Decentralization Trend in Public Administration

Concept of Decentralization and Rationale for Decentralized Governance

The meanings of and interpretations to decentralization vary from country to country and by experts or practitioners. As Devas (1997: 351-352) mentions, the term decentralization means different things to different people, and the approach to decentralization has varied widely between countries. Turner and Hulme (1997: 152-153) also insist that various writers have proposed very different meanings for the term decentralization and much ambiguity surrounds the concept. Yet, there is a wide-ranging agreement that decentralization is extremely needed to promote a better, more effective and more democratic governance. Both in developed and developing countries, decentralization forms a key element of the reform agenda.[1]

As a concept, Rondinelli (1999: 2) defines decentralization as the transfer of authority and responsibility of public functions from the central government to subordinate or quasi-independent government organizations. Similarly, Turner and Hulme (1997: 152) point out that decentralization within the state involves a transfer of authority to perform some service to the public from an individual or an agency in central government to some other individual or agency which is ‘closer’ to the public to be served. Hence, talking about decentralization is talking about relationship between central, regional and local government, both in political and economic dimensions. In other words, much of the decentralization happening in the world today has been aggravated largely by political and economic concerns or rationales.

From political perspective, on the one hand, Ford (1999: 6-8) and Javier (2000: 2-3) provide some interesting illustrations about the political grounds of decentralization in some countries. They identify that in Latin America, decentralization is a part of the democratization process where autocratic regimes are replaced by elected governments operating under a new constitution. In Africa, the spread of multi-party political systems is creating a demand for more local voice in decision-making. In some countries such as Ethiopia, decentralization has come in response to pressures from regional or ethnic groups for more control or participation in the political process. In the extreme, decentralization represents a desperate attempt to keep the country together in the face of these pressures by granting more autonomy. In Mozambique or Uganda, decentralization has been an outcome of long civil wars where opening political opportunities at the local level has allowed for greater participation by all former warring factions in the governance of the country.

On the other hand, from economic perspective, decentralization should be seen in the context of government’s intrinsic needs. This need derives from market failures and therefore centralization has to take into account. In this case, there are two main economic rationales for decentralization, they are, variations in individual preferences for private versus social goods (and services) and for different types of social goods (and services); and the benefits of social goods (and services) are generally characterized by spatial limitations (Owens and Panella, ed., 1991: 6). Ford (1999: 6) further adds economists justify decentralization on the grounds of allocative efficiency. A second economic rationale for decentralization is to improve the competitiveness of government and enhance innovation – and hence the likelihood that governments will act to satisfy the wishes of citizens.

Obviously, there are some other reasons for decentralization as exposed by Litvack, Ahmad, and Bird (1998: 5) who provide some political economic rationales for decentralization. Rondinelli and Cheema (1983: 15-16) also propose 14 specific benefits that may accrue from decentralization, as follows:

• Decentralization can be a means of overcoming the severe limitations of centrally controlled national planning.
• Decentralization can cut through the enormous amounts of red tape and the highly structured procedures.
• Officials’ knowledge of and sensitivity to local problems and needs can be increased.
• Decentralization can allow better political and administrative “penetration” of national government policies into areas remote from the national capital.
• Decentralization might allow greater representation for various political, religious, ethnic, and tribal groups in development decision making that lead to greater equity in the allocation of resources.
• Decentralization could expand local governments’ and private institutions’ capacity to take over functions that are not usually performed well by central ministries.
• The efficiency of the central government could be increased.
• Decentralization can provide a structure through which activities of various central government ministries and agencies could be coordinated more effectively.
• Decentralization is needed to institutionalize participation of citizens in development planning and management.
• Decentralization might offset the influence or control over development activities by entrenched local elites.
• Decentralization can lead to more flexible, innovative, and creative administration.
• Decentralization allows local leaders to locate services and facilities more effectively within communities.
• Decentralization can increase political stability and national unity by giving groups the ability to participate more directly in development decision-making.
• Decentralization can increase the number of public goods and services and the efficiency with which they are delivered at lower cost.

