AGRICULTURE & NATURAL RESOURCES DEPARTMENT DISSEMINATION NOTES TOWARD SUSTAINABLE PRODUCTION SYSTEMS AND RURAL POVERTY REDUCTION Number 1 August 1995 Decentralization: A New Strategy for Rural Development The zwidespread failure of integrated rural development to bring about a sustained im- provement in the living standards of rural people has left unanswvered the question of hozv best to ensure effective rural development programs. Attempts to decentralize decision- making authority to lozver-level governments and other non-government institutions provide some positive experiences for improving the design, implementation and sustainability of rural development interventions. Rural Poverty-Reduction Strategies back to project-by-project lending. This left In the 1970s, the World Bank (WB) made the question of how best to ensure effective rural development unanswered. poverty reduction a high priority. Since the New ve s .a nowe bei a vast majority of poor people live in rural tem inisevera re as well asb ara, WB f fince a vaitl fruarj tempted in several countries as well as by areas, WB financed a variety of rural proj- WBadohrlnesbsdonecna- ects. In the 1960s, it had lent for large irri- WBing deisin-main based on decentral- gation projects and large-scale farming of iming beneficiar pgaricipatio ning rald export crops. In the 1970s its emphasis . shifted towards increasing the agricultural programs. The initial results of such ex- productivity of smaflholders. periments have been encouraging in several Initially, WB supported various rural countries, and have uncovered substantial development projects without any attempt organizational capacity in local bodies (Bra- zil, Colombia, India, Mexico). However, to integyrate them to realize potential syner- maoprbeshvaloenecu- gies. This project-by-project approach pro- tere andbdecen al onbhas fednc duced indifferent results in many countries, tere cntrieschtas C at falve an so WB decided to imnplement integrated Ghana. WB research now aims to extract programs for rural development. These lesns resexr iec o etraci programs typically contained integrated lsosfo h xeineo eetai prokagrs tfsypergically cotervenaind integrd zation, and evolve guidelines for the future. packages of synergistic interventions in ag- ricultural extension, research, marketing, World Bank's Experience with credit, rural roads, water supply, rural Integrated Rural Development electricity, minor irrigation and sometimes education and health. These were seen as WB lending for IRD rose more sharply than > m essential parts of a "green revolution" strat- for other rural projects, and a total of 208 egy to harness the productivity of small- IRD projects were financed between 1974 holders that had already paid dividends in and 1986. A review by the Operations - East Asian countries. Evaluation Departmcnt of WB in 1987 However, integrated rural development showed that the record of IRD was incon- (IRD) often failed to live up to expectations, sistent. WB regards projects obtaining a real one major reason being the anti-agriculture economic rate of return of at least 10 per L I bias of policies in borrowing countries. So cent as successful. The average for IRD WB switched its emphasis in the 1980s to projects was 10.4 per cent, just above par. agricultural policy reform, and reverted However, half the projects failed to achieve Agriculture & Rural Development Notes are an output of the Agriculture and Natural Resources Department of the World B3aik. Further information and additional copies may be obtained by contacting Dean Housden, ext. 36637. l the 10 per cent target mark, and two-thirds * Complexity of design. It is ironic that of these failures were in Africa. The worst complexity should have become the Achil- performance came from eastern and south- les' heel of IRD. Building rural roads and ern Africa, where only 20 per cent were schools should be much simpler than judged successful. In other continents the building large dams or ports, yet WB did success rate was somewhat higher, but still not encounter coordination problems in the lower than for other rural and non-poverty latter. One reason for the paradox is that a projects. All rural projects taken together fixed blueprint approach implemented by a had a much higher return of 16.7 per cent, centralized authority may be suitable for showing that the shift to IRD had not pro- big projects, but is invariably unsuitable for duced the expected synergies. projects spread over large areas with widely The 1987 WB evaluation concluded that differing conditions and weak administra- the main reasons for poor performance tive capacity. In such circumstances cen- were: tralized IRD can prove a problem rather * Adverse policy environment. Where than a solution. national policies were biased against small- Thus, centralized IRD failed in most re- holder agriculture (as in much of Latin gions, especially in Africa, for want of ac- America, Africa and Eastern Europe) the countability, the necessary motivation and failure rate was high. The approach was skills in the bureaucracy, appropriate proj- ect design to suit varying local conditions, more successful in Asian countries with anbefiarprtcaio.Tsesus better agricultural policies-China, Indone- nd beneiarparticipat e issues sia, India. are now being addressed by new initiatives in decentralization. * Lack of government commitment. Of- ten governments did