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Fiscal and administrative decentralization is necessary

May 08 - 21, 2000

'Political stability' and sound governance are vital instruments for sustained economic development of a multi-ethnic society such as Pakistan.

Pakistan continues to grapple with difficult political, social, cultural and governance issues that affect the pace and effectiveness of its economic development effort. Ethnic, domestic and regional rivalries have contributed to political instability and have delayed efforts to reach a consensus on development policies and programmes.

These persistent crisis have eroded the moral fibre of our society and slowed implementation of development projects and have caused unsustainable development. The real cause of such a wide ranging malady is the failure of governance that contributes to a great measures of positive support not only to infrastructure, but to the overall environment of development activity through its policy, its decision making and policy instruments:

1) Reason behind this the "failure of governance". Unfortunately Pakistan has not been governed properly by those who were given the opportunity of governing it. Although the country had sizable potential, i.e. resources, talents and infrastructure but its leaders one after the other failed in the "art and science of governance" because of a glaring lacks of commitment and a misdirection in mismanagement of the economy.

2) The frequency of crisis has created reoccurrences of military intervention in Pakistan's political life. Civil military relation are now viewed as a key indicator of the Government stability.

3) Given a frequent switch in government, the civil institutions have either been held by governments in power or else their powers been stifled. Such a policy has infiltrated the entire spectrum of the economy. Most of the institutions today have become victims of political parties and have failed to perform their roles.

Politics in Pakistan evolve around personalities rather than programmes and policies. Real democracy has not even dare set foot on Pakistan soil because elected political governments are unable to tolerate strong governments at the local level which have been able to function only under the wings of dictators.

The above is a brief background of 51.5 years history of Pakistan, leading to a collapse of the state. But now we have time to pull our economy out of this distresses and restructure it and obtain all expected results. Through fiscal and administrative decentralization we can support the overall development of the nation.

We must keep in mind the three objectives.

To evolve a transparent power structure.

To evolve a system to increase and improve the integrity of institutions. (Civil and non-govt.).

The supremacy of laws to be upheld under all circumstances.

Political process must ensure democratic, fair election and public accountability at all levels. Decentralization has potential to be a powerful instrument for better "governance". The "art of governance" is the relation that exist among ruling class. The different components of the power structure, and provinces which constitute the federation of Pakistan Central administration, which is overloaded and congested in the channel of administration, has limited knowledge about local conditions and infrequent contacts with regional or local communities. So its many development projects have ended in mixed results. Administrative and fiscal decentralization could improve the management efficiency, serve political interest and improve financial performance of Pakistan. Because the decentralization principle is to improve the delivery and impact of public sector services by increasing the role of local government and communities in decision making. This is accomplished through the transfer of political, fiscal, administrative often legislative power from federal and provincial governments to the local government. If Pakistan finds the appropriateness of decentralization, there must be provision of a large degree of independence and autonomy to local bodies governments in earning out their expenditure responsibilities or formulating their policies with respect to assigned taxes can help ensure their accountability and allow efficient allocations of their fiscal resources. So the enhanced representation of a wide variety of political, religious, ethnic and other social groups would improve the equity in the distribution of national income and wise use of our existing resources.


Second there is a need to evolve a system to increase and improve the integrity of institutions. Continuous encroachment of a well defined constitutional authority relationship leading excessive centralization of authority of the components of the power structure. This has caused a near collapse of some of the institutions integrity which was initially upheld by the public in general. Similarly the integrity of the public functionaries has been evaded raising the qualities of their legitimacy. Civil servants become instruments in the hands of rulers. We should manage a standardized and transparent set of rules which can not be applied in an ad hoc manner. Without civil service support and cooperation development objectives could not be achieved. Government should establish a close link between government and civil services. Accept only high standard of performance and appoint only highly qualified professionals on merit and replacing the seniority system.

Third, the supremacy of laws to be upheld under all circumstances. Although the "implementing of laws" is the most difficult task because in last over 51 years we have experienced that our government institutions and administration machinery have failed to act upon laws in a fair, impartial and effective manner. Rules are impatient to get their orders (wrong or right) carried out in a hurry, began to by pass rules and tradition. Good governance is nothing but the obeying of laws. When laws are broken, whether for good reasons or bad only evil results. Proper implementation of laws would bulldoze the entire culture of allotments, permits, quotas, favouritism and nepotism. No one would be engaged in the effort of obliging his or her high authority. Everybody must realize that if he or she disobey or break the law nobody can save him or her from the accountability and punishment.

Pakistan's economic problems can improve significantly if its public resources split among different levels of governments.

These arrangement must be made as a whole if constructions of the state is to work well in a decentralized setting in Pakistan.

1) Local participation in a way that local people are able to understand and endorse the boundaries and management plans of their regional developments and promote other resources in an around their areas.

2) Capacity building to increase skills and patience and accountability among local and government units and NGOs so they work together and promote overall development of the nation.

3) Decision makers and fiscal authority through dialogue must take constructive action and requesting help from non local society to meet local development priorities.

4) Efficient allocation of expenditure responsibilities between levels of governments in a way that provide public service according to people preferences and at the lowest possible cost.

5) Assignment of taxes to different levels of government in a way that built-in-elasticity, equity. Incidence of taxed is borne by those for whom it is intended. It means heavily rely on direct taxes not on indirect taxes.

6) Overall fiscal imbalance for all levels of government net of transfer and grants, in such a manner so as not to cause inflation or create shortage of invisible fund for either the private or productive sectors of the economy.

7) All government must avoid fiscal deficit through heavily rely on financing alternatives (revenue sharing, grants, or subsidies), but these should be non inflationary.

So by the provision of a large degree of independence and autonomy to local bodies governments in their affairs and strengthening the inter-governmental fiscal relations, we will get the macro economic and political stability. Because in a ethnically, regionally, and racially diverse environment fiscal and administrative decentralization supports the overall development of the society.

The writer is lecturer in the Department of Economics, University of Karachi.