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Governance in developing countries: The challenge of multi-level governance

Dele Olowu
Institute of Social Studies,
The Hague, Netherlands


Introduction and Abstract
Governance, a little known political science concept until recent times, entered the center stage of policy debate in all countries towards the end of the last century. The three most prominent issues in governance discourse as it relates to developing countries include the horizontal coordination of markets, government hierarchies and networks—an issue that has become pronounced with the advent of globalization. Has globalization favored or disadvantaged many developing states in relating to markets as is claimed by protagonists and antagonists of globalization? (Scholte 2000) Second, there is the challenge of multi-level governance. This implies that states must share their powers of governance with regional and local self-governing communities. How to organize this in countries where paternalist centralism has been the principal mode of governance has become a tough challenge (McCarney 1996). Finally, there is the challenge of global governance: how nation-states relate to one another and to the many public and private supra-national bodies that now wield more power in the policy process in many developing countries. In a sense, these challenges are not peculiar to developing countries nor do they affect all developing countries in the same manner but they constitute a common denominator in the policy and scholarly discourse on governance.

This paper focuses on the second challenge for four reasons. First, the first and third challenges have been the subject of much research whereas the second has been comparatively neglected. Second, the challenge of multi-level governance is at the heart of a major revolution occurring in the Third world policy circles though not many scholars have fully appreciated its reality or significance. Finally, it is a subject which I have studied continuously for many years.

The paper begins by defining governance and then goes on to identify the main differences in multi-level governance arrangements between developed and less developed countries (LDCs). It then reviews the evidence for the policy shift in the developing world with respect to decentralization. Until the last two decades, conventional wisdom was that developing countries needed to be highly centralized for a variety of political, cultural and economic reasons. Decentralization if it is to be contemplated at all must be of the deconcentrated variety. However, since the late 1980s and early 1990s, many less developed and transitional countries have moved in the direction of democratic decentralization (DD). It has not always been smooth sailing but the experience in a number of countries is already yielding many positive policy outputs and outcomes that lead many other developing countries to begin to contemplate similar policies. This paper will identify major forces promoting change, highlight the key achievements of democratic decentralization in developing countries as well as the nagging problems but also indicate some of the ways by which key institutional actors—including donors, research organizations and policy think tanks (like GIDESCO) can best assist this process. The paper has six sub-themes:
  • What is governance: Approaches to defining governance
  • Multi-level Governance in developed and developing countries
  • Evidence of a Paradigm shift in decentralization discourse and policy
  • Explaining Policy Shift
  • Dilemmas of Devolutionary Decentralization
  • Significance of Policy Shift for Development, Democratization and GIDESCO
1. What is Governance?: Approaches to Defining Governance
In spite of the popularity of the governance discourse the concept remains ambiguous. Two major definitions of governance have gained currency in the rapidly growing academic and policy literature on the subject. In the most popular one, used by the World Bank and many other United Nations institutions, governance is defined as ‘ the manner in which power is exercised in the management of a country’s economic and social development’ (World Bank 1994: vii, see also United Nations Development Program 1997). Essentially, governance as conceived by these multilateral organs, emphasizes leadership--the manner in which (state) political leaders manage, use (or misuse) power --whether to promote social and economic development or to pursue agendas that undermine such goals. This was made explicit in the World Bank’s first application of the concept to Africa. Governance was regarded as the single most important if not the sole cause of Africa’s underdevelopment (World Bank 1989:60). Well-governed countries are led by regimes in which rule of law, accountability, transparency and the enjoyment of human and civil rights are allowed.

A second approach to defining governance focuses on the sharing of authority for public management between state and non-state organizations. Jan Kooimans (1993: 2) and other European researchers define socio-political forms of governing as ‘ forms in which public or private actors do not separately but in conjunction, engage in problem solving together, in combination, that is to say co-arrangements’. The school therefore views governance as forms of multi-organizational action rather than involving only state institutions.

The definition used in this paper is closer to this second school of thought. Governance is approached, as it had always been understood in the political science literature as the fundamental rules, which regulate the relationships between rulers and the ruled, the rules-in -use or constitutive choice rules, operating at deeper levels of analysis than collective and operational choice rules (Kiser & Ostrom 1982, Ostrom 1990, Hyden 1992). The legal community (Okoth Ogendo 1999) also refers to these constitutional rules as ‘ground-norms’.

Although primarily associated with the analysis of the state, governance is a generic term, which can be applied to all forms of human organization--economic, cultural, religious or military.

There are those who see in the governance debate a way of scapegoating the poor countries for the failure of development—while completely ignoring some of the problems within the international economic relations which have perpetuated old patterns of relationship between weak and strong nations. On the other hand, some see governance as providing the crucial opportunity to address issues of power inequality within national (and international) political systems which some hope may help to improve institutional quality especially in developing countries where ordinary citizens have a high distrust of governmental institutions and actually work to undermine them (Narayan et al 2000, Ekeh 1975).

One significance of approaching governance as the fundamental rules of the political game is that it facilitates the analysis of the high levels of asymmetry in the distribution of power and other resources among different power wielders in society—those at the center as against those in the periphery, between one region or locality and another and between individuals who exercise power and those that do not. For an important difference between developed and underdeveloped countries is in the concentration of power in central government agencies in the latter groups of countries as we shall see in greater detail below.

