Advantages and cost limitations of decentralisation

Decentralisation has advantages in two main areas: on the one hand, it is supposed to produce a reduction of administrative transaction costs and, on the other, to increase the proximity of decision-making, hence creating a more dynamic interaction with citizens. As for the former, a local administrations allows public and elected officials to be closer to the demands and needs of citizens and businesses, which gives them a greater capacity to react to them directly, without co-ordinating with intermediary and central institutions.

The second element is the greater interaction with citizens due to the proximity of decentralized institutions to their constituencies. Local government allows for a more direct and dynamic active interaction with citizens and can better take into account the political, cultural, ethnic and religious factors that are specific of their local communities. This interaction also implies more opportunities for consultation and participation of civil society in public affairs. This also improves public sector accountability as it enables citizens and CSOs to better supervise and monitor the use of public funds.

However, decentralisation is not a magic formula since it requires important efforts of co-ordination in the transfer of competences and also in assessing the performance and efficiency of management and delivery of public services by the lower levels. Giving more powers and resources to subnational governments will also be costly at least at the beginning when human and financial resources will be needed to ensure services are effectively and efficiently delivered by the new authorities. In fact, the lack of appropriate skills and capacities at the subnational level is known to be one of the main obstacles to successful decentralisation reforms.

Giving more competences at the subnational level can also entail risks on performance and accountability of the new authorities who will decide on how resources are to be used. This may also generate corruption from local elites if rigorous mechanisms of supervision are not put in place.

As stated before, there’s not an optimal model of decentralisation. It’s not an either-or choice7. For instance in different State models like Italy and Spain, subnational governments are kept under a tight financial discipline as enshrined in their Constitution. Governments must create or maintain the "enabling conditions" that allow local levels to take on more responsibilities when resources are available (see Chapter 3). (World Bank, n.d.).

Decentralisation is influenced by a country's size, population, political and institutional inheritance and diversity. These attributes have an important impact on the design and modalities of decentralisation, which are crucial for its success. The appropriateness of functions to be decentralised, adequacy of fiscal resources to be transferred to the subnational governments, effectiveness of administrative and legal setups, and sufficiency of technical/skilled personnel at all levels of government are important ingredients for a successful reform. The next section will provide a historic overview of Jordan’s model and its evolution.

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