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Comments: Decentralization Process and Stability

Comments: Decentralization Process and Stability. Ehtisham Ahmad Manila November 28, 2012. Mrs. Ter-Minassian’s presentation. Excellent introduction to issues Traditional concern of Ministries of Finance (and IMF) on fiscal stability

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Comments: Decentralization Process and Stability

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  1. Comments: Decentralization Process and Stability Ehtisham Ahmad Manila November 28, 2012

  2. Mrs. Ter-Minassian’s presentation • Excellent introduction to issues • Traditional concern of Ministries of Finance (and IMF) on fiscal stability • Share concerns—of increasing importance in EU and other parts of the world • Particularly why rules do not work so often • But also includes the importance of political economy perspectives to multi-level finance issues • survey of method: Ahmad and Brosio, Handbook of Fiscal Federalism, 2006 • method and policy, Ahmad and Brosio, Handbook of Fiscal Federalism II forthcoming)

  3. Additional challenges re multi-level finance for countries and multilateral agencies • Keeping countries together—including issues related to management of natural resources; • Climate change and natural disasters; • Migration and urbanization—asymmetric solutions—especially for metropolitan areas • Growth enhancing clusters (Chinese coastal areas) • How to ensure effective service delivery and reaching the most vulnerable—marginalized?; • Post-conflict reconstruction and building civil society? • Iraq and Afghanistan

  4. Lessons from the crisis in the EU? • Focus on the scope for game-play, including difficulties highlighted in the problems in the EU; • Rules per se seen to be inadequate—necessary, but clearly not sufficient • Despite advanced systems, no lack of capacity; financing • What inadequacies in structure and information flows led to the crisis? • How the crisis feeds back to decentralized entities? • Effectiveness of service delivery? • National unity under stress: Spain • Forthcoming volume on EU (Ahmad, Bordignon, Brosio) • Will repeat for East and South Asia

  5. Some lessons from EU? • Need to be able to avoid the game-play that is facilitated by inconsistent and contradictory standards: financial flows, assets and liabilities • Relatively few countries adhere to IMF’s GFSM2001; COFOG; Accounting rules • Incentive structures at different levels of government not aligned: • Portugal-case of Madeira • Spain: regional governments: Catalonia • Greek SOEs • Political economy: How to get this to work? • Can standard rules and reporting work without an overriding national/federal structure?

  6. Implications for developing countries • From China, India and Indonesia to Brazil and Mexico: • Macro-stability important but elusive without: • Critical standardized information flows • But even more importance is laying the basis for accountable local governments— • utilizing “yardstick competition” to discipline local officials • Comparison with neighboring jurisdictions • subjecting elected politicians to justify reelection on the basis of accountability for clear responsibilities (if these are defined) • including though linking resources to results (emphasis by ADB)

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