2. Multi-level Governance: Industrialized and Developing Countries Contrasted
Whichever way one looks at it, industrialized countries are more decentralized than developing countries. This is the case whether one is looking at local governments, which are semi-autonomous bodies (measured by expenditures or employees size) or field administrations of the central government. Table 1 for instance shows that central governments in industrialized (OECD) countries engage twice the number of officials as the developing countries of Asia, Latin America but they engage four times the number of local government employees. The relative difference is equally reflected in total government expenditures as a ratio of local government expenditures 1 . These figures relate to local governments. But field administrations of central governments in developing countries are also more concentrated than those of industrialized countries. Generally, a substantial proportion of central government employees in developing countries lives and works in the capital city. In contrast, only a small proportion of central government employees lives and works in the headquarters in most industrialized countries. The proportion of headquarter to field officials is 20% in the United Kingdom, 25% in France and only 12% in the USA (Smith 1985, Olowu 1984). The reverse is generally the case in many developing countries. These points can be stated in terms of three broad propositions:


Table 1: Government Employment as % of Population, 1997

  • Industrialized countries are generally more decentralized than developing countries. While this correlation is clearly established in terms of expenditure, revenue and employee size data, the direction of causation remains unclear (UNDP 1993). Is it decentralized governance that leads to economic development or is it economic development that makes decentralized governance possible?
  • Local governments employ more staff than central governments in industrialized countries. The reverse is the case in the developing countries.
  • Extensive devolved governance in industrialized countries correlates with high levels of deconcentration. It is not difficult to see how an extensive system of field administration becomes necessary to support the strong patterns of decentralized local government in developed countries. The contrary logic may be occurring in many developing countries— weak local governments are complemented by equally weak field administration systems.
Some LDCs have actually attempted to integrate these two institutions (local governments and field administration) without much success (Rondinelli 1981, Wunsch & Olowu 1995, Haque 1997).

This pattern of governance in industrialized countries has followed a historical logic whereby local governments existed before central organs. Of the most successful of these countries, Alexis de Tocqueville (1959: 84) wrote: ‘one can say that in general, the striking feature of American public administration is its extraordinary decentralisation’. Other scholars who have examined the underlying theory of governance in industrialized countries have discovered that the system of governance in these countries is based on long struggle for the accountable use of power. This has led to deliberate checks and balances on central power most evident in the simultaneous exercise of power by autonomous entities: the church, municipalities, universities, trade unions etc—each of which is capable of exercising veto powers. This model of governance has been referred to as polycentricity –and regarded as an important attribute of democracy (V. Ostrom 1987, E. Ostrom 1990). Different patterns of polycentricity are observable among western countries, with variations reflected by their national cultures (Andrew & Magnusson 1998).

Whereas LDCs came to political independence with formal structures of democratic, representative government, political leaders in their bid to consolidate political power opted for highly centralized modes of governance. This centralized mode of governance in LDCs is reinforced by a culture of politics of patrimony in which all powers and resources flow from one source of power (‘the father of the nation’) to clients to shore up the regime. This pattern of power and resource distribution was strongly supported by both domestic and external actors until the late 1980s. The reasons adduced for adopting this approach included –rapid economic and social development actualized through centralized planning, unity and national integration, containment of corruption and political stability. In fact, as earlier noted, the argument was that if decentralization would be necessary at all it must be in the form of administrative decentralization or deconcentration—the sharing of responsibilities between central and local administrations which do not exercise any discretionary authority nor dispose of resources (Riggs 1964). A monocentric governance model was adopted and this affected the manner in which decentralization was approached--administrative decentralization or deconcentration prevailed over political or democratic approaches. The latter is different because it includes not only the transfer of responsibilities but also of financial and human resources to semi-autonomous entities with their own decision-making powers.

In the last decade however, many countries changed course dramatically. They have abandoned the monocentric political model and sought to replace it with its exact opposite—a polycentric structure of governance. The latter accepts the idea of multiple centers of power within a state –which was denied by the monocentric state.

3. Evidence of a Paradigm Shift in Decentralization Policy
A number of scholars and policy analysts have called attention to new forms of democratic decentralization which have been initiated in the decade of the 1990s in many developing countries (Dillinger 1993, McCarney 1996, Crook & Manor 1998). The extent of change has been massive and sustained over a period of time than in the past. In fact, some of these countries have defied the ‘ pendulum model’ (Mawhood 1984: 8) by which a decade of democratic decentralization is followed by another decade of centralization. Responsibilities and financial resources—revenue sourcing and transfers, powers to borrow etc –as well as human resources and accountability arrangements have been transferred from central governments to local communities in many countries. A few comparative studies are now documented and three of such studies are reviewed here. They are further corroborated with specific national experiences from LDCs—India, the Philippines, Colombia and Nigeria.

Since the publication of the UNDP/UNHCS/World Bank study that showed that only 12 countries out of 75 developing and transitional countries with population greater than 5 million have embarked on the transfer of power to democratically elected councils at intermediate and local levels, scholarly and policy interest in democratic decentralization has been aroused (Dillinger 1993). Crook and Manor (1998) for instance compared and contrasted the experiences of four countries in Asia and Africa which have ‘ devolved ‘power, responsibility and sometimes resources to democratically elected councils at local and intermediate levels’. The countries they selected for study included Ghana and Cote d’ Ivoire in Africa and Bangladesh and the Indian State of Karnartarka in south Asia. Their research showed that the transfer of responsibility, resources and accountability to local communities led to considerably enhanced levels of participation by citizens in governance—when measured by both electoral and non-electoral indices, and in some cases these were much higher than levels of participation in several western countries’ local governments. (p. 271).

