which the militaryviewed as opponentsof the re-form. As noted, the Local GovernmentOrdinanceautho-rized anew setof civil societyinstitutions ordevelopmentprojects,called citizen communityboards. There is stillfear these boardsmay entrench local moneyed interestsrather hanempowerthe poor,because it is the rich whowill have time todevelopthe technicalexpertiseto attractdistrict council funds (WorldBank 2002b, 23). As ex-pected, citizen communityboards have not yet becomeoperationalandareexperiencingproblems n competitionwith otherlocally powerful groups.The scope of the In-donesiansupervisory tructure alls betweentheother woprograms-some representationat the top (the Office ofDecentralized Local Government),but more is neededfrom civil society organizationssuch as the professionalmunicipalorganizationsAPEKSI andAPKASI.It is clearthat, after the establishment of macroeconomiccontrol,all threeregimesmade efforts to establishsupervisory n-stitutions,but each variedin its emphasison representa-tion and the need for societal feedback.

Second,as indicated n table2, decisionsof supervisoryinstitutionsmustbe guidedby sensible lawsrelating o tax,budget,debt,participationn governance,and the assign-ment of functionalroles. Decentralizationaws mustbe in-formedby a full understanding f whatcan go wrong inpublicandmunicipaladministration,swell ashow topro-videspeedyremedies orconflictswithother awsandregu-lations.Many aws have been writtenby generalists rom atop-downplanningperspectivethat contain few insightson theneed to deliver ocal services.In thedevelopmentofthe LocalGovernmentOrdinance,hePakistani egime n-

cluded few internationalxamplesand did not solicitinternationalexperience-despite the intent of theAsian DevelopmentBank's Fiscal DecentralizationTechnicalAssistanceproject 2001-02). Pakistanas-signedroles to districtsbut ignoredlower-tier nter-

ve governmental elations,and it is still uncertainhowto proceedwith provincial-localrelations.Both thess PhilippinesandIndonesiahave reliedheavilyon in-ternational ndcomparativeocal legalexperience odraftandmodifytheir egal frameworks.As a result,the institutionalbase of the lattertwo programs s

ffortsstronger han n Pakistan.Third,regimes that wish to sustaintheir decen-est tralizationreformsconcentrateheavily on capacitybuilding.ThePhilippinesbeganearly oprovide rain-ing througha varietyof institutions, ncludinguni-versities,nongovernmentalrganizations, ndprivatefirms. Indonesia also stresses capacity building and isstronglysupportedn this by fundsfrom the U.S. AgencyforInternationalDevelopment.However,Indonesia rans-ferredabout wo million staff withoutpriorcapacity-build-ing support.Pakistanhasrespondedmoreslowly,restrict-ing training to the existing colonial-based institutions,which areknownmore for theirlegal focus than for man-agement nnovationandtechnicalanalysis.ThePhilippinegovernments transferring eopleandpositionsto districtsbut with little prior trainingother than from theirprovin-cial offices. The Asian DevelopmentBank will providesupport or trainingandcapacitybuilding.But it appearsthat much of this supportwill be locally drivenandmaynot be consistent with international estpractices.The finalkey element of the organizationalrameworkfor decentralization s monitoringand evaluation.This isthe fourthareaof majordifference ntechnicalperformanceamongthe threeprograms.The centralsupervisory nsti-tution(orresponsibilitycenter)needs to establish a func-tioningmonitoringand evaluation ystemtoprovide eed-back on the performance ndprogressof the reform.Thisinformation hould be used to make course corrections ntheprogram nd orcapacitybuilding odevelop ocalabili-ties for institutionalandpolicy analysis.Todate,Pakistanhas not establisheda monitoringand evaluationsystem,norhas the Indonesiangovernment.The Asia Foundationsupporteda three-year ffort thatbeganin 2002 calledtheIndonesiaRapidDecentralizationAppraisal,but this ap-praisalis external and not linkedto the Centerfor LocalGovernment nnovation.Only the Philippineshas recog-nized the importanceof this dynamiclearningelement tothe success of the devolution.

