1. Introduction and summary
2. Local community priorities
3. Local government priorities
4. Some Empirical Evidence

Bibliography

PART IV EXPENDITURE ALLOCATION - COMPARATIVE PRIORITIES 

1. Introduction and summary

One task of the present study is to identify the overall relationship between decentralisation and expenditure allocation by sector - that is, whether or not local governments are associated with relatively higher expenditures on areas of priority for human development. Following the Human Development Reports of 1990 and 1991 (as well as a substantial body of academic work and numerous international declarations), "human priority" is defined to encompass those expenditures which contribute most to human development. Basic education, primary health care and family planning, water and sanitation for the poor and decent housing all fall within this ambit in the social sectors. A number of categories of economic expenditure, on rural roads, irrigation etc. are clearly also important, although excluded for the purpose of the present exercise.

First this Part sums up the general arguments about expenditure allocations and decision making under decentralisation - in terms of the priorities of the local community and local governments. This is illustrated by a number of case studies. It is suggested that decentralisation has demonstrated potential to lead to a greater emphasis upon areas of priority for human development, but that this need not follow. Second, available evidence as to the relative priorities in specific sectors is presented. Finally, but certainly not lastly, an attempt is made to quantify the ratios of local and central governments. The limited evidence available reveals such a diversity of country experience that it is difficult to arrive at any firm general conclusions. Nonetheless it can be said that the sample revealed that proportionately higher shares of local expenditure are typically directed to the social sectors.

At the outset, the difficulties facing the present exercise should be noted. Any attempt to assess relative priorities is problematic where local government cannot be regarded as 'autonomous'. The vertical fiscal imbalances and lack of financial autonomy which characterises local government in many countries may well entail a lack of local competence to determine local expenditure allocations. Central grants may be directly tied, or subject to guidelines. Further it is possible that decentralisation may impact upon central expenditure allocations, leading to higher, or lesser, shares directed towards human priorities.

Note should be made of the obvious point that local priorities are virtually inherently more likely to accord to the basic priorities of human development, in the following senses. First because local governments are not generally concerned with such matters as defence, general administration and overseas debt repayment which may consume a large proportion of national budgets. Second, within the social sectors the focus is likely to be upon the lower (cheaper) levels of provision with their primarily local effects - for example, local clinics and dispensaries rather than large sophisticated hospitals, and basic schooling rather than universities.

When examining decision making under decentralisation there are at least two related dimensions - the priorities of the local government and those of the local community. The main focus here is upon the former given that the task of the survey is to examine decentralisation of government. The latter is, however, clearly relevant - indeed in systems characterised by a significant degree of participation in local government, the priorities would be expected to converge. 

2. Local community priorities

It is difficult to generalise about the priorities of local communities, which will inevitably vary across inter alia urban, rural and remote, better off and poorer, industrial and agricultural areas. Nonetheless the following observations can be made.

The priorities of the local community may well differ from those considered to be important by the national government or donors. One major study argued that there is good evidence that neither rural nor urban residents volunteer for communal projects aimed at increasing productivity (e.g. irrigation); rather the projects in which they are prepared to participate showed that their priorities lie in the construction of schools, health clinics, water supplies and roads (Ralston et al 1983).

It has been observed that the self-help activities are mainly concentrated upon the provision of priority social services such as schools, water supply and clinics (Hughes 1985 p.60). Insofar as self-help schemes originate within local communities, they may provide a forum for expressing local needs and priorities. (This is not, however, the case when they are dominated by influential but narrow interest groups; when the poor lack the skills, confidence or influence necessary to advance a case; or when the availability of matching funds distorts local demands.)

• In Tanzania, rural communities involved in the self-help movement co-operated in building schools, dispensaries and water supplies, but did not participate in agricultural projects unless compelled to do so by the government (Hyden, 1968 cited in Ralston ibid.). The same pattern has been found in Zambia (projects of the Ward and Village Development committees), rural communities in Papua New Guinea and in the highlands of Peru (Ralston, ibid.).
• It has been found that women's groups in most developing countries tend to be focused on health and education, rather than physical infrastructure, such as roads (Miller, 1982, p.6-9).
• In 1985, in response to demands from village parents, the Bangladesh Rural Advancement Committee (BRAC) started experimental schools aimed at providing basic literacy, numeric and social awareness to the children of landless families. BRAB has developed a new model of basic primary education, which has proved to be accessible to the children of the poor and relevant to their needs. By late 1989 the programme had expanded to 2500 schools, with a further 2000 to open by this year.
• Nigerian rural communities are reported to regard improved water supplies as of the highest priority, but because this is expensive are more likely to begin with simpler, cheaper facilities such as roads (Okpala, 1980 cited in Ralston ibid.).