But the key question they tried to relate to was whether this increased level of participation led to improved performance of local governments in delivering basic community services. The response to this question was mixed—the African cases generally performed poorly compared to the south Asian cases according to this research. But what is important to underscore from their work is the documentation of the movement of responsibility, resources and accountability to local governments in varying degrees in all countries. This is quite different from the past reluctance of LDC national governments to empower local or municipal governments and complements a long line of research in Latin America that has demonstrated this pattern since the late 1970s. Asian and African cases came later (OECD 1997, Litvack et al 1998).

A second set of study focuses on the health sector. Two comparative studies have been conducted using the novel approach of ‘ decision space’ allowed to local governments by the national government. The concept of decision space analyses the range of choice that municipalities were allowed to exercise over different functions in financing, service delivery, human resources, targeting and governance. The studies on three Latin American countries – Chile, Colombia and Bolivia—found that there was a tendency for the decision space to be wide initially and to reduce over time. Moreover, greater choice was allowed local government decision-makers with respect to contracting for private services and internal governance while financial allocations were moderate but their choices over human resources, service provision and targeting of priority programs were much limited and remained centralized. Generally, local governments were able to make innovative decisions and one of the notable effects of decentralization was its positive impact on equity, a tendency for wealthier and poorer municipalities to have similar per capita expenditures. An important explanation for differential performance was varying institutional capacities—where institutional capacity was weak as in Bolivia, the achievements of decentralization was weak.

The same patterns were observed in the second set of studies which included –the Philippines, Ghana, Uganda and Zambia. The Philippines had the highest degree of decision space partly because of the country’s institutional capacities as well as the form of decentralization – devolution (not deconcentration nor managerial delegation as in the other countries) (Bossert 2000, Bossert et al 2000).

Finally, a third set of comparative studies has been conducted by international organizations. Four of these can be mentioned here. First, the World Bank in its landmark World Development Report of 1997 reports the fact that ‘ developing countries which went through a nation-building phase in the 1950s and 1960s were becoming more decentralized in terms of expenditures and revenues since the 1970s’ (p 121). Table 2 lends credence to this report which shows increased levels of revenue and expenditure decentralization in several Latin American countries. Other literature shows that decentralization was more widespread in LDCs and had included not only the transfer of responsibilities and financial resources but also human and accountability arrangements. For instance, a study conducted by the International Labor Office (ILO 2001) found that devolutionary decentralization was a reality in developing countries in the management of many municipal services (education, health, transportation, waste management). It also noted that employee size increased at the sub-national levels in many countries for which data was available (Mauritius, Philippines, Botswana, Uganda, South Africa and Costa Rica). In a country like the Philippines, massive numbers of formerly central staff were devolved to the local governments (see Table 3).


Table 2: Changes in subnational finance in selected countries (Percentage of expenditures or revenues for all levels of government)


Table 3: Number of Government Employed Health workers in the Philippines (Decentralized and Retained Centrally), 1997 Category Decentralized Retained

A third study was undertaken by the Danish National Association of Local Authorities (NALAD) together with a consortium of other bilateral and multilateral donors on six African countries (Ghana, Senegal, Swaziland, Uganda, Zambia and Zimbabwe). They found that ‘. the countries in the sub-Saharan African Region are all at different stages in the decentralization process..as a group these countries comprise a virtual continuum of the steps necessary to build strong municipal governance and infrastructure delivery systems’ ( Steffensen & Trollegard 2000: 14). Responsibilities, resources and accountability are being moved from the central to local governments and Table 4 shows data on local government expenditure in these countries. The report notes that LG expenditure and revenue levels increased between 1994 and 1997 in all countries.


Table 4: Share of Sub-National/ Local Government Expenditure as a share of GDP and Government Expenditure 1997/1999

Before we conclude this section, it is useful to review the outstanding experiences of three countries briefly. These countries are India, the Philippines, Colombia and Nigeria

India
India is the world’s largest democracy and one of the major intellectual puzzles posed by that country’s successful embrace of democracy is how a low income economy, with widespread poverty, illiteracy and immense ethnic and religious diversity could become a successful democracy. The most profound explanation of this puzzle as well as of the resurgence of democracy in developing countries is to focus not so much on social and economic factors but on the manner in which power is distributed and the type of choices made by Indian local and national elites. Mitra (2001: 103) has put together excellent data to show that the judicious use of local government has enabled India ‘ to infuse new political resources into the political system..and enhanced resilience and legitimacy of the state’. He then goes on to argue with impressive inter-state data that ‘ the success of local government depends to a large extent on the type of leadership that obtains at the local level’.

