CONFERENCE ON DEMOCRATIC TRANSITION AND CONSOLIDATION Working Group 6: The Reform of the State Bureaucracy Co-ordinator: Byung-Kook Kim

The State: Reform of the State Bureaucracy and Building Capacities for Decentralization Alex B. Brillantes Jr

1. To reform the state, its institutions and processes is a gigantic but critical and difficult task if we are to sustain the gains brought about by democratization and transitions from authoritarian to open and democratic regimes. 2. Equally important is the fact that the imperative to reform state bureaucratic institutions and processes is also in response to the need to improve the quality of lives of the people and address the ever present problem of poverty that is prevalent in the Third World today. 3. Decentralization must therefore be viewed as a strategy that may be adopted to address the twin challenges of strengthening democratic institutions and reducing poverty in the third world. It is therefore imperative that the capacities to design, implement and sustain decentralization must be high in agenda for reform of centers of government. 4. It is within the context of the above that many interrelated issues and concerns have to be addressed by efforts to reform the state bureaucracy. These include the following: To what extent should central government authorities adopt decentralization as a strategy to transfer powers, authorities, responsibilities, accountabilities and answerabilities to lower level institutions within the context of opening up institutions and making then more accessible as part of the overall process of democratization?

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How should the process of decentralization be managed by the center specifically in terms of providing adequate and efficient mechanisms for coordination in order to obviate wasteful duplication and overlap? How should the tension between decentralization and centralization be handled both by central and local authorities? How could constructive partnerships between both levels be engendered in order to enable convergence of paradigms, goals, objectives, and strategies towards democratization and strengthened state institutions and processes? How could the processes of centralization (an imperative for coordination) and decentralization (an imperative for participation) be made to complement each other within the context of public sector reform? Finally, what role can international agencies and multilateral institutions play in this whole dynamic of decentralization vs. centralization / coordination? 5. Decentralization must be seen as a basic component of public sector reform. More specifically, reforming the state through public sector reform can be carried out through three highly related mechanisms. These are the following: Administrative reforms. These include reforms in the bureaucracy and the civil service with the general objective of "institutional reform" (which many also call "changing the rules of the game"). These would also lead to improving "internal rules and restraints" in order to promote effectiveness and efficiency in the public sector. Citizen participation. These reforms include opening public sector institutions to the people through people's organization and non-governmental organizations by enabling them access to policy-making processes and service-delivery mechanisms. This would provide them voice in basic the political processes of interest articulation and aggregation. Equally important is the fact the citizen participation also enable citizen engagement in the

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oversight and accountability processes. These are critical in any effort to transform state bureaucracies as instruments of democratic consolidation. Decentralization. This is a key reform to enable citizen engagement in the process of governance usually through the formal mechanisms of local governments. Decentralization reforms will empower communities through local institutions and authorities and enable them to be heard - and participate in public decision-making institutions and processes. As suggested at the outset, this paper focuses on decentralization. 6. Decentralization should be viewed from a multi-dimensional perspective. This means that it should not be seen as a "zero-sum" proposition whereby the central government's powers and authorities are diminished with the dispersal of power through decentralization. Neither should it be seen simply as increasing the powers of local authorities vis--vis the central government. Instead, decentralization should be viewed as a process whereby the state as a whole is strengthened. It enables component local institutions of the state to be self-reliant. It allows local authorities to address specific local issues and concerns that may be unique to their areas considering their different social, cultural, political and geographical context. On the other hand, decentralization also strengthens the central government by allowing it to focus its energies on broad and "macro-issues," sparing it from details that may be better addressed by local authorities. Decentralization enables central authorities to focus their efforts on broader concerns including the formulation of long range plans and programs including defining the state's strategic economic and political role in the global arena. Central authorities may also help strengthen local authorities by providing them technical assistance, consultancy and

customized training programs. However, towards the overall objective of rationalizing the whole decentralization process, central authorities must exercise a role that they must legitimately and morally play: that of coordinating and orchestrating the various development efforts and interventions in the country.

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7. It is within this context that centers of government (COGs) operating mostly through the cabinet (in presidential systems) or a cabinet of ministers (in parliamentary systems) must play a key role in designing, and operationalizing, decentralization if it is to be successful as a public sector strategy to reform the state bureaucracy. In other words, decentralization cannot - and should not - proceed unilaterally on its own, driven only by the pressures from local authorities or orchestrated by central authorities as simply a management tool for the efficient and effective coordination of implementation. 8. As suggested earlier, the process of decentralization must be viewed its totality, with the perspective that the whole society stands to gain collectively from it. Other critical issues that must be addressed include the following: how should decentralization proceed? Should decentralization be a phased process? Who should "orchestrate" and coordinate the process of decentralization? entail? 9. There is some wisdom to phasing the implementation of decentralization. Such phasing will be largely be dependent upon the capacities and capabilities of the various institutions involved in the process, both at the local and national levels. Thus, the determination of capacities, together with building capacities may be a major responsibility that will be reposed upon the centers of government. However, such as process should be done through extensive consultation with, and active participation of, the local authorities themselves. Finally, the phased implementation of the decentralization process should be incorporated into a Master Plan for the Implementation of Decentralization, the formulation of which should be the responsibility of the COG. 10. Capacity building may be targeted at two levels: at the local governments and at the national government itself. Among the areas of capacities that must be addressed and determined by the COG are the following: What does this process of coordination and orchestration from the center

