New Rules for Implementation of Fiscal Decentralization

[Glen Wright]

Colleagues:  Attached is paper I presented at the International Public Policy Association conference in Singapore last week. It presents a review of the literature on the success of the fiscal decentralization efforts over the past two decades and indicates these have not been successful to a large extent. The paper addresses the implementation rules formulated by Professor Roy Bahl in 1999 paper and addresses their practicality over the past decades and formulates new rules based on field experience and the case of Albania recently undertaking fiscal decentralization.  The response to this paper was quite positive from the presentation in Singapore and I wanted to share to this PFM Board for further comments and discussion. The paper calls for more original thinking and new ideas for implementing fiscal decentralization. 

[Napodano]

Thank you, Glen!

Interesting especially for the Albanian experience. I am heading to Tirana in March for a PFM assessment and your work will be a good reference.

Cheers, Mauro

[Glen Wright]

Hello Mauro:  I would be interested to learn about the results of your PFM assessment, particularly with regard to the situation of the local governments.  Is this a WB PFM assessment?

Best regards,

Glen

[Glen Wright]

Hello Mauro: I hope your mission to Albania went well.  I would be interested to hear about your PFM assessment and if report is available a copy of it.

Glen

[Napodano]

Hi, Glen;

Sorry for the late reply.

Mission went well and we delivered our assessment report to the EU Delegation (the assessment is linked to the Budget Support contract on PFM).
Report cannot be shared but I believe the attachment explains it all.

[Glen Wright]

Hello Mauro:  Thanks for this.  It provides good description of the situation as I understand it as well.  Did you do any assessment of the state of fiscal decentralization and the local government finance situation.

[Napodano]

Glen,

There are five PEFA reports for Tirana, Berat, Fier, Kuçova and Tropoja.

Attached a presentation made by the consultants. Full reports may be available on the PEFA Secretariat web-page.

[Glen Wright]

Hello Mauro:  Thanks for this informative powerpoint presentation. It aligns with what I had observed there over the past five years as well. They pursued this classic fiscal decentralization approach "finance follows function" and are in worse shape now than before this territorial reform.  I tried to get them to focus more on the revenue side and particularly the property tax but in Albania they have a very particular tax policy:  "the people don't want to pay taxes, and the government doesn't want to collect taxes"
I see the Swiss recently put out a RFP focused on improving the tax collection and revenue basis for the LGUs. Hopefully, this will improve things.  The USAID project contributed little to solving the problems of the LGUs.