Person:
Shah, Anwar
Author Name Variants
Fields of Specialization
governance; public sector reform; budgetary accountability;
Degrees
Departments
Global Practice for Governance, The World Bank
Externally Hosted Work
Contact Information
Last updated
January 31, 2023
Publication Search Results
1 - 10 of 21
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Publication
Implementing Decentralized Local Governance: A Treacherous Road with Potholes, Detours, and Road Closures
(World Bank, Washington, D.C., 2004-06)During the past two decades, a silent revolution in public sector governance has swept across the globe aiming to move decision making for local public services closer to the people. The countries embracing and adapting to this silent revolution have had diverse motives and followed even more diverse approaches. This paper attempts to present a stylized view of the motivations and approaches used to strengthen local governance. The quest for the right balance, i.e. appropriate division of powers among different levels of government, is not always the primary reason for decentralizing. There is evidence that the decentralization decision may have more to do with short-term political considerations than the long-run benefits of decentralization. To take stock of progress worldwide, we take a comparative look at developments in political, fiscal and administrative decentralization for a selected group of countries. Most of the decentralization literature deals with normative issues regarding the assignment of responsibilities among different levels of government and the design of fiscal transfers. The process of decentralization has not received the attention it deserves as the best laid plans can fail due to implementation difficulties. We revisit major controversies regarding preferred approaches to obtaining a successful outcome. Key approaches examined are big push versus small steps; bottom up vs. top down; and uniform vs. asymmetric decentralization. Finally, Indonesia's 1999 big bang decentralization program is evaluated. The program should be commended for its achievements over a short period of time, however incentives are lacking for local governments to be accountable and responsive to their residents. -
Publication
Grant Financing of Metropolitan Areas : A Review of Principles and Worldwide Practices
(World Bank, Washington, DC, 2012-03)In the new information age in the globalized and interconnected world, metropolitan areas hold the key to the future prosperity and growth of nations. This paper takes a closer look at grant-financing regimes faced by metropolitan areas and their role in facilitating or hindering improvements in economic and social outcomes of residents of metropolitan areas. A review of 42 large metropolitan areas worldwide shows that, with a few notable exceptions, metropolitan areas in general are hamstrung from playing their potential role in economic advancement. Metro areas have large economic bases and therefore little a priori needs for grant financing, yet they have strong dependence on central transfers. This is because of the highly constrained fiscal autonomy given to these areas, especially in developing countries, with the singular exception of metro areas in China. Such a strong reliance on transfers undermines local autonomy and local accountability. General purpose transfers are formula based , transparent and predictable yet they discriminate against metropolitan areas as they utilize a one size fit all (common formula) for all local governments -- large or small. Such formula typically incorporate equal per jurisdiction component that discriminates against large metropolitan areas. Compactness is rarely rewarded and the greater needs of metro areas for transportation, education, health, culture and welfare go unrecognized. Overall the emphasis in grant financing of metro areas deals with vertical fiscal gaps or project based specific purpose grants. To ensure that metropolitan areas can play their dual roles in improving economic and social outcomes for residents, it is important to strengthen their fiscal autonomy while at the same time enhancing their accountability to local residents. The paper argues that results based grant financing of social and transportation services and tournament based approaches to encourage inter-jurisdictional competition need to be given serious consideration to ensure metropolitan autonomy while strengthening citizen based accountability. -
Publication
Demanding to be Served : Holding Governments to Account for Improved Access
(World Bank, Washington, DC, 2008-06)This paper presents an overview of the constitutional-legal provisions on access to services in developing countries and shows that rights to public services are not justice-able. It further documents the performance record to show that governments' response to such a weak accountability framework has been predictable - poor performance in service delivery with little accountability. The paper also shows that while there has not been a shortage of ideas on how to deal with this problem, most approaches have failed because they could not diagnose and deal with the underlying causes of government dysfunction. The paper presents an analytical perspective on understanding the causes of dysfunctional governance and the incentives and accountability regimes that have the potential to overcome this dysfunction. The paper also documents practices that have shown some promise in improving access. The paper then integrates ideas from successful practices with conceptual underpinnings for good governance and presents a citizen-centric (rights based) governance approach to access. It further explores how such a citizen empowerment and government accountability framework can be implemented in practice, especially in the context of developing countries, where most governments still operate in a command and control environment with little or no orientation to serve their people. It also presents ideas on how to overcome resistance to such reforms. -
Publication
The Reform of the Intergovernmental Transfer System to Achieve a Harmonious Society and a Level Playing Field for Regional Development in China
