Decentralizing governments is not a guarantee that growth and development will reach the poorest of the poor, according to the World Bank (WB).
In its latest Global Development Report (GDR), the WB said decentralization is not a guarantee that growth and development will reach the poorest because of “unequal” distribution of power in society.
“Successful reforms are not just about ‘best practice’. They require adapting and adjusting institutions in ways that build more effectively on local dynamics and address specific problems that continue to stand in the way of development that serves all citizens,” said Debbie Wetzel, Senior Director of the World Bank’s Governance Global Practice.
Efforts to decentralize governments can be affected by the “power dynamics” in governments. In the Philippines, during deliberations for the creation of the Local Government Code (LGC) in 1991, members of the House of Representatives and senators had different views.
House members weakened the fiscal resource base of provincial governors, which could be their “potential rivals as dispensers of local patronage.” Senators, meanwhile, favored to devolve more power to the provinces.
Government critics have already expressed their dissatisfaction on how the LGC has worked in the Philippines. During the term of former President Gloria Macapagal-Arroyo, there were calls to amend the LGC, particularly the computation of the internal revenue allotment (IRA).
Former WB Philippines Country Director Bert Hofman said that under the LGC, local government units (LGUs) that have achieved cityhood will be given a higher IRA. Hofman, on the other hand, is asking for an equitable distribution of IRA to improve the allocation of government resources.
Further, Hofman said well-to- do LGUs should also be allowed to access the capital markets directly. Currently, he added, LGUs go through government financial institutions (GFIs), such as the Development Bank of the Philippines and the LandBank of the Philippines, to access loans.
These loans, in turn, are sourced by GFIs from multilateral funding institutions such as the WB and the Asian Development Bank.
“Outcomes reflect the relative bargaining powers of competing interests, mediated by the existing political institutions. Understanding how these bargains take place can help produce more effective, adaptive and context-specific decentralization designs,” the WB said.
The report looks at country examples, including state building in Somalia, anticorruption efforts in Nigeria, growth challenges in China, and slums and exclusion in India’s cities. It identifies three winning ingredients of effective policies: commitment, coordination and cooperation.
This means institutions need to bolster commitment to policies in the face of changing circumstances; enhance coordination to change expectations and elicit social desirable actions by all; and encourage cooperation.
“As demand for effective service delivery, good infrastructure and fair institutions continues to rise, it is vital that governments use scarce resources as efficiently and transparently as possible,” World Bank Group President Jim Yong Kim said. “This means harnessing private-sector expertise, working closely with civil society and redoubling our efforts in the fight against corruption. Without better governance, our goals of ending extreme poverty and boosting shared prosperity will be out of reach.”
The 2017 GDR explores how unequal distribution of power in a society interferes with policy effectiveness.
The report helps explain why model anticorruption laws and agencies often fail to curb corruption, why decentralization does not always improve municipal services; or why well-crafted fiscal policies may not reduce volatility and generate long-term savings.