In line with such rationales, decentralization may occur in four major typologies, (a) political, (b) administrative, (c) fiscal, and (d) market or economic decentralization. Political decentralization aims to give the people access to public decision-making. Administrative decentralization aims to redistribute authority and responsibility for providing public services among different levels of government. Administrative decentralization has three major forms, deconcentration, delegation and devolution. Fiscal decentralization, on the other hand aims to provide the local institutions the authority to carry out the decentralized functions together with making expenditure decisions and power to raise their own revenues. Market or economic decentralization aims to shift responsibilities for functions from public to private sector. It is regarded as the complete form of decentralization. Privatization and deregulation are its two major forms (Rondinelli, 1999: 2-4).

The Impacts of Decentralization

From cross country data and experiences, decentralization may produce higher performance of certain field of development. Keith McLean and Elizabeth King (1999: 55) conduct research on decentralization and its impacts on the education sector. The initial evidence suggests that decentralization to sub-national governments may increase autonomy for communities and school actors to improve school and learning. By increasing the participation of the parents, community-managed school in El Salvador show significantly low rates of student and teacher absenteeism. In Nicaragua, controlling for similar household background and school inputs, students in school that make more of their own decisions about school functions perform better in tests.

Similarly, as declared by Anne Mills (Kolehmainen-Aitken, 1999: 57), decentralization in health sector offers some advantages, those are:

·        More rational and unified health service that caters to local preferences.

·        Improvement of health programs implementation.

·        Lessened duplication of services as the target of populations is defined more specifically.

·        Reduction of inequalities between rural and urban areas.

·        Cost containment from moving to streamlined, targeted programs.

·        Greater community financing and involvement of local communities.

·        Greater integration of activities of different public and private agencies.

·        Improvement of intersectoral coordination, particularly in local government and rural development activities.

However, without careful planning of appropriate organizational roles, relationship and structures, decentralization in health service may produce unproductive results, as occurred in some countries like the Philippines, Zambia, and Papua New Guinea (Kolehmainen-Aitken, 1999: 59).

In the infrastructure sector, Jessica Seddon (1999: 70) serves studies that indicate that decentralization can have varied effects on the infrastructure sector. For example, both aggregate and sub-national infrastructure expenditure increases as decentralization proceeds, particularly in developing countries. This could be an indicator that local government prefers more infrastructure than would have been provided by the central government. In addition, performance indicators generally improve slightly or stay the same when infrastructure sectors are decentralized, although they do observe a few negative effects.

To some degree, decentralization also gives a better performance on economic growth, as researched by Seldon (1999: 93). Quoting some experts, she points out that decentralization has a positive and sometimes significant effect on regional economic growth in India, while work on the US find fiscal decentralization to be associated with lower growth. However, several methodological problems in these studies discount even these mixed results and much more needs to be done to ensure that the measured decentralization-growth relationship is robust. That’s why, in the absence of strong, unambiguous empirical evidences; researchers have put forward three hypotheses about the relationship between decentralization and growth. In each hypothesis, growth has only a secondary relationship to decentralization, and the nature of the connection, whether growth enhancing, growth impeding, or growth requiring, depends on what are considered to be the primary effects of decentralization.

Those three hypothesis are: 1) Decentralization increases economic efficiency in public spending, therefore its dynamic effects should be growth-enhancing; 2) Decentralization can lead to macroeconomic instability, which can inhibit growth; and 3) Developing countries have significantly different institutional and economic environments than do industrial countries and will not reap the benefits or suffer the consequences of decentralization in the same ways (Seldon, 1999: 93-95).

A brief summary of nine countries case studies on the impact of decentralized governance on service delivery for the poor is served by Work (2002). He points out that decentralization lead to the improvement of health services in Belo Horizonte, Brazil; improvement of Municipal service delivery in Sinuapa, Honduras; successful project implementation in Jamunia Tank Gram Panchayat, India; improvement of education services in Ma’n and Irbid, Jordan; upgrading of squatter settlements in Pakistan; improvement of health services in three cities in the Philippines; generating local economic development in three Polish Cities; improvement of revenue generation in Ivory Park, South Africa; and improvement of market services through private partnership in Jinja, Uganda.

Another interesting research conducted by Moore and Putzel (1999: 12) supposes that decentralization is a popular prescription for the governance problems affecting poor countries in particular. It is widely believed that decentralization will also have pro-poor impacts. The most common argument is that, because decentralization by definition involves bringing government closer to the governed in both the spatial and institutional senses, government will be more knowledgeable about and hence more responsive to the needs of the people. This is expected to lead to pro-poor policies and outcomes. However, it is difficult to evaluate these kinds of arguments, because decentralization covers a very diverse range of phenomena. That is the reason why decentralization produces both positive impact in a particular region (West Bengal), but it also creates negative impacts in other regions (other than West Bengal).