India has had a long and checkered history of local government reform. This history pre-dates political independence. From the first legislation in the early 1880s to its formal appearance as a part of the independence constitution and the 73 rd amendment to the constitution in 1992, the objective of state policy was to move local government in India from the preserve of the feudal lords to a democratic form. Panchayats as basic units of the Indian political system were contested by several political groups but the 1992 amendment gave constitutional recognition to panchayat raj as a tier of government in the federation. They are elective and endowed with taxation powers and are entitled to central transfers supervised by the State Finance Commission. Mitra notes that India’s panchayats today have more potential power than before and in some parts of India they have become viable political units in their own right’ (ibid p. 108). One of the most important measures of the importance and significance of local government in India is the fact that more citizens on the average trust it more than state or the central government. And in states such as West Bengal (others will be Kanartaka) trust levels in local government are even higher still. (See Table 5). Data from participatory poverty assessments from other parts of the world confirm the finding that citizens trust municipalities more than central governments in most countries (Narayan et al 2000).


Table 5: Regional variation in trust in central, state and local government (%)

The Philippines
After the democratic revolution that ousted the corrupt Marcos regime in 1986, the successor government of President Coraxon Aquino pushed through a radical Local Government Code which had been resisted by national politicians since the country’s independence in 1946. The latter preferred deconcentration because it made local councilors dependent on national politicians ‘ for getting windows fixed in city hall’.

The new Phillipino decentralization code of 1991 is regarded as one of the most radical decentralization legislations in many respects. Local governments were entitled to 40% of all central government revenues which is transferred to them automatically, they also had complete discretion in how they used these resources and former expenditure responsibilities of the central government were devolved to them. This included agriculture, education, sports, environment and natural resources health, education, public works and highways, transportation and social communication. One implication of this provision was the movement of central government officials to the local governments –as already shown above (Table 3). Not surprisingly, concerted efforts were made by national politicians to reverse this ambitious decentralization program. However, one of the most important provisions of the reform helped to stall these efforts (Eaton 2001). This was the provision that civil society organs will be a part of the decision-making system at the local government level. They were a part of the special committees on tenders for large projects. Local special bodies were created to participate in the formulation of development plans—for health, schools, pre-qualification bids, bids, awards committees. Representatives of the non-governmental organizations also fill one quarter of the local council. This has not only given greater voice to non-governmental actors but it also ensured that LGs had very strong support within civil society and this proved important in resisting the efforts of central politicians and administrators at recentralization.

Colombia
Colombia ‘s program of decentralization to local governments was no less ambitious. It was particularly significant that this took place against a background of armed insurrection by guerilla groups fighting the government from the bush. As in many other Latin American republics, power was highly centralized in Colombia. As late as the early 1980s, the mayors of some 900 municipalities were appointed. Above the municipalities were 24 departments which were also run by a centrally appointed governor and an elected assembly.

Municipalities had few responsibilities as most of the basic public services (social services, water, and electricity) were provided by decentralized agencies of the government. But from the mid-1980s, Colombia’s municipal institutions were transformed. Municipos have now more resources, responsibilities and decision-making authority than under the old centralized regime (Fizbein 1997: 1030). For instance, national transfers to municipalities rose from 4.3% of GDP to 7.7% of GDP in 1997 (Linjan & Gomez 2000). Local governments are currently responsible for the provision of services in education, health, water, sanitation, roads, and agricultural extension etc..

Central to the success of Colombian local governments has been their ability to make use of existing but underutilized capabilities in the local governments through conscious efforts to upgrade them. This is the case with respect to poorly utilized buildings or personnel. The key was the role of responsible and innovative leadership brought in by the competitive electoral process. New political leadership made possible the upgrading of the quality of municipal personnel as well as their skill composition. This led to improved participation thereby instituting a virtuous circle of improved capacity, citizen participation and improved resource levels. Several innovations have been implemented to ensure that the municipalities become more effective—e.g. sharing professionals with other municipalities, or the mayor serving also as professional officer, contract for services etc (see also Campbell 1997).

The study by Fizbein of Colombia municipalities is instructive in many respects. First, he notes that size is not a predictor of capacity as small municipalities have been the scenes of great innovations compared to serious shortcomings in large municipalities. Second, the crucial role of leadership and community participation is highlighted. Finally, the role of the national government not only in introducing reform but also in constantly monitoring and administering incentives for improved local government performance (certification) is also crucial. High performing local governments are rewarded with larger discretionary authority.

Nigeria
Nigeria has also undertaken sustained and extensive reforms similar to the three countries highlighted above. One of the few positive legacies of Nigeria’s many military governments was the reform of local governments in 1976. It successfully transformed Nigeria from a country governed from one national and three regional centers into a three –tiered federation of 36 states and 779 local governments (Adamolekun 1984).

Some of the achievements of the Nigerian LG system are well documented. First, since the reforms of 1976, LGs have had access to huge and reliable financial resources from the country’s oil windfalls. The amount allocated to local governments rose from almost nothing in the pre-1976 period to 3% in 1976, 10% in 1981 and currently stands at 20%. In addition, 35% of the country’s valued added tax also goes to the local governments. This explains the huge revenues accruable to Nigerian local governments by African and global standards (see Table 4 again). Second, substantial responsibilities have been transferred to them—basic education, health, roads, community welfare as well as the promotion of economic development etc. Thirdly, the political and administrative leadership of the LG system has been substantially upgraded. The Nigerian presidential system has been replicated at the local level ensuring that the incumbent leadership has ample authority to manage the local government and effect change, often with a cabinet of highly talented local people. When this is coupled with the huge resources devoted to training local government officials and improving the local government administrative system generally, it is not surprising that local government has attracted a corps of skilled administrative and professional public servants (See Olowu 1990, IMF 2001).

