Report No. 29912-PK Pakistan Devolution in Pakistan Annex I: Recent History September 1, 2004 Poverty Reduction and Economic Management Sector Unit South Asia Region Document of the World Bank Table of Contents Pref.ce ............................................................................................................................................ iv Acronyms and Abbreviations vi 1 The Background to Devolution . ...................................................................................................... ................................................................................................. Why Devolution?..................................................................................................................................... 1 1 2 How was Devolution Implemented? . What does Devolution do to the Local State? ......................................................................................... ........................................................................................... 4 Political reforms........................................................................................................................................ 88 8 .......................................................... .......................................................................... ................................................................................. .................................................... 12 Fiscal Reforms.......................................................................................................................... Mergingcadres .................................................................................................................................. ........................................................................ 13 Expenditure assignments ........................ .............. ................................................................ 14 Fiscal transfers ............ ................................................................................................. 15 Accounting and Audit .................... ................................................................................... Achievements and challengesin implenientation LO dnte ....................................................................... 22 Uneven Impletnentation ................................... ................................................................. 32 24 3 Service Delivery and Devolution . Does the Diversity Matter? .............................. ............... ......................................................... .................................................................. 25 Framework Used ..................................................................................................................................... 25 Exly Signs of ChangingIncentives for Nuzinzeenand Senior Staff 27 Provincial Efficiency Incentives ...................................................................................................................... ...................................................... 27 Citizen Power (Voice) ............................................................................................................................. Early S i p s of ChangingIncentive ....................................................................... ..................................................... Managerial Power 57 Citizen Po\m (Client Power) 72 Appendix ....................................................................................................................................... ....................... ...... .......................................................................... 78 Dataon Institutions in Transition ........................................................................................................... 78 Data on Vet-ticaf Programs Glossary ......................................................................................................................................... ..................................................................................................................... 86 91 References ..................................................................................................................................... 92 Tables `I'able I:Districts and `TMAs Studied .......... ..................................................................... .................................................................... iv Table 3: Functional Reassignments from Provincial to Local GovernmentsunderDevolution ............15 Tahlc 2: ExecutiveStructureof the District 12 Table S: Variations in District Structure................................................................................................. Table 4: l'rovincial ConsolidatedRevenues........................................................................................... 18 23 .......................................... Table 7:Proportionsof Total Funding Transferredto Loci11tiovernmetits on a Formula Basis ...........28 Table 6: Key Incentives in the Devolved Structures............. Table 8: Mccling the Bal:inced Budget Requirement............................................................................. 'Table 9: An:inpemcnls for Public Oversight over Transfers........................................ 29 `Table IO: Vertical Programs as a Percentage of the District ADP Table 11: Proportionsof TMA Budgets AvailabIe for Local Determination................................. ............................................... Table 12: Local Govemment Controlof Accounts, by Province ........................................................... Table 13: Revenue-raisingAuthorities for Local Govemrrient.............................................................. 36 37 Table 14: Responsibility for Aspects >fRating......... ........................................................... 42 Table 15: Political J, egitimacy in Local Govemment ................................................. Table 16:Provincial Incentives to Intervene in the Districts ...................................................... Table 17: Location of the Employer Function For District Staff ....................................................................................... ............................................... 1(1 Table 19:Execution of the Development Budget................................................................................... Table 18: Mechanisms For External Oversight 65 72 11 Table 20: Mechanismsfor CitizenDisputeResolutionand Community Management of Services and ............................................................................................... Table 21: Numbers of LocalGovemmentsafter Devolution....................... Facilities Table 22: Phasingof Local GovernmentElections, 2000/01................................................................. 78 Table 23: Local ElectoralArrangementsfor PakistaninComparativePerspecti ............................ 79 Table 24: Impactof the Reforms on EachLevelof Govemment ........................ ............................ 79 Table 25: HealthFacilitiesTransferredto District Govemments........................................ Table 26: Implementationof BudgetReformsas Requiredby the LGO ............................ Table 27: APT Authorities in the Districts ............................................................................................. 83 Table 28: Honorariafor Membersof District MonitoringCommittees ........... .................................. 84 Table 29: Cases before Courts at the Time of Devolution, 2001...................................................... ............................ Table 31: Staffing Strength of Judges, October 2003............................................................................. Table 30: Comparisonof Sanctionedand Actual Strengthof Police(October 2003) 84 85 Table 32: Highly VerticalPrograms(deconcentrated expenditures) ...................................................... Table 33: Less Vertical Programs (delegated expenditures).................................................................. 86 88 Figures Figure 2: IndirectElections......................................................... Figure 1: The ChangingFramework of Accountability .............. ...................................................... Figure 3: ImbalancesbetweenRevenues andExpenditures, Federaland ProvincialGovemments Figure4: Key IncentivesinDevolution.................................................................................................. ...........................................................18 7 8 Figure 5: Predictabilityof Province-District Transfers, 2002/03........................................................... 25 31 Figure 6: District Own SourceRevenue ................................................................................................. Figure7: TMA Own Source Revenue.................................................................................................... 39 39 Figure 8: Trend in Own Source Revenues-Districts-as Proportionof Total Revenues..................... 39 Figure9: Trend in Own Source Revenues-TMAs-as Figure 10:Taxes as Proportionof Own Source Revenues,Districts...................................................... Proportion of Total Revenues.......... 41 Figure 11:Taxes as Proportionof Own Source Revenues,TMAs ......................................................... Figure 12: Nontax Receiptsas aProportionof Own Source Revenues, Districts.................................. 41 ..................................... 43 Figure 14: Nonsalaryas a Percentageof TotalExpenditure,Districts ................................................... Figure 13:Nontax Receiptsas aProportionof Own Source Revenues, TMAs 43 Figure 15: Nonsalaryas a Percentageof Total Expenditure, TMAs ...................................................... 51 Figure 16: Percentageof Small Schemes in the DevelopmentBudget, Districts................................... 51 Figure 17: Percentageof OngoingSchemesin the DevelopmentBudget, Districts .............................. 51 52 Boxes Box 1: A View from the NationalReconstructionBureau....................................................................... 2 Box 2: PRSPand Devolution.................................................................................................................... 2 Box 3: The Arithmetic of Local GovernmentElections........................................................................... 9 Box 4: InternalandExternalRecallof Nazimeen................................................................................... Box 5: Local Govemment Commissions................................................................................................ 10 13 Box 6: The 1997NFC Award ................................................................................................................. 16 Box 7: FiscalTransfers to Tehsil andUnion Administrations 20 Box 8: PoliticalOppositionto Devolution .............................................................................................. ................................................................ 24 Box 9: GamesmanshipinSalary Transfers ............................................................................................. 28 Box 10: VerticalPrograms ...................................................................................................................... 33 Box 11: Water and Sanitation Revenues ................................................................................................. 44 Box 12: ConflictsOver Credit-Claiming Box 13:A Case Study of ProvincialGovernmentInterference.............................................................. ................................................................................................ 47 55 Box 14:The Politicsof StaffTransfers .................................................................................................. Box 15: DPSCUnable to EnforceCompliance...................................................................................... 60 68 Box 16:Staff Shortfallsin the TMAs 70 Box 17: CCB Success Story ................................................................................................................... ..................................................................................................... 75 ... 111 Preface The Devolved Service Delivery Study (DSD) was conceivedandplannedby a SteeringCommitteemade up of representativesof the Governmentof PakistanFinanceand PlanningDepartments,the National Reconstruction Bureau (NRB) and three bilateral and international lending agencies: the World Bank, the Asian Development Bank (ADB), andthe U.K.Departmentfor International Development (DfID). Additional financial supportwas provided by the CanadianInternational DevelopmentAgency (CIDA). This i s the second in a three-volumereport. Devolution in Pakistan: An Assessment andRecommendationsfor Action reviews the current state of devolution, noting bothdangers and opportunities,and sets out a possiblestrategy and some practical actions to meet the key goals of devolution. Devolution in Pakistan: Annex 1-Recent History has two parts.I t sets out the detailed history of the initiative, and the political, fiscal, and administrative changes that havebeenmadeto date. It then provides adetailed assessmentof the impact of these institutional changeson the key actors, particularly the nazimeen and senior staff of the districts and the TMAs. Devolution in Pakistan: Annex 2-Technical Considerations provides a morein-depth review of a series of contentious topics that contribute to the intensity of the debates on devolution. I t examinesthe following: Options for reducing the throw-forward of ongoingADP schemes indevolution Developmentsand limitations inmonitoring data Provincial-local fiscal transfers includingareview of the weightings usedin PFC formulae An examinationof the vertical fiscal imbalances,and the implications from apossiblechangein the NFC award Reforming access tojustice under devolution Key considerationsin administrative decentralization The study i s the product of an agreement betweenthe World Table 1:DistrictsandTMAs Studied Bank, ADB and DfID, inresponse to a request from the Government Province 1 TMA of Pakistanthat the agencies Balochistan I District Killa Saifullah Killa Saifullah review progresstoward improving 11I1 Muslimbagh servicedelivery through Sindh I Karachi Lyari decentralization.The govemment Gulshan-e-Iqbal Khairpur Khairpur has emphasizedthat it is looking Kot Diji for feasible, practical N.W.F.P Bannu TownI recommendationsthat add value TownI1 to a devolution process that is well Punjab Bahawalpur , BahawalpurCity advanced. Itrequesteda range of Yazman robust technical analyses that Faisalabad FaisalabadCity Drovidea summary of the emergingIGLSUIIL auu IIII~IILCLLIUII~ IUIuuui puii~yaiu UpGl~llUllQ~lI ~ L L I L C . ~ .IIIC.~ U V G l I J l l l G l l L III~UG LIIC point strongly that this should not be an assessment of larger legal or political arrangements, rather that the focus of the review must be on pragmatic actions for service delivery improvements at district and tehsil level, basedon reasonableassumptions aboutthe likely preconditions for service delivery. The authors have drawn comprehensivelyon the following datain the preparationof this report: Extensivepublished outputsfrom the NRB and a rangeof informal outputs includingpresentationsand conference notes. i V District Studies-new, largely qualitative, data gatheredfrom six districts (and a selection of tehsils within them) on their experiencesto date gathered through the use of a series of sector-specifictemplates systematically reviewingexperienceto date with sectoralconcerns including public expenditure,civil service, politics, water and sanitation, health, education, and accesstojustice issues (see Table 1). The districts identified by government for this study were Faisalabadand Bhawalpur (Punjab); Karachi and Khairpur (Sindh); Bannu (NWFP); andKilla Saifullah (Balochistan). Fieldwork was conductedbetweenJune and August 2003 by a seven-member team in these six districts. Detailed socioeconomic datafor the districts are availablein a separate working paper (Qadir: 2003). The teamincluded ShehryarSarwar, Sajjid Siddique, Ali Murtaza, Syed ata ur Rehman, Masroor Ahmad, Nasir Jamy, RehanaHashmi, FareehaZafar, MohammedSaboor and Sarwar Bari. The qualitative data from this fieldwork are cited in this report as "ADBIDfIDMrB DSDDataset 1." IntergovemmentalFlows of Funds-a model of fiscal flows underpinnedby a comprehensivedatabaseof revenueand expenditurefor district governmentsand tehsils. The model allows: Some analysis of the overall fiscal architectureand inparticular the combined effect of the Provincial andNational Finance Commission Awards under altemative scenarios illustrating the impact of revenuereassignments or of any changes in funding assumptions; An assessment of the impact of any "lumpiness" inrevenue, assessingthe cash flow problems that the provincesare flagging as the major reasonfor their slow movementtoward the devolution of civil servicepay; and A comparisonto be drawn between the intendedandthe actualbehavior of provinces in transferring funds, assessinghow predictably districts receivedtheir anticipatedfunds. Fieldwork and analysis was conductedbetweenJune 2003 and January 2004 by Abdul Wajid Usmani, Mirza Irfan Begand Adeel Sattar. The fiscal data from this fieldwork are cited in this report as "ADBIDfIDIWB DSD Dataset 2." Background to the dataset and the methodology usedto construct it are provided inthe appendixesto the first volume (An AssessmentandRecommendationsfor Action). V Acronyms and Abbreviations ACR AnnualConfidentialReports EPI ExpandedProgramfor ADB Asian DevelopmentBank Immunization ADP Annual DevelopmentPlan ESR Education Sector Reform AG Accountant General FJ3S FederalBureauof Statistics AGP Auditor Generalof Pakistan FCF FederalConsolidatedFund AGPR Accountant GeneralPakistan FIR FirstInformationReport Revenues FJA FederalJudicial Academy AIT AgricultureIncomeTax GDP Gross Domestic Product APT Appointment, Promotionand GFS IMFGovemmentFinance Transfer Statistics BHU Basic HealthUnit GRAP Gender ReformAction Plan BKN BadanKepegawaianNegara(Civil GST GeneralSalesTax Service agency in Indonesia) HIPC High1y-Indebted PoorCountries BPS Basic Pay Scale HMIS HealthMonitoringInformation CBR Central Boardof Revenue System CCB CitizenCommunityBoard IMF IntemationalMonetary Fund CDMD City Development and Municipal IT InformationTechnology Department JM Judicial Magistrate CED Central ExciseDuty KPP KhushalPakistanProgram CEDAW ConventiononEliminationof All KWSB KarachiWater andSewerage Formsof DiscriminationAgainst Board Women LGC Local GovernmentCommission CFAA CountryFinancialAccountability LG&RDD Local Governmentand Rural Assessment Development Dept. CGA Controller General of Accounts LFO LegalFrameworkOrder CPLC CitizenPoliceLiaisonCommittee LGO Local GovemmentOrdinances DA DevelopmentAuthority LHC LahoreHigh Court DAO District Account Officer MICS Multi-Indicator ClusterSurvey DC Deputy Commissioner MCP MalariaControl Program DCJCC District Criminal Justice MIT Member InspectionTeams (of the CoordinationCommittee High Court) DCO District CoordinationOfficer M&R MaintenanceandRepair DDC District DevelopmentCommittee MMA Muttahida Majlis-i-Am1(political DDO Drawing and DisbursingOfficer Party) DERA DroughtEmergency Relief MNA Member of Na~onalAssembly Assistance MoWD Ministry of Women's DflD U.K.Departmentfor International Development, SocialWelfare and Development SpecialEducation DM District Magistrate MPA Memberof ProvincialAssembly DMG District ManagementGroup MQM MuttahidaQaumiMovement DoF Departmentof Finance MVT Motor VehicleTax DO District Officer NAM New AccountingModel DPO District PoliceOfficer NBP NationalBank of Pakistan DPR DevelopmentPolicy Review NFC NationalFinanceCommission DPSC District Public Safety Commission NGO Nongovernmental organization DRTA District RegionalTransport NM NationalInstituteofHealth Authority NPA NationalPlan of Action DS Deputy Secretary NPSC NationalProgramSteering DSD DevolvedService Delivery Study Committee DSSP DevolvedSocial ServicesProgram NRB NationalReconstructionBureau DTCE DevolutionTrust for Community NWFP NorthWest FrontierProvince Empowerment OPD Out-Patients Department ED0 ExecutiveDistrict Officer OSR Own SourceRevenue OZT Octroi and Zila Tax vi P&D Planningand Development RHC RuralHealthCentre PCA PoliceComplaintsAuthority RTA RegionalTransport Authorities PCF Provincial ConsolidatedFund RWSSP RuralWater Supply and Sanitation PCP PakistanCentrefor Philanthropy Program PER1 PunjabEconomic Research SAP Social Action Program Institute SBP State Bank of Pakistan PFC ProvincialFinanceCommission SDM Sub-DivisionalMagistrate PHED Public HealthEngineering SE SuperintendentEngineer Department SHO StationHouse Officer PIFRA PakistanImprovementto Financial SJM SpecialJudicialMagistrate ReportingandAuditing Project SLGO SindhLocal Government PIHS PakistanIntegratedHousehold Ordinance Survey SMC School ManagementCommittee PLA PersonalLedgerAccount TAO Tehsil Accounts Officer PML PakistanMuslimLeague (political TMA TehsilMunicipal Administration party) TMO TehsilMunicipal Officer PO PoliceOrder TO Tehsil Officer PPP PakistanPeople's Party uc Union Council PPSC ProvincialPublicService UIPT UrbanImmovablePropertyTax Commission W&S Works and Services PRGF Ih4FPovertyReductionand WAPDA Water andPower Development GrowthFacility Authority PRSP Poverty.ReductionStrategyPaper WASA Water and SanitationAuthority PSC Public ServiceCommission WB World Bank PSDP PublicSectorDevelopment WDD Women's Development Program Department PTA ProvincialTransport Authority WDR World DevelopmentReport PTAs ParentTeacher Associations XEN ExecutiveEngineer vii 1.TheBackgroundto Devolution WHY DEVOLUTION? On taking power in 1999,the Musharraf government announceda far-reaching reform agenda for "reconstructing the institutions of the state" through the establishment of a democratically elected system of local government. The government emphasizedthat the new system was designed to ensurecitizen involvement in planningservices andto provide mechanismsfor citizen oversight of implementation. Pakistan's devolution built on a Supreme Court decision that sought to enforce the constitutional principle, disregarded by previous governments,of the separationof the executive from the judiciary, and on Article 37(i) that required government to decentralize its operations to bring them closer to the public.] Inpractice, however, the start of the latest devolutionprocessis most often linked to the March2000 releaseof a National Reconstruction Bureau (NFU3)discussion paper that called for a series of bold structural changes to be implemented by 14August 2001, a deadline that was met. The changes includedthe abolitionof the existing three levels of deconcentratedprovincial administration (divisions, districts and tehsils) and the creation of a new tier of local governments comprising districts (called city districts inthe four provincial capitals), tehsils (city towns in the four city districts) and union administrations, and the replacementof the existing municipal bodies by these new local governments. These arrangements apply to all provinces, but not to the Cantonment (military) areas of towns and cities, or the Federally AdministeredTribal Areas, or Jammu and Kashmir. To date the arrangementshave not been implemented in the Islamabad Capital Territory. The proposals were given shape in the August 2000 Local Government Plan (National Reconstruction Bureau: 2000). Though not set out in any single document, the objectives of Pakistan's devolution program can be discerned from various NRB publications (Box I), the PRSP (Box 2), the LocalGovernment Ordinancesand many of the 297 other ordinances promulgated over the three years of the military government.' Devolution's overarching political objective was to reform the political structures and inthis respect, current policy had muchincommon with previous "devolutions"- notably of Ayub Khan and Zia ulHaq. It had three aims: to introduce new blood into a political systemconsidered to be the domain of historically entrenched interests; to provide positive measures for marginalized citizens-women, workers, peasants-to have access to politics; and to introduce a measureof stability into a turbulent political scene by creating a stronger line of accountability between new politicians and a local electorate. Underpinning the overall political strategy were other, technical objectives.The most prominent being the promise to improve service delivery, social services inparticular. It was arguedthat local governments, appropriately empowered, staffed and resourced, would deliver better on primary health, education and municipal services like water and sanitation. A second service- delivery objective was to improve the way in which laws about property and labor rights, and economic activities, were determined and enforced. Accordingly, local governments were given ' - ~ The Constitution of Pakistanenforce81on 14th August 1973 mandatesby Art. 175(3) that "the judiciary shall be separatedprogressively from the executive within three years from the commencing day." Govt. of Sindh v. Sharaf Faridi. PLD1994 SC.105. Article 37(i), notes that: "The state shall decentralisegovernment administration so as to facilitate expeditious disposal of its business to meet the convenienceand requirements of the public." In addition to the Police Order 2002, ordinancesconcerning freedom of information, and laws regarding family and small causescourts, habeas corpus, security, anticorruption, independentprosecution services are all, arguably, part of the "devolution commitment" of the Musharraf government. 1 responsibilities to regulate and administer laws on land, labor, natural resources, NGOs and commercial enterprises. The third and perhaps distinctive feature of Pakistan's devolution was the ambition to facilitate access to justice. The belief was that the performance of local administrations, courts and police would all improve, that basic human rights would be better recognized and protected under devolution. Box 1: A View from the National Reconstruction Bureau "The objectives of changingthe systemof governance.., 0 Restructurethe bureaucratic set upand decentralizethe administrative authority to the districtlevel and below. Refocus administrative systems to allow public participation in decision-making. 0 Facilitate monitoring of governmentfunctionaries by the monitoring committees of the local councils. 0 Rationalize administrative structuresfor improving efficiency. 0 Introduce performanceincentive systemsto rewardefficient officials. 0 Ensurefunctioning of the relatedoffices in an integratedmannerto achievesynergistic effect and improve service delivery. 0 Eliminate delays indecision-making and disposalof businessthrough enhancedadministrative and financial authority of district andtehsil level officers. 0 Improve administrative and financial managementpracticesinthe district and managementcontrols over operational units. 0 Redressgrievances of people againstmaladministrationthrough the office of zila mohtusib (district ombudsman).The government functionaries will also beeligible to lodge complaints against the unlawful and motivated orders of the electedofficials. 