• An evaluation of an NGO-assisted programme to train village health workers in El Salvador reveals some of the difficulties which may be encountered (Capps and Crane, 1989). A survey conducted among the health promoters, who were all volunteers with limited education, found that much more time was being spent on treating illnesses than on community health education. This arose from the public demand for curative care, especially medications. In some cases this was due to a single promoter serving a large isolated community where no other resources existed. It was also noted that advertising has lead people to expect modern medicines to provide quick cures for almost all illnesses.
• In Mozambique, many of the village health workers met real difficulties as they could not satisfy the local demand for basic curative care. This sometimes resulted in the people losing confidence in the health workers, which had negative implications for the effectiveness of preventive measures, and also for the decentralisation of financing health care. Subsequently, the Ministry of Health decided to adjust its services to local aspirations, through providing greater curative skills in the training of health workers (MacIntosh and Whyt 1988).
• Tumwine (1989) provides a number of examples from the Chmanimani district of Zimbabwe where the priorities of local people differed from those of donors, and of local health workers. He cites the case of an externally assisted clinic, which had only involved the community in the construction of the building. It is the least utilised health facility in the district, mainly because the local community comprises va-postori (apostolic) religious groups which do not believe in the use of Western health services. Another example is the case of a village meeting called by a local nurse in response to a high incidence of bilharzia cases. The local health team decided that the people should be motivated to build and use improved latrines. But at the meeting it was revealed that the problem regarded as most serious by the community was 'sadza' (the staple food) and 'pellagra' (a nutritional problem). The meeting ended up discussing drought relief, nutrition, and communal food production plots.

Generally it has been noted that local NGOs tend to engage in areas of prime significance for human development - income-generating (e.g. credit), communal (such as afforestation), and social (e.g. primary health care) (World Development 1987). An evident priority of many local NGOs appears to lie in the task of educating and mobilising the poor to participate in, or demand services when they are illiterate, unorganised and/or live in remote areas. 

3. Local government priorities

It would appear unwise to make sweeping statements about the extent to which local governments focus upon areas of significance for human development. Many complex factors will affect the orientation of local governments - including the socio-economic environment; the extent to which local public authorities represent the interests of their constituents; the political climate, which facilitates or restricts the free expression of popular feeling; and the functional responsibilities and financial resources available, or the extent to which local representatives are able to make decisions relating to the planning and implementation of human development projects and programmes. Nonetheless this sections attempts to draw a general picture of local government priorities.

Local governments often have significant expenditure responsibilities in the areas of basic social services. Generally their concerns will tend to vary between localities, particularly between rural and urban areas. Matters such as refuse collection, sanitation, street cleaning and zoning - residential and industrial - are naturally more likely to be addressed by urban councils.

One study of alternative forms of popular participation in the context of basic needs concluded that local representative institutions may be well placed to articulate local perceptions and priorities but "in practice, lack of information, sectional interests, lack of resources and/or restricted powers may prevent them from fully appreciating the needs of deprived groups or acting to remedy them" (Hughes 1985).

It has been argued that political and administrative decision-makers, particularly in democratic systems, prefer short term projects with immediate returns (Bahl et al 1984). This problem is not peculiar to developing countries. There is said to be a bias of local government in favour of highly visible projects such as new municipal buildings, rather than infrastructure development and recurrent expenditures such as road repair and school maintenance.

• It is reported that 80% of block grants to the upazilas in Bangladesh are spent on high profile and prestigious physical infrastructure, whilst allocations for critical social programmes are under-spent. Thomas (1989) concluded that, "without a further change in local level priorities, any further decentralisation of responsibility for primary education, health, water supply and other basic services to the local level cannot be contemplated" (p15).
• By way of contrast it was found in Agra district, Uttar Pradesh decentralisation promoted human development priorities: " The allocations for sectors like agriculture, social welfare and education...increased substantially ... Officers did more touring, and so came into direct contact with the poor, rather than dealing only through intermediaries. Programmes that benefited the poor and neglected areas were given priority" (Sanwal, 1987).
• Olowu (1989) reports that the experiments in self-governance across Africa in the early 1950s reflect high expenditures on areas of priority for human development, and that they had "remarkable success at building basic infrastructure" - roads, schools, clinics, bridges, markets, etc. - some of which still exist today (see table 18).