While the input side has been positive, there are serious problems in terms of output and impact. In the early years of the reform impressive results were achieved in terms of improved infrastructures—better rural roads, health clinics, basic education and agricultural extension etc (Olowu 1990). But this was not sustained –except in a few local governments with outstanding political and professional leadership (WHO 1992, Olowu & Wunsch 2002). The answer to the question—why the huge inputs have not translated into sustainable outputs and desired outcomes of the LG system probably lies in three main areas. First, the lack of a clear policy and institutional framework of intergovernmental relations that can ensure that resources allocated to LGs achieve their socio-economic objectives. Some LGs lack critical equipment, skilled staff and training to be able to make and implement policies in the areas on which they are expected to be effective. Neither the state nor the federal government is providing assistance to such LGs on how to tackle these problems. The federal government has practically withdrawn from exercising any leadership roles such as the ones that led to the reforms in the first place. Secondly, the system of local government revenues—which makes the local government heavily dependent for up to 94% of total revenues on external sources practically excludes the citizens from the budgetary and governance processes. Finally, the present mechanisms for ensuring accountability and transparency at the local government level—leave too much power in the hands of the executive mayor and much less in the council, the community and the citizenry (Gboyega 1998).

From these studies and cases, therefore, it is possible to note that the evidence is conclusive that several developing countries—not all –made a shift in their approaches and policies with respect to decentralized governance. But we also noted that not every country that has made this policy shift that has succeeded in implementing the program of decentralization.

Democratic decentralization also comes with a number of problems and dilemmas. In the next two sections, we examine why countries undertake such momentous shifts in public policy and what constitutes the major dilemmas with which they must contend.

4. Explaining Policy Shift on Decentralized Governance
There is a tendency to view the policy change in LDCs with respect to devolutionary or democratic decentralization from two perspectives—as an incremental progression from state consolidation of power to the need to build state authority based on the consent of the governed or as a discontinuous break with the past, occasioned by internal and external sources of pressures for change. This paper takes the latter view.

The most significant internal cause has been democratization. Developing countries have for a variety of reasons—internal and external –democratized since 1989. Demand for democracy at the national level has fuelled pressure for democracy and accountable governance at the most basic level. This is not surprising, as the politics of developing areas has always been community-based (Hyden 1999, Barkan 1994). Democratic decentralization is also regarded as an important approach towards deepening democracy in developing countries. It should also be mentioned that many liberalizing autocracies in LDCs have pursued the colonial logic of using local governments as the building blocks for democratization at the national levels – as happened in many Latin American countries, Nigeria, Ghana and Pakistan (Hicks 1961). Economic failure and success also represent another set of explanation. Economic failure and crisis in Africa and Latin America led to a search for alternative institutional designs. On the contrary, economic success in East Asia also stimulated demand for greater political and economic freedoms (Anderson 1999). As already argued above, decentralization featured prominently in programs of economic and political reforms in all countries. In fact, decentralization was regarded as an important element of institutional reform—and treated as a complement to other principles of shrinking the state—such as privatization (see Silverman 1992, ILO 2001)

Other internal factors are demographic changes –one of which is the movement of large numbers of people to cities and metropolitan areas (see Dillinger 1993, Rakodi 1997). National governments could no longer continue to directly fund infrastructures as they had always done as cities multiplied in numbers and size. Moreover, many countries have witnessed a growing elderly and youthful population—these groups required specialized services that are normally provided by municipal authorities (WHO 2001).

Finally, structural changes in the economy –informalization: increasing role of the informal sector in the economy made municipal authorities more relevant than larger or higher level governments. In some countries, devolutionary decentralization became an important mechanism for resolving long –standing conflict –e.g. Ethiopia, RSA, Nigeria, Mozambique and is seen as providing a potential mechanism of conflict resolution for many other war-torn situations (e.g. Sri Lanka, Sudan and Somalia).

This long list is not to deny the reality and importance of external factors. Many of the internal forces –e.g. democratization have been strongly stimulated by external actors as are the programs of economic reforms –many of which have had important implications for democratic decentralization. Besides, devolution has become an important part of a good governance agenda hat is actively promoted by bilateral and multilateral donors in many developing countries which in dire need of cash to support capital and in some cases recurrent expenditures have been forced to implement what are considered to be donor-inspired reforms (OECD 1997). The demise of Soviet Union and the end of cold war made it easier for donors to use governance as an important consideration in disbursing aid in LDCs. The adoption by the United Nations of the charter on Local Government sponsored by the International Union f Local authorities (IULA) and other international agencies has been adopted by many developing countries. Finally, globalization has also been a major consideration that has forced developing countries to adopt democratic decentralization. The recognition that international capital is searching for attractive sites to invest has made cities to be competitors for international investment. Moreover, with many governments having to compete for foreign domestic investment, there was pressure to invest their scarce skills in strategic areas (e.g. trade, ICT, R&D, etc) rather than in the mundane issues of municipal governance—land, water, roads etc.

It is important to underscore the point though that not all decentralization programs involve top down policy making. Some decentralization has taken place by default—local actors have moved into provide services which the central state could not provide—thereby forcing national governments to acknowledge the fait accompili by providing them with the institutional and legal cover (McGaffey 1992). It is also important to note that the conditions that sustain democratic decentralization are different from the ones that bring it about. Sustenance is conditional on a combination of contextual and design issues at the national and local levels. This is further discussed below.

