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Decentralization and Good governance is about debilitating the discretionary power of central
bureaucratic power-holders by enlarging and strengthening the interrelations and transactions
among effected parties within a decision area in order to attain the acceptability, efficacy,
responsibility and therefore morality of rules and rights. Good governance is largely perceived as
a political and economical order which includes representation, participation and audit, an
effective civil society, superiority of law, de-centralized clean/transparent administration and
liability to render account, quality and ethics, rules and limits, alternative representation methods
in accordance with competition and market economy and finally consistency with the digital
revolution (the new basic technological developments in the management of the state.
The purpose of this section is to provide a broad overview of the many different types of
decentralization which can be occurring across countries and even within the same country and
sector. Distinguishing among different types of decentralization facilitates the discussion of
design and particularly impact. For example, the type of decentralization selected within a
country will depend on its design--which will depend on the political structure and
administrative issues of that country. The impact of decentralization will differ depending on
what type of decentralization is taking place, (the political, fiscal and administrative
arrangements which characterize the decentralization) and what the objectives of decentralization
are. It is important to introduce consistency in any discussion of decentralization to avoid
"comparing apples and oranges" and to ensure that we can draw lessons where applicable.
What is Decentralization?
The term "decentralization" embraces a variety of concepts which must be carefully analyzed in
any particular country before determining if projects or programs should support reorganization
of financial, administrative, or service delivery systems. Decentralization -- the transfer of
authority and responsibility for public functions from the central government to intermediate and
local governments or quasi-independent government organizations and/or the private sector -- is
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a complex multifaceted concept. Different types of decentralization should be distinguished
because they have different characteristics, policy implications, and conditions for success.
Types of Decentralization
Types of decentralization include political, administrative, fiscal, and market decentralization.
Drawing distinctions between these various concepts is useful for highlighting the many
dimensions to successful decentralization and the need for coordination among them.
Nevertheless, there is clearly overlap in defining any of these terms and the precise definitions
are not as important as the need for a comprehensive approach. Political, administrative, fiscal
and market decentralization can also appear in different forms and combinations across
countries, within countries and even within sectors.
Choosing the Most Appropriate Form of Decentralization
Under appropriate conditions, all of these forms of decentralization can play important roles in
broadening participation in political, economic and social activities in developing countries.
Where it works effectively, decentralization helps alleviate the bottlenecks in decision making
that are often caused by central government planning and control of important economic and
social activities. Decentralization can help cut complex bureaucratic procedures and it can
increase government officials' sensitivity to local conditions and needs. Moreover,
decentralization can help national government ministries reach larger numbers of local areas with
services; allow greater political representation for diverse political, ethnic, religious, and cultural
groups in decision-making; and relieve top managers in central ministries of "routine" tasks to
concentrate on policy. In some countries, decentralization may create a geographical focus at the
local level for coordinating national, state, provincial, district, and local programs more
effectively and can provide better opportunities for participation by local residents in decision
making. Decentralization may lead to more creative, innovative and responsive programs by
allowing local "experimentation." It can also increase political stability and national unity by
allowing citizens to better control public programs at the local level.
But decentralization is not a panacea, and it does have potential disadvantages. Decentralization
may not always be efficient, especially for standardized, routine, network-based services. It can
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result in the loss of economies of scale and control over scarce financial resources by the central
government. Weak administrative or technical capacity at local levels may result in services
being delivered less efficiently and effectively in some areas of the country. Administrative
responsibilities may be transferred to local levels without adequate financial resources and make
equitable distribution or provision of services more difficult. Decentralization can sometimes
make coordination of national policies more complex and may allow functions to be captured by
local elites. Also, distrust between public and private sectors may undermine cooperation at the
local level.
Project and program planners must be able to assess the strengths and weaknesses of public and
private sector organizations in performing different types of functions. Before developing
elaborate plans for decentralization, they must assess the lowest organizational level of
government at which functions can be carried out efficiently and effectively and -- for functions
that do not have to be provided by government -- the most appropriate forms of privatization.