To summarize the impact of decentralization, UNDP Poverty Report 2000 confidently asserts that decentralized governance, when carefully planned, effectively implemented, and appropriately managed, can lead to significant improvement in the welfare of people at the local level, the cumulative effect of which can lead to enhanced human development. In addition, if decentralization involves real devolution of power to local levels, the enabling environment for poverty reduction is likely to be stronger. On the contrary, badly planned decentralization can worsen regional inequalities. Left to their own devices, richer regions are likely to develop faster than poor ones. And a system of matching grants, intended by central government to motivate local government to raise funds, typically exacerbates regional disparities. The richer regions can raise more funds – and thus receive more in matching grants (UNDP, 2000: 60-61).

In the political aspect, there is also a direct link between decentralization and democracy, as exposed by Hadiz (2003: 16). He argues that decentralization imagines the enhancement of levels of transparency and accountability and the development of good governance practices. The idea is that local needs will be better identified as a result of decentralization, given higher priority, and that local leaders will be more directly under the scrutiny of their communities. Local initiative and creative energies will be unleashed as well due to the lifting of stifling centralized control over various aspects of local life. Moreover, democratic governance requires solid foundations in well functioning local institutions that could conceivably thrive in a decentralized environment.

In the case of Indonesian decentralization, IRDA (2002a: 10) finds out that decentralization is able to endorse the following three current directions. First of all, there is an increasing awareness and appreciation of peoples’ participation in local politics. In the sites covered, there are strong indications of increasing peoples’ participation, transparency and accountability. People are demanding better performance and in response, some local government units (LGUs) have become more ‘customer oriented’ and open to public discussion and dialogue about their performance and how they can improve. In Bandung, for example, the Bupati (Head of District) and technical staff have held weekly public dialogues with constituents at the sub district level for the past year. The dialogues give the public an opportunity to provide feedback on local government performance related to service delivery and social, political, economic and environmental problems. These forums have favorably impacted peoples’ image of local government and their perceptions of government accountability and transparency.

Another finding is that local government agencies are committed to improving service delivery and are feeling the pressure to do so from citizens. Since public service delivery in the hands of closer and more accessible local governments, citizens have found it easier to express concerns about the quality of service and demand more. The quantity and quality of services has improved in some areas, but it has deteriorated in others. Generally speaking, however, local government units have managed to maintain the level of service that the central government used to provide. For instance, a perda (regional regulation) was passed in Pontianak in April 2001 to improve the quality of public services. Considering local potentials, community needs, and work efficiency, the Pontianak City Government established a benchmark of 5.6 (out of 8) working hours as minimum amount of time that should be devoted to service delivery. The remaining time is for administrative matters. Units that fail to meet this standard will be evaluated and face the possibility of being merged with other units (IRDA/Asia Foundation, 2002a: 14).

Finally, the last finding concerns with the fact that regional governments are cooperating and sharing information with one another and with provincial government to solve a variety of shared problems. A common interest in improving public service delivery, increasing revenue and resolving problems and conflicts arising from decentralization have motivated local government to help each other. Though the roles and responsibilities between different levels of government remain unclear, and the central government has provided insufficient support for local problem solving and conflict management, local government units are being proactive in forming association to share information and approaches to common problems and to advocate policy reforms.

The Bupati of Indramayu, for example, established an association of local government officials from kabupaten (districts) that are rich in oil and gas resources. This association provides a forum for these kabupaten to negotiate with the central government over the amount of resources from oil and gas that is returned to the local government. The association has lobbied the central government to be more transparent in how it allocates the DAU (dana alokasi umum, general allocation unit) to the district level (IRDA, 2002a: 22).

In its second report, IRDA (2002b) has also found many good practices of such development management as health, education, agriculture, environment, and investment sector. Accordingly, in its third report, IRDA (2003) has opened up main achievements of decentralization in three aspects: decision making process at the local level, human and financial resource management, and accountability system.

