World Bank Report Offers Lessons from East Asia on
How to Do Decentralization Right Jakarta, June 16, 2005 – In the most comprehensive survey to date of the impact of decentralization on public service delivery in Indonesia, the new Governance and Decentralization Survey 2004, a partnership between Center for Population and Policy Studies - Gajah Mada University and the World Bank, shows that a large majority of Indonesians see improvements in public health, public education and local administrative services in the aftermath of decentralization. But most people believe the quality of police services has stayed the same or deteriorated. These findings were presented during a seminar which also launched a new World Bank region-wide report, East Asia Decentralizes – Making Local Government Work, available online at http://www.worldbank.org/eapdecentralizes. The report brings together evidence from across the region to show how a system of more capable local and provincial authorities linked effectively with the central government can improve service delivery and help promote balanced economic growth. The Governance and Decentralization Survey, available to the public on http://www.gdsonline.org, covered over 1,815 households across 8 provinces in Indonesia. It had the following key results regarding the impact of decentralization on public services: 65% cited improvements in public health delivery; 60% cited improvements in public education; 59% cited improvements in the quality of local administrative services; 66% said that police services either stayed the same or deteriorated.
While the finding is encouraging, the jury is still out there to judge whether fundamental service delivery outcomes are as positive. “The verdict is in and the majority of Indonesians can see real improvements in their local public services following decentralization,” says Andrew Steer, Indonesia Country Director of the World Bank. “As the historic direct elections begin for Indonesia’s regional leaders, this survey demonstrates that shifting responsibility for public services closer to the people is beginning to show real results.” However, the survey also shows that corruption and inefficiency continue to threaten higher quality public services. More than 36% of the respondents reported that they had to pay bribes for key public services. The use of high cost intermediaries to get basic administrative services is increasingly common. And families with connections to local elites and civil servants still get faster and cheaper access to basic public services. “Decentralization has not yet tackled the corruption, high costs and personal connections in public service delivery that weigh most heavily on the poor,” notes Joel Hellman, the World Bank’s Senior Governance Advisor in Indonesia. “There is still a large unfinished agenda to strengthen decentralization in Indonesia and its focus should be on further enhancing accountability at the local level.” To address these challenges, five donors – the ADB, DFID, the Netherlands, UNDP and the World Bank – have established the Decentralization Support Facility (DSF) with an initial US$9 million grant from DFID. The DSF is an innovative multi-donor initiative designed to support the Government in strengthening decentralization through increasing the harmonization and effectiveness of donor support at all levels of the system. Through the DSF, donors will seek out local governments committed to enhancing accountability and strengthening their capacity and offer coordinated assistance that builds on existing programs of each institution. The DSF has also set up a comprehensive monitoring system on local government performance, of which the Governance and Decentralization Survey is a key component, that can serve as a benchmark for tracking decentralization and identifying the best practices across the more than 400 local governments in Indonesia. At the regional level, one of the main themes of East Asia Decentralizes: Making Local Government Work, is that now more than ever the future of East Asian countries depends on the capacity and performance of local and provincial governments. Over the past two decades, sub-national governments have taken on core responsibilities for raising and spending public money and for providing critical services and infrastructure. Throughout the region, decentralization has also unleashed local initiative and energy, with new ways to deliver services to people. With great potential for continued improvement and innovation, the report says, it is essential that decentralization is done right. “Reform is happening rapidly in almost every country in East Asia,” said Homi Kharas, World Bank’s Chief Economist for the East Asia and Pacific Region. “Demands for government accountability on the local level are on the rise as people look more and more to their local and provincial institutions to improve education, health, and other public services. The key now is to ensure that government delivers for people and for the economy.” The report, which focuses on six countries, notes the differences in the approach to decentralizing government in Cambodia, China, Indonesia, the Philippines, Thailand, and Vietnam. The systems chosen are quite different but with some shared features that the report uses for comparisons. In some cases, like in Indonesia, decentralization was a rapid process or a “Big Bang.” In others, like Vietnam and Cambodia, the process has been much slower. Despite encouraging progress, fundamental problems remain. Across the region, local governments lack the resources and power to fulfill their new responsibilities, and they have few incentives to improve their performance. “Most countries are caught in an ‘institutional limbo’ between the dissolution of old, top-down service-delivery mechanisms and the emergence of still-weak local government structures,” said Roland White, co-author of the report. “A combination of robust political leadership, smart strategic focus, and real technical effort will be required if countries are to make the new decentralized systems effective.” The report suggests that while decentralizing countries need policies and strategies that are appropriate to their specific environments, policy makers can usefully focus on three key challenges: Improving the organization of the intergovernmental system: Subnational governments now have substantial responsibilities, but basic weaknesses in the systems that link the central, regional, and local governments limit their ability to fulfill these responsibilities. In the Philippines and Indonesia, for example, overlaps and conflicts in the roles of various levels of government have diluted accountability for results. To tackle this problem, policymakers can make sure that roles and responsibilities are balanced as well as clearing up rules for functions and finances of different levels of government. Strengthening local and intergovernmental fiscal and financial structures: Progress in this area has been the greatest in increasing the transfers from the central government to the local governments which make up most local government revenue. But these funds are not always distributed fairly, and local governments have few ways of raising money and even less control over funds they do raise. To repair this, policymakers can do a number of things, including making sure that local authorities have incentives to raise revenues and control expenditures. This may spur local government units to capture the 40 percent of property tax revenue that remain uncollected annually. Developing the accountability systems that make local governments work: Finally, local governments often have flawed financial management systems. Audits are rare, and central control over local staffing, budgets, and pay undermines attempts to devolve authority. Policymakers can work to enhance local accountability through improved monitoring and oversight, both from citizens’ groups and from the top.
The report is available online at http://www.worldbank.org/eapdecentralizes Contact:
Mohamad Al-Arief (021) 5299-3084
malarief@worldbank.org
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