Even program planners who do not see decentralization as their primary motive must carefully
analyze the types of decentralization already present in a country in order to tailor policy plans to
existing structures.
Centralization and decentralization are not "either-or" conditions. In most countries an
appropriate balance of centralization and decentralization is essential to the effective and
efficient functioning of government. Not all functions can or should be financed and managed in
a decentralized fashion. Even when national governments decentralize responsibilities, they often
retain important policy and supervisory roles. They must create or maintain the "enabling
conditions" that allow local units of administration or non-government organizations to take on
more responsibilities. Central ministries often have crucial roles in promoting and sustaining
decentralization by developing appropriate and effective national policies and regulations for
decentralization and strengthening local institutional capacity to assume responsibility for new
functions. The success of decentralization frequently depends heavily on training for both
national and local officials in decentralized administration. Technical assistance is often required
for local governments, private enterprises and local non-governmental groups in the planning,
financing, and management of decentralized functions.

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Rationale for Decentralization
Much of the decentralization which has taken place in the past decade has been motivated by
political concerns. For example, in Latin America, decentralization has been an essential part of
the democratization process as discredited autocratic central regimes are replaced by elected
governments operating under new constitutions. In Africa, the spread of multi-party political
systems is creating demand for more local voice in decision making. In some countries, such as
Ethiopia, decentralization has been a 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 to all localities or by forging "asymmetrical federations." A variation on this theme
has been decentralization as an outcome of long civil wars, such as in Mozambique and Uganda,
where opening political opportunities at the local levels has allowed for greater participation by
all former warring factions in the governance of the country. The transition economies of the
former socialist states have also massively decentralized as the old central apparatus crumbled.
In many countries, decentralization simply has happened in the absence of any meaningful
alternative governance structure to provide local government services. In some cases
(particularly in East Asia) decentralization appears to be motivated by the need to improve
service delivery to large populations and the recognition of the limitations of central
Although the main reason for decentralization around the world is that it is simply happening,
there are a multitude of design issues that affect the impact of different types of decentralization
on efficiency, equity and macro stability. In this regard, there is a growing body of literature
examining the economic rationale for decentralization.
The specific services to be decentralized and the type of decentralization will depend on
economies of scale affecting technical efficiency and the degree of spillover effects beyond
jurisdictional boundaries. These are issues that need to be taken into account in the design of a
decentralized system. In practice, all services do not need to be decentralized in the same way or
to the same degree. In an important economic sense, the market is the ultimate form of
decentralization in that the consumer can acquire a tailored product from a choice of suppliers.
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The nature of most local public services limits this option and establishes a government role in
ensuring the provision of these services, but it does not automatically require the public sector be
responsible for the delivery of all services. Where it is possible to structure competition either in
the delivery of a service, or for the right to deliver the service, the evidence indicates that the
service will be delivered more efficiently. Although uncommon in practice, local governments
have successfully competed for the right to provide certain local services. In an array of local
public services in any particular country, a mix of solutions from deconcentration to managed
competition/privatization is likely to co-exist.
Although politics are the driving force behind decentralization in most countries, fortunately,
decentralization may be one of those instances where good politics and good economics may
serve the same end. The political objectives to increase political responsiveness and participation
at the local level can coincide with the economic objectives of better decisions about the use of
public resources and increased willingness to pay for local services. At least five conditions are
important for successful decentralization: the decentralization framework must link, at the
margin, local financing and fiscal authority to the service provision responsibilities and functions
of the local government - so that local politicians can bear the costs of their decisions and deliver
on their promises; the local community must be informed about the costs of services and service
delivery options involved and the resource envelope and its sources - so that the decisions they
make are meaningful. Participatory budgeting, such as in Porto Alegre, Brazil, is one way to
create this condition. there must be a mechanism by which the community can express its
preferences in a way that is binding on the politicians --so that there is a credible incentive for
people to participate; there must be a system of accountability that relies on public and
transparent information which enables the community to effectively monitor the performance of
the local government and react appropriately to that performance- so that politicians and local
officials have an incentive to be responsive; and, the instruments of decentralization --the legal
and institutional framework, the structure of service delivery responsibilities and the
intergovernmental fiscal system-- are designed to support the political objectives.
