Local Technical and Managerial Capacity
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Contributor: World Bank
Author: Decentralization Thematic Team
Contact: Jennie Litvack

Local Technical and Managerial Capacity

Can local governments and communities manage their new responsibilities?

The recent international trend toward decentralization has provoked a lively debate about the capacity of local governments and communities to plan, finance and manage their new responsibilities. Assessing, improving, and accommodating varying degrees of local capacity has become more and more important as decentralization policies transfer larger responsibilities as well as budgets from national governments to local governments and communities. While one of the common rationales for decentralization proposes that local governments' proximity to their constituents will force them to be better than central governments at managing resources and matching their constituents preferences, it is not at all clear that local governments and communities have the capacity to translate this information advantage into a efficiency advantage. Inexperienced, small local governments may not have the technical capacity to implement and maintain projects and they may not have the training to effectively manage larger budgets. This note discusses the two main branches of the "local capacity" debate: first, the question of what local capacity is; and second, the issue of what to do about varying degrees of local capacity once it has been identified. "Local government" is taken to mean the level of government where some degree of everyday face-to-face interaction between citizens/beneficiaries and government is possible.

Assessing Local Capacity

Decentralization planners have used the general guideline that central agencies should focus on creating and sustaining the enabling environment and overall strategic issues, while local organizations should concentrate on tailoring the specific mechanisms of service delivery and public expenditure packages to fit local needs and circumstances. In reality, however, varying degrees of local capacity - both local government and civil society/the private sector-- obviously affect decisions about which levels of government can best perform which tasks. In most cases, decentralization of basic services does not mean the wholesale transfer to local agencies of all tasks associated with those services. An assessment of local capacity is an integral part of designing decentralization.

What is "Capacity?"

Measuring local capacity can be difficult and the debate over quantifying it has often been motivated by political concerns as well as technical considerations about the local government's ability to provide services. (Widner, 1994). Central governments have used "lack of capacity" excuse for refusing to transfer their authority, financial resources, and the accompanying privileges to local units. For example, Fiszbein(1997)found in Colombia that "what was being characterized (by national agencies) as poor planning in municipios was in fact a genuine disagreement between local and national priorities." The municipios were actually demonstrating considerable local capacity by turning down conditional matching grants from central agencies and borrowing funds locally at market rates in order implement their own priorities. For this reason, it is useful to set out some of the relevant issues in objectively measuring local capacity. The fact that a community and its government exist indicates the presence of some skills. The challenge for development agencies and their partners is to identify the latent capacity in the local government, civil society, and private sector, and bring it into the development programs. The first task is to identify the specific tasks that that local governments and citizens will need to carry out. The following are just a few of the components of planning, implementing and sustaining basic services.
  • analyzing and solving local problems
  • determining community needs
  • organizing local and national political support for programs
  • mobilizing national resources for programs
  • raising tax revenues or collecting user fees
  • writing specifications for the technical elements of programs
  • maintaining and sustaining the service
  • evaluating the impact of the program on the local environment
  • providing for those affected adversely by the program
  • contracting for services and buying equipment
Uphoff has suggested that there are four fundamental functions that organizations (and systems of organizations) must be able to do in order to reach their objectives. These functions are:
  • decision-making, which includes planning and evaluation;
  • resource mobilization and management;
  • communication and coordination; and,
  • conflict resolution.

Thus the question becomes: "Can local communities and their governments organize themselves to perform the four functions and provide basic services for their residents?"
The second task is to create appropriate, comprehensive measures for local groups' ability to carry out the required functions. There are several issues to consider in measuring capacity:
  • Outputs vs. Outcomes: The effects of government policies are subject to so many uncontrollable outside influence (such as weather) that outcomes are usually an unreliable indicator of how well the government provides services.
  • Ability varies between tasks and sectors: One of the most important tasks in planning decentralization is to identify the comparative advantage of the local governments in various tasks.
  • People vs. Institutions: Observers must consider whether "local capacity" consists of individuals who may or may not continue to play a role in the government or whether there are institutionalized mechanisms (such as competitive pay, prestige, contracting arrangements, or training procedures) for ensuring a continuous supply of technical and managerial expertise. In assessing the community's capacity, one would want to look at the depth and history of civil society organizations as well as the number of private contracters and concentration of skills (ie. Is there only one contractor who could move at any time?) in this area.
  • Bureaucratic and Technical Infrastructure: The processes by which information is received, processed, and stored underlie most local government functions. The existence of appropriate technology -databases, filing systems, is essential, for example, for the ability to collect taxes or user fees.
  • The Role of Civil Society: NGOs can often be a source of trained, experienced personnel and local construction, accounting, etc. firms can provide services on a case-by-case basis. The local government's relationship with the private sector and demonstrated ability to contract out is an important, often overlooked part of "capacity." In assessing the community's longer-term capacity, one would want to look at the depth and history of civil society organizations (is there one skillful community leader or a network?) as well as the number of private contracters and concentration of skills (i.e., Is there only one contractor who could move at any time or are there several firms that could provide technical help) in this area.