not provide counter- Experiments in Decentralization part funding, despite assurances given Decentralization can take many forms. during project loan negotiations. Four widely-recognized varieties are: * Lack of appropriate technology. This * Deconcentration: establishing local of- was important in unirrigated areas, espe- fices of central governent departments; cially in Africa, and highlghted the need for strong national research institutions. * Delegation: delegating some central * Neglect of institutional development, government powers to parastatals or sub- Project coordination units were often national entities; staffed by expatriates, and this "enclave" * Devolution: creating formal fiscal approach meant that the development of mechanisms for sharing taxation powers local institutions to plan and implement and revenue with local governments; and programs was neglected or even under- * Privatization: permitting agencies pro- mined. Indeed, the attempt to maximize *Plazto:prltn gnlspo economied. returnd the spt ru m,iitted vide services earlier delivered by govern- economic returns in the short run militated etoaarsaas against the development of local human ment or parastatals. capital, which is time-consuming and yields These forms of decentralization are all returns only after a long gestation period, being attempted in varying degrees across * Lack of beneficiary participation. A all continents. Of 75 transitional and devel- top-down approach often prevailed result- oping countries, 63 have transferred or plan ing in poor program design. The supposed to transfer power to local governments, a beneficiaries were generally excluded from revolutionary change encouraged by the decision-making. Sometimes they chose the collapse of autocracies in former communist only decision-making option available- and many Latin American countries. This voting with their feet! emphasizes the point that decentralization 2 is highly political in nature, and so must be tional or matching grants for poverty alle- guided by local history, culture and social viation schemes. conditions. It is impossible to produce a Periodic democratic elections to local blueprint suitable for all societies. Howeve,suthe epraieneso bodies will help screen out vested interests, Howeverd the experlience soifant l- provide competition for ideas on develop- ready yielded the following significant les- met an mak deiinmkigmre ment, and make decision-making more re- sons: sponsive to public needs. * Local communities possess significant * The legal framework must clarify the latent capacity, which was earlier sup- responsibilities of local government, so that pressed by centralized rule, for planning political interference from above is mini- and implementing local micro-projects. mt They are capable of highly productive in- novations, and can often deliver services Decentralization can mean different more efficiently than conventional bureauc- things in different countries, and it is es- racies (Colombia, Mexico, Brazil, India, tial to caterent varies forms of China). However, they lack both the moti- sental to categorize the various forms of vation and expertise for complex projects dectralizanon anduto m eare thei cutting across larger territorial jurisdictions, pact. WB is now conducting research to see how local bodies have used their new pow- * Decentralization is no simple panacea; ers in different countries. These studies much depends on how it is put together. It should shed new light on how best decen- has three critical elements-political, fiscal tralization can promote rural development and institutional. These must be consistent and help to reduce poverty. with each other to avoid fiscal imbalances, failure or backlash. Where any of the three Suggested Reading elements is missing or mishandled, the Binswanger, H.P. 1995. "Agricultural and whole package is ikely to fail. Rural Development: Painful Lessons" e Decentralization fails if adequate fiscal Agrekon 33 (4): 158-66 powers or transfers from the center are not Crook, R. and Manor, J. 1994. Enhancing assured (Cote d'Ivoire, Ghana). Participation and Institltional Perform- * Decentralization appears to work better ance: Democratic Decentralizationt in Soutlh if deconcentration and delegation precede Asia and West Africa Report for the or accompany the formal devolution of Overseas Development Administration. power to local bodies, so that professional Parker, A.N. 1995. Decentralization: Thle Way staff are in position to assist local govern- Forward for Rural Development? Policy ments. Research Working Paper No. 1475 * Strong political commitment is needed (Washington DC: World Bank) to overcome sabotage by vested interests. A World Bank. 1987. World Bank Experience change in the constitution, supplemented With Rural Development 1965-87 Opera- by legal changes can help ensure that de- tions Evaluation Department (Wash- centralization is effective( Colombia, India, ington DC: World Bank) Mexico). * The political representation of poor and This Dissemination Note has been prepared by disadvantaged groups, e.g., women, in Svaminathan Aiyar, Andrewv Parker and Johan digenous groups, should be strengthened in van Zyl under the supervision of Hans Bins- local bodies to prevent local elites from wanger, Senior Agricultural Policj Adviser, usurping the gains of decentralization. The Office of thw Director. central government should earmark condi- 3