Fulfilling these goals (or at least having local governments improve upon the central
governments record) is a tall order, but achievable.
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Successful decentralization is closely related to observing the design principles of: finance
following [clear assignment of] functions; informed decision making; adherence to local
priorities; and accountability. However, applying these principles in practice has not proven to be
simple. Country circumstances differ, often in subtle and complex ways, consequently the policy
and institutional instruments that establish decentralization have to be shaped to the specific
conditions of individual countries.

What does good governance mean?
Almost all major development institutions today say that promoting good governance is an
important part of their agendas. The outcome document of the recent 2011 Busan High-Level
Forum on Aid Effectiveness further reflects these commitments. In a well-cited quote, former
UN Secretary-General Kofi Annan noted that good governance is perhaps the single most
important factor in eradicating poverty and promoting development.
Despite this consensus, good governance is an extremely elusive objective. It means different
things to different organizations, not to mention to different actors within these organizations (to
make matters even more confusing, governance experts also routinely focus on other types of
governanceglobal governance, corporate governance, IT governance, participatory
governance, and so onwhich may be related only peripherally to the good governance agenda
vis--vis domestic politics and administration which is our focus here.)
Good governance as a concept
In general, work by the World Bank and other multilateral development banks on good
governance addresses economic institutions and public sector management, including
transparency and accountability, regulatory reform, and public sector skills and leadership. Other
organizations, like the United Nations, European Commission, and OECD, are more likely to
highlight democratic governance and human rights, aspects of political governance avoided by
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the Bank. Some of the many issues that are treated under the governance programmes of various
donors include election monitoring, political party support, combating corruption, building
independent judiciaries, security sector reform, improved service delivery, transparency of
government accounts, decentralization, civil and political rights, government responsiveness and
forward vision, and the stability of the regulatory environment for private sector activities
(including price systems, exchange regimes, and banking systems).
In short, working uses of the term good governance include a variety of generally good
things. But these good things do not necessarily fit together in any meaningful way. Indeed,
good governance would be a great example of a poorly specified concept for an introductory
course in social science methodology. What makes a concept good? In a 1999 article, political
scientist John Gerring spelled out eight criteria of conceptual goodness that provide a useful
framework. Four of these criteria are especially relevant here:
First, good governance lacks parsimony. Unlike good concepts, good governance has
endless definitions, and we always need the details of each to understand if we are talking
about the same thing.
Second, good governance lacks differentiation. Well-governed countries often sound a
lot like functioning liberal democracies, for instance, and it is not clear how they differ.
Third, good governance lacks coherence. Its many possible characteristicsfrom
respect for human rights to efficient banking regulationsdo not clearly belong together.
Fourth, and most important, good governance lacks theoretical utility. It confuses,
rather than aids, in the formulation of theory and the related project of hypothesis testing,
not least because the concept is so fluid that analysts can easily define it in the way that
best fits their data.
Methodological discussions are often esoteric and best kept within scholarly circles, but this one
has real world relevance to development policy. Donor agencies regularly measure and assess the
quality of governance, and may condition assistance on these measurements. The Millennium
Challenge Corporation of course is one of the most explicit in doing so, but it is in good
company. Donors also purport to design and implement evidence-based policies on governance
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reform. They further justify this focus on good governance partly on the basis of evidence that
better governance promotes economic development.


The weakness of the good governance concept, however, calls into question each of these
projects. Without stronger concepts, donor agencies have no clear basis upon which to argue the
merits of one measurement versus another or to evaluate the relative importance of various
components of governance in any classification. Without better measures, donor agencies cannot,
in a rigorous manner, empirically test hypotheses about how political and economic institutions
change, much less develop evidence-based strategies about how to positively influence this
change. Nor can they be very convincing about the rigor of quantitative findings suggesting a
causal relationship between (weakly-conceptualized) measures of governance and development
Rwanda provides just one illustration of some of these issues. As many observers note, Rwanda
has made clear progress in terms of economic growth, public sector management, and regulatory
reform since the genocide in 1994. As many other observers note, its record with respect to
democracy and respect for civil and political rights has been extremely problematic. Should
Rwanda be considered well governed because of its economic progress, or poorly governed
because of its democratic deficits? The UKs Department for International Development (DFID),
for instance, has been the largest bilateral donor in Rwanda, effectively arguing the former.