Importantperformancedifferenceswere also noted atthe implementation evel. Devolution of authorityunderanycircumstances equires iscal support o achieve localautonomy.This is both a frameworkand an implementa-226 PublicAdministrationeview* March/April005, Vol.65, No. 2


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tion issue. Fundingmust be provided orbothcurrent er-vices and for capitaland development projects.Fundingnormallytakes the form of transfersandcan includeper-formance conditions in exchange for local programdis-cretion(blockgrants).Itmayalso take the formof author-ity to collect and use fees andtaxes-broadening local taxbases.All three countrieshaverecognizedthe importanceof providingnotonly funds,but also authorityo mobilizelocal revenue sources to reduce dependence on centraltransfers.Local fundingalso needs to be linked to the ac-tualcosts of services rather hansimpletallies of previousbudget expendituresunrelated to service requirements.Pakistanhas attempted o providerevenues,but hashadtodeal with provincialreluctance to partwith revenueau-thorityover districts.Theprovincial inanceaward till hasnot been approved, eopardizing ocal fiscal stability.Thegovernmentof the Philippines supportslocal fiscal au-tonomy through ocal salary coverage and block sectoralgrants.This leaves the problemof coveringlocal serviceswith veryweak local tax bases (exceptin largercities).As noted,Pakistandevelopedcitizencommunityboardswithaccessto dedicated unds forspendingonlocal worksand generationof wider political interest in proposingneededprojects.The citizencommunityboardmechanismhasnot beenfully implemented.Pakistanhas also consid-ered methodologies for estimation of service costs, butthese havenot been implementedeither at the local level.Thus,thebulkof local funds are still derivedfromcentraltransfers(National Finance Commission awards)basedon population,and financing is largely unrelated o ser-vice requirements.

The Philippines nitiallymade a mistakein not cover-ing local salariesand devolutioncosts through heinternalrevenue allotment.This caused a majorpoliticalbacklashagainst the reform. Since 1994, a new grant-loan linkframework has provided strong fiscal supportfor localgovernments.The Philippinesalso providesfiscal incen-tives in the formof a 20 percentadditionto the develop-ment fund for good performance. ndonesiaearmarks25percentof central transfersfor local units, but it is stillunrelated o local needs or costs of services.Therelation-shipbetween loans andgrants s notcoordinated,withper-verse results such as poor cities borrowingandrichcitiesrelyingon grants.Fiscal sufficiencyis criticalandtakesalong time to work out institutionallyandpolitically.ThePhilippinesrequired ourto five yearsto do this.Decentralization s also a matter of local governance.The qualityof governancewill be affectedby internalor-ganizational fficiency.Structures ndsystemsneedto existthatdevelop policies implementedby managerswith suf-ficient resources andauthority.Political and administra-tiverelationships, speciallybetween elected orappointedmayors,councils, and city departmentsneed to be clari-