0 Enablethe proactive elementsof society to participatein community work and development related activities." Source: (NationalReconstructionBureau: 2001a). The idea that good governance is linked with poverty reduction runs through the technical and political objectives of devolution. The many recent poverty assessments have highlighted the vulnerability o f the poor to predatory and dysfunctional government service-delivery agencies responsible for education, health, land registration and taxation, policing and the courts ("Participatory Poverty Assessment": 2003; Asian Development Bank: 2002; CIET: 2003; World Bank: 2002). The vulnerability stems from government agencies' failure to provide adequate access tojustice, redress for administrative grievances, access to basic information about entitlements and accountability, or inclusion in public policy and decision-making. I Box 2: PRSP and Devolution The PRSPprocessrests on the principle that improvedgovernancei s essentialfor economic growth and poverty alleviation andholds that "addressing this governance componentof the poverty reduction strategy requiresamajor transformation of govemancestructures and systems, as well as of political and organizationalculture, especially at the local level." The government's strategy for institutional renewalis a bottom-up approach to restructuring, which consistedof devolution of power, decentralization of administrativeauthority, deconcentrationof management functions, diffusion of the power-authority nexus anddistribution of resources to the district level. "Improved access tojustice i s an absolutelynecessarycomplement to devolution that is directly linked to poverty reduction.An important factor for grass roots support for devo utionis precisely the restorationof the confidenceof citizens in the police andcourts. The governmentrecognizes thatjudicial, legal and Police reformsare essentialto establishrule of law andenforcementof contracts that will stimulate economicgrowth and encourageprivate investment-both local and foreign. The basic problems of judicial 2 administrationin Pakistanrelate to case management anddelay reduction, automation of courts, human resources and its development,infrastructureinadequacy, andredressalof small causes." The PRSPalso emphasizesthe needfor community empowermentthrough the further developmentof Citizen CommunityBoards, Village and NeighborhoodCouncils, and the promotionof the devolution movement. It calls for "full implementation" of devolutionby undertaking directelections of zila and tehsil nazimeen, given the greater legitimacyand accountability conferredby directelections; by federal-to- provincial devolution to strengthenprovincialautonomy; andby federal-to-provincialrestructuring.It also states that success is contingenton further fiscal and administrative decentralization and that implementationof thesereforms in an integratedandholisticmanner, is the crucial ingredientfor more effective governance. Source; (Govemmentof Pakistan:2003). When the agendawas first announced, skeptics pointed out that devolutionhad beentried before, was discredited and then abandoned.Historically, local government systemsinPakistanhave been promoted-by incoming military regimes as a way of reaching over the heads of existing political elites to consolidate their power by appealing directly to apopulace typically disaffected by ineffective civiliangovernment. The "Basic Democracies" system, introduced following General Ayub Khan's coup in 1958, created80,000 "basic democrats," or union councilors. These local leaders constituted the ElectoralCollege for presidential elections and for elections to the national and provincial legislatures createdunder the constitution promulgated by Ayub in 1962.Although the military government of General Yahya abandonedthis system, it was revived again under GeneralZia-ul- Haq (1977-88), who increasedthe powers of the electedmembers of local councils as compared to the Basic Democracy system. Thereafter, during the governments of Benazir Bhutto and Nawaz Sharif, sporadic attempts to re-empower local governments occurred, the most noteworthy being the "district governors" to be elected under the "New Social Contract" of the second Benazirgovernment (1993-96).3 By and large, however, efforts to institute forms of local democracy were lost inthe backwash of political centralization prompted by a range of factors: the series of military conflicts, (with India, with the former East Pakistan, peripherally inthe Soviet-Afghanconflict and the Gulf wars); the increasing de facto power of the executive over the legislature; the persistenceof conflicts unresolved since Partitionbetween the center and the provinces; and the legacy of the 1970s philosophy of state-led development. Not surprisingly, in a political system glued together by patronage, national and provincial leadershave tended to view local governments as potentially destabilizing interlopers. While the latest reforms are the most comprehensive so far, they have yet to produce any shift of responsibility from the federal to the provincial governments. The initial attempt was to bring about changes that would not requireany constitutional amendment, which devolving any function to the local governments from the Federal Legislative List (or even the Concurrent List) would have required. Moreover, devolution from the province to the district has also been accompaniedby amendments to the 1973 Constitution that are politically centralizing, inthat they give the head of state the power to dissolve the National Assembly and provincial governors the authority to dismiss provincial legislatures. This "stop-go" nature of political decentralization has also been accompanied by a steady trend of increasedfiscal centralization. This drift i s most evident in the distancebetween the 1956 Accounts of previous ``devolutions'' are foundin (Tinker:1954), for the preindependence period, and (Feldman: 1965,2001). 3 Constitution, which envisaged a decentralizedfederation with significant provincial public spendingresponsibilities and revenueraisingpowers, and the prevailing highly centralized revenueresponsibilities of the federal govemment. The 1956 Constitution gave the federal government the duty to exercise its tax and spendingpowers to ensure abaseof comparable services across the nation through a systemof fiscal transfers to provincial governments, and most crucially, gave the lower levels of government sufficient revenue to discharge their significant functional responsibilities (Shah and others: 1996). The 1973 Constitution took a significant step incentralizing revenueresponsibilities by bringingthe sales tax under federal ~ontrol.~At present, there i s a significant mismatch betweenexpenditure responsibility and revenuegeneration capacity of the lower tiers of govemment, with the provinces inaggregate depending on federal transfers for over 78 percentof their revenues.' WHAT DOES DEVOLUTIONTO THE LOCAL DO STATE? Two features of Pakistan's constitutional arrangementshave proven most challenging and contentious since Partition-the assignmentof functions and powers between the federation and provinces, and the separation of powers (in particular, thejudicial from legislative and executive powers). The current devolution experienceis yet another attempt to deal with these vexed issues. The reassignmentof functions, powers and resourcesat province and local levels has already beensignificant. Prior to August 14,2001, when the LocalGovernment Ordinances (LGOs) were promulgated, the four provinces were divided into three administrative levels, resultingin a national array of 26 divisions, 105 districts and 354 teksils. Other local government bodies existed mainly inurbanized areas and, in decreasingorder of size, there were two metropolitan municipalcorporations (Lahore and Karachi), 12 municipal corporations, 144 municipal committees and 303 towns committees. There were and still are 41 unelected cantonment boards. Inrural areas, district (zila)councils were responsiblefor local services. The districts and divisions were distinct legalentities (createdby the Provinces as envisaged by the 1973 Constitution), butunlikethe Provinces they lacked constitutional status. After devolution, Pakistan remains, constitutionally, a two-tier federal state. However, there are now 6,458 new local governments for the populationof 146 million: 97 districts and 4 city districts; 306 teksil municipal administrations and 29 city towns; and 6,022 union administrations.6Political reforms have includedthe election of 126,462 new union councilors, and intricate arrangements for both the internal and extemal recall of the nazimeen in local government. The LGO (14 August 2001) and the Police Order, (14 August 2002), provide for an unprecedentedrange of bodies to encourage and accord a mandatory status to citizen engagement inlocal governance. Mostnoteworthy are Citizen Community Boards (CCBs), but these are complementedby local arrangements for alternate dispute resolution, monitoring of court conduct, promotingjustice, accountability of the police and administrative grievance redressal. Administrative reforms include the creation of district govemments divided into 11departments, Sincepartition, Pakistanhas hadfour federal constitutions: the interimconstitutionof 1947 basedon the Govemment of India Act of 1935, the Constitutionof 1956devisedby the Constituent Assembly, the Constitution of 1962imposedby the military, andthe 1973Constitutiondrafted after the secession of East Pakistan (Bangladesh). Calculatedfrom ADB/DffDiWB DSDDataset 1. See the third volume (Annex 2-Technical Considerations)for a moredetailedanalysisof current fiscal vertical imbalances. Forsimplicity, unless moreprecisionis needed, this report usesthe general term district to refer to districtsand city districts, and tehsil to refer to TehsillTaZukhaMunicipalAdministrationsandcity towns. 4 and the District Coordination Officer (DCO) establishedas the highest-ranking civil servant in the district. The office of deputy commissioner has been abolished and its powers divided among ' the district and sessionsjudge, district nazim,the District Police Officer (DPO) and the DCO. Local governments have beengiven the powers to raise some additional revenues and Provincial Finance Commissions (PFCs) havebeenestablishedto make awards for distribution of resources between the province and local governments as well as distribution among local government^.^ District governments have been given functional responsibility for delivering elementary and secondary education, primary 'and secondaryhealth, agriculture, and intra-district roads. Towns and tehsils have been assignedmunicipal serviceresponsibilities-including local roads and streets, water supply systems and sewers and sanitation. Although unionadministrations have not been assigned any major service-delivery responsibilities, they are responsible for small-scale development projects that initially have beenfunded from the DistrictGovernment allocations under KPP. I n the context of the separationof powers, under the pre-devolutionsystem, the office of the deputy commissioner was the local face of the government, having all administrative powers to implement official policy. The creation of the office of the District Coordination Officer has also entailed the abolition of the office of the district magistrate and the cadre of executive magistrates under him.With devolution, alljudicial powers of the executive magistracy are now vested in the judiciary; each civil judge now also acts as ajudicial magistrate, while the District and Session Judge exercises the powers of the erstwhile district magistrate. As aresult, civiljudges now exercise criminal and regulatory jurisdiction under the CriminalProcedure Code and local laws and as a result, the regulatory implementation of laws through administrative fines has assumed the status, form and sequence of criminal trials. This shift has weakenedthe power of district administrators who must bring every allegation of illegality before the ordinary courts (that is, judicial magistrates) and prove their case againstthe accusedina court that is no longer presided over by one of their own. More profoundly, vesting the district magistrate's former powers in the District and SessionJudge has fundamentally changedthe relationship between the district executive and the police (see the third volume, Annex 2-Technical Considerations, for a more detailed discussion of the Access to Justice reforms). Inthe past, while the police were not formally controlled by the executive magistrate, the police were required to respond to the executive magistrates in respect of pretrial custody and investigation, whereas the new arrangements vest these responsibilities with thejudiciary and provide only weak formal responsibilities-for inspections of police stations, for instance-to the nazim. This complex set of institutional changes has created a new framework of accountabilities at the local government level as summarized in Figure 1. Devolution has changed the nature of both the horizontalchecks (relationships between the executive and those players of more or less equal power) and the vertical checks (where power i s predominantly on one side). The key aspects of the changedaccountability relationships are: 0 There are many more actors and accountability relationships o The new systemhas creatednew formal horizontal mechanisms, Such as monitoring committees, to establish checks on the executive. o Increased vertical checks in the form of citizen oversight, boththrough direct elections as well as through oversight bodies such as District Public Safety Commissions. ' The statutory basis for the PFCs was created through amendments in the Local Government Ordinancesnearly a year after local governments were created as administrative entities. The legal provisions of the Ordinancesaim at the creation of medium-tenn, formula-basedtransfer systems. 5 0 Balancedautonomy and accountability for the police o The Police Order 2002 has reoriented the managementof policing inorder to insulate it from political interference,' placing its professional managementunder the District Police Officer who becomes responsiblefor all police professional mattersincluding postings and transfers of officers. o New structures of District Public Safety Commission and Police Complaints Authorities provide new routes of accountability, inprinciple nonpolitical ones.' Localgovernments have beengiven constitutional protection under the 17'hConstitutional amendment, by placing the LGOs, which are provincial laws, underthe Sixth Schedule for six years (or wosubsequentrounds of elections) so that during this periodthey cannot be altered, repealed or amendedexcept with the sanction of the President." * Pressreports df a highlevel meeting held on 14April 2004 involving the Prime Minister, Provincial Chief Ministers, the NRB and other federal and province officials indicatethat significant changes will be introducedto the Police Order 2002 and that a new target date of December2004 has been set for complete implementationof these new arrangements. Untilthese are officially confirmed and clarified, this report will makeonly passing reference to what has been reported, but will not speculate on their likely impact. However, it is reported that the powers of the Chief Minister (province) havebeenincreasedwith respectto policerecruitment, postings and transfers, and that the involvement of province politicians in district policinghas increasedwith the decision to includethem as members of the District Public Safety Commission. It is reportedthat the provincePSCs and PCAs havebeenmerged inone body. See footnote 8. lo Constitution (Seventeenth) Amendment Act, 2003 (http://www.pak~stani.org/pakistan/constitution/amendments/17amendment. html). 6 Figure 1:The Changing Framework of Accountability Bef e vertic 1 checks 4 P u Province Note: This mapping of accountability relationships owes significantly to (Schedler, Diamond, and Plattner: 1999). 7 2. How was DevolutionImplemented? POLITICALREFORMS Electoral arrangements The foundation of the electoral structure for the three tiers of local government is the union council. The union i s a multimember ward for the election of members of the union council (that is, each constituency i s on average 25,000), and each union council i s composed of 21 directly elected members." The nazim and naib nazim (mayor and deputy mayor) are elected on ajoint ticket. The remaining 19 seats on the union council are allocated as follows: 0 12 Muslim seats, 4 of which are reserved for women 0 6 seats for peasants and workers of which 2 are reserved for women 0 Iseatforminoritycommunities.'* The nazim of the union council then becomes an ex officio a member of the district council, and the naib nazim of the union council becofiks an ex officio a member of the tehsil council (Figure I Figure 2: Indirect Elections NaibNazim NaibNazim UnionNazims UnionNaibNmms The union councilors constitute the Electoral College for the district or tehsil councilors-at-large and for the district and tehsil nazim and naib nazim, none of whom can be union councilors. Electedunion councilors are not permittedto stand for election as nazim or naib nazim of any tehsil or district-the nazim and naib nazim stand as ajoint ticket once all the union councilors in their district have been elected. If nojoint tickets secure at least 50 percent o f the votes for any 'I Councilors must be at least age 25, be a Pakistani citizen residing in the relevant ward, of good Muslim character (except for non-Muslims), and must not have been convicted of various crimes, nor be an employee of federal, provincial or local governments. Nazirneen and nnib nnzimeen must have at least a matriculation or secondary school certificate. I' In a district where the population of the minorities is in excess of 10percent of the total population, some seats are reserved for minority communities. There are direct elections for these seats for which only the minorities will be eligible to vote, and the whole of the district will be the constituency. 8 district or tehsil, a runoff election i s held within a week between the two pairs that secured the highest number of votes. The joint candidates securing the highest number of votes are declared winners. One-third o f the seats are reserved for women-directly elected at union council level and elected by the electoral college of union councilors at tehsil and district levels. This emphasis on women's participation inpolitics is a dramatic break from the past. Inaddition, 5 percent of district and tehsil seats have beenreserved for peasants (inrural constituencies) or workers (in urban areas), and 5 percent for minorities. Thus, overall, district councils and tehsil councils are made up o f about two-thirds directly elected members and one-third indirectly elected, including the nazim and naib n a ~ i m .The size of district and tehsil councils varies according to the number ' ~ of unions within the district. Some district councils are of a significant size and larger than 3 provincial assemblies. Box 3: The Arithmetic of Local Government Elections Assume a district with 60 union councils (UCs), groupedin three tehsils of the same size (20 UCs per tehsil) ...................... ........ ............................................................................... Union Councils Direct Thereare direct elections for all 21UC councilors. 19 are electedindividually, but the elections UC nazim and naib nuzim are electedon ajoint ticket. Inthis example, there are therefore 1,260 UC councilors overall. ........................................................................................................................................................................................................................ Tehsil Councils District Council EachUC naib nazim is automatically a Each UC mzim is automatically a memberof the tehsil council; memberof the district council; Inaddition to the 20 UC naib nazim, In addition to the 60 UC nazim, the each of the three tehsil councils has a districtcouncil has adistrict nazim and tehsil nazim andnaib nazim, plus 9 naib nazim, and 26 additional members: Indirect additional members: 7 women 20 women councilors,' 3 peasant- elections councilors, 1peasantor worker workers and 3 minority councilors; councilor and 1minority councilor; The district nazim, the district naib The tehsil nazim.,the tehsil naib nazim nazim and the additional 26 councilors andthe additional 9 councilors are are electedby the 1,260 UC councilors. electedby the 420 UC councilors (20 UCs in the tehsil x 21 UC councilors per ' The33 UC). . percentspecialseats for women on the district council appliesregardlessof how many are already on the district council by virtue of their havingbeenelected as UC nazimeen.So in theory if a largeproportionof women were electedas UC nazimeen,an additional numberof at-large seats would still beprovided,givingwomen a majority on the council. Source;Adapted from (Charlton,Ebel, Mukhtar, Scott and Vaillancourt:2002). Each tier of local government has a term o f office o f four years,I4 with a two-term limit for nazimeen and naib naziineen at all levels of government. l3 The majorityof nazimeenare experiencedpoliticians fromestablishedpolitical families. Accordingto one media survey, 30 percentof districtnazimeen inPunjabwere former MNAsor MPAs, andapproximately90 percent belongedto establishedpoliticalfamilies (The Herald,August 2001). Someof these nmimeen laterresignedfrom local government inorder to contest provincialor federal assemblyseats. l 4 The term of office was changedfrom three years throughan amendment in 2002. 9 I Box 4: Internal and External Recallof Nuzimeen For the external recall of a district nazim, the chief ministerof the province may offer a motion in the Provincial Assembly against a nazim, and if a simple majority approves, the nazim would cease to hold office with immediate effect. Similarly, the district nazim can proposea motion inthe district council for the recall of a tehsil or union nazim. If amajority in the council approves these motions, they are then subjectedto a vote of all union councilorsinthe tehsil in the case of the motion againstthe tehsiE nazim, andby union councilors in the union in the case of the motion against a union nazim. Ifa majority of the members supports the motion, the nazim in questionstands dismissed. The procedure for the internal recall of the nazim i s more elaborate. A memberof the district council, secondedby another member, may move to dismissthe district nazim inthe Council; if the motion wins by a simple majority, the Election Commissionwill seek a vote from the membersof the union councils in the district. Ifa simple majority of them approve, the district nazim loses office. However, if the motion fails, then the proposer and the seconder of the motionsinthe district council shall lose their seats both as union nazimeen and members of the district council. Moreover,no such motion can be tabled in the first six monthsof the district nazim's term of office or for 12 months after the rejection of a previous motion. The proceduresfor the internal recall of the tehsil and union nazimeen are similar. CitizenAccess and OversightBodies Whereas the provision for direct election of union councilors provides the most potent form of citizen representation in local government, the PO and LGO (along with other ordinances, such as the Freedom of Information Act) also provide numerous new bodies through which citizens are able to access and potentially influence government at the local level. These may be distinguished inthree broadcategories. First, there is a group o f exterrial oversight bodies that provide some external check on performance and probity. Insome of these bodies, such as the Monitoring Committees at the district, TMA, and union level, citizens are able to influence the performance o f service providers through their elected representatives, who comprise the committees. Guidelines exist for the establishment of monitoring committees to identify problems at the service facility level and bring them to the attention o f the respective council and the concerned EDOs (National Reconstruction Bureau: 2001b). Such committees are to consist o f at least three council members elected for a period o f three years, with a third of the members of each committee from among the reserved seats for women, peasants, workers, and minorities. The union committees are responsible for monitoring the functions of all offices o f the local government (district, tehsil, and union) that are responsible for the delivery of services within the union, while the tehsil and district committees oversee offices intheir respective g~vemments.'~ The Guidelines specify that members o f the monitoring committees are to involve the community inassessingthe quality o f service delivery through regular field visits and that they must present quarterly reports of their activities to their respective councils. On the basis o f these reports the councils are to pass the necessary resolutions (or refer the matter upward to tehsil or district councils if needed), andthe nazim are to report back within 30 days to the council on the actions taken. Functioninglike monitoring committees, but concemed with thejudiciary, insaaf committees have been established as subcommittees o f the unioncouncils to assist inredressing Is The NRBGuidelines specify that at the Unionlevel monitoringcommittees will be establishedin at least the followingareas: MunicipalServices, Finance, PublicSafety, Health,Education, Literacy,andWorks and Services. Tehsil monitoringcommittees will beestablishedfor MunicipalRegulation,Infrastructureand Services, Planning, andFinance;andDistrict monitoringcommitteeswill beestablishedfor each"group of offices or for each individualoffice within thegroupof offices." 10 litigants' grievances relating to the functioning of the district courts by facilitating access to the Member InspectionTeam (MIT) of the HighCourt. This category of oversight bodies also includes new agencies, such as the District Public Safety Commissions (DPSCs) madeup of both elected councilors and community representatives appointed through proceduresthat involve local andprovince government and the Chief Justice of the HighCourt. PSCs are a mechanismfor local external accountability over the police, part of a hierarchy involvingPSCs at province andfederal levels. The DPSCs are to look into cases of police excess, ensure the registration of FIRS,approve the annual policingplan of the district covering proposed expendituresand performance targets and check against misuse of the police by the district political leadership. Accounts Committees are beingformed as subcommitteesof district, TMA or union councils to monitor activities of the corresponding local government or any organization usingpublic funds, to identify any corruption or leakageor waste of public money at any time and to conduct annual reviews o f external and internal audit reports. Although not yet formed, but with potentially the broadest base of representation, Village and NeighborhoodCouncils are to be elected under provisions of the LGO. These institutions are meant to be vehicles for community participation in local government planning. Designed to mobilize community resourcesand gather information, they can also be delegatedto deliver services for their respective areas. The architects of devolutionalso recognized the importance of mechanisms for citizen dispute resolution to establish direct accountability relationships between citizens and service providers, To assist inresolution of citizen disputes with government, Departmental Grievances Redressal and Complaint Cells are to be establishedinlocal governments. To back up the new offices, there is to be a zila mohtusib (district ombudsman) to provide a formal avenue for redressfor citizens who have been the victims of maladministration. Citizen Police LiaisonCommittees have also beenestablished as self-financing voluntary organizations, which citizens can set upto assist the Public Safety Commission and the Police complaint authority in the discharge of their functions. They are also expected to assist in settlingdisputes between citizens and the police. Of a similar nature, the LGO provides for Musalihut Anjuman, which are to function as committees to promote the amicable settlement of disputes of acivil or criminal nature Finally, a group of bodies i s responsible for community development and management of facilities. Citizen Community Boards (CCBs) are the most prominent of these. Although formed voluntarily by citizens, who comprise the entire membership, CCBs are formally registered in accordancewith local govemment guidelines and have a legal claim on the localgovemment planningand budgeting process. Consisting of at least 25 members, CCBs can, inprinciple, be establishedfor a variety of purposes, including initiation and improvement of development projects, establishment of cooperatives, formation of monitoringbodies over police and other service providers and to reinforcethe capacity of monitoring committees at the behestof the concernedcouncil. At least 25 percent of the total development budget of each tier of local government (district, tehsil, and union) must be earmarkedfor projects identifiedby CCBs, and each CCB has to make a cash contribution of 20 percent inorder to be able to tap into these funds 11 for a specific project.'6 CCB development funds cannot be re-appropriated for other activities if unusedby the end of the fiscal year and mustbe carried forward to subsequentfinancial years. Although School Management Committees predatedevolution, they are associatedwith it. Names vary with the provinces-SMCs in Sindh, School Councils inPunjab, Parent Teacher Associations (PTAs) inNWFP, and ParentTeacher School Management Committees (PTSMCs) inBalochistan. These are discussedinmore detail later inthe report. THEADMINISTRATIVECHANGES Executive structure within local governments The executive branch of each district government is divided into 10 to 13 departments, depending upon the province, to carry out its functions (see Table 2).17 Table 2: Executive Structure of the Districts Department name I Statutory basis 1 Responsibilities I Finance and Planning I I Financeand Budget, Planning and Development, Accounts, Enterprise and I InvestmentPromotion InformationTechnology I InformationTechnology Development, Information Technology Promotion, and Database Law (Magistracy)a Litigation, Legal advice, Legislation I Agriculture Agriculture (Extension), Livestock, FarmWater Management, Soil Conservation, Soil Fertility, Fisheries, Forests andWildlife, Environment Community Development 0 Community Organization, Labor, Social Welfare, Sports and Culture, 3 Cooperatives, and Registration office District Coordination Coordination, Human Resource ManagementandCivil Defense .