Human Rights Watch, among others, sharply criticized DFID policy last year, effectively
arguing the latter.
How to improve governance
The question of how to improve governance? is of course the most pressing from a policy
perspective. However, this question cannot be rigorously answered without better addressing the
concept of good governance: how to improve what exactly?. These points are discussed in
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greater depth in my forthcoming working paper, Good Governance as a Concept, and Why This
Matters for Development Policy. The paper provides a review of donor approaches to
governance, discusses conceptual issues in greater depth, and argues that one promising way
forward is to disaggregate the concept of good governance and to refocus our attention and
analysis on its various disaggregated components (e.g., democracy, civil and political rights,
public sector management). In short, the term good governance has become a catchy shorthand
way to describe a variety of political and economic institutions and outcomes and is thus likely to
remain in common public usage, but, as is, it is not a useful concept for development analysts
and policy makers.

Decentralization as a Contribution to Good Governance (DeCGG)
As part of the democratization process following the resignation of President Suharto in 1998,
Indonesia entered a period of rapid decentralization which has seen many competences for public
service delivery transferred to local governments in a relatively short space of time. This
includes the transfer of responsibility for a significant portion of the country's public finances as
well as its human resources.
Indonesia's decentralization process is one of the most complex structural transformations of a
state and administration taking place anywhere in the world. However, the local governments do
not yet possess adequate human resources or the organisational and fiscal capacities to provide
effective, transparent and accountable public services. At the same time, the division of tasks and
responsibilities between the different administrative levels has not been clearly defined. The
situation is made more difficult by the often opaque regulations for implementing the legislation
on decentralization.
Regional and local government authorities are using standardised administrative and financial
procedures for the provision of public services, and they apply the principles of good
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To improve the coherence of the administrative and fiscal decentralisation policies, as well as
bureaucracy reform, the programme is working with four Indonesian ministries: the Ministry of
Home Affairs, the Ministry of Finance, the Ministry of Administrative and Bureaucracy Reform,
and the National Development Planning Agency. Together with these partners, the programme
concentrates its efforts on three components:
Regulatory framework
Fiscal decentralization
Bureaucracy reform.
Through these components the programme supports the reorganization of the legal framework
that applies to local autonomy and bureaucracy reform, to public service delivery, to horizontal
and vertical fiscal balance mechanisms, and to the improvement of local tax revenues. The
approach addresses multiple levels of governance and thus promotes better stakeholder
coordination. This helps ensure that local governments, particularly in Central Java and East
Kalimantan, and West Nusa Tenggara, develop the capacities to apply national rules and st
Results achieved so far
Standards while also adapting them to local needs and dynamics.
National government authorities are becoming increasingly aware of the need to harmonize and
coordinate their policies on local autonomy and fiscal balance. Capacities have been built up at
this level for implementation of the bureaucracy reform agenda.
Local governments have begun implementing first measures to reform the bureaucracy,
standardize their public services and introduce gender-responsive budgeting.
The supervisory role of the governors in the jurisdictions of local governments has been
strengthened. This was achieved by introducing regulations to promote greater coordination at
the provincial level.
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Networking with civil society groups has opened the way for more intensive contacts between
government and non-governmental actors.

Reality of decentralization in Africa

The present concept of decentralization pursued by many African governments focuses on the
promulgation and revised rules and responsibilities for administrative and political personnel,
and on establishing the framework for some sort of local accountable political institutions
(Olowu, 2004). Global Action for Africa's Development (GLAFAD) (Olowu, 2004) noted that
any debate on decentralization policies and local government in Africa must be rooted in
appreciation of the political realities that produce such policies. Many African states were
centralized during colonial rule and local authorities were inspired by local government systems
in operation in the time of the respective colonial masters (Olowu 2004). Most colonial
governments endorsed this colonial legacy after independence. In the French-speaking territories
and British former colonies, for example, central governments continued appointing local
government officials.