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In accordance to the basic principle articulated by Roy Bahl that "finance follows

function," it is important to determine what functions and responsibilities should be transferred, i.e., "decentralized," to local authorities. This is very much dependent upon the basic services that may be best delivered at the local level, ranging from health to social services to agriculture to infrastructure to "localize" them and make them more responsive to the unique needs of the people. The other dimension of capacities is one that pertains to fiscal capacities. In other words, it is equally important to determine the sources of financial resources and revenues at the local level that are critical to finance the delivery of basic services. For instance, to what extent are local governments dependent upon financial transfers and grants from the national government? How are such fiscal transfers computed? Is there a set formula? How do the factors of population and land area come into the computation of the fiscal transfers? Are other factors considered in determining the transfers to local governments? For instance, is the extent of deprivation (or poverty) of local governments - due in part to their distance from the capital (as they do in Australia through the Grants Commission), or being isolated as in the case of island local governments, considered in the determination of their share from the national government? Is performance considered? Here, performance may be determined by the extent to which the local governments have collected taxes. It may also be determined by the people themselves through a report card system. (For instance, Bangalore, India has developed some kind of a citizens report card on the performance of the local government.) Finally, it is important to determine other resource generation schemes at the local level that may be available to support the delivery of basic services at the local level, in particular, and good governance, in general. This may be where strategies to harness the energies of the private sector may come in. Examples may be in the area of joint ventures with the private sector, entering into build-operate-transfer arrangements, and

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privatization of the delivery of certain basic services may be considered. Making available information about such to local governments, and providing opportunities for them to work with the private sector, by identifying potential partners and areas of public-private partnership may be part of the overall capacity-building effort. After having determined what functions local governments should be responsible for under a decentralized set up, it is important to determine the availability of qualified personnel at the local level in order to build and develop their absorptive capacities. It is within this context that appropriate capacity and capability building programs may be designed for local personnel. This may range from attendance to short term training programs, to participation in study tours, to cross posting of personnel to other branches and other levels of government (as they do in Japan) in order to broaden their perspectives and enable them to appreciate the situation "from the other side," as it were. Capacity building must also be targeted at national government agencies who should be seen as indispensable partners to the success of the decentralization process. Due to failure on the part of decentralization policy-implementors to focus capacity-building interventions at national government agencies, there have been cases where decentralization initiatives have floundered (as parts of the Philippine experience has shown) or worse, been subverted by national government agencies. This was largely due to the lack of appreciation on the part of said national agencies of their role in the overall decentralization strategy. They saw decentralization as a process that diminished their powers and therefore failed to support it, intentionally or otherwise. Still part of the overall capacity building intervention that may be designed by the COG as part of its overall mission of effective coordination is the need to clearly define the relationships between the national government agencies, and local government, and between and among the local governments themselves, within the context of

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intergovernmental relations. This means that vertical relationships (national-local) and horizontal relationships (local-local; government-non-government; public-private) should be clearly defined. Again, this could be done by the COG only after extensive consultation with the major stakeholders at the national, local, government and non-government levels. Another dimension of capacity building for decentralization is to encourage the local governments to organize themselves into associations, or leagues, that would essentially serve as a lobby and advocacy group to support decentralization. Many local governments around the world, including the United States, Canada, Australia, Sweden, Germany and the Philippines, have organized themselves essentially as non-governmental organizations precisely to advance the cause of local autonomy. Local governments could collectively organize themselves with the purposed of advocating decentralization through various means, including strengthening of local absorptive capacities under a decentralized set-up. Part of this local capacity building strategy is the preparation of appropriate researches that would provide empirical bases for transferring fiscal resources to the local governments. Another aspect of capacity building and advocacy could be in documenting good, and best, practices of decentralization at the local level, as experienced by other local authorities, both at the national and international level. The association of local authorities should be backed up by a professional secretariat and support group, staffed by appropriately trained personnel, with the capacity to provide technical expertise to the local authorities upon demand. Additionally, such a secretariat would provide the element of continuity and stability when the inevitable changes in leadership of local governments, mostly brought about by elections, arise. 11. At the level of the COGs, the experience of other countries in the decentralization process has shown that it may be helpful to set-up a sub-committee that would be primarily be responsible for orchestrating the decentralization process. The sub-committee will essentially prepare the