* i!! Education % Boys Schools, Girls Schools, Technical Education, Colleges, (other than professional) Sports (Education) and Special Education 1 Health `8 Public Health, Basic and Rural Health, Child and Woman Health, Population Welfare, District and Tehsil (Headquarters.) hospitals Literacy B Literacv CamDaiens. Continuing Education. and Vocational Education a 8 Revenue -9 Land RevenueandEstate and Excise and Taxation Works and Services Housing, Urban and Rural Development, District Roads and Buildings, Energy and Transport Public Health Engineering Water supply and sanitation Livestock Livestock District . I a. The Magistracy appears in the First Schedule to the Local Govemment Ordinancesbut as a policy decision stands abolished. The urovinces may relocate (deconcentrate) this office but it will not be a separatedistrict deuartment. The District Coordination Officer (DCO), the highest-ranking civil servant inthe district, heads the District Coordination department. An ExecutiveDistrict Officer (EDO) heads each of the The guidelinesspecify that "in kind" contributions by CCBs will be consideredas an addition to the 20 percent cash requirementand not a replacementand will be taken into consideration in the ranking andevaluation of the project proposal. " The NationalReconstruction Bureau (NRB) set out a detailed framework for administrative decentralization, which explains why the structure of district govemment is fairly standard within and betweenprovinces. 12 remainingdepartments.Intehsils,the TMA Municipal Officer (TMO)performs coordination functions similar to those of the DCO at the district level. There are four tehsil, tuluku, or town officers (TOs) reporting to the TMO: TO (Regulation), TO (Infrastructure and services), TO (Finance), and TO (Planning). The staffinginheritance of the districts Three groups of employees were assigned to the new district governments. These included staff from: Federal employment groups, primarily District Management Group (DMG) and the Audits and Accounts Group; 0 Former ruraldistrict councilemployees; and Provincial employment groups, particularly Public Health Engineering, Rural Development, LocalGovemment, Health and Education. The overwhelming majority of district staff formerly belonged to the provincial employment groups, particularly education. Most are in grades 1-15 (90 percent of district staf inNWFP and 83 percent inSindh). TMAs inheritedstaff from the former urbancouncils, and from ruraldistrict councils and also some provincial PHEDstaff where thesehave been devolved. Mergingcadres Despite multiplereform efforts, occupational groups in Pakistan remainvertically separated, Box 5: Local Government Commissions distinct career streams, Posts sometimes havebeen The Local Govemment Commission ineach createdto satisfy the needs of the various provinceis a reconciliationmechanismfor inter employee groups for promotion opportunities, local governmentdispute resolution.However, rather than on the basis of policy priorities or it has no executive authorityto imposea operational needs.Now, these systemic civil settlement. Any issue that is not resolvedby the serviceproblems are replicated at the district level Commission is referredto the provincial as the parallel, vertically oriented, occupational The processes by which the LGCs and groups have generatedsignificant problems in workare cumbersomeandtime-consuming result indelays to resolution.InNWFP, the merging different groups of Staff. Incertain Sindh LGC has beenusedby the provincial districts, for instance, devolution has resulted in government to investigate allegationsof Communications and Works Department staff mismanagementby district nazimeen. 13 FISCALREFORMS Expenditureassienments Areas of expenditure responsibility of the federal and provincial governments are set out inthe Constitution of Pakistan. While the Federal Legislative List'* of the Constitution specifies the functions of the federal government, the ConcurrentList," indicates the areas of shared responsibility, that is, those which can be undertakenby the federal government or by the provincial governments orjointly by both. The Constitution i s silent on the remainingfunctions and assumes by default that these residual functions are to be performed by the sub-national (that is, provincial or local) governments. Thus, according to the Constitution, the federal government is responsible for foreign affairs, defense, banking and currency, postal service, transportation (ports, airports, railways), while the main provincial responsibilities are police services, justice, roads, education and health. The actual assignment of functions remained much more centralized than the Constitutional provisions required, as higher levels of govemment played a dominant role in areas of shared responsibility. Centralization of taxes, by agreementwith the provinces, has emphasizedthis practice. The Constitution accepts that the actual or implied assignments of expenditures and revenueswill lead to vertical fiscal imbalancesbetween the upper two levels of government, which are to be resolved through revenue sharing.Thus, the Constitution also sets up the National Finance Commission-an institution assignedthe task of determining appropriate revenue sharing arrangements among the federal and provincial governments. Underdevolution, there were no shifts of responsibility from the federal to the provincial governments, The initial attempt was to bring aboutchanges that would not requireany constitutional amendment, which the devolution of any function to the local governments from the Federal Legislative List (or even the Concurrent List) would have required. As Table 3 indicates, significant functionaltransfersdidoccur from provincial to local governments. Containedin the fourth schedule, article 70(4) of the Constitution. l 9 Also containedin the fourth schedule. 14 Table 3: Functional Reassignmentsfrom Provincial to Local Governments under Devolution I District 1 I Tehsil. taluka, or towna ~ Province Education Education Primary education Primary education Secondary education Secondary education Colleges (non- Colleges(non- professional) professional) Professional colleges Teacher education Health Health Basic and Rural Health Basic and Rural Health d District and Tehsil (HQ) District and Tehsil (HQ) hospitals hospitals Provincial hospitals Medical colleges Population Welfare Agriculture Agriculture Agriculture extension -------- -------- Agriculture extension On-farm management On-farm management Soil conservation soil conservatik Fisheries __..____ _ _ _ _ _ _ _ _ bb Fisheries Forests --------, Forests Water Supply and )'Water Supplyand Sanitation Sewerage +.Sanitation Sewerage Transport Transport Transport Inter-district roads Intra-district roads 1' Intra-districtroads Intra-tehsil roads b. Intra-tehsil roads Street lighting ).Street lighting Parks and playgrounds ).Parksand playgrounds Municipal regulation ).Municipal regulation Irrigation Police Mines andmineral development Industrial and labor regulation Fully devolved -----------. Partially devolved a. Inurban areas, city districts, not the city towns, undertake these responsibilities. Fiscaltransfers Federal-provincial InPakistan, revenue sharingis the dominant form of federal-provincial fiscal relations. The main sourceof provincial revenuesi s a transfer basedon a share of federal tax collections. The decision on the list of taxes to be shared (the "divisible pool"), the ratio of the provincial-federal share of the pool and the formula for its distribution to the provinces i s to be fixed at least once every five years by the National Finance Commission (NFC) established under Article 160of the Constitution. The NFC last rendered a decision (called an Award) in 1997, allocating to the provinces 37.5 percent of the divisible pool, comprising all major federal taxes, with distribution to the provinces according to a single criterion-population (basedon the 1981Census of Population). Besides determining the taxes to be included inthe Divisible Pool and the respective 15 shares o f the federal and provincial governments, the NFC also determines other tax and non-tax revenues that would be provided to the provincial government as "Straight Transfers." These generally include revenues from sources that technically fall in the provincial domain (for example, taxes and royalties on natural resources) but which, for collection convenience or otherwise, are collected by the federal government. Previous quinquennial awards stay in force in the event a consensus is not reached on the new award. As the 2002 NFC failed to come to a consensus on a revised Award, the 1997 NFC Award i s still current. Box 6: The 1997 NFC Award The 1997NFC award (renewed in 2002 changingthe basis of provincial shares from the 1981population ratios to 1998 census) consistedof three components: (a) revenuesharing-distribution of a pool of federal revenues to provinces by formula; (b) straighttransfers-returning to the province of origin resource royalties, chargesand excises after deductinga federalcollection fee; and (c) speciallump-sum transfers to NWEPand Balochistan provincesto compensatefor backwardness. Revenue sharing ComDonent Under the 1997 Award, the federal divisible pool comprises all major federally collected taxes (that is, all CBR collected taxes). These include personalandcorporateincometaxes, wealth tax, capital value tax, generalsales tax (GST) on goods, central excise duties(CED) (excluding gas) andcustomsduties. These revenues are notionally placedinthe divisible pool from which 5 percentof the gross amount is deducted as collection charges to cover the presumedadministrative overheadof the federal government. An additional 1percenti s deductedfrom incometax collected.This removesfrom the divisible pool an amountroughly equal to the income tax paid by federal civil servants.' Of the remaining funds, 37.5 percentis then distributed to the provinces on the basis of population. Inaddition, to these revenues,provincescurrently receivean additional 2.5 percentof general sales tax (GST) revenues as pass-throughfunds for local governments in lieu of octroi and zila taxes they eliminated.*For FY 2002/03 the total divisible pool came to Rs.448.5 billion, and the provinces received Rs. 159billion as revenuesharingtransfers.The divisible pool inFY 2003/04 was projected to be 496.7 billion, of which provinces received 176.3 billion in addition to straight transfers of 32.5 billion. The revenue from 2.5 percentof GST was transferredto the provincesin two separate forms: the NFC formula- based normal transfers (which accountedfor about Rs. 14billion of the total Rs. 34 billion in FY 2003); andfederal grants (the remaining Rs. 20 billion) determinedon the basis of OZT collection in the province `at the time it was abolished.While revenuereceivedunderthe first mode automatically becamepart of the divisible pool, each PFC also includedrevenuesreceivedunder the second mode as items in the divisible pool. Revenuesreturnedbv origin Other taxes (royalty on crude oil, surcharge on naturalgas, central excise duties on natural gas, royalty on natural gas andGST on servicesare distributed as "straight transfers." These are taxes returned to the provinces on a derivation basis net of a 2 percentfederal collection charge. InM 2003/04, provinces receivedRs. 34.3 billion from these revenues. I t is important to note the distinction betweenGST on goods and GST on services, as constitutionally the former falls inthe federal domain and therefore forms part of the divisible pool, while collection of the latter (by default) i s a provincialresponsibility, which has beengivento the federal government through provincial ordinances inexchangefor an undertakingthat all net revenue from the tax will be transferredto the provincesas straight transfers. Similarly, the CED falls into two categories: naturalgas-relatedrevenuesand other CEDs. The net revenue from the former is passedon to the provinces as straight transfer basedon collection, while the latter are 16 distributed through the divisible pool. SpecialGrants to Fiscallv DisadvantagedProvinces, The NFC mandatedpayments of speciallump sum grants to NWFP and Balochistanprovincesin recognition of their specialneeds. InFY 2003/04, the budget estimates suggest that the subventionswere 3.9 and 4.8 billion for NWFP and Balochistan,respectively. 1.This resolves the problem that would otherwisearise becausethe income tax would amountto adirect contribution from the FederalConsolidatedFund (FCF) (which pays civil servants salaries)to the provinces via the divisible pool, and it is illegal for the FCF to fund the provinces. 2. While Octroi was an "import tax" on selectedgoods being transportedinto the urbanlocal bodies, the zila tax was an "export tax" leviedby District Councils. The revenuefrom 2.5 percentof GST is transferred to the provinces, from where it is transferredto tehsils (on the basis of shareof Octroicollection when abolished) andUCs on thebasis of share on zilu tax. The transfers are being made either directly by the province or via the DistrictGovemment.Insome provincesaproportion i s retainedby the District Governmentsalso. Federal-provincial fiscal transfer mechanisms have not been reformed. However, although no new NFC Award has been announced, the previous revenue-sharing arrangement has not been static since 1997. In 1999,2.5 percent was added to the GST to raise revenue to finance Octroi and Zilu Revenue Replacement Grants." This buoyant tax was to be distributed directly to local bodies as a hold-harmless revenue replacement grant. The basis for the distribution was the claims made by the provinces concerning the amounts that had previously been raised from these local taxes. Inpractice the transfers o f the 2.5 percent only began inFY 2002/03. For FY 2000/01, arguing that the 2.5 percent of the GST was generating an amount inexcess of the initial amount raised (Rs. 30 billion FY 2002/03 compared with Rs. 19 billion in FY 1999/2000), the federal government maintained that capping the grant innominal terms at Rs. 19 billion achieved a reasonable replacement of the original amounts lost with the abolition of OZT. Thus the replacement grant to the provinces fell to 62.5 percent of Rs. 19billion OZT (Rs. 11.9 billion). InFY2001/02, while the mechanism for revenue transfer remained the same, the cap on amounts to be transferred was removed and the entire Rs. 30 billion collected from the tax was transferred (37.5 percent through the NFCmechanism and the remaining as federal grants) to the provinces for onward transfer to the local governments. This reversal o f the FY 2000/01 policy was undoubtedly a significant victory for the provinces and local governments. These changes have had very little impact on the vertical fiscal imbalance, measured as the transfers to sub-national government as a share of total sub-national expenditures.2' Urbanlocal bodiescollectedOctroi (import taxes levied by municipalentities at their borderson goods imported for resale) while ruralones collectedZilu Exporttaxes onagriculturalgoods exportedout of rural(thencalledzila councils).Together,the octroi (collected largely in urbanareas)andzilu (ruralarea) taxes accountedfor 50 percentto 60 percentof autonomouslocalrevenues. While productiveof revenues,bothtaxes (whichwhen combinedarereferredto as the OZT) werenotoriousfor their inefficiencyandas asource of corruption.They were abolished(FY 1999/2000). Vertical imbalances= (total revenues own source revenues)/(total revenues). Forprovincesfor example, - vertical imbalancescan becalculatedas (grantst straighttransfers t sharedrevenues+ own source revenues).Definitionsof own sourcerevenuesare difficult, ideally they refer to + sharedrevenues)/ (grants straighttransfers + revenueswhere provincesAoca1governments haverate-settingauthority,however for this paper UIPTis allocated as 15 percent OSR for thedistricts and 85 percent OSR for the TMAs. Inthe case of TMAs, the Octroi andZila Replacement Grant must alsobe considered. 17 Figure 3: Imbalances between Revenues andExpenditures, Federal and Provincial Governments (percent) '100 , I a Y -8 1985 Share inRevenues 4Sharein Expenditures Source: Percentagesbasedon datafrom annualbudget documents (federal government andprovincial governments) from (Ahmad andWasti: 2003). The anticipated dependenceof local governmentson transfers, through abaseline assessmenton the eve of promulgationof new LGOs, was assessed at more than 95 percent for district governments andranged from 50 percent to around 90 percent for TMAs in2001, in various provinces (Cyan 2001). The calculations were basedon extrapolation of subjects inthe previous arrangement onto the new local government units. Inthis study the high dependencehas been reconfirmed. The sample of districts and TMAs covered in this study had an average fiscal dependenceon the province of 84 percent and 54 percent, respectively, including UIFT.22 Table 4 highlights Pakistan's current federal-provincial vertical imbalances. InFY 2002/03, the provinces were projected to dependon federal transfers for 78.2 percent of their total current revenues.Together, the provinces were budgetedto collect only Rs. 60 billion in own source revenues. Table 4: Provincial Consolidated Revenues Balochistan NWFF Punjab Sindh Total urrent Revenues (millions of Rs.) (millions of Rs.) (millions of Rs.) (millions of Rs.) (millions of Rs.) Federalreceipts* 22,960 27,357 107,275 57,299 214,891 Provincial taxes 594 1,775 12,568 7,851 22,788 Provincial nontax receipts 733 7,907 9,494 19,096 37,230 24,287 37,039 129,336 84,247 274,909 Current Revenues (% current) (% current) (% current) (% current) (% current) Federalreceipts* 94.5 73.9 82.9 68.O 18.2 Provincial taxes 2.4 4.8 9.7 9.3 8.3 Provincial nontaxreceipts 3.0 21.3 7.3 22.7 13.5 100.0 100.0 100.0 100.0 lO0.d Source: ADBIDBDIWB DSD Dataset2 and staff calculations. Vertical imbalancesdiffer significantly across provinces. Almost all (95 percent) of Balochistan's revenueswere anticipated to come from federal transfers. But e'en Sindh dependedon federal transfers for over two thirds of its current revenues. *' Source: ADBlDfIDlWB DSD Dataset 1. See the third volume (Annex 2-TechnicuZ Considerations) for detailed discussionof the vertical fiscal imbalances. 18 The new NFChas beenmeeting, andthere are indications that the federal government is prepared to consider a significantly increasedprovince share. At the time of writing, the Minister of Finance is reported as saying that he expects the new award to be announcedin time for the FY 2005 budget. Provincial-local Changes in fiscal transfershave beenmade to complement the devolution of expenditure responsibilities. Mirroring the federal-provincial arrangements, transfers to local government were to be accompaniedby a system of unconditional fiscal transfers from the provinces determined by provincialfinance commissions. However, and importantly, the claims of local governments over the provinces are not the same as the provincial sharingrightswith the federal government, since local governments have no constitutional rightsto revenue sharing.23 All provinces havenow establishedProvincialFinanceCommissions, which have madeawards for the distribution of provincialresourcesto local governments. According to the legislation establishing each PFC-containing only slight variations from the NRB's suggestedmodel-the PFC is to evolve a formula for distribution of resources, including distribution of the proceedsof the Provincial Consolidated Fundbetweenthe provincialgovernment and the local governments. The statutory basis for the PFCs was createdthrough amendments to the LocalGovernment Ordinances nearly a year after local governmentswere created as administrative entities. The legalprovisions of the Ordinances aim at the creation of medium-term, formula-based transfer systems. Progressincreating the necessary secretariatsand establishing the required analytic support for the PFCs was initially slow. The absence of a secretariat, offices for private members andbudgetary allocations representeda serious constraint on the PFCs' work, but their situation has now grown significantly better. The capacity of the Secretariats, the frequency of meetings and public reportingand their interest indeveloping multiple grant systems are all improving. The PFC interim awards made in 2002 were initially intended to cover just the first two quarters of FY 2003. A full award was to be determined by the end of the first quarter FY 2003 to cover the last two quarters of FY 2003 and the subsequent three years (FY 2004-06). However, the final awards have not been made, and the interim awards were extended first to cover the rest of FY 2003 andlater, FY 2004 as well. What constitutes a divisible pool for allocation of localshare varies somewhat across provinces with the general practice that the provinces make some exceptions from the Provincial Consolidated Fund.These are labeled obligatory expenditures and include the charged expenditure of the province and debt liabilities. These are not determined on the basis of a formula, and in theory the province can determine them as the year progresses.The local share of the divisible pool i s currently: Punjab: 39.8 percent; Sindh: 40 percent; NWFP: 40 percentand Balochistan: 31percent. Population is the most important indicatorusedin allprovincial awards. Details of the award formulae by province are provided in the third volume (Annex 2-Technical Considerations).A backwardness index is usedby three of the four provinces, and the two largest provinces incorporate tax-effort provisions. The index has beenpreparedinPunjab and Sindh by ranking 23 In this context it should be noted that the constitutional protectionon the rights of the provinces is very strong- undoubtedly inpart becausethe provinces predate the country and the country only exists becauseof a willingness of these provinces to confederate. 19 districts against health, education, housing, employment and residential services indicators. [II NWFP, the backwardness index is derived from the Multi-Indicator Cluster Survey (MICS) ,md incorporates child health, education andliteracy, income, and access to water variables. Balochistan gives 50 percent weight to district area and NWFP assigns 25 percentweight to infrastructure deficiency. Inall cases grant funds vary directly with fiscal need, butfiscal capacity (revenue potential) has no influence on grant entitlements. Significantly, usingthe PFC mechanism as establishedby various amendmentsto the LGOs, these changes established entitlements for local governmentsin the provincial consolidated funds for the first time. Earlier the district departments werejust deconcentratedarms of the provincial government with, by definition, no transfers. The lower tiers of local government received no transfers from the province except for discretionary specific-purpose grants and in some jurisdictions had some sharing of the UIPT. Now, predetermined shares of the Provincial Consolidated Funds are passed as transfers that are non-lapsing. To enable this, district funds and TMA local funds were createdas accounting entities distinct from the provincialconsolidated fund to prevent re-appropriation by the province. The intentionwas that all local government expenditure would be financed from own-source revenues or formula-based unconditional transfers. Inpractice, intwo provinces (Sindh and NWFP) salary expenditures were merely deconcentrated, and staff are still paid from a provincial account. Even in the other two provinces, the transfers are not formula-based; districts are reimbursedfor their actual wage bills, and the funding is earmarkedfor salaries (Cyan: 2001). Box 7: fiscal Transfers to Tehsiland UnionAdministrations Differentprovinces havetakendifferent routesto fund tehsil and union administrations, but they have been largely financed out of GST revenues in additionto their own-sourcerevenues.The only exceptionshave been the salary grantsfor public health and engineeringemployees in Punjaband Sindh anddiscretionary specificpurposegrants. Punjab: The transfers to TMAs andUAs were mainly basedon GST. In Punjab the full amount of GST receivedwas transferredto TMAs to ensure they receivedat least the baseline amount of OZT collectionin their jurisdictions. The UAs were givenan equalallocation.Out of the expectedshare of Rs.7.0 billion, baselineshares consumed Rs.6.2 billion. The remainingRs. 800 million was distributedbetweenunionand tehsils with Rs. 300 million goingto unions and Rs. 300 million for TMAs. Another Rs. 200 millionwas left undefinedwith the provincefor grantsto local governments. NWFP: NWFPdividedGST on the basis of historicalshares, distributingshares of the zilu tax, after deductionof 10percentas district share, equally among all unions.The sameformulaoperatedfor the distributionof Octroi to,tehsils. A special grant of Rs. 18 million providedfunds to new TMAs with no historicalclaims. The balanceof GST funds was transferredto the districtson the basis of backwardness. Sindh: InSindh the GST transfers were complex, providingbaselinecollectionsfirst to all TMAs andto the UAs that earlier collectedOctroi. Rs. 6.5 billion was distributedon the basis of baselineshares. Another Rs. 2.8 billionwas mergedwith KPPand distributedon the basis of the developmentfund sharingformula of 70percentpopulation, 30 percentbackwardness. Within the district 30 percentof the district sharewas givento TMAs. The remainingfunds were to bedistributedamong smaller districtson the basis of backwardness. Balochistan: The distributionin Balochistan followed the formulafor cistribution of developmentgrants. Once district shares were so determined, they were further dividedamongdistricts, TMAs andUnionsin the ratioof 40:25:35. 20 Other Trun-sfrrs: TMAs in Punjabwere given another grant to finance the recurrent expenditure of PHE including staff salaries. This was worked out on the basis of actual staff posted to a TMA. Discretionary transfers. mostly specific purpose grants, are given for development projects. InPunjab they are quite common. Accounting and Audit Accounting and audit arrangementshave also beenreformed. Although not undertaken as part of the devolution process,this reform has significant implications as it impacts the quality of accounts and therefore accountability over public expenditures. The key, current problemis that confusion and conflict over the administrative control of District Accounts Officers (DAOs) is creating problems inthe effective delivery and the timely submission of district accounts. The existing financial managementprocesses at the local government levels are therefore weak, and accounts, mostly basedon manual accounting procedures, are often late and incomplete. Two major reasons are behindthis conflict. First, there is confusion about the respective responsibilities of the Auditor General of Pakistan (AGP) and the Controller General of Accounts (CGA) over accounting. The conflict beganwith the promulgation of the Auditor General's (Functions, Powers andTerms and Conditions of Service) Ordinance 2001 and Controller General of Accounts (Appointment, Functions and Powers) Ordinance 2001, which separated audit from ac~ounting.