Nevertheless, some negative impacts seem unable to be avoided. In its research report titled “Regional Autonomy and the Business Climate: Three Kabupaten Case from West Java”, SMERU (2002: 21-22) depicts that Cirebon District Government is preparing to launch 18 new tax / levies (pajak / retribusi) regulation; while Garut District Government has issued 24 new tax / levies (pajak / retribusi) regulation, 17 of which concerns with financial charges. The similar can be found in Ciamis, where LGU has 35 types of revenues: taxes (6), levies (27), and third party grants (2). These phenomena have propensities impeding economic investments and domestic businesses in the future if the government does not anticipate through proper policies. According to Soesastro (2001), one of the most hazardous impacts of such regulations is obstruction of inter-regional trade and the weakening competitiveness of local commodities.

Likewise, Hadiz (2003: 16) observes that decentralization in Indonesia has given rise to highly diffuse and decentralized corruption, rule by predatory local officials, the rise of money politics and the consolidation of political gangsterism. In the Indonesian context, the main questions to ask are, therefore, ‘who has benefited most from decentralization?’ and ‘who have been the main beneficiaries of the advent of democratic system that is primarily driven by the logic of money politics and of political violence? In fact, it is not difficult at all to identify who these are. By and large, they have been individuals and groups who had earlier functioned as the old New Order’s local operators, small/medium but politically connected businesspeople with big ambitions, as well as an array of the regime’s former henchmen and enforcers.

But the Indonesian case is not unique. There are many countries that offer examples of decentralized democratic political life in which predatory elements of civil society – including political gangsters – have been major players. Post-Soviet Russia provides one of the better examples, as does the Philippines case mentioned earlier, and Thailand (Hadiz, 2003: 17).

Since decentralization policy in Indonesia creates positive outcomes as well as negative consequences, it is important to consider the preconditions that could strengthen the role of Law No. 22/1999 in upholding the democratic developmental regime. In general, the following requirements should be met to construct a developmental state / regime: a dedicated developmental elite; relative autonomy for the state apparatus; a competent and insulated economic bureaucracy; an empowered civil society; a capacity to manage effectively local and foreign economic interest; and a varying balance of repression, legitimacy and performance (Leftwich, 2000: 160-167).

Unfortunately, it is extremely difficult to create such requirements for developmental state. In this case, we need accurate strategies of development. For that purposes, Kimura (1999: 37-50) offers six central points in promoting (LGU) capacity building. Those six points are: establishing nation-wide minimum standard of services, improving policy formulation capacity, modernizing bureaucracy, reorganizing boundary between LGUs, promoting check and balance system in local level, and strengthening financial basis. To some extent, both central government and LGUs in Indonesia have realized such points or policies, but to some other extent they have not.

Here, there are hypothesis that the more effective the implementation of those policies, the stronger LGUs capacity in promoting development. Subsequently, the stronger the capacity they have, the higher their possibility to become developmental democracies or democratic developmental regimes. Without adequate capacity, decentralization may bring about the failure of development processes.

The Shadow of Decentralization (Regional Autonomy) Failure

It is unquestionable that decentralization is an outstanding concept. However, the good implementation of decentralization represents more essential factor in achieving effective and democratic governance. As World Bank (2001: 1-2) alerts, decentralization holds great promise for improving the delivery of public services, but outcome depends on its design and on the institution arrangements governing its implementation. The study found that decentralizing service delivery offers benefits, but these benefits have not always materialized.

Turner and Hulme (1997: 151) also indicate that decentralization within the state is a good theory but poor practice. By quoting Smith (1995), they express that experience of decentralization in less-developed countries (LDCs) has almost everywhere fallen short of expectations and the declared objectives of policy makers.

Correspondingly, Litvack, Ahmad, and Bird (1998: 7) confess that designing decentralization policy is difficult in any country because decentralization can affect many aspects of public sector performance and generate a wide range of outcomes. But it is particularly difficult in developing countries because institutions, information, and capacity are all very weak. Therefore, successful decentralization depends highly on institution-specific design.

In Indonesia and even in other countries, decentralization policy is not a final purpose of government processes. It is only a tool or method in creating an interaction among people, between people and the government, and between local and central government. For this reason, it needs concrete efforts, which assures the effectiveness of the tool. Otherwise, decentralization is potentially going to be failed in the implementation step. In this case, decentralization will only work in an ideal concept, but never come as a political and administrative ideality.