(World Bank, Washington, DC, 2006-12)In China, most of the service delivery responsibilities are assigned to the subnational governments. Yet for reasons of efficiency in tax collection and administration, the central government collects revenues far in excess of its expenditure needs. In 2003 the central government collected 70 percent of consolidated revenues but accounted for only 30 percent of consolidated expenditures. The initial fiscal surplus of the central government enables it to use its spending power to provide financing to subnational jurisdictions for the achievement of national objectives and to influence local priorities. This paper examines the incentives associated with the design of such transfers and their implications for the efficiency and equity of public service provision and accountable local governance in China. The paper argues that the existing design of such transfers is not consistent with efficiency and equity considerations. It further undermines local autonomy without enhancing local accountability while creating incentives for imprudent fiscal management. Its main limitations include a complex and opaque system, a piecemeal approach to gap filling, lack of consistency of design with objectives, focus on input controls without regard for output accountability, incentives to support an antiquated management paradigm, a one-size-fits-all approach to local financing, and lack of transparency and regulatory framework for the intergovernmental transfer system. The paper makes specific suggestions on a reform of this system to overcome these limitations and on better use of fiscal transfers to create responsive, responsible, equitable, and accountable local governance in China. -
Publication
A Practitioner’s Guide to Intergovernmental Fiscal Transfers
(World Bank, Washington, DC, 2006-10)Intergovernmental fiscal transfers are a dominant feature of subnational finance in most countries. They are used to ensure that revenues roughly match the expenditure needs of various orders (levels) of subnational governments. They are also used to advance national, regional, and local area objectives, such as fairness and equity, and creating a common economic union. The structure of these transfers creates incentives for national, regional, and local governments that have a bearing on fiscal management, macroeconomic stability, distributional equity, allocative efficiency, and public services delivery. This paper reviews the conceptual, empirical, and practice literature to distill lessons of policy interest in designing the fiscal transfers to create the right incentives for prudent fiscal management and competitive and innovative service delivery. It provides practical guidance on the design of performance-oriented transfers that emphasize bottom-up, client-focused, and results-based government accountability. It cites examples of simple but innovative grant designs that can satisfy grantors' objectives while preserving local autonomy and creating an enabling environment for responsive, responsible, equitable, and accountable public governance. The paper further provides guidance on the design and practice of equalization transfers for regional fiscal equity as well as the institutional arrangements for implementation of such transfer mechanisms. It concludes with negative (practices to avoid) and positive (practices to emulate) lessons from international practices. -
Publication
How Close Is Your Government to Its People? Worldwide Indicators on Localization and Decentralization
(World Bank, Washington, DC, 2012-07)This paper is intended to provide an assessment of the impact of the silent revolution of the last three decades on moving governments closer to people to establish fair, accountable, incorruptible and responsive governance. To accomplish this, a unique data set is constructed for 182 countries by compiling data from a wide variety of sources to examine success toward decentralized decision making across the globe. An important feature of this data set is that, for comparative purposes, it measures government decision making at the local level rather than at the sub-national levels used in the existing literature. The data are used to rank countries on political, fiscal and administrative dimensions of decentralization and localization. These sub-indexes are aggregated and adjusted for heterogeneity to develop an overall ranking of countries on the closeness of their government to the people. The resulting rankings provide a useful explanation of the Arab Spring and other recent political movements and waves of dissatisfaction with governance around the world. -
Publication
General Purpose Central-provincial-local Transfers (DAU) in Indonesia : From Gap Filling to Ensuring Fair Access to Essential Public Services for All
(World Bank, Washington, DC, 2012-06)Indonesia has come a long way from centralized governance to decentralized local governance, and today Indonesia ranks among the most decentralized developing countries. The Government of Indonesia is revisiting all aspects of local governance to make appropriate legal and institutional adjustments based on lessons leaarned during the past decade. An important area of this re-examination and possible reform is the central financing of subnational expenditures. The system of intergovernmental finance represents one of the most complex systems ever implemented by any government in the world. The system is primarily focused on a gap-filling approach to provincial-local finance in an objective manner to ensure revenue adequacy and local autonomy but without accountability to local residents for service delivery performance. This paper takes a closer look at Dana Alokasi Umum -- the most dominant program of unconditional central transfers to finance provincial-local government expenditures in Indonesia. The paper also presents illustrative simulations of alternative programs and compares these with the existing Dana Alokasi Umum allocations. The paper concludes that super complexity leads to lack of transparency, inequity, and uncertainty in allocation. Simpler alternatives are available that have the potential to address autonomy and equity objectives while also enhancing efficiency and citizen-based accountability. Such alternatives would represent a move away from the complex gap-filling approach to simple output-based transfers to finance operating expenditures. Capital grants would deal with infrastructure deficiencies. And the alternatives would institute fiscal capacity equalization as a residual program with an explicit standard to ensure that all local jurisdictions have adequate means to deliver reasonably comparable levels of public services at reasonably comparable levels of tax burdens across the country. -
