Fostering Responsive and Accountable Governance: Lessons From Decentralization Experience by

During the past half a century, by subscribing to various variants of central planning paradigms of development, developing countries, by and large, followed a path of centralization and as a result, they are more centralized today than industrialized countries were in their early stages of development (Boadway, Roberts and Shah, 1994). A number of recent developments, discussed below, are prompting most developing countries to re-examine the respective roles of various levels of government, the private sector and the civil society as partners in development. This rethinking has caused much heated controversy and debate in development policy fora. Regrettably, this debate has focused on straw men of “centralization” Vs “decentralization” (see Prud’homme 1995, Tanzi 1996, Sewell, 1996 and McLure, 1995) and ignored the precepts of federalism that appropriate institutions and mechanisms must be introduced in support of the constitutional assignment of responsibilities in multilevel or multicentered governments. It must be noted that contrary to focus in the above mentioned debate, the federalism literature is concerned with seeking optimal assignment of responsibilities among different levels of government in support of good governance (see Shah, 1994). This paper examines the reasons for a rekindling of an interest in fiscal rearrangements in both industrial and non-industrial countries. It reflects upon the debate on the “dangers of decentralization” by providing an evaluation of the decentralization experience using a systemic framework. It draws general and institutional lessons to enhance the effectiveness of decentralization as a means to foster listening, learning and evaluation environment for responsive and accountable governance. An overall conclusion of the paper is that decentralized fiscal structures are more suitable in the institutional environment of developing countries provided careful attention is paid to the design of institutions vital for the success of decentralization policies especially the rule of law, conflict resolution and coordination, charter of rights, effective limitations on the authority of governments beyond their designated spheres of influence, accountability and institutional capacity for evaluation at all levels.