~~The latter ordinance createdthe new office of the Controller General of Accounts (CGA) as the head of the accounting machinery inthe country, removing accounting from the administrative control of the AGP. However, constitutional and statutory ambiguities have prevented the de facto implementation of this change. Specifically, because article 170of the constitution gives the AGP responsibility for prescribing accounting principles and methods, it has beeninterpreted to meanthat the AGP also has controlover accounting staff.2sTherefore, the AGP continues to transfer staff across the accounting and audit lines, and the CGA does not have clear administrative authority over his own staff. Second, there i s conflict between the CGA and provincialfinance departments over control of province level accounting staff. District accountsare preparedby DAOs, an office currently staffed by individuals belonging to both the Pakistan Audit and Accounts Service, a federal cadre, and the Treasury, aprovincial finance cadre. The CGA argues that quality assurancein their respective tasks requires direct, hands-on federal control at all levels of government. This position would require that managerial control of all District Accounts Officers be passedto the CGA from the provincial Finance Departments and, ultimately, would also shiftresponsibility for the TMA accounts from the LocalCouncil Accounts Service to the CGA. The provinces have a very different view of the issue. Accounting is seen as aprovincial function accordingto the Constitution, and this logic is supportedby current intemationalpractice of vesting responsibility for accounting within the level of govemment that has responsibility for expenditures. Any transfer of control to the CGA would be very difficult to arrange becauseof intricate cadre issues.Provincial staff would want their seniority protectedina merged cadre, but the federal accountsstaff are reluctant to concede this benefit because of perceived differences inthe levels of skills. Were the CGA to assume charge of the TMA accounts, some posting of federal cadre personnelas Tehsil Accounts Officers (TAOs) would be required. A staffing planinPunjab was 24 Inparallelto theseinstitutionalreforms, sometechnical changes have beendriven by the Projectfor Improved FinancialReporting and Accounting(PIFRA), which entails the introductionof a new computerizedaccounting system and a shift of the basisof accountsfrom cashto commitment (referred to as the New AccountingModel or *' NAM). Articlel70: "The accounts of the Federationandof the Provincesshall be kept in such form andin accordance with such principles and methods as the Auditor-General may, with the approval of the President,prescribe." 21 prepared on these lines last year but could not be implemented. The FederalCabinet decided in 2002, as a matter of policy, that responsibility for accountsshould devolve to the provinces from 2006, although recently there has beendiscussionbetweenprovinces and CGA that this takeover mightbe onthe basis of "readiness criteria" rather than time-bound. These administrative control problems aside, the preparation of local governments' accounts requires adjusting accounting systems to correspondto the new administrative entities. A major task i s the merger of local funds with operations under the Provincial Consolidated Fundin order to create District Funds and appropriation and finance accountsfor Account IV.The Local Govemment Accounts Code, notified by the AGP to the President, underpins this move. Although audits have limitedcoverage due to lack of data, resources and staffing capacity, responsibility for the audit function itself is an issuerelatively free of contention. Generally the Auditor General is to carry out the audit function for all levels of government, but an amendment to the Local Govemment Ordinances, through insertion of a new Chapter XU inJune 2002, assignedthe audit responsibility for TMAs and union administrations to the Local FundAudit of the provincial service. This action was based on the argument that staff from the AGP lacked the necessary numbers and experience to audit the systems of the old councils. Untilthe AGP has the neededcapacity, therefore, the audit should continue to be carried out by local authorities, who have more familiarity with the accounts kept according to the old system ("Pakistan Country Financial Accountability Assessment": 2004). ACHIEVEMENTSAND CHALLENGESINIMPLEMENTATIONTODATE UnevenImalementation Itis not surprisingthat devolution hasbeenimplementedunevenly-as Table 6 illustrates for the administrative aspects of devolution. Devolution presentsquite different challenges to a remote rural tehsil inBalochistan than to ahigh-density tehsil in central Karachi. While the core departmentsof local government have been set up according to the LGO, there are notable exceptions (Table 5). 22 Table 5: Variations inDistrict Structure (shaded cells remesent offices established indistricts', I F Offices Statutory Killa Saifullah Karachi Bannu Bahawalpur Faisalabad Khairpur Finance andPlanning (1) Vacant 1 Information Technology I District Coordination Revenue Works and Services 3 50$ Health 0 Education -i2 Literacy CommunityDevelopment fb 35 Agriculture -a '3 E Public HealthEngineering 1 Livestock EnterpriseandIndustrial I Promotion (10) city Public Transport Govt (10) Water and Sanitation (11) Information Technology will be the 10thGroup inKilla Saifullahafter adistrict structure is put intoplace InKarachi3 EDOs(College, Elementary,andLiteracy)havebeenposteddue to the size of the department InNWFPthe DO (Revenue)headsthe office. There is nopost ofED0 (R) PublicHealthEngineeringDepartment (PHED), CommunicationandWorks (C&W) andPhysicalPlanningand Housing(PP&H) departmentswere mergedto form the Works and Services (W&S) office inNWFP.InMay 2003 theprovincial government divided the NWFP into six circles each headedby SuperintendingEngineer (SE) of W&S department. EducationandLiteracyhavenotbeenseparatedinNWFP RecentlyLiteracyhas beenmergedwith the Educationdepartment.The ED0 post was vacant prior to merger. PublicHealthEngineeringhas, inprinciple,beendevolvedto the TMA level.Inpracticethis hasnot been enforced-but Balochistanis the only provincethat has formally createdadistrict structure. EIP (Enterpriseand InvestmentPromotion) andPublic Transport groups of offices were establishedonly in Karachidistrict. KarachiWater and SewerageBoardhas beennotified as the 15thGroup of OfficesinCity Govemment Karachi,thoughfunctions andinfrastructureare yet to be devolved. The key structural variations between provinces concern Public Health Engineering and Education and Literacy. Ineducation, Punjab has created separate departments for education and literacy at the district level, while NWFP and Balochistan have opted for one department for both services. In Sindh, Karachi has separate departments while Khairpur has ajoint department. At the provincial level, the structure o f the Departments o f Educationinthe Punjab, Sindh and NWFP are more complex with three directorates; Balochistan initiallymergedthese into one but subsequently created a separate directorate for colleges. InWater and Sanitation, there has, inpractice, beenvery little devolutionto the TMA level. Balochistanhas not formally devolved PHED and has simply restructured it. The PHED department remains at the provincial level, with the Secretary and ChiefEngineer operating from Quetta. Sindhhas abolished the provincial PHED office, and merged the staff into the LG&RDD. NWFP has devolved the functions to urban tehsils but not to rural ones. 23 Does the Diversitv Matter? The success of the 2000 Local Government Plan and of the LGOs inestablishing a consiatcni sct of political, administrative and fiscal structures across four provinces is remarkable. Thc di\ ersity inimplementationwas inevitable for several reasons, including most importantly the reality that the patterns of province-local government political relations, conflicts and alliances vary considerably from one province to another. Similarly, some groups o f staff themselves have a vested interest inblurringthejurisdictional responsibilities betweenprovinces and local governments so as to cause delay and confused implementation arrangements. Also important were differing expectations among both elected and administrative officials about the outcome of the prolonged hiatus in the National Assembly's approval of the Legal Framework Order. This inevitably created some uncertainty and, arguably, some hesitation inimplementation of the LGOson the part of provincial governments. Box 8: PoliticalOppositionto Devolution InNWFP, the provincialMMA government, which countsonly two district nazimeen as political supporters, has been accusedby nazimeen of interferenceindistrict affairs. In2003, NWFP nazimeen tendered their resignations to the Presidentand asked for the federal governmentto deal with provincial interference. Tehsil andUnion Council nazimeen backedtheir district colleaguesand offered to resign in sympathy. In Bannu, the district of the provincial chief minister, provincial influence is particularly strong. Directives havebeen issued to allocate funds to both education and healthprojects that have not been prioritized within the district. I nhealth, the provincial governmentmade a special allocation to the DHQ hospital through Account 1(the provincialaccount)to supplement its resources so that medicinescould be purchased. This decisionwas not made known to the district healthdepartment. InSindh, the provincial governmentis arural-urbancoalition, with the urbangroupcomprised of the MQM, which boycottedthe local governmentelections, and the rural group consisting of acoalition of anti-PPPpolitical parties. The provincial government's hostility toward Karachi stems primarily from the MQM, which has longbeena rival of the district nazim's party (the JI). InKhairpur the tension is due to the district nazim's being from the PPP. The nazimeen of Khairpur and Karachi, who belong to opposition parties, have complained about transfersof district staff madeby the provincial govemments without their authorization. Since local governments across the country face very diverse situations (Qadir: 2003), some variance in implementationwas not only inevitable but also welcome. Turning a constructive blindeye to some of the more marginal differences has prevented needless federal-provincial conflict, and has starteddevolution along a path that will be o f strategic value in the future- where basic principle2 are recognized and enforced, but where, in the detail, local institutions are tailored to local circumstances. 24 3. Service Delivery and Devolution FRAMEWORK USED Devolution changes the accountability relationships and the relative importance of various actors-most notably politicians and policy makers-associated with service delivery, as cast by the 2004 World Development Report (World Bank: 2003).26The study focuses on the capacity and incentives faced by nazimeen for making services work at the district andTMA level. Whether the incentives really will in turn lead to better services inhealth; education, infrastructure, and access to justice across local governments remains an empirical question. Cross-national studies find no clear evidence that decentralization has ledto better governance and improved service delivery (Azfar: 2002; Blair:2000; Smoke: 200l).27 Figure4 summarizes these assumptions in a simplified framework for thinking about the prospect for making services work under Pakistan's devolution, centeredon the nazirneen and their senior staff. The question is how to improve the services from the provider to citizens. Figure4: Key Incentives inDevolution The incentives and T capacity to make Provinces services work under devolution can be Prov-ficiency grouped undertwo broad entives headings. I Nazimeenand I First, there i s the set of incentives that might make nazimeen want to see service delivery improvements for citizens at reasonable cost. As will be seen, in a context of indirect elections for nazimeen and complex intergovernmental relationships and political career paths, it i s far from self-evident that service delivery improvements for the poor will be a priority for them. Nuzimeen must be influencedby citizen power, in the form of "voice, `Iz8 so that they have an incentive to direct those providers to achieve service delivery improvements (although as Figure4 illustrates, this assumes that they are in a 26 The 2004 World Development Report (World Bank: 2003) presents an accountability framework focused on servicedelivery. At its simplest, the WDR sets out an "accountability triangle," where the nodesrepresentactors (citizens, politicians/policy makers, serviceproviders/departments) and the sides represent accountability relationships (voice, compact/management,client/power). The approach in this paper takes these principal-agent relationships as given, and does not seek to rerun the arguments that are well set out inthe World Development Report.The approach here essentially convertsthese relationships into qualitative checklists or sets of incentives. 27 Some studies are more sanguineabcut the impact of local governments. For example, in Boliviait appears that devolution has resulted in changes in investment patterns in the country, putting a greater focus on educationand water and sanitation, as well as to a more geographically equitable distribution of public expenditure (Faguet: 2001). 28 "Voice is the relationship of accountability betweencitizens and politicians, the rangeof measuresthrough which citizensexpress their preferences and influence politicians" (World Bank 2003). 25 position to direct the behavior of the staff that provide the services-motivated nazimeen with no ability to direct their front line staff will not be able to improve services.). Voice mustbe accompanied by provincial eflciency incentives, so that service-delivery improvements are not simply obtained through increasedspending. Second, there are the incentives on those who provide the services-for example, the staff of schools and clinics-so that they also want to see improvements. This motivation can be provided through managerial power, ensuring that the nazimeen and senior staff have authority over the front line workers or, again, through citizenpower (this time in the form of "client power") providing potential service recipients with some direct means to have an impact on the conduct of service providers. Table6: Key Incentives in the Devolved Structures Incentives for local revenue-raising Councilors motivatedto listen to citizens The pull from councilors is stronger than that from the Provinces Staff working in the district are employed by the district Nazimeen authority over senior staff External oversight 26 EARLY SIGNSOF CHANGING INCENTIVESFORNAZIMEEN SENIOR STAFF AND Provincial Efficiencv Incentives The study assumes that devolution would be providing district and tehsil nazimeen with greater incentives for efficiency in fiscal management if it achieved positive movement in three key categories: Budgetary certainty-the degree to which they must live within hard constraints and the predictability of the budgetary transfers that they dependon; Autonomy in preparing the budget-specifically the development, the non-salary recurrent and the salary budgets; Incentives for local revenue-raising-the buoyancy and potency of taxes assigned, the clarity of revenue assignmentsand other incentives for revenueraising. The efficiency implications of budgetary certainty and autonomy have been well studied. Most local governments are financed in large partthrough intergovernmental transfers, which can lead to problems of macroeconomic instability if local governments do not face ahard budget constraint. A system of transfers creates a disconnect betweenexpenditure and taxation, encouraging "free-riding" behavior-specifically, there are incentives to overspend as citizens of otherjurisdictions are payingpart of the costs of local programs.z9The inadequacy of hard budget constraints can also lead to unpredictability in the flow of resourcesto local governments, thus reducing their ability to plan and manageresourcesefficiently and underminingoperational performance (World Bank: 1998).Given hard constraints, it is also important that local governments have autonomy to manageexpenditures so as to increaseincentives for efficient and effective use of funds.30 While not as well studied, in addition to problems of overspending, intergovernmental transfers can also lead to inefficiencies inthe quality of local govemment expenditures. The logic is similar to that discussedabove-since costs are borne by distant taxpayers, localcitizens have fewer incentives to monitor public expenditures and the services produced by the local government.31 Budgetary certainty Hardconstraints Fiscaltransfers represent a largeproportion of revenues for sub-national governments inPakistan, therefore potentially magnifying the perverseincentives createdby soft constraints or unpredictability implicit in the transfers. Two arrangements can undermine hardconstraints- negotiations over the size of the transfers and deficit financing. While inprinciple fiscal flows have becomeformula-based (PFC awards), in practice they are significantly discretionary and subject to the politics of province-districtrelations. Discretionis incorporated within the awards invarious ways. Inthe NWFPPFC Award, the divisible poolis defined after deducting the province's "obligatory" expenses (including debt servicing, pension, subsidies and charged expenditure such as that for the assembly and the govemor) and these can be inflated at any time For example, the large literatureon the "flypaper effect" analyzesthe incentives for local spending from locally generated revenuesas comparedto those from intergovernmental transfers.Empirical evidence suggeststhat increasesin (nonmatching) grants from higher levels of government translate into greater increases in local govemmentexpendituresthan do equivalent increases in local incomes (Hines and Thaler: 1995). One study found that decentralizationbasedon intergxernmental transferstends to increase the size of the total govemment sector, while decentralization basedon increasedlocal taxes does not increase the public sector (Burki, Perry and Dillinger: 1999). See also (Rodden, Eskelandand Utvack: 2003; Shah and others: 1996). Ibid. There is some evidence that user charges can elicit greater accountability from the state andimprove services (World Bank: 2003). 27 since they are not based on a predeterminedproportion of the ConsolidatedFund. There are in addition many deductions from the provincial pool before development expenditures are allocated in accordancewith the PFC indicators-basedformula. The provincethen allocates the remaining funds betweennon-salary recurrentand development funds. Furthermandatory deductionsare then made within each district. While, this degree of provincial control i s unique to NWFP, in other provincesthe transfer of salaries to districts on a reimbursementbasis through Account Ifurther reduces the proportion of the transfers that are formula-basedand therefore predictable. Box 9: Gamesmanshipin Salary Transfers The current arrangements for transferring salaries on the basis of actual staff in post, rather than through a formula-basedtransfer, invite gamesmanship in budget preparation.A key element of the 2001/02 budget process was to define an initial schedule of establishmentfor the new district governments. This budget containedthe staff salaries for the actual numberof employeesworking in the district. This staff strength (both actual and sanctioned) was intimated to the provincial govemment by the Accountant General Punjab on the basis of data provided by District Accounts Officers and the Financeand Planning office of the district govemment. The provincial government (Finance Department),however,placed greater weight on information gathered through the DAO. Becausethis information was incomplete in respect of Bahawalpur. the sanctioned strength of staff given in this budget. especially of devolved departments, was much less than the actual working strength. On the other hand in Faisalabadthe DAO anticipating that the salary transfers would be based on the actual number of employees sent the actual staff figures equal to the sanctioned strength of the district. Since the DAO was also holding the post of DO FOP, he was able to come up with matching figures from both sources. This figure was accepted by the province due to shortage of time and lack of information to authenticatethis data. As Table 7 shows, most funding for local government is in effect negotiated.The proportions transferred on a formula basis are quite modest. The table shows that the proportions of the Provincial Consolidated Fund that ultimately are transferred in this way are trivial (less than 8 percent in all provinces). The formula-based proportion of de facto transfers (transfers made in practice) ranges from 71 percent (NWFP) to 17 percent Punjab. However, this is a somewhat misleadingfigure as NWFP and Sindh do not, formally, transfer funds for salaries as these remain in account I.If the proportion is taken from de jure transfers-the transfers mandated by the LGOs-then all provinces come in at around 20 percent or less. All negotiatedrevenues provide opportunities for gamesmanship, basingcurrent policy decisions on their likely impact on future resource transfers, rather than on their merits. Table 7: Proportionsof TotalFundingTransferred to LocalGovernmentson a Formula Basis Vote: Formula-based transfers are shaded. a. For Sindh andNWFP, GST was paidout to districts, TMAs and UAs first to meet baselineshares andthen additionalfunds were distributed to new units. PunjabpaidGST to TMAs andUAs alone, first to meet baseline shares 28 and thcii on population basis to new units. In Balochistan GST was distributed on formula basis and was usedfor finiinciiip local development as well. No transfers for capital budget were made otherwise b. Dc f'ilcto transfers are dethed as payments from provinces to local government that are madeto the account of the district or the TMA-that is, they are genuine transfers as they are non-lapsing and within the re-appropriation authority of the district or TMA. In case of Sindh the de facto transfers includedevelopmentfunds, althoughthey were made available through accountI, budgetary autonomy was given to LGs because c. Dejure transfers are those that are mandatedby the LGO. For NWFT and Sindh, dejure transfers are considerably larger than de facto as salaries should be transferredvia Account IV as specified inthe LGO, but in reality are not. d. Punjab transferredRs. 50.9 billion in revenuesto districts as lump sums without specifying salary, non-salary, and development allocations. Non-salary and developmentallocations were formula-based district shares while the salary transfers were in accordancewith historicalbaseline, although in some cases negotiatedincreases were given. e. No disaggregation is possiblefrom the budget data, however, the Devolved Service Delivery 2 shows that Rs.42.6 billion were bookedas salary and non-salaryexpenditurein FY 2003 inthe 34 districts and hence the development expenditures can be calculated. Source: DSD2, basedon 2002/03 revisedbudget estimates. The law requires that no local government can pass a deficit budget.Although Table 8 shows that most local governments are maintaining balancedor surplus budgets, there are a few notable exceptions. The Karachidistrict council passed a deficit budget for FY 2003/04.The reasongiven was that, due to the pressure from councilors during the budget session, the development allocations assigned to the discretion of the individual councilors were increased without properly calculating the impact on the fiscal balances. As a result a deficit amounting to approximately Rs. 30 million was passed. TMA Lyari had also passed abudget in deficit for FY 2002/03. Officials claimed that they had no option, having inheritedexcess staff during the transition without the resourcesto pay their establishment costs (specifically, establishment cost were Rs. 136million whereas the total estimated receipts were 120million). While the TMA did not needsuch a large staff, it did not Table 8: Meeting the Balanced Budget Requirement have the option of firing them. TMA officials also claimed that the two unions with the maximum revenue potential had been devolved to an adjacent TMA, and they had referred the matter to the Local Government Board to no avail. Similarly, TMA Kot Diji indistrict Khairpurhas passeda deficit budget for the last 3 years, againprimarily becauseof a mismatch between establishment costs and the TMA's revenue- raising potential. Despite the generally encouraging picture, this study could not ascertain whether local -Not available. governments were adopting Socwce: ADB/DfID/WBDSDDataset2. realistic revenue estimates. The possibility of artificial targets for revenueto ensurebalanced income and expenditure estimates could not be ruled out. It will be important for the future to evolve systems to integrate incentives on meetinglocal revenue targets. 29 Predictable Transfers Given that transfers include a significant amount of discretion, there i s a real possibility that they will vary significantly over time, making i t difficult for local governments to predict their resource envelope. Within a given year, however, the data suggest considerable predictability in the transfers at the district level. Inmost cases, districts received slightly less than was budgeted (Figure 5). 30 - O O O O O O O O O O l O O O O O O O O O O 0 ~ 0 . 0 0P- '0 v)* c* N- Kindofinstrument Methodof publicdissemination PublicDomain Monthly transfers Notified by Finance No DAO statements Communicationinternalto AG No Monthly accounts Communicationintemalto AG No State Bank orders I Communicationinternalto SBP No orSBPtoNBP PFC Reports I For Public Info (Yet to be 1To be determined formulated) A requirement underthe LGO District Accounts Reports Forsubmissionto the nazim and To bedetermined placement before the council(Yet to be initiated) A requirement under the LGO Inthe initial year of devolution, in all four provinces the budget was preparedby the provincial Finance Department and sent to the districts for adoption. For example, inBahawalpur the district govemment had no time to go through the FY 2001/02 budget. The Finance Department allowed only 5 days to examine and pass the budget, leaving district authorities no choice but to adopt this budget without amendment.By FY 2003/04, all districts hadprepared their own budgets. In Faisalabad, the budget was submitted to the district council that made a number of changes to the allocations. In addition, enhancedpowers of re-appropriation and reallocation at the local level allow governments to reprioritize between different heads of expenditure where necessary. Inpractice, the districts andTMAs retain very little roomfor maneuver inmaking or amending their budgets. Despite the very few statutory limitations on the local governments, a plethora of notifications, instructions and operational practices allow provincial Departments o f Financeto reachdeeply into the local budget-making process. For example, NWFP inJune 2002 prescribed targets for apportioning development funds among sectors, Punjab inJune 2003 notified minimumproportions for maintenanceand repair allocations, while Sindh exercised control over development shares by centralizing stage-by-stage disbursement of funds for schemes. Despite the many rigidities and the extensive earmarking of recurrent budget funds and the equally frequent capacity problems, ownership of the budget process is increasing. For example, the Sindh LGO requires detailed scrutiny and recommendation to the Council by the Budget Committee. InFY 2002 and 2003, inboth Karachi and Khairpur, this requirement was met. Similarly, the Sindh and Punjab LGOsrequire that there i s authentication of the Schedule of 32 Expenditure by the nazim. While Karachi or Khairpur did not meet this requirement in FY 2002, Khairpurconformed inFY2003. Bahawalpur also passedmuster inFY 2002, and, along with Faisalabad, in FY 2003. Autonomy in preuaring the development budget Vertical programs are the main constraint on district and TMA autonomy inpreparing the development budget. Box 10: Vertical Programs Vertical programsrepresent the allocation of funds by federal or provincial governments to particular programs that might otherwise havebeen left to the discretion of local govemment.In these programs planning, budgeting and often even implementation remaincentral functions. Broadly, vertical programsare of two kinds. Some representfederal or provincial governmentactions that simply happento be locatedin the province or local government-with no fiscal relationship to the provincial or localgovernment and no placein its budget-and as such are simply deconcentrated expenditures from the higher-level government. Othersentail some element of fiscal transfer to the province or to local governmentoutside the mainstream mechanism^.^' As such, they representa specialcase of conditional grants to provide incentives to build infrastructureor carry out servicedelivery. However, what makes themvertical is that (i)the transfersare conditioned on inputs-e.ffectively removing them from the local government budgetpreparationandplanning processesand (ii) the grants establishnew expenditure controls that effectively placethem outside existing accountability arrangements.In effect these are delegated expenditures,with all control remainingwith the higher-level government.This latter type of vertical programcan be ongoing or one-time, specific-purposegrants. In reality many programsentail a combination of these components. In the spectrum, most vertical programs are those that remove responsibility for planning andoperational design, budgeting and financing and expenditurecontrol from the recipientsubnationalgovernment. As deconcentratedor delegatedexpenditures,vertical programsare distinct from fully decentralized expenditures,which are made with the full budgetary authority of subnationalgovernment and monitored using standard accountability arrangements. These programsare discussedin more detail in the third volume (Annex 2-Technical Considerations). Each provincial government has provided sizable funds for schemes to be identified by the MPAs. Inthe case of Balochistan, these allocations were explicitly financed by withholding district development budgets and a 27 percent reduction was made inthe Provincial Allocable duringthe fiscal year.33Although MPAshave been directed to seek scheme approval through the District Development Committee, this accommodation has continued to confuse responsibilities and accountability for efficient use o f resources. InSindh the MPAs are allowed to seek approval of their projects at the provincial level if they so desire, effectively sidelining any prospect o f integration with local planning. 