5. Dilemmas of Democratic Decentralization and Local Self-Governance in Developing Countries and Approaches for Tackling them
The objective of decentralized governance in most countries is to empower the people to be self-governing. This objective has been realized only in a few countries and communities. The reason is that democratic decentralization confronts a number of tough challenges and dilemmas in developing countries—but not usually not the type of problems predicted by earlier scholars and analysts: capacity, corruption, secession etc.

Economists have been foremost in highlighting the dilemmas of democratic decentralization (which they also refer to as fiscal federalism). They have focussed on the economic functions and dysfunctions of local governments—their high contributions to allocative efficiency but the problems they pose for stabilizing the economy and for redistribution (see Bird 1995, Smoke 1999). Since these economic and fiscal issues have been exhaustively discussed in the literature, focus will be on the neglected but crucial elements—the political, institutional and policy dilemmas. Six key problems and dilemmas are highlighted here:
  1. Sustaining Commitment to Democratic Decentralization—Problem of Recentralization: Decentralization is about the transfer of power and resources from those who possess them to those who do not. In country contexts in which patrimonial exercise of power is ingrained and notions of opposition is poorly developed with political contestants perceiving one another in adversarial terms, it is indeed a miracle that democratic decentralization happens in any developing country. As we saw, a combination of external and internal pressures on national political and administrative leaders explain the response to transfer responsibilities, resources and accountability to sometimes weakly empowered local communities. Such transfers are viewed in zero-sum rather than positive –sum power game lenses. It is therefore not surprising that in Argentina as in the Philippines and several African countries, there is a tendency for recentralisation in almost all countries as the central legislators, political executives and civil servants worry about the loss of power to the provinces and localities and the effects on their hold on power. Such ambivalence has often led to serious implementation problems for implementing democratic decentralization in developing countries (see Eaton 2001, Wunsch 2001). As the Philippines case has shown, there is a need for the champions of decentralized governance to build effective coalitions within and outside the state not only to bring about DD but also to sustain it.
  2. Dilemma of Time: Research on institutions underscores the slow path of institutional change (Putnam 1993). Democratic decentralization is therefore a long-term not a short-term project. This is because a crucial challenge of DD for self governance (LSG) is how to integrate old and tested institutions in which people have confidence (the informal organs) with new untested but well-resourced (formal) organs. On the other hand, these reforms need to be monitored for results -- outputs and outcomes—in the short to medium terms (Steinich 2000). History and geography also play critical roles in determining the appropriate timing and structuring of local government units and powers. Mistakes here—e.g. relating to size units and tiers of local governments-- have often proved fatal for sustaining decentralized governance in developing countries.
  3. Resource Dilemma: Decentralization is a costly venture in the short run. It should be evident why DD would be costly—the cost of new structures at central and local levels, the challenge of change, implications for training for officials to update central and local actors on current developments and persuade them to change their ingrained attitudes etc. Unfortunately many countries embarked upon decentralization as a strategy for reducing the costs of the state and its institutions! On the other hand, democratic decentralization (DD) represents an opportunity as well as a challenge to transform the total system of taxation and governance in developing countries. But many DD programs focus only on revenue transfers which in many cases boost local capacity but ultimately enhance central power and control and may fail to link up the other goal of building an effective fiscal system that can be supportive of genuine democratic development. It must be admitted of course that only a few countries have the political willingness, the opportunity or the capacity to undertake the extent and depth of the reforms that DD requires in the area of developing local taxation and revenue systems (Guyer 1992, Moore 1995). Moreover, huge human resource management (HRM) reforms are needed before and after the reform (see below).
  4. Complexity of decentralization: DD involves not only a diversity of interests at all levels of state and non-state society, each of these actors have different interests. A colleague developed a model suggesting that decentralization should be viewed from the viewpoint of 3 major actors—the central state, the local government and the citizens (Ribot 2001). This model is more sophisticated than most models that only posit two sets of actors (central and local) but it is a very restricted list of strategic participants. Excluded are the local business community, the not for profit community, the traditional rulers as against community institutions? Even within each set –government there is considerable diversity of interests: ---e.
  5. executive, vs. legislative, judicial v/ finance vs. local government/ local government vs. line ministries/ central vs. local workers/ junior vs. senior workers/ professional vs. administrative groups etc. It is known for instance that local self-governance initiatives are being started by local peoples themselves but failure to link central programs with such initiatives only impoverish the people and fail to tap their social capital (McGaffey 1992, Olowu & Erero 1996). Failure to tackle complexity thus continues to be a problem for DD in many African countries.
  6. Deepening and Broadening Decentralization: A key question to be confronted in any program of democratic decentralization is the extent that decentralisation is feasible in the absence of wider institutional, political and economic reforms? For instance, Nzokenu (1994) suggested the need for land reforms in many parts of Africa if decentralisation is to be advanced in many rural parts of Africa--land is presently held by local elites or governments in trust for the people, but in reality it is only accessible to the rich and powerful. But land reform must also be accompanied with the reform of the banking system which at the present time is concentrated in the urban centres. A number of experiments of community banking have shown the great possibilities which exists for mobilising idle savings in the rural areas for economic development purposes (Mabogunje 1995). Clearly, the development of a favourable local economic system will provide the enabling environment for the development of critical economic and social infrastructure -all, which are crucial for economic development.