fied and nstitutionalized. rocedures orcitizeninputsandaccess to permits,licenses, and otherdocumentsneed tobe transparent ndefficient to preventdelays andcorrup-tionopportunities.All threecountriesrecognizedearlyonthatcapacityand structureproblemsexisted at the locallevels, which could deraildevolution. In Pakistan,effortshavebeen madethrough he provincial ocal governmentdepartmentso reorganizeand restructure perationsandto transferthose models to districts,tehsils, and unionsthrough echnicalassistance.On the otherhand,therehas been little recognitionofthe complexity of this process or the need for a formalmethodology(suchas anorganizational fficiencyreviewor process reengineering)other thanpolitical logic. Re-sults so far have been variable.In Indonesia,the centralgovernment is implementing civil service reform andslowly transferringreforms to local governments.ThePhilippineshasadoptedanti-red-tapemeasuresand takensteps to reform local governments.The difference is thatthe latter has permitted ocal units to reformthemselvesconsistent with Civil Service Commission guidelines.Pakistan and Indonesia have been more insistent on acookie-cutterapproach,hat s, a commonmodelprovidedby provincialor centralgovernmentplanners.The Phil-ippine approachhas been more innovative and seemslikely to producesuccesses thatcan be replicated n otherlocal governments.Finally,effective devolutionrequiresmeasurement ndanalysisof results. Funds should be allocatedon the basisof performance ignals providedby the budgetingandfi-nancialmanagementsystem. Informationon progressincapacity building,local financing,service results,devel-opment projects,andthe overalldevolutionreform itselfis requiredfor managementand policy making. Perfor-mance-monitoringystemsand the analyticalskills to op-eratethemarerequired.The mostcommon means of inte-grating managementandfiscal performance nformationis througha performance-basedbudgetingsystem. Thisshouldbe consistent with the national chartof accounts,but based on a flexible systemto measureoutputsand out-comes. As is known, many budget formatsand servicemeasures are available,as are means to achieve overallobjectives.While the legal basis for programandperfor-mancebudgeting s included in Pakistan'sLocal Govern-mentOrdinance,ts implementationhas been impededbyan emphasison prior legal constraintsandsystems. Suc-cessful models in Punjabprovincehavenot yet been fol-lowed elsewhere. Indonesiahas shown less interest n per-formance-oriented udgeting hanin the establishmentofborrowing ystemsto finance ocal infrastructure. y con-trast,the Philippineshas a long historywith all forms ofperformancer resultsbudgetingzero-based, erformance,andprogrambudgeting)andcontinuesto strengthenhese



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systemsat the centraland ocal levels throughassociationssuch as the Association of Local BudgetOfficers.

Findings nd PolicyLessonsTwo findings are useful for regimes that are contem-platingdevolutionor find themselves n the midstof imple-mentation.First, regimes should follow the frameworksummarized n figure 1, andrealisticallyassess the levelsof backgroundupportandtechnicalcapacityandcultural-institutional onstraint.On the basis of these assessments,regimes should decide whetherto proceedwith plans ormodify ongoingdevolutionprograms.Regimescanrespondto perceivedgapsin background upportand technicalca-pacityin the shortrunif theybelieve theycan allocate re-sources to them quickly and effectively (for instance,throughthe transferof centralor provincialpersonneltolocal units).Because supportand minimal local capacityeither exists or it does not, these arereally short-term s-sues. Regimes also need to assess whethercultural-insti-tutionalandcivil societyconstraintsarisefromtemporaryrepressionor totalabsence.In most cases, values and in-stitutionshavebeenrepressed,andgapscanbe dealtwiththroughmodificationof incentives andtraining/technicalassistancein the shortterm.The problem s often thatre-gimes intendingto implementdevolution do not provideenough support suchas disorganized upervisory nstitu-tions andinattention o theneed fornew kindsof capacitybuilding),and this createsproblemsfor implementation.If regimesbelieve theycan(1) give sustainedpublicfiscalandpolitical support o the program, 2) increasethe ca-pacityof local decision makers,(3) modify those culturalconstraints to modern systems requirements, and (4)strengtheninstitutionssufficiently, they should proceedwith decentralization nd move to the more immediate s-sue of technicaldesign andsequencing.In all threecases,the regimesproceededto thatstage.Second,it was found thatmajordifferences n technicaldesign andsequencingaffectprogramsuccess. The threecountriesfollowed similarsequencing,butefforts variedwithineachset of activities.The most advanced more han10yearsexperience)and most successful decentralizationprogramof the three was the Philippines.ThePhilippinesdiffered from the other two cases in the performanceofseven activities (see table 2). The only areain which allthree cases followed similarpracticewas in the deploy-ment of personnelto lower-tiergovernments romhighertiers. Evenwithinthiscategory, he threediffered nprovi-sion of capacity-buildingncentives and salary financingfor newly deployedstaff.Five of the seven areasappearto be immediatelyim-portantor decentralizationuccess. Forexample, only thePhilippinesstressedbroad andresponsivesupervisory n-