Decentralize or build local capacity? Which comes first?

The answer: "Do both simultaneously."

The traditional approach to decentralization has been to build capacity before transferring responsibilities or revenues. This cautious method was fueled by worries about irresponsible spending, local corruption, regional inequities, and service collapse as well as many central governments' reluctance to devolve authority. Some authors such as Bahl and Linn even argued that the lack of local capacity, among other factors, made decentralization ineffective and even undesirable in developing countries.

This traditional approach is changing, however as increasing evidence shows that the capacities of all levels increases as decentralized service systems mature. There is a growing appreciation that "management is a performance art" better learned by doing than listening. Rondinelli, et al. (1984) reports that Indonesia, Morocco, Thailand, and Pakistan's local government capacity increased slightly but perceptibly in the years following decentralization. Devolution in Papua New Guinea has increased popular participation in government and improved the planning, management, and coordination capacity of provincial administrators. Faguet's ongoing research on Bolivia shows that local governments' education investments are more rational and more in line with local needs than the national government's expenditure. In general, much of the evidence indicates that decentralization has increased local participation and hence local government leverage in gaining access to national resources and encouraged the development of public and private planning and management skill.

Implementing the Answer: Doing Both Simultaneously

Decentralization in and of itself can be the best way to build local capacity. Central support can be important to maintain equity in spending across jurisdictions and ensure proper attention to training. Tendler (1997), for example, points out that effective delivery of local services rests upon partnerships crossing levels of government and the public, private and civil sectors. Nevertheless, capacity-building should not be a supply-driven endeavor that provides the same support package to widely varying local jurisdictions. It is also not always clear that national capacity is greater than local capacity. Putnam's research, for example, shows that Italians rate local government effectiveness higher than national government capacity.

Demand-driven capacity-building programs. One way enhance local capacity is through training and practice is to allow local institutions to use a portion of program funds, or their own funds, to contract for the technical expertise that they feel is appropriate to their specific requirements. This technical help can often be found locally, and acquired quicker and cheaper than from central or regional sources. Similarly communities (or regional groupings of communities) can be given block grants for their own capacity-building training programs. They can purchase the training they need to fill the gaps which they have identified in their own management and technical capacity. They can decide whether to buy the training from local, regional or central institutions. When local sources are used, a local network of technical expertise develops. This local network can be tapped more efficiently for maintenance of existing and new programs in the future.

Local participation can be a strong motivator for change: Recent evidence from Colombia and Bolivia shows that citizen/constituent oversight can be an important impetus for local governments to actively improve their capacity. Regular, fair, elections and citizen councils can increase the pressure on local leaders to turn popular demands into outputs.

Clarity in responsibility assignment is essential. India's technically and managerially ambitious Small Farmers' Development Agency and Sri Lanka's lack of guidance for the appropriate uses of district budgets, for example, led to low levels of success. The more successful decentralization efforts in Indonesia and Thailand however, had clearer procedures for local budget allocation and responsibilities.


The prevailing wisdom today can be summed up by the following statement from Working Group 5 (Institutional Capacity ) at the

Technical Consultation on Decentralization and Rural Development, FAO, Rome, December 1997: "Rather than plan and make large up-front investment in local capacity building as a prerequisite for devolution of responsibility, there was a broad consensus that it would be quicker and more cost-effective to begin the process of devolution, to permit learning by doing and to build up capacity through practice." The evidence increasingly shows that local capacity can be built by the process of decentralization, particularly when appropriate programs to increase interaction with the private sector are included in decentralization design.