    Similarly, an independent judiciary as an independent arbiter is also crucial to the enhancement of decentralised governance. Instead of relying on central governments to resolve disputes between local government authorities or between local government and the national governments, a strengthened judiciary can more impartially resolve these disputes. In fact, there is evidence that local people value the judicial functions which are often excluded from many devolutionary decentralisation programmes (see Olowu & Wunsch 2002). Similarly, effective local legislatures can act as more effective checks on local executives than the central government in many instances.
  7. Institutional and Policy Design Issues: Even if the national political legal and economic context is supportive of decentralization, two other factors are critical—the design of multi-level governance (especially as it relates to resource allocation & utilization) at the national and local levels and the structure of the local economy. At the national level, a system of revenue transfers from central to local government that ensures that a substantial amount of responsibilities transferred to local governments can be financed at that level. This fiscal federalism must be complemented with a human resource management regime that suits decentralized governance. Since human resources are the critical agents in any organization, the availability and effective management of skilled and highly motivated human resources is even more critical than financial resources. This further compounded by the fact that many LDCs have poor human resource policies even at the national level. Other Key HRM issues include the following: How to distribute scarce skills among regions and localities without loosing quality service? How to compensate for service in hardship regions? How to change long-established education programs that assume centralized delivery e.g. in health care and education? How to overcome cultural beliefs concerning serving in local government?
How to build professional relationships between professional and administrative cadres, among different professional groups and between professionals/administrators and politicians? How to change the attitudes of central ministries of local government from one of control to one of support and monitoring? How can common standards be maintained while allowing for diversity in personnel conditions among local governments? What program of training is best for local government officials? Is this different from central or regional governments—e.g. the promotion of local economic management (see Kolemianen Aitken 1998, ILO 2001).

All of these underscore the need for a constant review of decentralization policy at the center and the meticulous gathering of information that helps to inform that analysis in a dynamic fashion.

At the local level, it is not only important to design a suitable local government structure that can ensure that devolved power is not captured by local elites, but is accountable to the people and provides opportunities for all to participate in its activities. The quality of the local economy will be important here. This includes the demand for local services that can be provided locally—local schools, health, feeder roads, credit security etc and the existence of local community organizations—e.g. religious organs, community development agencies, locally based cooperatives etc…what is regarded as the social capital of trust built up in the community. This is why it is important for the units of local government to approximate or relate closely to the subjective sense of community as perceived by the people The ability of the locality to bear a substantial share of the cost of local services—a result of having a supportive local economic situation and a system of effective local taxation (to equalize resources between the rich and powerful and reduce heavy burdens on the poor). Hence, a system of local taxation must be developed to complement such transfers otherwise the democratic nature of local governance is jeopardized.

Moreover, the system of local governance must have an effective local government system which makes decisions (an executive that is able to combine scientific factual (or rational) analysis) with the requirements of democratic responsiveness), has an effective check on executive power (local legislature). Its executive, legislative and administrative branches must be accountable to the public through conventional (elections, audits) or non-conventional forms (service delivery surveys, citizens’ charter, media or participatory budgeting etc). For all of these it is important to have local governments of varying size units and effective legislatures. The last issue take on significance because local legislative assemblies are often incapacitated by a number of factors---asymmetry in information and resources between executive and legislature, concentration of power in the executive vs. fragmentation of power in the legislature, greater proximity between executive and administration compared with the legislature and lack of focal leadership in legislative matters. The resulting weakening of the local legislature as an effective mechanism for participation and public accountability explains the growing popularity of more direct and non-conventional forms of accountability as highlighted above (Blair 2000).

The above discussion underscores the critical importance of four crucial factors which determine the success or failure of devolutionary decentralization programs. These are: national and local contextual factors and the design of institutions and policies at both the central and local levels to ensure that the objectives of local self-governance, development, effective use of available social capital and pluralism are actualized (see Table 6).


Table 6: Overview and Analysis of Democratic Decentralization and Local Governance in Seven African Countries

Conclusion: Relevance of DD for Development, Democracy and GIDESCO
Viewed from an historical perspective, democratic decentralization represents a rebuilding of the institutional order after the disruptions occasioned by the colonial experience and the imposition of post-independence autocracy in many LDCs. It is a task that should have been confronted immediately political independence was secured but the prevailing thought at the time was that technology and capital could make these nations leap-frog the development path and enter a take-off stage without a protracted long period of institution-building for such take-off. Hence, the idea was to construct national institutions from the top-down rather than bottom-up as has been the experience of most countries in the historical past. It is therefore possible to speak of the reconstitution of order after the disorder occasioned by colonialism and in some cases by its antecedents (slavery and conquest) and post-independence autocracies.

To the extent that development is a function of institutional development and development itself represents the ability to put resources to better use, the evidence from many of the countries that have undertaken democratic decentralization programs indicates that the society is re-energized or empowered for better governance. In this sense, DD leads to a fusion of the great societal ideals of development and democracy. Data set reviewed here shows that DD can make a difference to equity and sustainable development. This is made possible by greater opportunities for citizen participation in making choices which affect their lives. There is some literature which links the effective organization of local institutions not only to development but to making state institutions accountable to citizens (Barkhan 1994, Moore 1999)

But the key question for all of us at this meeting is how can GIDESCO assist this on-going process in LDCs. I want to conclude by suggesting three critical areas in which essential and precise information –the type that GIDESCO can generate cam make a difference.