stitutions.Itdid not do so initially,but learned romexpe-rience. The other two countriesdid not follow the Philip-pine example despite its importance.All threecountriesrecognizedthe importanceof international ndcompara-tive inputs nto local governmentordinancedevelopment.But only Indonesiaand the Philippinesincluded this inpractice,and the lattermoreso than the former. t is criti-cal thatregimesreview and absorb lessons learnedfromregionally similarprograms.To proceedon the premisethatprogramconditions areculturallyandpoliticallydis-tinct is a high-risk strategy.This researchrevealedmanysimilarities nddifferencesnonlythreeregionalprograms,andregimes ignoresuch conclusionsattheirperil.As partof theorganizationalramework ordevolution,all three regimes recognized the importanceof capacitybuilding.Pakistanhas had a harder ime severing ts linkswith ineffectiveand hideboundstatetraining nstitutions.The PhilippinesandIndonesiahavechangedtheir nstitu-tions and solicited internationaldonorsupportwith sub-stantial uccess. At thesametime,onlythePhilippineshasrecognizedthe importanceof monitoringand evaluationsystemsto the success of devolution.Despitetechnicalas-sistance recommendationsn bothcountries, his is still amajorgapin the Pakistanprogram. ndonesia s beginningto workwith theAsia Foundation n a devolutionmonitor-ing and evaluationsystemthatwill link into the Office ofDecentralizedLocal Government'sCenter orLocal Gov-ernment nnovation.All threecountriesrecognized he im-portanceof local fiscal autonomy,buttheyalso had to rec-oncile mixed political interests in mandating formercentral-provincial esponsibilities o local units with tech-nical needs for local units to be financiallyautonomousorprogram uccess. Provisionof sufficientgrants, oans,andtaxauthorityo local units in federalsystems requires op-level supportand strongsupervisory nstitutions o pushthrough hereforms.Morefiscalsupport romthecenter srequiredn both Indonesiaand Pakistan.Intwo othertechnicaldesignandsequencingareas, hePhilippines adopted different approachesor priorities.These have been less immediately mportant or programsuccess. Forexample, it is important or devolution suc-cess to restructureocal governmentoffices and systemsand to adoptperformance udgetingandmanagement ys-tems. While the Philippine program ocused to a greaterextentthan the othertwo cases on these components, t isapparentheycan be deferred n the mediumterm withoutseriousjeopardyto the program.In conclusion,basedon the three-caseAsian compari-son, it canbe saidthatdevolutionprogramshatfollow theperformancepathof thePhilippineswill be more success-ful.Whileall regimesmust meet the commonrequirementof initial macroeconomicstabilityto begin decentraliza-tion, subsequently the Philippine programwas imple-

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mented differently in seven areas compared to Pakistanand Indonesia. It can be concluded that all regimes need torespond to potential gaps in support and deal with culturalconstraints to modem systems of administration and elec-toral representation. Regimes must respond to local op-portunities by building on existing cultural practices andusing them as support mechanisms for the more radicalinstitutional, fiscal, managerial, and political changes thatmay be required for effective decentralization. Regimesthat effectively respond to these shorter-term issues, then,need to follow the path of the Philippines, with (1) a broadsupervisory institutional structure, (2) substantial interna-tional inputs into the development of the legal and regula-tory framework, (3) innovative capacity-building exercisesand institutions, (4) strong interest in monitoring andevalu-ation of the devolution program, (5) provision of sufficientlocal fiscal autonomy, (6) efforts to streamline local gov-ernment operations, and (7) efforts to replace input bud-geting and legal management with systems driven by per-formance incentives and targets. Regimes that focus onthese areas in sequence are likely to be more successfulthan those that do not, illustrated by Pakistan and Indone-sia at present.More research needs to be done on the determinants ofeffective decentralization implementation. This three-stageframework offers a modest start. In the future, to provideapplied policy guidance to regimes contemplating designand implementation, research should focus on differencesin the performance of technical activities by similar coun-tries and programs. Specifically, research questions shouldask, what factors are associated with variation in perfor-mance of these activities? Armed with more precise dataand further lessons learned, it should then be possible tomeasure the comparative program impact and link this todifferences in performance of technical activities. With thisapplied information, regimes should have a better assess-ment of the potential risks of their decentralization deci-sions and how to minimize them.

