Institutional Change and New Incentive Structures for Development: Can Dezentralization and Better Local Governance Help

Since decades decentralization is regarded a hot topic in development. Particularly for policy makers. Many governments today are on a dual track toward greater market orientation and decentralization to local-level authorities (Bennett 1990b: 7-9). And subnational governments are on the move as well. Decentralizing the public sector is high on the agenda of many governments in Africa, Asia and Latin America. Worldwide some seventy countries began decentralizing during the 1990s in the hope of improving allocation, management, and mobilization of resources; providing higher quality services for citizens; achieving greater accountability; and, eventually, generating more balanced economic and social development (World Bank 1995a). Moreover, recent debate has stressed the importance of decentralization and ‘lo-calization ’ being complementary to ‘globalization’1. Today, decentralization is bringing many benefits in China, India, much of Latin America, and many other parts of the world. It can improve the quality of government and the representation of local business and citizens ’ interests. And competition among provinces, cities, and localities can spur the development of more effective policies and programs. Decentralizing state power and resources seems a logical continuation of the many recent efforts to bring government closer to the people, or people closer to government. Like the broad range of participatory mechanisms discussed in the literature, decentralization offers the chance to match public services more closely to local demands and preferences and to build more responsive an