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technical requirements in the take the formulation of the decentralization master plan, the determination and design of capacity building interventions, consultations with national and local stakeholders, etc. In the Philippines, an oversight committee was set up precisely to

orchestrate and monitor the decentralization process. Included among the members of this oversight committee were representatives of the local governments through their associations and leagues. This sub-committee will address the inevitable transition-related decentralization problems, such as status of personnel transferred from the national to local governments, the bases for the computation of fiscal transfers to specific local governments, and even areal and boundary related issues and concerns. The idea is to have a mechanism (preferably, as suggested above, a cabinet level-subcommittee body where local governments are represented, say through their associations or leagues) constituted specifically for the task of addressing decentralization related issues and concerns. However, it is still the COG that will have final responsibility for the adoption and implementation of the overall decentralization strategy of the stage as part of the reform process. 12. With the general goal of supporting good governance , international organizations and agencies operating can play a key role to support - and thus increase the probability of success of public sector reforms through decentralization. Support for decentralization processes may be imbedded in the country operations strategies, or country assistance strategies, of international donor and financial institutions as they support strategies for good governance. For instance, international institutions such as the United Nations development Programme (UNDP), World Bank (WB) and the Asian Development Bank (ADB), and international donor / aid agencies such as the United States Agency for International Development (USAID), the Canadian International Development Agency (CIDA), the United Kingdom Department for International Development (DFID) and the Australian Agency for International Development (AusAID), all have support for good governance as central in their country operations

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strategies. Support for decentralization processes can be a key pillar for good governance strategy. This support can be operationalized in various ways mostly through capacity building assistance for central and local governments . This includes support for the conduct of training and sharing of good and best, practices (e.g., in devising formulas for intergovernmental transfers; developing strategies to enhance local accountabilities and addressing the problem of graft and corruption; harnessing information communications technology for local governance; exploring various alternatives for revenue generation and resource mobilization, etc.); support for the professionalization of the associations and leagues of local authorities / local governments; and, providing a forum of information exchange not only among national and local government, but more importantly, among the international partners supporting good governance and decentralization for public sector reform.

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Annex One

Lessons Learned for Devolution Implementation: Drawn from studies on the experiences of other Countries

Roy Bahl in a study prepared for the World Bank

Establish National Decentralization Committee to monitor status of decentralization and local fiscal condition

Clearly assign expenditure functions among levels of government Allocate adequate local revenues and enhance local collections Improve equalization impact of inter-governmental grants Develop local accountability

Ammar Siamwalla in a rural development study for the Asian Development Bank

Prepare the process carefully Consult extensively Formulate the plans precisely Commit politically without reservation Implement quickly Finance adequately

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Leonardo Dayao in assessing the Governance and Local Democracy (GOLD) of the USAID

Stakeholder participation is a function of method not time. Decentralization is more constrained by centralized model than by local capability. The local is responsive and capable.

Complex planning is overrated as a condition for success. Conventional needs assessment tend to skew planning and analysis towards conventional solutions.

Expect that national government agencies operate mainly on the basis of anecdotal information about local governments

Emphasize organizational development not individual skills Governance is being redefined at the local level

Terry MacDougall in assessing the Japanese experience on decentralization

Meaningful decentralization cannot simply be legislated. Professional rule-based bureaucratic and fiscal systems are critical for effective governance at all levels.

The character of local-central relations and balance of initiative change with new issue agendas.

Where local administrative capacity is inadequate to handle a nation's policy needs, it can be nurtured.

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The LG system can be useful for reducing regional disparities, experimenting with policies to address new issues, and incorporating new participants into the political process.

Shared growth, through redistributive measures and local responsiveness to diverse interests can help legitimate democracy.

Local democracy can promote governmental effectiveness by creating feedback channels to policy makers.

Alex Brillantes Jr in assessing the Philippine experience on decentralization

Decentralization without financial decentralization is meaningless.

Capacity building should be high in the priority of the agenda for local governance.

Through the Leagues, local governments have become more assertive and effective in articulating LGU concerns over the past ten years.

Local Governments have recognized the value of inter-local cooperation and collaboration.

Local governments have begun to increasingly enter into partnerships and collaboration with civil society.

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Governance in general, and local governance in particular, has generated interest of international donor agencies.

Awards Programs are instruments in disseminating and encouraging good, and best practices, at the local level.

Globalization issues and concerns are concerns that are being increasingly addressed by local governments.

It is critical to develop performance indicators and benchmarks for good governance.

Devolution in the Philippines is ready to proceed to the next logical step: federalism.

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