3.1 Education

In principle, it would appear likely that local governments would focus more upon primary and lower secondary levels of schooling, rather than tertiary education - given the largely localised effects and lower costs involved. However whether education, per se, is an important priority of local governments is another matter. This would depend, to some extent, upon the allocation of functional responsibilities among different levels of government.

There is little empirical evidence as to whether decentralisation will help to promote spending on basic education, in terms of comparative expenditure ratios for local and central government. At the same time however there are numerous cases of local initiatives resulting in the expansion of provision of basic schooling - BRAB and Harambee are notable examples which have been referred to elsewhere.

• It has been reported from Uttar Pradesh, India, that decentralisation resulted in vastly increased provision of primary schools. There was increased emphasis on primary education, for example - in 1982, 98 schools were opened in Agra district, while the previous average had been seven new schools per year (Sanwal, 1987).
• The Chinese government under Deng endorsed increased spending on education in order to promote economic development. The centre expected lower level governments to use the increased revenue available under economic decentralisation to support basic and vocational education. Problems have arisen however (Rosen, 1984). The localities, who are supposed to bear the burden of financing of mass education, reportedly prefer to invest in heavy industry projects, which are more prestigious and compensate for the irrational and inefficient supply of national industrial projects. According to Rosen (1985), local officials perceive education as a form of consumption which is essentially a "bottomless pit". Since 1979, intergovernmental transfers from the centre have been made on a lump sum basis with broad guidelines, whereas previously education funds had been earmarked for very specific purposes. In the result, the mass rural sector is locally (under-) financed, compared to the wholly urban elite sector which is disproportionately and centrally financed (Sautman, 1991). (The foregoing may represent a good example of a standard type of principal-agent problem in the decentralisation context).

It is likely that local health expenditures are directed towards more basic levels of provision. In most cases, large, sophisticated hospitals would not fall within the fiscal possibilities faced by local government. This points to a higher share of priority health expenditures in local budgets. And at least in operational terms, it appears that certain areas of health care crucial to human development require a significant degree of decentralisation. Family planning, for example, may require medical personnel to go out to the people, and meetings with village leaders. The inherent limitation of population policies implemented through central agencies is expressly recognised in Bangladesh's current Fourth Five Year Plan (the national contraceptive prevalence rate is 35%).

It has been argued that a shift in spending patterns alone will not be sufficient to promote preventive and basic curative health care - that there "also has to be a sharp change in the organisation of the social production of the new care" (Mackintosh and Whyt, 1988). An important difference between preventive health care and curative medicine is that the former requires the mobilisation of whole communities to be effective, while the latter normally treats individuals. In other words preventive care has to be eminently social in character (hence, the term 'public health') (ibid, p.169). It follows that health policy, in order to be effective, requires a significant degree of devolution, and must draw on and interact with community organisations.

• In 1972, the responsibility for health care in Tanzania was shifted to regional and district development directorates in a restructured central government field administration (Maro, 1990). The objective was to promote equity in the allocation of resources to health facilities. The establishment of rural health centres was funded partly through national government and partly through rural self-hElp, in the form of local materials and labour. Allocations for health increased greatly between 1972 and 1978, especially in recurrent expenditures, most of which went to rural clinics and dispensaries. This was accompanied by mass education campaigns aimed at improving nutrition, maternal and child health programmes. Maro (1990) found that most clinics and dispensaries were adequately maintained in terms of staff and essential drugs, and were generally regarded as adequate by users.
• In Mozambique, especially in the early years, local debate and as well as the decentralisation of resources were effectively promoted in the health sphere (Mackintosh and Whyts, 1988). The process of decentralisation in health planning and financing led to a shift in relative, and sometimes absolute terms, from city hospitals to rural clinics; from complex medical intervention to simpler procedures; from doctors to para-medicals; and from curative to preventive care (Macintosh and Wuyts,1988). There was an emphasis on training para-medical personnel and health posts. Health workers, chosen by local residents and sent on a six-month training course, were to concentrate on preventive care and health education, and be financially supported by the villages. Many villages put considerable local resources into providing health facilities and financing the health worker; some collected contributions in cash or kind from each household. There were, however, many problems with this system. The communal villages themselves were sometimes badly sited and unviable. This meant that health workers could not be financially supported, a fact which they naturally resented, given that teachers and agricultural workers were paid by the state. Also it was often difficult to maintain adequate basic supplies (Mackintosh and Whyts, 1988).
• The statutory responsibilities of the District Councils in Botswana include primary health care; the Councils are said to have played a major part in enabling the country to achieve one of the best health records in Africa (Tordoff 1988).
• Health services were not a high priority of local government in Ioilo City in the Philippines, where less than 6% of total local expenditures are directed toward health care. Health facilities suffer from inadequate premises, poorly qualified personnel, and shortages of medical and other supplies.