32 The four componentsof the mainstreamfederaVprovincialtransfers are: (a) The divisiblepool providesrevenuesharing; (b) Straighttransfers representthe returnof resourceroyalties, charges andexcises after deducting afederal collectionfee to theproviiice of origin; (c) Speciallumpsum transfersare providedto NWFP and Balochistanprovincesfor backwardness;and (d) In 1999, a fourthcomponent was effectively addedto the Award, the "Octroi andZila Replacement Grant," although inpractice the transfersof the 2.5 percentGST beganonly fromFY 2002/03. 33 The ProvincialAllocable is the Provincial ConsolidatedFundnet of the ProvincialRetainedandthe distributionof GST. 33 Often the volume of funds channeledthrough vertical programs dwarfs the district's own ADP for particular sectors (Table 10). Although figures are incomplete, in general it appears that more thanhalf of the ADP is under the effective controlof the federal andprovincial agencies controlling the vertical programs. This practice underminesthe sovereignty of local governments inplanning the development of their districts according to their own priorities.Vertical programs frequently result induplication of investmentsby province and local authorities. Of greater concern is that once completed, these programs off-load recurrent costs on to local budgets thus reducing further resourcesavailable to councilors to allocate to local demands.They distort relations between local service providers-administrators or agency personnel-and councilors by reinforcing vertical relations with higher governments. Citizens find it difficult to exert pressurefor better performance from serviceproviders because they can exercise only weak accountability over centrally controlled program managementunits.Finally, andmost critically, in the present circumstances, vertical programsfeed aclear ambition of federal and provincial legislators that they will, on a continuing basisbe able to use local salary, staffing, resource allocation and development contracting as prime sources of politicalpatronage. Table 10: Vertical Programs as a Percentageof the District ADP - Not available. Note: The verticalprogramsincluded are: KPP; SAP; ESR; President'sProgramfor Education; DERA: DIMRC: Governor's Priorities. Source: District Budgets. Inaddition to the vertical programs, some other practiceslimitdistrict autonomy inrelationto the development budgets. The large throw-forward of uncompleted development schemes means that ifthe funds for ongoing schemes are transferred to the local governments, the requirement to complete the ongoing schemes makes district govemments implied conduits for implementing the priorities of the previous setup and leaves them little leverage to implement projects and programs basedon their own priorities. The scale of the throw-forward problem is difficult to calculate from available data. However, given that from FY 2003104, localgovernments were able to decide which schemes should be completed, it may technically be possible to address this constraint, provided that provinces accept the impliedobligation to complete those schemes they regard as priorities. Citizen Community Boards also represent a check on local government autonomy in preparing the development budget as they resultinring-fencing of 25 percent, annually compounded, of the development budget. They are discussedin more detailbelow. Arguably the price i s worth paying iftheyfacilitatedeepercitizenengagementinplanning. The constraints on TMA budgetary autonomy are more acute, largely because of specific issues in water supply and sanitation. TMAs have responsibility for both urban and rural areas, and 34 while service delivery expenditures are increasingly focusing on the urban, the general trend of equal sharing of capital investments is now giving increasing shares to ruralareas. The lack of clarity inthe roles andjurisdictions of TMAs and the provincial water and sanitation organizations is creating some confusion. For example, Bannudistrict i s divided into two TMAs, Town I(rural) andTown I1(largely urban). Town I1i s developing, operating and maintaining WS&S infrastructures, but its rural neighbor does not have control over water and sanitation. Instead the provincialdepartment looks after the sector. At the same time, becausethe local development resources inthe two TMAs were sliced up among the councilors, only very small- scale schemes such as bore wells or lining of street drains were possible. Autonomy inPreparing the Non-salary Recurrent Budget Recurrent budgets were preparedduring the transition years through the unbundlingof provincial departmental budgets. The local governments are expected to follow the same pattern for the time being. With restrictions on the number of positions and the wage bill, local governments can do little with the recurrent budget beyond adjusting the non-salary allocations. Furthermore, restrictions on what local governments can do with the salary budget in effect result in earmarking a large share of the non-salary recurrent costs of the staff that the local government might otherwise not retain (for example, electricity, rent, and heating of offices occupied by staff'). Among further restrictions is earmarking inpreparation of the non-salary recurrent budgets inNWFPand inP ~ n j a bThe~transfersfrom these provinces to districts andTMAs are . ~ predefined by indicative proportions to be allocated to each sector. A key difference i s that these indicative proportions are enforced inNWFP, but inPunjab they were offered late in the budget cycle and have beencompletely disregarded inpractice. Unlike the districts, TMAs receive most of their funds as general-purpose grants out of which councils make salary, non-salary and development allocations. Becauseof the provincial controls on establishment in effect, the non-salary and development budget are the only aspect of expenditures over which TMAs have appropriation authority. Table 11shows that, typically, this gives them autonomy over some 60 percent of their revenues or some 50 percent of the total resourceflows. Payments Total made for Transfers within the appropriation Revenue Salary PHEstaff authority of TMAs as %of total T M A (Rs.1 Ias %of revenues' resourceflowsb Kot Ddi 25,645 14,048 2,733 45 41 Jaranwalla 266,147 38,022 14,520 86 81 Faisalabad 1,120,991 352,100 228,304 69 57 IBahawalpur I 194,755 86,218 47,600 a. TMAs haveaoorooriationauthoritv over their non-salarvanddeveloDmentexoenditures. . I 56 45 b. Total resource flows to the TMA include the reimbursementmadefor PHE staff. Non-salary anddevelopment I . expenditures are shown hereas a proportionof total revenuesplus PHEreimbursements. Source: ADBDBD/WBDSD Dataset 2-from 2003/04 budgetestimates. '' T h i s refersto 2001/02 budgets.No data are yet availableon implementationof the 2002/3 budgets. 35 Autonomy in meparing the salary budget3' Local governments have particularly limitedfreedom inpreparing the salary budget. Neither local nor provincialgovernmentsare able to determine pay scales, which are de facto set at the federal level. Inaddition, as Table 12 indicates, inSindh andNWFP, salaries are transferred through provincial Account Irather than the district-controlled Account IV. The districts must seek approval from the province (via the provincial District Accounts Officer) for the releaseof the funds from Account Ifor their salary payments.Thus, the salarieseffectively are still paidfrom the provincial budget.36Similar ambiguities exist at the tehsil or tuluku level, butthe number of staff affected i s much smaller. Table 12: Local Government Control of Accounts, by Province Province Salary Non-salary Recurrent Development Balochistan Account IV Account IV Account IV NWFP Account I Account IV Account IV Punjab Account IV Account IV Account IV Sindh Account I Account IV Account I Inaddition to basic concerns about district capacity, provinces may bereluctant for several reasons to transfer district salaries via Account IV. First,no objective, needs-basedformula has been devised to ensure distribution of salaries inways that approximate the current expenditures. Second, in the absence of reliable employee databases, transfers baseduponthe number of sanctionedposts runthe risk of over-fundingthose districts inwhich many positions are unfilled. Third, the provinces argue that transferring salaries through Account I V presentsapotentialcash- flow problem. The current arrangementeffectively allows the province to pool the district budgets until they are disbursed, providing the government with sufficient balancesto cover the shortfalls arising from irregular receipts from Federal disbursements, thereby obviating the need to borrow. However, the presentarrangement places the largest part of the budgetoutside the control of the district government. The districts are unable to reallocate resources or change the composition of the workforce. Once salary budgets are paid through Account IV, the districts would, according to the LGO, be able to select more of one type of staff or skill and fewer of another. Inpractice, the provinces may retain control over the creation of new sanctioned positions; but the districts would be empowered at the least to reallocate any staffing saving^.^' Even if, principle, the salaries budget could be preparedrelatively autonomously by local in governments, structural rigidities tie the hands of local governments. Organizationally, they are required to maintaina standard set of offices, which automatically carry overhead charges, and changing staff composition is difficult given the nature of the occupational group system. " No data are yet available on implementationof the 2002/3 budgets. The following analysis therefore relies on '` 2001/02 budgets. This i s in contrastto the previous employees of the rural district councils who are paid from the district budget through Account IV (or the Local Fund where this has not yet been mergedwith Account IV). It seems that even when salaries are transferredthrough account IV, there will not be any c'lange in the responsibility for future pensionliabilities. 37 The Governmentof Punjab hasbegun working on this issue. The proposal has beenmade that where a district identifies a staff savinghdundant post, the employee will be sent to a provincial surplus pool for a new posting- possibly to anotherdistrict. Districts will receive a proportion of the saving, although the province will retain a highproportion, as they will have to continue paying the salary. 36 IncenthJesfor local revenue-raising Background As noted earlier, heavy dependenceon intergovernmental transfers can lower the quality of public expenditures. Arguably, the disconnect betweenexpenditure andtaxation can reduce the incentives to monitor public expendituresas resourcesare collected from distant taxpayersnot likely to be usingthe services produced by the local government. Incentives for local revenue effort are linked to the buoyancy and potency of taxes assignedto localgovemment, and the clarity of such assignments. Effort will be deterred if there i s no credible connection to likely revenue results and if it is not evident which level of government i s to benefit from which tax. Additionally, PFCs can provide further incentives in the form of rewards for local revenueeffort, Buoyancy and potency of taxes assigned The 1973 Constitution assigns almost all taxes with any worthwhile revenue potentialto the federal government. The exceptions are the Agriculture IncomeTax (An), UrbanImmovable Property Tax (UIPT), Motor Vehicle Tax (MVT) and Stamp Duties.Localgovernments' tax bases are assigned through the LGOs and not through the constitution, and therefore tax assignments between the provinces and local government can, inprinciple, be changedaccording to the requirements of the time. Table 13: Revenue-raising Authoritiesfor Local Government District Councils Tehsil and Town Councils Union administrations Education tax. 0 Local tax on services. Feesfor licensinr! of - Health tax. 0 Tax on the transferof immovableproperty. professionsand Tax on vehicles other than e Property tax on annual rental value of vocations. motor vehicles. buildings and lands. Feeon sale of animals Local rate on lands assessable 0 Feeon advertisement, other than on radio incattle markets. to landrevenue. andtelevision, and billboards. Market fees. Fees in respect of schools, e Feefor fairs, agriculturalshows, cattle fairs, Feesfor certificatioq colleges, andhealthfacilities industrialexhibitions, tournaments and of births, marriages establishedor maintained by other public events. and deaths. the district government. e Fee for approval of building plans and Chargesfor specific Feesfor licenses grantedby erection and re-erection of buildings. services renderedby the district government. 0 Feefor licenses or permits andpenalties or the union council. Feesfor specific services fines for violation of the licensingrules. Ratefor the renderedby a district e Charges for execution and maintenanceof remunerationof village government. works of public utility like lightingof and neighborhood Collection charges for public places, drainage, conservancy, and guards. recovery of tax on behalf of water supply. Ratefor the exect&~n the government as prescribed. 0 Feeon cinemas, theatrical shows and tickets or maintenaner)UFarty Toll on new roads, bridges, thereof, and other entertainment. work of public M%&y within the limits of a district, 0 Collection charges for recovery of any tax Iike lighting of public other than nationaland on behalfof the government, District places, drainage, provincial highways and Government, Union Administration or any conservancy and water roads. statutory authority as prescribed. While districts have beengiven rightsto raise additional revenues (Table 13), their tax basei s weak, and some district taxes and user charges are very difficult to impose inpractice. For example, given that there i s every reasonto subsidize education (as is the case for elementary education, which is provided free of cost inevery province) and health services, using the education and health tax opportunities would be hard to Tuition (and other) fees are 38 There is some uncertainty here in the wording of the LGOs becausethese taxes are mentioned in the same clause as other heads of revenue. The NRB is of the opinion that "education tax" and "health tax" meansearmarkedtaxes for education and health services, and does not mean tax on education and health services. already levied on secondary3'and tertiary level education. Sincerelatively more affluent segments of the society make use of higher education services, there i s every reasonto rationalize user charges for tertiary education provided measures are taken to ensure poorer households are not excluded as a result. Tehsils have been assignedmore buoyant and potent taxes, such as the Urban Immovable Property Tax (UIPT), which is collected by the district and then passeddown (minus a 15 percent collection charge). The tehsils are also assignedthe transfer of property tax and entertainment tax. The provincial professional and calling tax, though collected by the province, has been devolved to the union administration. Despite these difficulties, in the six study districts and their TMAs, where the council supported a determined nazim encouraging trends were emerginginown-source revenue (OSR) collection (Figure 6 and Figure 7). An analysis of the reported revised estimates for previous fiscal years and projections for the current fiscal year show a generalrise inthe OSR from 2002/03 to 2003/04 (noting that the revenuefigures for 2001/02 might be distorted by transitional effects). In Karachi, as a proportion of total revenue, OSR has increasedfrom 46 percent in 2002/03 to 48.85 percent in2003/04 (Figure 8). A similar upwardtrend is evident in the TMAs visited (Figure9). 39 Fromthe 200213 budget, Sindhhasoptedfor free secondary education, which the Punjabgovernment is seri~)usl! thinking of replicatingfrom the 2003/04 budget. 38 I I * I P 0 m 0 N c1 4 N 0 0 0 cu - 4 0 N 0 O As apercentage of total resources,the upward trend inOSR i s less evident than inabsoluteterms because transfers have also increasedover the same time period. PFCshave legislated higher shares for local governments in general; where decreases have occurred, they are attributable to political skirmishes between the province and particular local govemments. Transfers also increasedbecause of the transfer of GST, which took effect from FY 2002/03. When these factors are considered, the efforts being made by nazimeeiz and councilors to increase OSR are quite remarkable and certainly belie the alarmist concerns that incentives to raise local taxes would be overwhelmed by political imperatives to do otherwise. While these are positive initiatives to increaserevenue, significantly greater effort from the districts is unlikely because the taxes assignedto them are not potent and produce only a small share of total OSR. Inthe six study districts, for example, for 2003/04 they range from 0.4 percent (Bahawalpur) to 49 percent (Faisalabad) (Figure lo). During the same period, however, since OSR represented only some 8 percent of total revenues for Faisalabad (Figure S), the contribution of local taxes to total revenuesrangesfrom 0 percent to 4 percent. Inshort, a large tax effort bringsonly modest results in total revenue.For OSR in general and tax effort in particular to be attractive propositions, buoyant tax itemsneed to be assignedto local governments. The current range does not provide much roomfor increase. 40 U 4 m 0 N 0 w 4 N 00 N O .- c M 4 m 0 cv 0 - 0 CCI N 0 0 N - 0 N 0 0 p.l 0 Claritv o f Revenue Assirrnments Although the district and TMA taxes are c-~arlyassigned in theory, administrative confusions in the collection arrangements blur the assignments in practice. Non-tax receipts are mandated in LGO as local revenue, but the provinces currently collect non-tax receipts and put them in province accounts. For example, in Sindh, when the Provincial Finance Department calculates local government budgetary outlays, it includes non-tax receipts indistrict revenue but does not transfer them to districts. Level Authority Province Decisionson exemptions Laws and regulationson rating levels and methodologies Somede facto control on collection-through control of the civil service Somecollection* District Govemment Some collection* TMA Rating area declaration User charges in the six districts range from 0.2 percent to 80 percent o f the district's total own source revenues (Figure 12 and 13).40Ingeneral, however, new taxes and user charges remain underutilized as potential sources o f OSR increases. Local governments should be encouraged to charge for some services. By establishing a visible linkage between the paying public and the quality o f services that they value, such fees reduce the likelihood that infrastructure will suffer from underinvestment inoperations and maintenance. '" In some cases these new taxesluser charges do not appear to be entirely well thought out. For example, a tehsil in Khairpur decidedto useits development funds to buy real estate so as to yield a future stream of rental income. Not only does this run counter to the government's stated objective of withdrawing from areas of private sector expertise; the experiences of other countries also point to grave risksinsuch a mode of revenue generation. 42 Figure 12: Non-tax Receipts as a Proportionof Own Source Revenues, Districts 90% 80.7% I 80% 70% 60% 50% 40TO 30% 20% 10% 0% Bahwalpur Faisalabad Khairpur KUaChi 2001/02 El2002/03 W 2003/04 Source: ADBIDfIDIWB DSDDataset2-from 2001/02,2002/03 revisedestimatesand2003/04budget estimates. Figure 13: Non-tax Receipts as a Proportion of Own Source Revenues, TMAs 30% 25% i- 20% 15% 10% 5% 0% LiariTown Kotdiji Jaranwala Faisalabad Bahawalpur Yazman 0200U03 H2003/04 Source: ADBIDfIDIWBDSD Dataset2-from 2001/02, 2002/03 revisedestimatesand 2003/04 budget estimates. However, the study districts reveal a number of examples where jurisdictionalconfusion had a negative impact on these incentives for collection, becauselocal governments do not have assurancethat collection will be deposited intheir accounts or ultimately made available to them. A case inpoint is user fees inhealth. InKillaSaifullah and Karachi, no outpatient department (OPD) fee was charged, but other receipts were deposited into the provincial account. InBannu andBahawalpur, the OPD fee andother user charges were deposited into the provincial account. 43 I n Khaiipiir, by contrast, OPD fees are collected and depositedinajoint account of the facility and mi/)/m:ini of the union council concernedto be spent on small day-to-clay requirements of the fiicilily. In Faisalabad,OPD fee and other receipts do benefit the district as they are deposited in district account Iv. Inother cases, higher levels of government have thwarted local government efforts to raise revenue. For example, after some union administrations resorted to the collection of tolls (and the defunct zila tax), the federal government required the provinceLGRD to vet any new local government tax plans. Despite some advantages, that oversight potentially undermines the independence or discretion of local governments. Consumers are willing to pay for service and to co-manage services. InFaisalabad city, citizens have funded and constructed the sewerage system and are also managing it. However, jurisdictional problems generally prevent the effective application of user charges at the TMA level. These conflicts arise partly becausethe Water and Sanitation Agency, which i s responsible for all water and sanitation services within the defunct municipal corporation boundary, covers an area that extends into other city towns. The overlaps between provincial PHED responsibilities and those of the TMA also counter any incentive to make the fees effective. I Box 11: Water and SanitationRevenues I Significant collection inefficienciesin water rate appear across the country: 0 There are collectioninefficienciesin water and sanitationuser charges, bothfor the TMAs and for the un-devolvedagencies. For example, in the KarachiTMAs of Gulshan-e-IqbalandLyari, KWSB has 1.3 million registeredconsumers of whom fewer than 0.25 millionare payingwater bills. As a resultonly 19.6percentof the potentialrevenue of Rs. 1.3 billion is beingrecovered. In Bahawalpur district, TMA Yazman raisedRs. 486,095 from water bills against an expenditureof Rs. 1.7 billion. 0 Water rates are not uniform in the TMAs. InNWFPandBalochistanPHEand TMAs supply water in the samejurisdiction at different rates. Even after devolutionof PHE, in somejurisdictionsthe differences persist.For example, in Jaranwallamunicipal water is suppliedat Rs. 12per month while the newly devolvedPHEsystems charge Rs. 6 per month. 0 Dueto highexpendituresand low collectionefficiency, huge arrears haveaccumulatedon account of electricity dues and become amajorburdenon TMA budgets. Thejurisdictional issuessurroundingthe devolutionor non-devolutionof PHEDexacerbate these collectionproblems.For example, inthe BalochistanTMAs of Killa Saifullahand Muslimbagh,the PHEDis providingWater Supply &Sanitation services independentlyof the TMA. Theconsequence i s that water bill recovery from domestic consumers i s very poor, within the rangeof 10-15 percent contrastingwith 80-90 percent for commercial consumers. Domestic consumers are chargedRs. 60 per month while commercialconsumers are chargedRs. 260 per month. Additional incentives for revenue raising The interimPFC awards inSindh and Punjab do seek to create some incentives for increased revenue generation from the existing range of taxes and charges. For instance, in Sindh, districts will be given an additional allocation inaccordance with effort expendedincollecting district OSR. The political calculationinvolved inrevenueraising gauges whether the credit for services funded outweighs the politicalcosts entailed. Overall, the results of the calculation are clear. Complex and uncertain administrative arrangements discourage extra revenue effort, and, although empowered to levy new taxes, no district or TMA has d'me so. The Government of Punjab has providedsome incentives to the TMAs for cost recovery inwater andsanitation by waiving eleetricity arrears, loans liabilities and pension liabilities provided cost 44 recovery could match the expenditure on water supply systems!' The consequenceis that, in Jaranwalla, for example, the water rate hadbeen increased, and efforts were being made to bring the rural water rate of Rs. 6 to par with the urban water rate of Rs. 12. Citizen Power (Voice) A central puzzle analyzed inthe World Development Report 2004 (World Bank: 2003) i s why democratically elected politicians in developing countries, where the median voter is likely to be a poor person, often have little incentive to provide services that benefitthe poor. Instead of focusing on pro-poor services like primary education and basic health care, politicians are driven by clientele pressures that shift public spendingto cater to special interests and core supporters. For example, instead of improving the quality of teachinginprimary schools, politicians are often more interested inaklocating scarce resourcesto construction projects and the salaries of overstaffed public administrations. InPakistan, similarly, it is often noted that politicians seem disinterested notjust inpro-poor policies, but also insocially progressive or stable policies ingeneral, preferring to allocate resources in a fashion that is more akin to personalinvestments. The orthodox answer to this behavior i s feudal politics-that is, the influence of large landlords and tribal elders inrural areas allegedly transforms free elections into a kindof theater, inwhich local voters merely pretend to exercise independent discretion. Unquestionably, local power relations are important everywhere. However, recent studies of electoral behavior argue that Pakistani politicians care a great deal about voter demands (Wilder: 1999; World Bank: 2002). For example, one study notes: Voting behavior i s increasingly beinginfluenced by voter concems over local issues such as assistance in thana-katcheri (police station and courthouse) affairs; or the needfor a road, school, or basic health unit in their village; or for an electricity, telephone, or naturalgas connection for their house; or for jobs, promotions, or transfers inthe workplace. A growing numberof votes are therefore being cast for candidateswith strong records of addressingthese local concems by delivering patronage to their constituencies and introducing development schemes intheir constituencies (Wilder: 1999).42 In other words, it appears that politicians are responding to citizen demands, but that they value private favor and patronage more highly then pro-poor service delivery. What impact will devolution have on this generalproblem of politicalincentives for service delivery?A priori, given that local government inPakistan is inlargepart a system of indirect elections with elected councilors inturn electing na~imeen?~ it is far from automatic that a robust chain of accountability will link the citizen to the political leadership and that this linkage will motivate politicians to focus on service delivery. This study argues that there are two necessary conditions for these relationships to hold. 4' (Sidat Hyder Morshed Associates (Pvt)Ltd.: 2003) confirms the problems that the arbitrarydeductionof WAPDA arrearscausesfor the TMAs. 42 Individual contacting by voters is certainly more likely to be for privatefavors, which also tends to biaspoliticians towardthesetypes of goods.For example, one study found that an influential politician in Punjabwas inundated with an averageof 150-200 requestsfrom constituentsper day, the vast majority of which were requestsfor private favors likejobs, for getting land disputes resolved, for help inpolice matters, and for gettingadmissions to colleges anduniversities(Wilder: 1999). 