As a consequence, there has been a creeping centralization in favor of the central government,
which exerts strong control over decentralized local units. Sub-Saharan Africa has not been able
to take advantage of the potentials of local governments.
The quest for appropriate planning after independence in many African countries resulted in the
adoption of decentralization (deconcentration), in the form of a network of development
committees, which operated in every administrative unit in the field which was linked to the
parent committee or a government ministry at the center (Oyugi 2000). These operated in
countries such as Tanzania, Kenya, Lesotho, Tanzania, Botswana, and Zambia (Devas, 2004).
Between the 1960s and 1980s, decentralization initiatives (deconcentration) were undertaken in
the context of nation building and accompanied the Structural Adjustment Programs (SAPs)
under donor initiative in countries like Kenya and Malawi, aimed to strengthen citizen
participation in decision-making (Devas ,2004). The present wind of democratization and
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globalization has prompted African countries to adopt political and administrative
decentralization (devolution).
In Uganda decentralization was seen as a tool to achieve national consensus among different
groups, given the past political instability and tribal animosities (Ahamad et al., 2006). The
central government opted to create districts as the highest level of local government, in an
attempt to satisfy regional and tribal demands for political power (Makara, 1998).
Countries tend to adopt selective interpretations of decentralization and adjusted decentralization
policies to suit the prevailing ideologies of development (Hussein 2004). The present
decentralization is not static, but an evolving and dynamic process whose form and
implementation pace are shaped by each country's political and institutional arrangements,
capacities and resources.
Despite the wide literature on decentralization governance today, the meaning, essence, and
strategies of decentralization are still subjects of lively debate.
Decentralization and good governance
Decentralization is sometimes regarded as an alternative to centralization, yet, when viewed from
the policy angle, decentralization is a complement and not an alternative to centralization. Both
local and central elements are needed in every political system. Sometimes decentralization is
considered as falling exclusively within public sector reform, yet it is much more than public
sector, civil service, or administrative reform. It involves the relationship of all societal actors,
whether governmental, private sector, or civil society.
The concept of governance has been applied to the processes through which public decisions
are made (Ronald & Henry, 2000). Landell-Mills & Serageldin (1991) have defined governance
as the use of political authority and exercise of control over a society and the management of
resources for social and economic development. This definition emphasizes the political nature
and the management aspect of governance. However, it does not define the nature of the
relationship between the authorities (the governors) and the public (the governed). Charlick
(1992) looked at governance as the effective management of public affairs through the
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generation of a regime (set of rules) accepted as legitimate, for the purpose of promoting and
enhancing societal values sought by individuals and groups.
The fundamental principles of good governance include respect for the rule of law and human
rights, political openness, participation and inclusiveness, equality and non-discrimination,
effective and efficient processes and institutions, transparency, and accountability. According to
Ronald & Henry (2000), decentralization offers a key element of the enabling environment for
good governance through which responsibilities are transferred from the central government to
the local level, where citizens can more readily participate in decisions that affect them.
Decentralization offers partnerships between local government institutions, civil society
organizations and the private sector for attainment of good governance.
Good governance refers to the processes that bring and collate different interests and resources
together in a functioning order to produce and achieve collective goods at global and national
levels. These goods (goals) are shaped by political, economic and social values from which a
particular form of governance derives its legitimacy by discovering and enforcing overarching
values. These overarching values are not the properties of the state but of the polity. Too much
dependence on laws, rules and regulations may also mean the value-basis of the community and
society is in collapse, therefore more emphasis is put on procedures like dialog, discussions,
participation and democracy to increase the legitimacy of governance structures and
laws. Besides, this inclusion of conflicting interests and worldviews should occur not in terms of
inclusion in the state but inclusion in the polity