In other words, decentralization not always offers good stories, but sometimes also includes weaknesses. In this sense, Javier (2000: 3) describes that decentralization is not a cure for all bureaucratic illnesses; it has its own share of disadvantages and misgivings. A power shift away from central government to local institutions can result in losing control over scarce financial resources. A negative re-distributive effect of the transfer of administrative responsibilities can create friction in central-local relations.

Anticipating this, Kimura (1999: 35-36) sharply warns about the possibility of regional autonomy failure, particularly in Indonesia. For instance, one of central paradigm included in Law No. 22/1999 is promoting democratization process in local level. If democracy is defined as government of the people, by the people, for the people (Abraham Lincoln), the main actors of government should be the people itself. Nevertheless, government is never governed by the people, but by the political party instead. By quoting Schattschneider, Kimura says that in fact, people just like a football game observer; while the real political player are the football teams. Moreover, the optimism for the encouragement of check and balance function between executive and legislative body is likely postponed due to the domination of political party in determining some key positions.

The other paradigm included in Law No. 22/1999 is improving the quality of public service. Theoretically, it will cause local administration to be more responsive to both people’s need and local issues raised. However, local administration’s responsiveness can only realized when local politicians are more democratic than those in central level. It is ironic that most of local politicians relatively have traditional attitude, authoritarian, and tends to be dominated by local middle-classes that have narrow vision, and that are not familiar with democratization process and information disclosure.

Examining those phenomena, Kimura (1999: 36-37) mentions that in case that administrative infrastructure is not ready or prepared, excessive implementation of decentralization would produce serious problems, such as: widening gap between rich and poor local government, decreasing government services due to budget constraints or lack of capacity, increasing “local kingdom” and the hardship to create a check and balance system, and sharpening antagonism among ethnic groups.

Similarly, Prud’homme (1995: 202-209) stated that there are three dangers of decentralization, those are: 1) decentralization can increase disparities; 2) decentralization can jeopardize stability; and 3) decentralization can undermine efficiency. In Indonesian context, the possibility of wide-autonomous region policy failures can be detected from the phenomena that balance-fund legislation often produces disagreement between local and central government. Demand for independency from some provinces such as Aceh, Papua, and Riau, are also good examples for terrible reality. Rising trend of the Cities and Districts superiority over the Provinces as mentioned by Utomo (2000) is another indicator of such likely failures.

The fact that decentralization might be failed leads to the needs of strategic policy and concrete effort as an integral part of decentralization. In this case, all local governments need to employ capacity building programs. According to Kimura (1999: 37), capacity building is the subsequent step to be considered after implementing the decentralization.

From this perspective, capacity building constitutes prerequisite, by which local government would able to strengthen their administrative infrastructure in order to realize an effective governance system. Strong and productive administrative infrastructure is very important to achieve so called good governance. In turn, good governance hopefully will become a trigger for improving public service quality and democratic order of local governance. In a similar way, Alm, Aten and Bahl (2001: 87) propose that the first step in successful decentralizations is a clear statement of the objectives of the reforms. Accordingly, a plan, even if incomplete, is a necessary starting point for any successful reform.

To conclude, local government capacity building program – including strategic planning of decentralized programs – aims not only to reinforce the implementation of decentralization policy, but also to refurbish the public service performance. Besides, specific policies as explored below are extremely required in order to anticipate the failure of decentralization programs.

References

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Note:

This article is taken from a part of my Master Thesis, “Decentralization and Capacity Building in Indonesian Local Administration: A Long Journey for Discovering a Model of ‘Democratic Developmental Regime’ (Case Study of Bandung City Government)”, 2004, Graduate School of International Development, Nagoya University, Japan.

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[1]     In Japan, decentralization is widely regarded as “the third major reform” of Japanese government in the modern era, following the Meiji Restoration in the mid-nineteenth century, and administrative reform after World War II. See JLGG Newsletter, Decentralization: New Legislation Boosts Japan's Local Authorities, Issue No. 31, Summer 1999. In Indonesia, new decentralization policy is regarded as one of political reforms in addition to amendment of Constitution, abolition of dual functions of the military, and cutting off KKN (corruption, collusion and nepotism).