43 Although the PRSPenvisagesthat to complete devolution direct elections for district and tehsil nazimeen are essential(Government of Pakistan:2003, p. 59). 45 First, councilors themselves must havean interest in serving the needs of their constituents andin particular the poor. Factors that will contribute to councilors' responding to the needs of their constituents are: 0 The public must be able to assigncredit or blame for service delivery successes and failures andbe in a position to threatenelectedofficials at the polls for failure; 0 Councilors must be constrainedfrom substituting private goods inthe short termfor long-termservice delivery improvements. Second, since the relationship betweennazimeenand councilors is a critical intermediate step in the linkage to citizens, nazimeen must find the pull from the councilors more demanding than the pull from other political powerbrokers, particularly the provincialgovernments. This loyalty, in turn, depends on: 0 The pullfrom the councilors being high because councilors enjoy a high degree of legitimacy and translate it in the form of checks and balancesinto effective opposition politics in the local councils; 0 The province being disinclined or constrainedfrom intervening inthe affairs of the district. Do councilors listen to citizens? Public assignment of credit or blame While it is probably true that citizens value education and health services, it is also likely that voters believe politicians' claims to deliver patronageand infrastructure schemes are more credible than promises to improve health and education. This i s partly because, as the WDR argues, education and health are transaction-intensive services that depend on day-to-day provider behavior. I t i s much easier for a politician to demonstrate to a voter that he or she was responsible for providing the voter with ajob, for resolving apolice dispute, or for laying the first brick of a new school building,than to make the case that he or she was responsible for reducing teacher absenteeisminthe village school. Such credit-claimingi s particularly awkward if terms of office are short, as they were inPakistan during the democratic period in the 1990s. Unlike the provision of government jobs or construction of school buildings, improvements in service delivery, such as higher-quality education, do not bear immediate fruit and are therefore unlikely to preoccupy politicians with short time horizons. In the context of devolution, jurisdictional overlap makes it particularly difficult for politicians to seek credit for improved services. When multiple levels of government are involved in delivering the same services, the public is unable to assign credit or blame effectively for that particular service to a particular politician. The overlap thus weakens incentives to perform well on service delivery and encourages politicians to target services to their core supporters.@Jurisdictional overlap i s particularly an issue in the education and health sectors. as federal and provincial vertical programs remain principal tools inpromoting national policy priorities and represent a significant proportion of local-government expenditures on service delivery. For example, inthe six study districts, in the first year of devolutionbetween 39 percent and 91 percent of district budgets for the annual development program inhealth and education were channeled through vertical programs that requiredthat districts spend resourcesin predefined ways (Table 10). Jurisdictional clarity was further blurred, and conflicts became more acute, when MNAs, Senators and MPAs were provided with funds (Rs. 10 million each) for development schemes. 44 There is some cross-national evidence to support this argument. A recent econiinletric study found that the number of tiers of government was positively associatedwith corruption, and ncgaii\ely wiih the number of pavedroads or infants inoculated (Triesman: 2002). 46 The overlap also stretches deep into the provincial rules of business. Inmany cases, the provincial remit still extends into local domains in the form of project approvals, technical sanctions and authorization of payments. An example i s the creation of regional Public HealthEngineering offices for approvals and project oversight for fehsil water and sanitation schemes. Box 12: Conflicts Over Credit-Claiming In Karachi, the city nazim andcouncilors complained that provincialministersandmembers of parliament were inauguratingprojects initiatedby the city govemment. For example,one ministerhadinaugurateda localroadbuilt by the city govemment andclaimed insteadthat the roadwas built with the MPA funds. The negativeimpact of this credit-claimingby the province for local-govemment schemes was aptly summed upby a town nazim who stated that "the ministerwho inauguratedhisroadscheme shouldbethe one to complete it-I will not do it." In Killa Saifullah,party workers from the JUI(F)campaignedto claimcredit on behalfof the MPA for a local bridgeconstructedby the district administration; similarly aschoolconstructedby the local govemmentin tehsil Muslimbaghwas inauguratedby a prominent localJUI(F) partymember. InToba Taik Singh, atussle developedbetweenthe district nazim and the newly electedMNA over the provisionof gas to two towns in the district.The district nazim hadannouncedbeforethe October general electionthat gas hadbeen approvedfor the two towns. However, at a bigpublic meetingafter hiselection, the MNA stated that hewas responsiblefor the approval of the gas connection.The nasim respondedby orderingan inquiry againstthe heads of those govemmenteducationalinstitutionswho haddisplayed banners praisingthe MNA for gettingapprovalof gas for the two towns. The MNA in turn challengedthe nazim to a public debate and announced that hewould quit politicsforever if his opponentsucceededin provingthat the announcement was wrong. It is not known whether this challengewas taken up. Sources:ADB/DflD/WB DSDDataset 1; Dawn,February20 2003. These problems impact intra-local govemment relations as well, particularly with respect to water and sanitation. Development Authorities and Water and Sanitation Authorities inlarge cities have been transferred to the TMAs but not without creating some difficultie~.~'For example, in Faisalabadthe WASA was devolved to one tehsil without appropriate reorganization. Therefore, while the WASAs' service network spreads inneighboringTMAs as well, those TMAs denieda role in decisions on the quality or coverageof service provision are beginning to suffer. Jurisdictional overlaps are particularly problematic because citizen expectations are rising. A clear conclusion from all the districts visited i s that the degree of access of citizens to their representativeshas increasedconsiderably with devolution. This increase was in many ways inevitable. With hundreds of union councilors in allparts of the district, citizens now have multiple channels for conveying their problems to the government. Inthe districts visited, councilors stated, and NGOworkers andjournalists confirmed, that on average 50-60 people meet with councilors on a daily basis. Multiplying such contacts by the number of councilors makesit clear that the quantity of information flowing from citizens to electedrepresentativeshas increasedby several orders of magnitude as compared to the pre-devolution setup. The mismatch between expectations andjurisdictional responsibility, however, is creating disabling problems of accountability without responsibility. Union nazimeen and naib nazimeen constantly report that voters are demanding services from themfor which they do not have responsibility. Despite their ex officio presenceon tehsil and district councils, moreover, they are `' Except in the City Districtswhere, in accordance with theLGO, WASAs fall under the districtgovernments. 47 not credited with any of the successes of highertiers of government. This problemis particularly acute in Karachi. Not only i s the local population is very politicized; but its major demand -for better water supply and sanitation-falls precisely inthe area where the local government has the least power to deliver results. The reason:the Karachi Water and Sewerage Board and the Sindh Katchi Abadis Authority have yet to be devolved. The fact that citizens protesting the non- availability of water stoned one union council reveals the magnitude of this problem. One citizen interviewedstated that he didn't care whose responsibility it was-he had voted for the union councilors and as far as he was concernedthey were responsible. The Mushawarat Committees, with the membership of the district and town nazimeen and the DCO, were envisaged as forums for evolving broad strategic plans and coordinating the development of entire districts. Presumably, they couldhelp resolve some of these jurisdictional conflicts. Devolution arrangements establishno overt hierarchical relationship between the three component parts of local government. The Mushawarat Committee, therefore, is the only coordinating mechanism between the district and tehsils. However, it appears these committees are not entirely functional; they have no leverageover reluctant or recalcitrant parties. The City Districts have similar committees that should act as the forums for the approvalof capital investments for municipal services. These bodies are viewed, however, as hurdles to be cleared for scheme approval and not as opportunities for constituency-wide planning or rationalization. Constraints on the Substitution of Private Goods for Public Ones46 Realistically, the underlying motives for the provision of private rather than public goods will not Soon diminish. For one, councilors will have an incentive to focus on private goods because electoral campaigns are expensive. They needfunds for posters, vehicles, fuel, newspaper and television access, and door-to-door campaigning, and local elites can cover these expenses in exchangefor private favors later. For example, it is estimatedthat campaign spending averaged $120,000 per parliamentarian in the 1997 elections (World Bank: 2002). The cost of local government elections, while lower, was still substantial, especially given the more modest backgrounds of the lower-tier politicians. Inthe districts visited, reported election costs were on average Rs. 10,000-25,000 for a union councilor, Rs. 50,000-200,000 for union nazimeen and Rs. 500,000-2 millionfor the district n~zim.~' More generally, as argued above, apart from any opportunities for patronage that they offer, activities focusing on infrastructure and targeted specifically to a particular locality are more politically visible thanimprovements in service delivery and hence a greater priority for policy maker^.^^ For example, a review of the Faisalabaddistrict development portfolio reveals " This paper refers to private goods to include both pure private goods (that is, individual-specific) as well as narrow public goods (for example, locality-specific projects). Local infrastructure projects often encompass both- that is, only the local community benefits, and the contractorsfor the projects reap the private rewards. 47 It should be notedthat the indirect election of district nazimeen also creates the potential to buy off membersof the electoral college, thereby increasing campaigncosts. There is anecdotal evidencefrom the district visits that a number of elections were influenced in this way-in one case through the distribution of motorcycles to male '* councilors andjewelry to female councilors. It is also important to note that these projects are also easier to initiate. New water supply projects are favored in part because rehabilitationof existing projects is complicated (by ownership and mandateissues) and because, despite over 340 donor-supported water supply investment projects inPakistan since the mid-l99Os, it is easier to get external support for new projects than for rehabilitation.The extensivedonor presence in the infrastructure sector also leads to unintended and distorting consequences.InBahawalpur, electedrepresentatives had an incentive to focus on high-profile, clearly visible projects like infrastructure development and not on education andhealth, However, the launch of three "mega projects" in water and sanitation reflected the nazim's accurate beliefthat by creating a highly visible throw-forward, he could attract a commitment from Provincial politicians to ensure that an ADB project (Southern Punjab Basic Urban Services Project) would be directed during its preparationto pick up most of the liability. 48 the infrastructure focus-of the 1286schemes, 525 are for rural drainage and water supply, 200 are for roads and 90 are for electrification. By contrast, only 134projects concernededucation and 15 focusedon health. Many of the 149, moreover, emphasizeinfrastructure. Inall the districts visited, the district and tehsil councils hadreservedsignificant portions of their development budgets to be distributed equally among their respective councilors. For example, in Karachi Rs.3.5 million were allocated for each union nazim from the City District's development budget, and Gulshan-e-Iqbal TMA and Lyari TMA eachreleasedRs. 1.5 million and Rs. 1 million, respectively, to the naib nazimeenof the unions intheir jurisdictions. fie councilors inturn have usedthese allocations mostly for neighborhood-specific (or gully koocha) schemes, such as water and sewerage network extensions.I t may be arguedthat this practice of equal sharing across unions i s politically wise given the uncertainty many councilors perceive about the future. It may also ensure that some poorer constituents do get better access to the benefits of public spending than they would merely as pawns in a vote bank. However, these allocations are detrimental to constituency-wide planning, a fact recognized by the district nazim of Karachi, who complained that council members do not have a citywide vision but focus exclusively on the issues of their unions. One union councilor inKarachi summed upthe incentive by stating that solving neighborhood problems-such as fixing the streets sanitation line, or providing manholes-was more important politically than either a) reducing teacher absenteeisminthe local school since that was less visible orb) working on union-wide projects because that would result in credit-sharing with other councilors. This focus on union-specific development has meant that union nazimeen are not paying adequate attention to their other important role as district council members. The field visits revealed that councils, particularly inrural areas, were not performing as envisaged inthe LGO.The important council budget sessions were largely perfunctory, with budgets beingpassedina matter of minutes, suggesting that district-wide issues had not received the attentionthat they deserve. Monitoring committees, while formed, are generally not functional, inpart because councilors lack capacity and generally deal with a frustratingly non-responsive bureaucracy, but also because councilors' priorities lie elsewhere, and their attention i s focused on their particular constituency. This lack of effectiveness of monitoring committees is particularly detrimental to service delivery, as oversight i s one of the main mechanismsof controlling staff absenteeismin schools and hospitals. The lack of attention given to CCBs i s also symptomatic of the priorities of local representatives. With the notable exception of Khairpur, in none of the districts visited had the political leadership sustained any interest inCCBs as potentialvehicles for citizen participation inservice delivery. As one NGO representative inBahawalpur stated, CCBs were beingignored because they were viewed as apotential rival by the elected leadership, a force able to challenge the government's monopoly over development. This inattention might be changing. Faisalabad has recently formulated bylaws for CCBs; 107projects have been identified and community 20 percent shares raised; 85 projects have beenfully prepared, and 15 projects are currently underway. The study districts however, also reveal some importantcounter examples of localpoliticians' imposingconstraints on the provision of private goods. Some districts are trying to encourage councilors to collaborate in using ADP resourcesfor larger district-wide schemes. InBannu district, for example, the district nazim has adopted a transparent procedure to prioritize development schemes identifiedby individual district councilors. Every unionnazim who proposesschemes to the district assembly has to produce a form showing the voting pattern of UC councilors in favor or against the scheme. This requirement ensures the schemespresentedat district council by each UC nazim are thoroughly discussedinUC council before being approved 49 andratified, thus encouraging the adoption of schemes with more union-wide, as opposedto parochial, relevance. The anecdotal evidencepresentedabove suggests the strong incentives working on councilors to focus on private goods. However, it does not provide any indication of whether or not these incentives have becomemorepronounced with devolution. The expenditure patterns of local governments-specifically comparing the allocation in2003/04, the first year local governments prepared their own budgets, to the earlier years-can provide clues as to whether devolutionhas had a negative or positive impact on the provision of private goods. If these strong incentives exist, then local governments would be motivated to divert funds: 0 From operations, repairs and maintenancetoward new investment schemes. 0 From largeto small schemes. 0 From completion of ongoing schemes toward more new schemes. The evidence inFigure 14 andFigure 15 shows no obvious reductionin operations and maintenance expenditures and, inthe case of the TMAs, some apparentincrease. The argument in favor of continued earmarking-that non-salary budgets will be raised to finance new greenfield projects-therefore does not appearjustified. Figure 16illustrates the proportion of small schemes (interms of total value) in the development budget for districts. The proportion i s large, but no compelling evidence demonstrates a change ineither direction. Again, it seems that the new electoral arrangementsprovide sufficient incentives to prevent a significant movement toward more small schemes. Finally,as Figure 17 highlights,the limited evidence available does not indicate that councilors are abandoning existing schemes to gain political glory by starting new ones. The argument against granting district governments greater autonomy inpreparingthe development budget revolves around the concerns that unfettered, localgovernments would focus their resourceson new schemes for reasonsof patronage and credit-taking and that those new schemes would tend to be small and low impact, inorder to obtain maximum political benefit. In fact, the value of new schemes makes up only around a thirdof the total. 50 Figure 14: Non-salary as a Percentage of Total Expenditure, Districts 20% 18% 16% 14% 12% tZ Faisalabad 10% 8% W Khairpur 6Yo 0Karachi 4yo 2% 0Yo I 2001/2 2002/3 2003/4 Source: ADB/DfIDID/WBDSD Dataset 2-from 2001/02,2002/03 revised estimates and2003104 budget estimates. Figure 15: Non-salary as a Percentage of Total Expenditure, TMAs I I 90% 80% 70% Kotdiji 60% IJaranwala 50% 0Faisalabad 40% RBahawalpur 30% OBannu-ll 20% Bannu-I 10% 0% Source: ADB/DflD/WB D S D Dataset 2-from 2002/03 revised estimates and2003/04budget estimates. Figure 16: Percentage of Small Schemes in the Development Budget, Districts 100% 90% ] 7 80% 70% 60% RBahwalpur 50% W Faisalabad 40% 0Khairpur 30% 0Karachi 20% 10% 0% 20c 1 20021 2003/4 Note: Percentage calculated on the basis o ftotal value, not the number of schemes. Small schemes defined as less thanRs. 1 million. Source: ADB/DfIDM D S D Dataset 2-from 2001/02,2002/03 revised estimates and2003/04budget estimates. 51 Figure17: Percentageof OngoingSchemesinthe DevelopmentBudget,Districts 1M)% 90% L 80% 70% 60% E l Bahawalpur 50% Faisalabad 40% 0Khairpur 13Karachi 30% 20% 10% 0% 2002/03 2003/04 Note: Ongoingi s definedas funding for schemesthat were initiatedbeforethe currentfiscalyear. Source: ADBIDfIDTDIWBDSD Dataset2-from 2002/03revised estimatesand2003/04budget estimates. Overall therefore, the new electoral arrangementsseem to have prevented any major movement toward extending the private-goods strategiesof councilors. The legacy of local and national politics inPakistan and the patterns of parochial and infrastructure politics, inparticular, has built a strong tradition of private-goods approaches to constituency management. Devolution could not have beenexpected to counter the weight of history inthe short term. However, this study found no evidence that devolution i s exacerbatingthe problem; indeed it found encouraging signs to the contrary. Thepullfrom councilors is stronger than thatfrom the Provinces A secondcondition of devolution's positive impact on incentives for service delivery comes from insuringthat the nazimeenhave greater incentives to be accountable to the councilors rather than to other political powerbrokers, particularly the provinces. Although elected by them, nuzimeen- judgingby evidence from the district assessments-have few incentives to take notice of the district or TMA councilors. They feel some needto maintain their support, as indicated by the equal allocation of development funds to each councilor. However, it i s striking that no district nazim faced effective oppositionin any of the districts visited. This is, in large part, because the electoral college is often more dependent on nazimeenthan vice versa. This intum is because nuzimeen tend to be established politicians who inmany cases have used their influence to campaign on behalf of councilors and becauseof their control over development funds, primarily via the District Development Committee. This study asserts that councilors are likely to have more influenceon nazimeen than the province ifa)theycanclaimadistinctivepoliticallegitimacyandcantranslateitintoaneffective opposition in the council, and b) if the province itself feels little needto intervene in the districts andTMAs. Political legitimacy of councilors The degreeof accountability of the nazimeento the councilors is likely to increasewhen there is significant political competition inlocal elections markedby hig!ier voter turnout, fewer uncontestedseats and independent candidates giving way in most cases to representativesof 52 established par tie^.^' Overall, the six study districts revealed that the degree of local contestation was fairly high, certainly no lower than inthe parliamentary elections (Table 15). Ingeneralvoter tumout was higher than inthe October 2002 generalelections, with the notable exception of Karachi where the turnout was lower due to the boycott of the MQM." InBannuand Killa Saifullah, seats were often uncontestedbecauseof prior arrangementsmade between different groups to ensure that significant tribes were represented.Inboth these districts also, it is important to note that many women's seats were either not contested, or no woman was nominatedfor the reservedseat. (Initially there were 10percent vacancies nationally inthe reserved seats for women, with particularly large vacancies inNWFPand Balochistan, but some of these have now beenfilled.) Where, as in Bannu, the MMA decided to boycott the elections, this abstention undermined the legitimacy of the local government. The result was electoral success for candidates who undoubtedly come from the economically favored classes rather than from the lower-middle-class ranks of the MMA. Inbothdistricts of Punjab and inKhairpur, party politics, despite the nonparty rubric of the elections, was very strong. Where the party political element is clear, turnout i s also higher. Table 15: Political Legitimacy inLocal GovernmentElections Dimensions of Killa Karachi Bannu Bahawalpur Khairpur Faisalabad Legitimacy Saifullah Degree of Low High, including Low Contestation High level of High in all political contestation- women in LE. contestation- higher than political categories contestation 156 out of 315 Approximately approximately Bannu and KS, contest, of seats. seats (50%) 90% of all seats 50% of women's but below including for were not were filled seats vacant; and Karachi. 74% women's seats contestedbut through 25% of seats of women's of which 90% were contestation. electedwithout union were filled nominated contest. In two councilor seats through throughjirga union councils filledthrough political process. all members contest. contest. were elected unopposed. Voter turnout ($1Local election 31 41 55 65 60 General election 2002 25 35 38 44 39 43 1988 21 47 32 43 43 49 % of union 40 11 60 3 0 0 nazimeen who are "independents" Source: ADBlDfII WB DSD Dataset 1. Although competition was reasonably high, it has not translatedinto effective opposition politics in the councils. No-confidence motionshavebeenusedfor intemal recall primarilyagainstunion nazimeen and naib nazimeen, particularly in Faisalabad andBahawalpur. The relative lack of no- confidence motions against the district and tehsil nazimeen is not surprisingas the formal rules 49 Itcanbeargued that intensity of election campaigns is likely to behigher when political parties are involvedas opposed to when independentcandidatesare contesting, primarily becausecandidatesaffiliated with political parties have greater resources at their disposal for their campaigns. Partisanpolitics i s also likely to leadto higher turnout and greater contestation. In addition, party politics can also allow for internal-that is, within the party- accountability arrangements to operate. Inmost countries, local government election turnout is significantly lower than ingeneralelections (for example, Ugandaonly about 25 percent). 53 for internalrecall of district and tehsil nazimeeneffectively protect them.51Inproposing a no- confidence motion against a district or TMA nazim, a councilor has to be confident of securing a majority in both the council and among all the union councilors inthe district or tehsil, because otherwise he or she will be forced to resign as a union nazim. By contrast, union nazimeen and naib nazimeen are much more vulnerable to no-confidence motions than their district and tehsil counterparts. This i s because in most cases village and neighborhood committees have not been formed, and a simple majority inthe union council is enough to suspendthe union nazim." Therefore, a district nazim can engineer or threatento engineer such a motion against a troublesome union nazim. This threat i s particularly real because inmany districts the relationship between union nazimeen and union naib nazimeen is strained, and the district nazim has a potentialally in his or her bid to disciplineunion rza~imeen.~~ Another reason for weak oppositioni s that district and tehsil nazimeen are usually established politicians with highstanding inthe community, making them crucial allies inthe electoral efforts of union councilors. This dependencewas n view in Bahawalpur, where the district nazim-prior to the elections and inorder to ensure his subsequentelection-campaigned on behalf of union councilors and claims to have individually won 54 out of 107UCs. Ineffect he elected themjust as much as they elected him. Modest incentives for Drovincesto intervene inthe districts Another clear connection that emerges from the district visits i s the importance of the political relationship between provincial and local governments.Effectively, this relationship determines the extent of political control that the district nazim can exercise within local government as well as the freedom localpolicymakers have to act to meet their constituents' demands. Table 16 i s a stylized depiction of the degree of constraints imposed on the district naziin by the province. While other variables, such as the independent political strength of the nazim and the political affiliation of the MPAsfrom the district play a role, the key factor determining the nazim's freedom to maneuver is his or her relationship with the ruling provincial political coalition. Intwo of the six districts visited-Bahawalpur and Faisalabad-the district nazim i s allied to the Chief Minister and the ruling provincial political coalition, while in the other four the district nazim i s inopposition. This relationship has a significant impact on the flow of funds between the province and local governments, on the implementation of local development schemes and on the manipulation of appointments and transfers of personnel. District nuzimeencan alsoberecalled by provincial action. This externalrecallrequires that the chief ministerof the provincebring a motion to the provincial assemblythat, by passingthe motion, dischargesthe nuzim. 