Publication
Fiscal Decentralization and Fiscal Performance
(World Bank, Washington, DC, 2005-12)A resurgence of recent interest in fiscal federalism has been a source of concern among macroeconomic stabilization experts. They argue that a decentralized fiscal system poses a threat to macroeconomic stability as it is incompatible with prudent monetary and fiscal management. The author addresses these concerns by taking a simple neo-institutional economics with an econometric analysis perspective. His analysis concludes that, contrary to a common misconception, fiscal decentralization is associated with improved fiscal performance and better functioning of internal common markets. Fiscal policy coordination represents an important challenge for federal systems. In this context, fiscal rules and institutions provide a useful framework but not necessarily a solution to this challenge. Fiscal rules binding on all levels can help sustain political commitment in countries having coalitions or fragmented regimes in power. Coordinating institutions help in the use of moral suasion to encourage a coordinated response. Industrial countries' experiences also show that unilaterally imposed federal controls and constraints on subnational governments typically do not work. Instead, societal norms based on fiscal conservatism such as the Swiss referenda and political activism of the electorate play important roles. Ultimately capital markets and bond-rating agencies provide more effective discipline on fiscal policy. In this context, it is important not to backstop state and local debt and not to allow ownership of the banks by any level of government. Transparency of the budgetary process and institutions, accountability to the electorate, and general availability of comparative data encourages fiscal discipline. Fiscal decentralization poses significant challenges for macroeconomic management. These challenges require careful design of monetary and fiscal institutions to overcome adverse incentives associated with the "common property" resource management problems or with rent seeking behavior. Experiences of federal countries indicate significant learning and adaptation of fiscal systems to create incentives compatible with fair play and to overcome incomplete contracts. This explains why that decentralized fiscal systems appear to do better than centralized fiscal systems on most aspects of monetary and fiscal policy management and transparent and accountable governance. -
Publication
Public Services and Expenditure Need Equalization : Reflections on Principles and Worldwide Comparative Practices
(World Bank, Washington, DC, 2012-03)This paper reviews the conceptual challenges as well as lessons from worldwide experiences in implementing public services and expenditure need compensation in fiscal equalization transfers with a view to developing guidance for practitioners. The paper concludes that while in theory a strong case for a comprehensive fiscal equalization can be made, in practice fiscal need equalization as part of a comprehensive equalization program introduces significant complexity. This works against the simplicity, transparency and general acceptability of the program. This does not imply that fiscal need equalization should be abandoned in the interest of simplicity and transparency. Instead simplicity, transparency and local autonomy are preserved by having fiscal need equalization through public service oriented (specific purpose block transfers) output based fiscal transfers that impose no spending requirements for any functions or objects of expenditures. Such transfers contrast with traditional earmarked transfers, which impose conditions on spending for specific purposes or objects of expenditure and subsequent verification/certification of such expenditures. Such output-based block transfers would further enhance citizen based accountability for results and thereby offer potential for enhancing public confidence and trust in government operations. -
Publication
Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in Indonesia
(World Bank, Washington, DC, 2012-03)During the past decade, Indonesia has transformed itself from centralized governance to decentralized local governance. Local governments were given extensive expenditure responsibilities while keeping the tax system centralized. To finance decentralized provincial-local expenditures, Indonesia implemented a new system of intergovernmental finance. This paper provides a review of the equity and efficiency implications of the current system of central-provincial-local transfers. It finds that the system of intergovernmental finance represents one of the most complex systems ever implemented by any government in the world. The system is primarily focused on a gap-filling approach to provincial-local finance to ensure revenue adequacy and local autonomy but without accountability to local residents for service delivery performance. This is done through a great degree of academic rigor using highly complex procedures. The complexity leads to a lack of transparency, inequity and uncertainty in allocation as well as creating incentives for jurisdictional fragmentation and reducing own-tax effort. Simpler alternatives are available that have the potential to address equity objectives while also enhancing efficiency and citizen-based accountability. Such alternatives would represent a move away from complex gap filling and special allocation approaches to simple, output based transfers to finance operating expenditures. These would be complemented by capital grants to deal with infrastructure deficiencies, and fiscal capacity equalization as a residual program with an explicit standard to ensure that all local jurisdictions have adequate means to deliver reasonably comparable levels of public services at reasonably comparable levels of tax burdens across the country. The paper argues that such an alternative system of intergoveernmental finance would preserve autonomy, while enhancing equity, simplicity, objectivity, transparency and accountability.