Extensive appraisals conducted in the course of the International Drinking Water Decade by UNDP, the World Bank, and others have endorsed, inter alia, the following propositions: (i) Safe, accessible water supplies are an important priority of people living in rural areas in developing countries, as reflected in their willingness to pay for improved services and the extent of community involvement in a number of countries. (ii) Investments in sanitation services do not appear to be of high priority to most rural dwellers.

• In Senegal, it was found that spending decisions under decentralisation generally responded to the priorities expressed by the local councillors - the largest share of rural community budgets are directed toward the development of water supplies, particularly wells. Data from the Kaolick and Fatick regions indicate that expenditure on water by rural communities averages between 30-40% of the annual budget, compared to health (7%) and education (14%) (Vengroff and Johnston, 1987).

That clean water is a high priority for local communities is evidenced by the many examples of their successful involvement in the planning, implementation and management of water supply systems, including Burma (U Tin U 1988), China, Colombia and Malawi (Briscoe and Ferranti 1988).

• In China the local community plays a leadership role in initiating water projects, selecting the source, technologies, and service levels, and financing the recurrent costs (local governments and entities are expected to pay capital costs) (ibid. p.19). Rural access to water stands at 66%, compared to a developing country average of 50% (HDR table 9).

4. Some Empirical Evidence

Significant difficulties face any attempt to measure priority public expenditures in developing countries (for a brief, understated description, see HDR 1991 Technical Note 7). The prospect of quantifying local government priorities, and proceeding to conduct a comparative analysis, is even more daunting, given: (i) Severe data limitations - only 8 of the 85 developing countries which appear in the IMF GFS 1990 contain any data as to "Expenditure By Function" at local levels of government. Even here, we are limited to broad sectoral categories, without any further breakdown. Simply "education", for example, without any clue as to such sub-sectors as primary and secondary. (ii) Lack of financial autonomy - which may render any picture of "local expenditure allocations" illusory insofar as the local governments may not exercise any effective discretion in this sense. Even if central grants are not specifically tied, there may be guidelines which restrict the use of funds.

Nonetheless, it is an important and useful exercise to undertake, at least in order to illustrate the general pattern of priority expenditures which exists. Table 19 shows the available evidence as to relative expenditures in the areas of education, health, and community amenities. The latter comprises public expenditures on the support of housing activities, community development, water and sanitation services, and social security and welfare services for the unemployed, the aged, and disabled people.

This data reflects an interesting picture of expenditure allocations. First as to education, in five of the eight countries, local spending is proportionately much higher than at the central level. Again in health, in five countries (although a different group from that for education), local spending is relatively higher. In six countries, local spending on community amenities was relatively more significant at the local level.

It is also important to bear in mind the sub-sectoral breakdowns of expenditure. As the 1991 HDR emphasised, the need for restructuring within each of the social sectors is as urgent as the need to reallocate expenditures between sectors. In many developing countries more then 80%, and in some cases over 90% of central health expenditures are directed towards hospital care. Thus even where the central government spending on health is proportionately greater than that at the local level, the impact upon human development may be less. In Chile, 6% of central expenditure is directed towards health, compared to only 3.4% at the local level; but almost 96% of the central allocation goes to hospitals. Unfortunately, as noted above, sub-sectoral breakdowns are not available for local government spending. It might be surmised that local government spending would tend to be directed towards clinics and community health workers, rather than large expensive hospitals. [Arguably, however, such a bias ought not to be taken for granted, insofar as this would purport to answer an important aspect of the present investigation simply by assumption; if no general propositions can be put, and the matter would have to be approached on a case-by-case basis.]

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