52 TheLGO specifiesthat the intemalrecall of a unionnazim requires a majority inthe village or neighborhood councilsof that union. The holding of council elections at those levels is the responsibilityof the tehsil or town administratiqn,andif the tehsil fails to perform this duty within 90 days of assumingoffice, the district government is to hold these elections. Howeverto date these councils havenot been formed. Interestingly,the `' internalrecall of a unionnaib nazim is eveneasier as it requiresonly a simple majority inthe council. It appearsthat the reasonfor this tension is that unionnuzimeen andnaib nazimeen bothhaveaccess to development funds (from the district and tehsil councils, respectively), putting them in competitionfor patronage. 54 Sourceof the Killa Karachi Bannu Bahawalpur Khairpur Faisalabad Incentives Saifullah Party affinity Opposition Opposition Opposition Same party Opposition Same party between the Chief Minister and or the main provincial coalition, and the district rwrim Position of the A11 seats Majority All seats Evenly split Majority Evenly split nazim's party with seats with with with same in the opposition opposition opposition PmY Provincial parties parties parties Assembly constituencies within the district Independent Medium: Medium: High: nazim High: nazim Medium: High: nazim political nazim tribal well extremely astute nazim from extremely standing of the elder, but respectedbut wealthy politician with established wealthy nazim new to represents a big vote political politics and political bank family, but selected from party with new to above relatively politics small base Overall High High Moderate Low High LOW incentives for the province to intervene Source: ADB/DfID/WB DSD Dataset 1. Indistricts that are politically allied with the province, the district nazim has severaltools at his or her disposal to discipline oppositionnuzimeen. The most important is the DistrictDevelopment Committee (DDC), which has the responsibility for giving technical approval to development schemes and which can act as an effective agent of the province through its chairman, the DCO. Nuzimeen with strong relationships with provincial governments, as inBahawalpur and Faisalabad, have been able to use the DCO to discipline oppositionunionnuzimeen by blocking their development schemes inthe DDC. Box 13: A Case Study of Provincial Government Interference InMay 2003, through an order of the Finance Department, the Govemment of NWFP eliminated 21posts in the Bannu District Works and Services office, including the post of EDO.Across the province, the ' government abolished 291 such posts and in its place created six Works and Services Circles (each with responsibility for four districts). A SuperintendentEngineer (SE) will head each new Circle. Inthe opinion of the Bannudistrict nazim, this act was aclear indication of the provincial government's efforts to undermine the district govemment. One o f the Circles is headquarteredin Batyu, but the SE i s a provincial level employee who i s not answerable to the district government. There are two XENs (Executive Engineers or DOs) who report to the SE, and each of these district employees has technical sanction powers capped at Rs. 2 million. The practical effect of this change is that any district scheme above Rs.2 million will need the approval of the provincial government. 55 When the province has few incentives to intervene, the nazim can have a fairly free handto direct administrative staff without much check from the provincialheadquarters.The nazim of Faisalabad was able to resist the transfer of the DCO, who had beenposted there at the nazim's request inthe first place. In Bahawalpur the harmonious relationship that prevails between a dominant nazim and afairly compliant administration means that transfers of teachers and health staff within the district are subject to the approval of the nazim. Similarly, the nazimeen inboth Faisalabad and Bahawalpur actively influence the contractual hiringof doctors. By contrast, inopposition districts the DDC can be used as a tool to subvert the workings of the local government. InKilla Saifullah, for example, the district council reportedly proposed a number of water supply schemes that were blockedin the committee; instead, tube wells that were part of the MPA schemes were approved. Khairpur i s perhapsthe most blatant example of province-district tensions negatively impactinglocal development works. Initiatives by the nazim have beenneutralized or delayed by the DCO who uses his powers as a principal accounting officer to block funding and support to shelterless schools and CCBs and withholds the releaseof zakat and KPP funds. Provincial actions can also increase opposition to the nazim within the council. InKhairpur, for example, the former governor allocated funds to three opposition talukas inthe district, an act that has emboldenedthe opposition inthe district council as they now have an altemative source for development funds, insharp contrast to the situation inFaisalabad. Unwanted provincial interventioncan have an impact on the political career of the district nazimeen. In Killa Saifullahfor example, the district nazim statedthat the frustration of the people was growing and that continuation of the presentimpasse with the province would harm his chances for re-election. Similarly, unioncouncilors andnazimeen stated that given the high costs and general poverty of the districts and the frustration that they are facing intheir work, not many of themwill wish to runagain for office. There is potentialfor further provincial involvement indistrict affairs. InJune 2002 Chapter XI1 of the LGO 2001made it a dual responsibility for the Auditor General to lay the reports before the Provincial Assembly as well as Zila Council thus creating a dual accountability for the district nazim-to the province as well as to the Zila Council. This situation has been rectified inthe recent round of amendments to Chapter XIIrecently made by all four provinces. Since the Auditor General recently recommended again to the President that the audit reports of the districts be submitted to the Govemor, the issue may reopen. EARLY SIGNS OF CHANGING INCENTIVES FOR SERVICE PROVIDERS While devolution does appear to have increasedincentives for councilors to listen to citizens, not only does a strong tradition still encouragefocusing on the provision of private goods, but also interference by the province greatly diminishesthe accountability of nazimeen to the councilors. For service delivery to improve, however, the service providers-not just their elected superiors-must want to see improvements. This motivation is providedeither by ensuringthat the service providers have an incentive to listento the policy makers-managerial power-r by providing potential service recipients with some direct means to have an impact on the conduct of service providers--citizen power inthe terminology of the WDR. 56 Managerial Power Inreviewing the changedincentives for front-line staff andother service providers to listento nazimeen, the study examinesfour key aspects: 0 The extent to which staff working inthe district are employed by the district-including consideration of six key features: autonomy inpreparing the salary budget; local control over the establishment; locally determinedrecruitment; local determination of career paths; local managementof staff performance; and autonomy inpay policy 0 Adequacy of the nazim's authority over senior staff, includinginputs into the performance evaluations for senior staff and power to require their transfer. 0 Extent of extemal oversight, including a review of the effectiveness of bodies, such as Accounts Committees, Monitoring Committees and DistrictPublic Safety Commissions that are instrumentsfor monitoring front line staff. 0 Adequacy of the deployment of staff, including adequate numbers, skills and technical sanction powers. The first three of these areas focus on the issue of incentives, while the last-the adequacyof staff deployment-analyzes whether or not front-line staff have the capacity to listen to the nazimeen even if these incentives are inplace. The first of these considerations is dominant. Inthe 6 districts studied, public sector service provision in the key health and education sectors is almost entirely delivered by departmental staff with little contracting out or other partnership with the private sector. Such developments may come over time, but for the moment, serviceproviders are largely synonymous with civil servants. The question i s whether these civil servants have reasonto take policy directions from locally electedrepresentatives,in other words, whether they view local governments as their employer. The transfer of functions andthe physical relocation of staff have not beenfully matched by the transfer of the employer role. Localgovernmentshave limited ability to create fiscal space by dismissing surplus staff, and in two of the four provinces (Sindh and NWFP), salariescontinue to be paid from Account 1.Inother cases, while the formal authority rests with the local government, the province continues to exerciseinformal control. While the LGO provides for a sophisticated sharing of control over posting of civil servantsbasedon norms which clearly delineate responsibilities, informalprovincial controls are clearly evident inthe area of Appointment, Promotion and Transfer (APT) authorities. Inmany cases, provinces have reduced the control of local political executives over their civil service through unilateral orders of postings. The result is that although physically located in the districts, most senior district staff do not consider themselves as district employees and therefore are likely to accommodate provincial pressures to transfer subordinate staff. This attitude has considerably weakened the accountability of senior staff to localelected representatives.Infact, politically motivatedinter- and intra- district staff transfers are a main area of conflict between provincial and local governments and are most severe indistricts that are not politically aligned with the province, such as Bannu, Khairpur, and Karachi. Since TWA staff largely belong to local government cadres or are the council's own employees, the problemof low institutional allegiance and weak accountability i s less acute. 57 New mechanisms like the Monitoring Committees,District Public Safety Commissions, Accounts Committees and insaaf committees are aimed at bolstering Political authority over administrators. However, as yet these have beenintroduced only to a very limiteddegree. Staff Working & the District are Employed & the District Under a system of complete administrative devolution, all authority for personnel management would be found at the same level of government where staff are located. Inpractice, there are very sensible reasonsto deviate from this simplistic model. Above all, history and tradition determine many of the presentarrangements, makingit difficult to abandonthem completely and start again. Moreover, there are quite defensiblereasons for higher levels of government to retain some control over staffing at lower levels. Specifically, such an arrangementprovides: e An opportunity to exercise some top-down influence over policy (as a national integrating device) even where political and fiscal authority have beenlargely devolved; 0 A broader set of careeroptions for civil servants, so they are competing for positions both within and outside their immediate administrative location; and 0 Some fiscal safeguardsinsettings where political pressures might otherwise overwhelm constraints on hiring or remuneration. There are also sector-specific reasons-particularly ineducation andhealth-for maintaining certain personnel managementresponsibilities outside the administrative unit where staff are located. For example, there is a needto follow a common set of professional standards in curriculum design and public health. Arguably, this goal can be achieved most readily by creating overarching staff groupings that share common interests and provide a single career path. Notwithstanding these caveats, the ongoing challenge of decentralization i s to shift the employer function gradually to coincide with the new levels of functional responsibility-to create, in effect, the equivalent of a District Service whether abody is formally establishedunder that name or not, A District Service would constitute a group of personnel clearly employed by the districts.54Being fully the employer in such a situation makes a government responsible for: 0 Budget Control 0 Establishment Control e Recruitment e Career Management 0 Performance Management e Pay ~ o l i c y . ~ ~ Progressto date inshifting the employer functions to district governments has been decidedly mixed. The federal government clearly remains the employer of the DMGand Audit and Accounts Group staff posted to the districts. Meanwhile, senior staff of the districts -Executive District Officers (EDOs) and others at or above BPS-16, or BPS-18 in Punjab-remain subject to the province or the federal government for appointment, promotion and transfer (APT) decisions. The result i s confused and competing lines of control. For instance, while the DCO reports to the district nazim, he or she remains part of afederal employee cadre for whom promotions and transfers are determinedby authorities outside of the district, undermining the reporting 54 TheNRB continuesto discuss thepossibility of creating a formal District Service, but no decision has beentaken yet. 55 See the third volume (Annex 2-Technical Considerurions) for a more substantial discussion. 58 relationship to the district nazim. DCOs have been transferredfrequently, and while nazimeen may request the transfer of a DCO they disapproveof, they cannotprevent an adverse transfer. While the districts clearly becamethe employers of the former ruraldistrict council employees, the vast majority of district staff are from former provincial cadres. This group includes teachers and health-service providers over whom lines of control clash. Particularly inrelation to APT authorities, these staff find themselves effectively managedby the province. The six features of the employer function are describedbelow, Table 17provides a summary of the extent of devolution of the employer function ineach province. Overall, as can be seen, local governments have little de facto employment authority over staff located intheir areas. Table 17: Location of the Employer Functionfor District Staff IAspects of the EmployerFunction 1 9 1 P= province hasprimary authority D=district hasprimaryauthority S = shared Source: ADBIDfIDIWorld Bank DSD Dataset 1, Autonomv in ureuaringthe salarv budget Budget control over personnelincludes paying staff from government's own budget and the authority to dismiss surplus staff. InNWFP and Sindh, nearly all district salaries are still paid from the provincial Account Irather than the district-controlled Account IV (see Table 12).56 Under this arrangement, the districts mustseek approval from the province for the releaseof the funds for their salary payments. Thus, the salaries effectively are paid from the provincial budget, the district wage bill envelope is firmly controlled by the province, and any unspent district funds accrue to the pr~vince.~'By contrsst, in Balochistan and Punjab, district salaries are received and The exceptionis former employees of the rural district andurbanlocalcouncils who are paidfrom district budgets '' through Account IV (or the Local Fund where this has not yet beenmergedwith Account IV). The section onAutonomy in preparing the salary budget summarizesthe arguments presentedby provincesfor maintainingthis arrangement. The method for calculatingthe size of the salary transfer differs by province and 59 disbursed through Account IV, maintainedby the District Accounts Office (DAO). Furthermore, inno province are district govemments permittedto identify and dismiss surplus staff. Thus, even where salaries are transferred via account IV, there i s no incentive for districts to find savings in the salary budget and reallocate them to other purposes. Local Control over the Establishment Establishment control refers to the authority to set limits on the number of personnel ineach government organization and o f each skill type. According to the LGO, this authority formally rests with the district govemments as the districts can create new sanctioned position^.^^ However, in practice, the provincial governments retain considerable influence over establishment decisions because districts and TMAs needprovincial autho6zation to create new posts and to fill vacancies. I t should be noted that there are both advantages and disadvantages to devolving establishment control to local govemments. On the one hand this shift will enable local governments to respond to the demands o f their constituents particularly where staff shortages hurt service delivery, but on the other hand provincially imposed constraints may be limiting the scale o f patronage-based staff appointments. Box 14: The Politics of Staff Transfers InSindhmany EDOs reportedly were pressuredby provincial politicians to accede to inter-district transfers to and/or from posts within their departmentin advanceof the last by-election. The threat was that EDOs who did not comply would themselves be transferredto less attractiveposts outside the district. Several reports in Dawn recountthe rivalry between the Muttahida Qaumi Movement (MQM), akey memberof the provincial coalition government,andthe Jamaat-elslami party, which controls City District of Karachi. While the city district nazim, Naimatullah Khan, has insistedthat no officer shouldbe transferredwithout his permissionor, at least, consultation, the M Q Mhas ignored this demand. InFebruary 2003 senior police officers were transferredwithout consulting the nazim, although law and order is a responsibility of the district govemment.Similarly, inMarchthe EDOs for Revenue,Finance,Education and Local Governmentwere transferredand replacedwith successorschosenby provincial officials, The PakistanPeople's Party (PPP) dominatesrural district administration in Sindh. However, even some PPPparliamentarianshavecome out in favor of curtailing the authority of local nazimeenwho canposea challengeto the authority of the party's provincial office holders.Ruraldistrict nazimeenhavecomplained to the Chief Secretarythat their DCOs haveorderedtransfers without consulting them, and approved transfers that countermandtheir direct instructions.Nazimeen simply have little authority over the DCO. InNWFP, all 24district nazimeenresignedon June2,2003, to protestpolitical interferenceby theMMA. The primary grievanceof the lulzimeen was the transfer of governmentofficials and the placementof politically sympathetic new recruits within the districts. As reportedin the News International, "The officers were threatenedof badconsequencesif they didn't obey directives about transfers andpostings" - (June 2,2003). sometimesbydistrict.For KhairpurdistrictinSindh, theprovincialgovemmentreleases funds baseduponthe numberof sanctionedandnewly createdposts.Meanwhile,for the CityDistrictof Karachisalary transfers are madeaccordingto the actual strengthof employes, andnoton thebasisof sanctionedposts. InPunjab (Bahawalpur andFaisdabaddistricts) andfor Bannudistrict in hWFP th :salary transfers to Account IV are based ondatafor the actual staff strengthin the districts. 5s TheSLGOestablishesas a "functionandpowerof theZila council" to "approve the proposalsof the District Governmentfor changes in the numberof postsof officials andemployeesof the decentralizedofficesof District AdministrationandTalukaMunicipalAdministrationandTown MunicipalAdministrationas part of the budget statement" (Art. 39). 60 Locally determined recruitment Recruitment authority includes the ability to select and appoint staff and oversight over merit. Selection and appointment responsibilities havebeendevolved to districts but with significant limits-most notably, a prohibition on recruitment presently imposed by each province. Thus, even if local governments have vacant posts and local revenuesto cover the salaries, the recruitment banundercuts their ability to develop their own humanresources complement. These bans have recently beenrelaxed, but the districts may only hire certain groups of employees and only on a contract basis. Normally, the federal and provincial governmentscarry out hiringat specified intervals through their respective Public Service Commissions. The hiring of administrative staff and officers on contracts by the district government is,a significant departure from this tradition. Contract hiring has beencommonly practiced inthe Health andEducation sectors for teachers, medical staff and paramedics. Though it is becoming more common among the provinces, no clear rules or policy support this practice. One notable exception i s NWFP, where a contract policy was introduced in October 2002. Under it, BS 1-10 contract appointments would be made on the recommendations of Departmental Selection Committee (DSC) while BS 11-15 contract appointments would be made on the recommendations of Provincial Public Service Commission (PPSC). Contract appointments inBS 16 and above are to be made through the PPSC. Thus oversight of merit rests inpart with the districts andinpart with the PPSC.InSindh the oversight of meritremained, with the PPSCfor staff abovegrade 11untilthe Cabinet very recently removedBS 11-16 from the purview o f the commis~ion.~~Similarly, inBalochistan a recent notification of the provincial government, dated March26,2003, removed appointments inBS 11-16 from the purview of the Balochistan Public Service Commission. Inthe absence of aclear policy, confusion exists as to the powers of district governments to hire essential staff on contract. For example, in Khairpur, the provincial finance department has reportedly given authority (not yet beencarried out) to hire a D O Finance and ED0F&P on contract, but it is not clear who has this authority and how it will be exercised. However, inthe same district, the Health department was able to hire a large number of doctors, inexcess of the numberof advertised vacancies. Contract policies are also being gradually introduced in the other provinces, such as Punjab. The Government of Punjab's policy lays down certain parametersand guidelines to ensure uniform criteria for such appointments. The selection committees constituted at the district level for processing recruitment on a regular basis have been entrusted with the task of makingthese contract appointments. InFaisalabad, the hiringof doctors and teachers was proudly considered to be a strong display of district autonomy and authority. Inaccordancewith the provincial government's policy, a district recruitment committee has filled many previously vacant positions inthe BHUsthrough the appointment of morethan 100doctors on contract basisinvarious health facilities. Similarly, surgeons and child specialists have also been recruitedon contract. These facility-specific contracts appearto carry slightly better salary and emolument packagesthan those of regular employees. However, they can be usually terminated on three months' notice. 59 The Sindh Local Government Ordinance does not specifically mentionthe PPSC, raising the possibility that the districts will be able to mount a legal challenge to PPSCoversight of recruitment for their staff, 61 The government selecting and appointing staff i s likely to be recognized legally before the courts as the employer, but that status is not certain.60For government employees who may wish to contest an employment action inthe courts, the legal definitionof the employer i s critical. It is not clear whether employees formally transferred to the districts will bringlegal action againstthe province or district government to contest a perceived injustice concerning their employment. Local determination of career paths Career management includes the authority to offer promotions and make transfers among local government posts. The formal rules governing transfer authorities vary somewhat by province and by sector (see the Appendix). APT authority inPunjab rests with the DOs and DCO up to grade 18, and with the district nazim for grade 19 (except for the transfer of EDOs and DOs).In Sindh APT authority rests with the DCO inconsultation with the nazim up to grade 17.InNWFP district officers control APT authority up to grade 15 staff, while the provincial governments are authorized to make APT decisions for all higher grades. Balochistan has so far not produced APT rules for the districts. However, inpractice, provincial officials inall four provinces frequently exercise APT authority The disjuncture between the geographic location of senior staff and the location,oftheir superiors makingAPT decisions creates competing lines of control. The 10-12 EDOsresponsible for sectors such as education, health and literacy-report formally to the DCO andnot to provincial line ministries inthe former divisional-provincial hierarchy. However, as their promotionand transfers are determined at the provincial level, they too are unlikely to regard the district management structures as paramount. The threat of an unpleasanttransfer or the promise of an attractive one can pressurethe senior staff member to arrangethe transfer of ajunior employee, below grade 16. Enforced inter-district transfers for provincial cadres posted to the tehsils are also a significant problem. Thus, despitevarious bans on transfers andpostings issuedby the provinces, the provincial govemment often initiates transfers by exerting influence upon senior district officiak6' External pressurei s coming from at least two directions: provincial headquartersand elected representatives(MNA, MPA). The transfers of district staff tend to be most frequent in areas where there is some political conflict between the district and provincialgovernments. So long as provincial and federal cadres retain positions in local governments, some minimumtime should be placed on their tenure. Without this, the temptation to use transfers as a covert policy instrument is overwhelming. Tensions between the province and districts in staff management also manifest themselves in issues relatingto the accounting and audit cadres. Since accounting continues to be a federal and provincialdomain, it appears that in many cases accounting practice i s reflecting provincial and not district priorities in supporting financial and general management. This is producingbehind- schedule, unreliable and nontransparent reporting of localgovernment accounts. Inthe six districts the accounts reports to the councils were not beingtabled inaccordancewith the LGO provisions. With regard to auditing, there is aproblemof dual accountability for the district nazim, as district audit reports were required, until recently, to be placed in both the provincial assembly and the district council. The district generally is recognizedas the employer for health and educationstaff. InWFPdistrict cadres were formally createdfor these staff on January 15,2002, andMarch 15,2002, respectively.GazettedNotifications SOR.I(E&AD) 1-218/2001and SOR.II(E&AD) 1(20)98.V.III. 6' It is reportedthat in the 14April 2004 decision (see footnote 8.) powersof postings andtransfers of DPOshave been vested inthe provincialChief Ministerwho will appoint on the basis of alist preparedby the ProvincePolice Officer. This potentiallywill further exacerbate these tensions. 