AcknowledgmentsTheauthor hanksRachelQuero,directorof DAI-Philippinesin Manila,for her supportandprovisionof materialson the de-centralizationprogram here.An earlierversion of this articlewas presentedat the Association for Budgetingand FinancialManagementconferencein KansasCity,MO, October10-12,2002.The opinionsexpressedin this articledo not necessarilyre-flect those of the Open Society Instituteor the Local Govern-ment andPublicServiceReform Initiative.

Notes1. Conversely, here is a case againstfiscal decentralizationorforfiscal centralization), nd t is strongern transitional nd

developing societies than in industrialcountries. It is saidthatcentralizationavorsstabilization, conomicgrowth,andregional equity (see Prud'homme1994; Guess, Loehr,andMartinez1997, 1).2. Differencesin decentralization efer to how well the activi-ties areperformed,hesequence nwhichtheyareperformed,andoverallprogramresults.Here,differencescan be notedin how well the technicalactivities wereperformed.The se-quenceof activityperformancewas similar n all threecases.Dataon overallprogram esults are not yet available.3. As the decentralizationprogramadvances and statisticsarereportedmore systematically, he level of local own-sourcerevenuesshould ncrease.Thenew district ier has thepowerto set tax ratesandbases of such dedicated axes as theurbanimmovableproperty ax. Districts also receive a dedicatedannualportionof the sales tax to increase local fiscal au-

tonomy.The NationalReconstructionBureauandMinistryof Finance have largely agreed upon the conceptof a divis-ible pool of provincialresources(provincial inanceaward)to be sharedwith the districtson the basis of needs andper-formance.To a largeextent,districtscanestablishtheir owncurrentanddevelopmentbudget prioritieswith inputsfromnewly created civil society organizations or developmentprojectscalledcitizencommunityboards.4. The relationshipbetweenregimetypes and the level of sup-portfor decentralization s notexploredhere. Manor(1999)notes that,paradoxically,authoritarianegimesmay supportdecentralizationo increase theirbase of support.5. In Ecuador,exchanging tighterreporting requirementsonoutlaysandadding nperformancemeasures orprovisionofgreatermanagement uthorityo transfer ndreprogramundsduring heyearwasviewed as a positiveincentiveby financeministryofficials. This wasaccomplishedby theincrementalreallocationof rewardsandrequirementshatalreadyexistedwithin hebudget-executionystem.Thesmallchange nwhatwas viewed as a hopelessly centralistsystem produced m-provements n budget management Guess 1993).6. Onthe otherhand,the "wrong"kind of intermediary rgani-zations may exist. The threeregimes studied are gamblingthat in the medium-term,decentralizationwill reducesup-

portforunsupportive, egative ntermediary roups hat stillexist, to someextent, neachcountry.Warlords ndremnantsof al-Qaeda n the Pakistani ribalareas are unlikelyto en-courage centrally sponsored government decentralizationprogramsthat could deprive them of indigenous support.Disruptionof establishedcorruptionnetworksby the devo-lution of formalgovernmentalcontrolsystems (such as in-ternalaudit) n Indonesiamet the sameresistance.Regimesrecognize the threatof such organizations o sound gover-nance and the rule of law andattempt o reducetheirinflu-ence by political co-option strategies.The appropriatemixofpoliciestoco-optormodifythebehaviorof negativegroups



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(thatis, force andincentives)must be arrivedat by each re-gime onthe basis of its own strategicandoperational onsid-erations.7. The relevantIndonesian ocal governmentassociations canbe identifiedby theirIndonesianacronyms:APPSI (provin-cial), APEKSI(local anddistrict)and APKASI(mayors).

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