First, many developing countries have created large units of local governments in order to provide the necessary threshold for services. While there is merit in this arrangement, they often do not allow the municipal authorities to take advantage of the extensive social capital available to smaller communities of interest. The result is that local governments are no different qualitatively from national governments in terms of people’s trust in them. In extreme cases such as in Nigeria and Kenya, such arrangements have led to unending inter- communal violence and strife as different community groups protest neglect either in terms of the location of the local government headquarters or appointments to the few offices available to be filled (Barkan 1994). This explains why most of the more successful national local government systems have settled for multiple tiers of local government –, as is the case in Uganda and India. Moreover, as the example of Colombia has shown innovative leaders can join with other councils to hire staff and run services together or contract for them. Elinor Ostrom (1996) also reports an interesting case from Brazil. The available research on the subject and local government effectiveness in developing country contexts can help to shed important light on the correlates of local government performance, including size. The idea of single, large municipal organs is a carry over from some of the principles of classical management beliefs whereby overlapping structures are always bad and hierarchy and simplicity is always good. But the reality of life suggests that complexity is the order of the day and the more complex life is the more is there the need to be sensitive to that complexity and build institutions that can have fail safe mechanisms and stimulate competition in the production of human social services. It is known from the experiences of several countries that a mixed system of varying sizes of local governments are better than single tier, large-sized local governments (Landau 1967, Ostrom & Ostrom 1976, Smith 1985, Olowu 1989) Second, GIDESCO can also help in developing much more viable systems of municipal financing than currently exist in LDCs. ` Many local governments lack revenue tax sources.

They are heavily dependent on central transfers. While this is fine for a start, limits on central resources make the development of local government revenue sources imperative. On the other hand, most local government revenue sources remain underdeveloped for a variety of reasons. One of the best examples is the land tax, which are not collected in the urban areas of many countries (Olowu 2000). The few local governments that collect them do make a lot of resources from them and was the basis of the development of local government the industrialized countries. There are several obstacles to the development of local revenue sources in LDCs. There are technical problems to do with land titles, assessment, valuation and collection (Prud'home 1989). There are also problems of taxing poor people. But the most serious problem is the political one—those who own property are the leaders in local governments and they will be reluctant to spearhead the development of local government tax sources. Matters are compounded by the belief that everyone in the community is poor. This of course erroneous as wide disparities in wealth exists within many countries and communities (LDCs have high gini-coeeficients than DCs). The result is the poor development of taxes generally but especially at the local government level. Tax sources from property which at least ensures that the rich property owners make contribution to the coffers of the local government either on the basis of benefits received or ability to pay. Several of the taxes developed to enrich local governments in many developing countries have been bastardized or abolished over time—e.g. the octroi in Asia and the graduated income tax in Eastern Africa. (Livingstone & Charlton 2001). Poorly administered local taxes have tended to tax the poor to the exclusion of the rich and well-connected persons.

By providing detailed information on landed property, GIDESCO can make it possible for national and local governments to have access to information on land which will make the construction of a much better system of municipal finance to be developed. LDCs have wide income disparities and for many countries, their national tax systems are poorly developed. A start can therefore be made at the local level through a concerted effort of both the central and local governments at developing and improving the effectiveness of the property tax. A few countries are already using this tax to great advantage but donor assistance ought to give it more focus—especially given the fact that investments are usually held in landed property rather than in stocks in many LDCs. Providing detailed information on landed property can also stimulate much-needed land reforms and many farmers may also be able to use such land titles as collateral for credits to improve and expand their farm holdings.

Finally, a wide range of data is required for decision-making at local government levels which are often scarce to come by in many developing countries. This includes data on housing numbers and types, industrial units and farm holdings, available social and basic services— e.g. schools, health clinics, markets, roads, extension offices etc and their proximity to the mass of (especially rural) populations. GIDESCO can help in producing data banks f basic policy information that can help to inform debates on the size and deployment of public officials in many LDCs. Such data banks may be the crucial connection between the availability technology to tackle problems and the mass poverty that has afflicted the majority population in LDCs. Many LDC local governments lack this information and even of more basic facts relating to the number of persons in the area, land use and farming types and sizes, informal/formal enterprises etc. GIDESCO can help many such local governments develop relevant information databases.

In conclusion, there was much skepticism that decentralised governance can make a difference in developing countries. Much research and experience in developing countries have shown that while decentralisation does not guarantee change in economic and social conditions, well –packaged and focussed policies and programmes of decentralisation can indeed make a difference. This is perhaps the only way to explain the sea change in favour of decentralised governance in these countries today. There is evidence that the only way to lay the basis for development and accountable, democratic governance is by a conscious effort to build on the available social capital. There are problems and implementation hindrances but these are being tackled in many developing countries with courage and the available knowledge. It is heartening that organisations such as the World Bank and others within the United Nations family—the WHO, UNDP, the ILO –have taken up the gauntlet of helping LDCs address the problems of community-driven development. GIDESCO must join these progressive forces within and outside these countries to construct (more) robust systems of multi-level governance and local self-governance.

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