62 Local management of performance Preparation of the Annual Confidential Report (ACR) is the chief instrumentfor assessingthe performance of publicofficials inPakistan. At the district level, the ACR of the DCO is prepared by the district nazim and countersignedby the provincial Secretary LocalGovernment. The DCO i s responsible for preparing the annual ACR for EDOs, which are then countersigned by the district nazim, and the EDOs, in turn, preparethe ACRs of DOs, which are countersigned by the DCO. At the TMA level, similar arrangements exist, although with some variation among provinces. IngeneraI, the TMO prepares the ACR of TOs, to be countersigned by the fehsil nazim, with the notable exception of Balochistan where the performance evaluation channelhas yet to be delineated. Many officers interviewedconsider the ACR to be an ineffective device for promoting accountability. Inmost districts ACRs are preparedinfrequently and only for senior officials. These also appear not to be a robust instrument for measuring the quality of an officer's performance or ensuring accountability. However, some nazimeen have argued that EDOs/TOs might be more responsiveto instructions if the nazimeen were authorized to prepare their ACRs, as this duty would provide them some influence, however modest, inpromotiondecisions. DCOs, TMOs, and TOs have counteredthat this procedurewould subject officers to unduepolitical pressure inthe discharge of their duties, including pressureto provide favors at some stage. Autonomy in uav Dolicv Setting wage scales and hardshipor remoteness allowances are the two cardinal features of a pay policy. InPakistanthere i s no provincialor district control over basic pay scales, and very little over allowances. It is possible, however, for local governments to establish incentive payments for their personnel. The Provincial LocalGovernment Ordinances state, "in every budget a provision may be madefor payment of performance incentive bonuses as prescribed.'' Inthe study districts, some districts were makinguseof this provision. InFaisalabadfor example, the FY 2003104 budget earmarks Rs. 500,000 for incentivepayments. Once funds are set aside in the budget, as approved by the district council, then, inaccordancewith Schedule IIIof the District Government Rules of Business2001, specific recommendations for the grant of honors and awards are to be submitted to the nazim for approval. InJuly 2003, the employees of DO Finance and Budget, DO Planning and the central staff of ED0Finance and Planning each received a bonus of one month's salary (base pay and allowances) inrecognition of their work in preparing the budget. The performance-pay provision of the LGOprovides local government policy makers an opportunity to exercise some limitedcontrol over pay policy. However, it i s possible khat this authority could be abused, as the nazim may approve any payments once an overall envelopehas been approved in the budget. NazimeenAuthority over Senior Staff The role of the nazim acting as the employer for the DCOisparticularly complex. The relationship between the two officeholders i s key to the smooth functioning of the local government and is meant to be balanced and two-sided. On the one hand, the DCO should, as per the LGO,be accountable to the nazim. On the other, and appropriately for a senior public servant, the DCO must be able to expressindependent views inorder to provide professional, impartial advice to the mzim and council ("speaking truth unto power"). Inmany cases, as the previous section noted, the DCO i s not performingthis key role and has become de facto apolitical player, either acting at the behest of the province against the district nazim or as an agent infurthering the 63 nazim's political control over the district. These difficulties are of course not peculiar to devolution but reflect prevailing norms regulating politician-civil servant dealings at all levels of govemment inPakistan. Itwas generally observedthat the authority of the nazim to write the ACRs of DCOs was an insufficient mechanism for enforcing accountability since it was an ineffective tool for measuring the performance of an officer and tended to be viewed as aroutine matter to be placed on an officer's file at the time of promotion in fulfilling a legalor administrative requirement. Officers tended to be givenpostings regardlessof their performance inprevious tenures. District nazimeen must have a working relationship with the DCO that enables the nazim to drive policy, while being appropriately challenged on due process.Inpractice, there are few DCOs providing robust, technically informed and professional advice to nazimeen during the planning and budgetingprocess. Although DCOs can be supportive to nazimeen who are in a secure politicalrelation with the province, where nazimeen are not well aligned politically with province interests DCOs can also be hostile, supporting conflicting provincial interests. The relationship betweennazim and DCO i s therefore key. Strong differences between these two players can lead to administrative paralysis and divided loyalties for staff. There are two principal reasons why DCOs might and do seek to bypassthe nazim. First, they can themselves face some challengesin imposing authority over other senior district staff. Pre- devolution, the office of Deputy Commissioner (DC) heldthe pivotalposition at the district level, but other line departments were not answerable to the DC with respect to their annual development plans, budgets, or personnel issues. With the advent of devolution, the office of DCO has assumeda much larger and more formal role vis-&-vis the other groups of offices in a district. However, provincial departments can and do chooseto disregard the new arrangements, and many instances were reported where the provincial government had sent instructions directly to EDOs, particularly education, instead of following the proper procedure. To counter this, DCOs use their informal contacts in the province to enforce authority. Second, as members of federal or provincial cadres, DCOs consider, correctly, that the province rather thanby the nazim will determine their career advancement. DCOs can feel that their position as a federal or provincial employee in a district is now a less powerful office. Senior officers at grade 19 serving inthe districts note that their juniors are now serving the provincial govemment as Secretarieswhile they are serving as DCOs inplaces where they might have held more powerful positions more than a decade ago. The ACR systemis unlikely to provide aparticularly strong mechanism for ensuring that the DCOretains some incentive to serve the interests of the nazim as these officers remain part of the federal employee cadre and so the ability of the nazim to make a credible threat to transfer the DCO is completely a function of the informal relationshipbetween him or her and the province. Nazimeen also have very little authority over the District Police Officer. Formally, only inPunjab has the district nazim been given the initiating authority for the ACR of the DPO, although in practice in none of the districts studied were these performance evaluation reports completed.62 Some nazimeen, infact, considered that removing the authority of the former district magistrate incompleting the ACR of aformer districtSuperintendent of Police has contributed to deterioration inlaw and order ingeneral. 62 The 14 April 2004 meeting (see footnote 8) reportedly reaffirmedthe nuzim's responsibility to initiate the DPO's ACR inrespect of law andorder in all the four provinces. Police rules have not yet beenprepared. 64 External Oversight The LGO provides institutional arrangementsfor external oversight of service providers, some of which are internal to council-Monitoring Committees, for example-whereas others provide channels for direct influence by citizens on serviceproviders' performance through external bodies that have a statutory basis. Defined inthis way, Table 18 summarizes the various oversight and other community managementinstitutions that support devolution. Table 18: Mechanismsfor External Oversight Accounts Committees The LGOcalls for a strengthening of the auditingfunctions of local governments. M o r to devolution, a sample audit was conducted of different district departments but the district, as a whole, was not audited. Instead, the audit of district offices of line departments was conductedin isolation. Post-devolution, annual audits of the entire district government are meant to be the rule. Legislative oversight over the managementof public funds is an internationally acceptedgood- governancepractice and essentialfor ensuring accountability. The LGOcalls for the creation of public accounts committees at all three tiers of local government to be responsible for reviewing the accountsand audit reports of the respective government. Devolution has therefore, createdthe potential for a much larger number of transactionsto be publicly scrutinized, thus making increasedaccountability for public expenditure management possible.63 However, this potential remains unrealized. With the exception of Khairpur, no accounts committees have beennotified, and in no district or Th4A has any audit report of the post devolutionperiod beenpresentedin council. So practically there has beenno activity on accountability and audit reports. Monitoring Committees NRB has laid out elaborate guidelines for the establishment of monitoring committees at the union, tehsil anddistrict level to identify problems at the service facility level and bringthemto the attention of the respective council and the concerned EDOs (National Reconstruction Bureau: 63 It should be notedthat the accounts committeesdo nothavethe ability to review monthly accounts. Oncethe budget is releasedto DDOs, they maintaintheir own accounts andreconcile them with the DAO on amonthly basis.Thesemonthly accountsare not presentedbeforethe District Council, and hencethe council has noformal mechanismto makea timely check of improper useof funds. 65 2001b). Monitoring committees are meant to be subcommittees of the concerned council, consisting of at least three council memberselectedfor a period of three years. A thirdof the members of each committee i s to be from among the reservedseats for women, peasants, workers and minorities. The union monitoring committees are responsible for monitoringthe functions of all local government offices responsible for the delivery of services within the union, while the tehsiE and district committees overseethe functioning of the offices in their respective governmentsSMThe guidelines specify that through regular field visits, members of the monitoring committees are to involve the community in assessingthe quality of service delivery. The committees are to presentquarterly reportsof their activities to their respective councils as the basis for the councils' passing the necessaryresolutions or referring the matter upwardto tehsil or district councils if needed. The nazim i s to report back within 30 days to the council on the actions taken. The fieldvisits revealed that, with some notableexceptions andfor severalreasons, monitoring committees were not performingas the regulations envisioned. First, inonly one of the six districts-Khairpur-did it appear that the monitoring committees were the product of a competitive election through which opposition members were also able to secure some representation. Inthe other districts the processwas controlled by the respective nutimeen. As a result the committee members were not necessarilythe most enthusiastic or qualified for thejob. For example, in Killa Saifullah some of the union committees were formed simply by distributing the councilors amongthem, and the councilors were not even aware that they belongedto any committees. InBahawalpur, the district council formed a seven-member task force which was assignedthe task of forming monitoring committees and which selectedtheir members.The members selectedfor the education monitoring committee were all male, mostly illiterate and unawareof their roles and responsibilities. Unsurprisinglythey were unable to make much of an impression on the ED0and DDO, who did not recognize their authority. Committee meetings have also not beenheld, and no interaction has taken place among committee members. The Bahawalpur district health monitoringcommittee was somewhat more functional. It had produced a monitoring report in which the chairman acknowledged that the committee i s not functioning properly due to lack of training of the councilors and lack of coordination among the union and district health monitoring committees. Other reasons that monitoring committees function poorly if at all include lack of traveling allowance and transport facilities which greatly increasethe costs of field visits, lack of training, and inability to effectively enforce outcomes which inturndiscourages effort. Inthe districts visited, none of the monitoring committee membershad traveling allowances, and at the union level, with the exception of Killa Saifullah, councilors receive no honoraria. There was also a generalfeeling among councilors that since the bureaucracy i s not answerable to the local government andi s infact sometimes tryingto subvert it, monitoring of teachers and health officials is an exercise infutility. InFaisalabad,for instance, one councilor citedthe caseof a teacherwho was askedto be transferred since she was physically abusing the children. After 6 months of complaining, the teacher was finally transferred only to managelater to get herself reassignedto the post. In anothercase, the chairman of the district works and services committee inFaisalabad statedthat The NRB Guidelines specify that at the Unionlevel monitoring committees will be establishedin at least the following areas: Municipal Services, Finance, Public Safety, Health, Education, Literacy and Works and Services. Tehsil monitoring committees will be established for MunicipalRegulation, Infrastructureand Services, Planning and Finance; and District monitoring committeeswill be establishedfor each"group of offices or for each individual office within the group of offices." 66 the committee had reported a few months earlier to the district council about an unsafe school building, but to date no action had beentaken. Karachi was the only district where monitoring committees were functional, inpart due to the morepolitically aware and educatedbody of councilors. Reports of these committees were submitted regularly, and the health, education and works committees claimed to have increased the attendance of staff by 20 percent in their respective sectors, and the quality of maintenance, and repair, a claim that was generally supportedby NGOs andjournalists. Similarly, the city health committee statedthat it had visited 25 hospitals in the last year to ensurequality of service and reduce absenteeism.The committee membersbelieve that this improvement has been achieved becauseof their consistent monitoring andnot because of the respective EDO's interest inthe improvement of services. Evenhere though, there is considerable frustration with the bureaucracy, as exemplifiedby the fact that the district council has passed over 300 resolutions, many of them calling for disciplinary actions againstparticular staff, but without muchresult. These problems have resulted indwindling enthusiasmamong the councilors for carrying out their functions as envisioned inthe LGO? Clearly, while problems with enforcement go back to the larger issue of the mismatch betweenpolitical decentralization on the one handand administrative andfiscal decentralization on the other, it i s imperative that the moraleand capacity of monitoringcommittees be maintained so that they may continue to play the vital role of information gathering. Proper training, payment of honoraria andproper election procedures, to ensure that only interestedcouncilors become members, are needed. District Public Safetv Commissions InPakistan, overallpublic confidence inthe policeis low. Nationally, only 22 percentof households stated that they would contact the police for a matter of public safety, accordin'gto the CIET survey, and only 12percent had initiated any contact with the police inthe past five years (CIET: 2003). Among those who had contacted the police, about a thirdwere satisfied with the way the police treated them, a degreeof discontent primarily reflectinganger at the police for demanding payments. Lack of effective checks and balances on the police is perhaps the key reasonfor this low level of public satisfaction. It is interesting to note that in Balochistan and NWFP, where there is greater use of the levies forces, there is also ahigher levelof public satisfaction (40 percent ineach) with the police.66The levies forces are reflective of local tribal arrangementsand are therefore like a community policing system subject to tribal checks and balances.For example, inE l l a Saifullah it was generally observedthat the levy prosecution and investigationwas of a highstandardand the evidence was usually trustworthy and credible, that illegal detentions were rare andthat the levies were generally well behavedand appearedrespectful of the citizenry. Community sanction was the mainreasoncited behind the decentbehavior and truthfulness of the levies. Similarly, in Karachi, the Citizen Police Liaison Committee (CPLC), an organization of citizens with roots in the businesscommunity and dependent largely on privatedonations, has played animportant role inmonitoring police performanceand essentially co-producing police servicesthrough the useof information technology for crime analysis. 6s Studies from other districts point to similarproblems with monitoringcommittees. For example, one study of the City District Governmentof Peshawar found that most MCs were dormant or barelyfunctioning dueto lack of trainingandinfrastructure,delayednatificationof the MCs that constrainedtheir working, lack of cooperationby the District Administration, andlow budgets (City District Govemment: 2003). 66 In this survey the term "police" for BaiochistanandNWFPrefers to both the regular police andthe levies force. 67 Box 15: DPSCUnableto Enforce Given these examplesof the benefits of community Compliance oversight, the centerpiece of the police reforms as laid out in the Police Order is the establishment of In Bahawalpur, an NGOactivist complained to the DPSC that afalse case hadbeen District Public Safety Commissions to enforce local, registeredagainst him when he stopped and in particular, citizen control over the police. The policepersonnelfrom enteringa function DPSC is part of a hierarchy of PSCs, stretching from arrangedby him at the Bahawalpur Zoo. The the union council and tehsil to the provinces and the Commission's fact-finding committeehas National Public Safety Commission. At the city been inquiring into the case for the past seven district level, the DPSC is to consist of three elected months, but despiterepeated attempts, has members of the district council, and three from the been unableto get the accusedpolice provincial assembly, as well as an equal number of personnelto appear beforeit. The police independentmembersrecommendedby a selection personnelare said to beon atrainingcourse panel headedby the Chief Justice of the HighCourt. from which they cannot be excused.. Meanwhilethe complainant's case has been The ordinance defines the DPSC's functions as sent for trialto the AntiterrorismCourt where investigating cases of alleged police excess, ensuring it is pendingadjudication.One of the DPSC the registration of FIRS,approving the district's members inquiring into the case was doubtful annualpolicing plan covering proposed expenditures about the police intentionsinthe case. He and performance targets, and exposing misuseof the said that the samepolice personnelwere policeby district political leadership. appearing inlaw courts but were unableto make it to the commission.Moreover, the While a step inthe right direction, the DPSC policehad written to the Commissionthat the ordinance has some serious limitation^.^' I t gives the case shouldnot beprobedfurtherbecausethe DPSC no powers to enforce any of its decisions with matterwas now subjudice. Source: ADBIDflDAVBDSDDataset 1. regards to police excesses; it can only recommend action against a particular police officer to the DPO. This stipulation effectively means that the external accountability mechanism provided by the DPSC must either defer to internalpolice procedure, giving an in-house inquiry under relevant police disciplinary rules the leeway to exoneratedelinquent police officers, or refer its case to the Province PSC, should the DPO not submit areport or take action on the direction of the DPSC. Unfortunately, even with this limited mandate, DPSCs were either not formed, or where formed, were not particularly effective. For example, in JShairpur and Karachi, at the time of the visit, the DPSC had yet to be established as the independentmembers had not been selected. Inother cases, such as Bannu, Faisalabad, and Killa Saifullah, while commissions had been formed they were not providedwith offices, and their memberswere generally uninformed about the nature of their duties and their powers under the law. In E l l a Saifullah for example, neither the DPSC members nor the DPOwere knowIedgeable about the concept of the policing plan. Only in Bahawalpur was the DPSC somewhat functional, as evidencedby the fact that ithad established fact-finding subcommitteesthat were investigatinga number of cases of reported police excesses or negligence. However, the DPSC has been unableto elicit compliance from the police inits investigations. Apart from noting these institutionalweaknesses, journalists also voiced the opinion that DPSC members were afraid to take action against the police. Granted, DPSCs have a limited mandate under the PO. But unless they can be shown to be effective bodies that listento and make serious efforts to address the public's grievances regarding the police in a nonpartisan manner, it is likely that cynicism about police reforms will further erodepublic confidence. Urgent attention is therefore reqiired to establish, adequately 67 Further,thereporteddecisionsof 14April 2004 (see footnote 8) to includeMembersof the Provincial Assembly on the DPSCs, as well as increase the control ova the police by the Chief Minister, will undoubtedlyimpacton local policing. 68 support and build the capacity of DPSCs and to clarify, by way of the police rules, their responsibilities andpowers with respectto both the DPO and the province PSC Insaaf Committees While it i s not possible to interfere withjudicial decisions, it has long beenrecognized that litigants should have recourseto administrative difficulties that they face in the courts, including complaints regarding the conduct of a subordinatejudge. Accordingly, High Courts have entertained administrative complaints againstthe subordinatejudiciary, and all HighCourts have established Member Inspection Teams (MIT)to investigate such complaints. MITs report directly to the Chief Justice of the HighCourt concerned. Unfortunately the MIT's existencei s not well publicized. The LGOprovides for district insaaf committees to assistthe public to gainredress through the MIT. Unfortunately, while district insaaf committees have been established,they have rarely met and have generally been ineffective indischarging their role of assistinglitigants pursue grievances about district courts by facilitating access to the MIT. As a resultthe gap between citizens and the courts has not been narrowed. The courts have, however, taken two important initiatives inthis regard under the Access to Justice Program.First, the highcourts haveinstitutionalized the office of the MIT and are now in the process of makingit moreaccessibleandbuilding its capacity to dealwith citizens' complaints. In2003 the PeshawarHighCourt took out newspaper advertisements about the MIT function and received over 800 complaints in response. PHC i s also takingsteps to build the capacity of the MIT underthe Access to Justice Program. Second, the high courts have also endorsed the establishment of Citizen-Court Liaison Committees with the Districtand Session Judgeas its chair. These committees have membersdrawnfrom the bar and civil society. Inthe NWFP such committees have now beenestablishedin all districts. Adequate deployment of staff The preceding discussion of employership, the nazim's authority over senior staff andthe extent of external oversight over service providers has focused on the incentives of frontline staff to listen and respond to local political leadership.Although the emphasis here is on incentives, it should be recognized that lack of capacity i s clearly a constraint on the ability to act on these incentives. This section briefly reviews the staffing and skill levels in the key departments inthe study districts, as well as the financial powers exercised by local officials that enablethemto executethe budget effectively. Adeauate numbers and skills The districts face particular problems of understaffing inthe Health Departments, inpart because there has been a ban on recruitment, but also because of confusion about staffing due to the merging of different cadres after devolution. Shortagesof key staff such as doctors were particularly acute in Killa Saifullah (only 40 percent of doctors' vacancies are filled), Karachi, and Khairpur. By contrast, the situation inBahawalpuand Faisalabadwas better, inmajor part because-as noted earlier-the district government hadhireda number of doctors on contract. The situation in education was in general better, although all the ED0 offices, except that of Bahawalpur, were understaffed. When provinces have particular incentives to intervene in the district, staff vacancies and capacity problems are worse. In Khairpur, five ED0positions (F&P, Law, InformationTechnology, Community Development and Health) are currently vacant, and against a sanctioned strengthof 69 36 officials, only 17 officials are postedinFinance and Planning (F&P) departmentBy contrast, inFaisalabad officers are postedto allseniorpostsindistrict govemment, andoverall, fewer than 5 percent of posts at DO or DDO levels are vacant. For the TMAs generally, however, the current vacancy levels can be extreme. Lack of adequate skills is an equally pressingproblem. Although there are undoubtedly many capacity gaps inthe districts, the worst problems are found inthe TMAs. TMA staff often lack the capacity to perform the planning and service-delivery functions that they have been given. Many staff are serving inpositions that require higher levels of seniority andcarry greater responsibility than is appropriate for their experience. The posts of TO (Regulation), TO (Finance) and TO (Planning) were consistently weak aspects of TMA functioning. For example, inKhairpur, grade 11staff are postedto these positionsbutwithout the appropriate experienceor training. Wherejunior-level staff havebeenpostedto the Infrastructure and Servicesdepartments inthe TMAs, capacity problems are evident. Staffhavebeenassembledfrom the PHED, the LocalGovemment and LocalCouncil Service, and the Provincial Civil Service among others, and many occupy positions which require skills above their grade and cannot perform their responsibilities effectively Insomecases the problemis one of over-qualification. Typically, the TOs (Infrastructure and Services), who might have beenextemal engineersPHED at grade 18 prior to devolution, were most uncomfortable with their presentposition. InPunjab the PHED staffers resent the devolution of their department, considering that like W&S, education and health, they should also have been , assignedto the district level andallowed to keep their links with province. The external engineer level staff who have beenpostedas TO (I&S) take exception to the loss of their powers, independenceand largejurisdiction. Box 16: Staff Shortfalls inthe TWs The six study districtsrevealedseveral examples of the capacity problems acinglocal governments.In the two TMAs of Killa Saifullah,two TO seats were vacant, and the TMO an his staff did not havethe d requisite experienceto perform their functions. Inone TMA, a sub-engineerhadan additional responsibilityfor TO (Infrastructureand Services). InKarachi, the TO (Planning) postwas vacant inall 18 TMAs of thecity. Moreover, a significantproportionof the 8390 officers of the KarachiWater and Sewerage Board (KWSB) were political appointees, noneof whom was performinghis duties properly.In Khairpur, the TMO post in tehsil Kot Diji had been lyingvacant for the last three months, while the TOs for Planning,Finance, and Regulation were grade 11employees working in grade 17positions.Inthe TMAs of hWFP,a numberof TO (Planning) positions are vacant. The situationinPunjabwas relatively better-TMO and TO positions were filled inthe TMAs of Faisalabadand Bahawalpur, although the officers inmany cases do not have the skills required.However, inJaranwallaTMA inFaisalabad, almost half of the posts-sanitation workers for the mostpart-are vacant (300 employees out of 567). % Source: ADBDffDM DSDDataset 1. The provinces have taken some steps to improve the technical capacity of local govemments. For example, Punjab i s about to embark on a scheme to buildfinance and accounting capacity through the contract appointment of up to 250 technically qualified experts to support district and tehsil government. This innovation is anexample of the proactive approaches taken by the Punjab Finance Department to getting the key financial systems of loca1,governmentup and running. Technical sanction powers The Delegation of Financial Power Rules designatesthe authorities competent to approve expenditures, outlining the financial powers enjoyed by different categories of officers. 70 Nevertheless, devolution, while producing a degree of centralization of financial powers within the local administration, has also generatedconsiderableambiguity about the financial powersof the staff appointed to the new district andTMA positions. Many senior staff do not have Category Ifinancial authority, and the technical sanction authorities no longer are structured ina coherent hierarchyS6'Even when they do have this authority, as in the case of the DCO, inmany cases the district government has to turn to the provincial government for sanction, particularly in matters relating to the purchase of durable goods. This lack of financial authority impairs budget execution. Development budget execution suffers becausethe powers of technical sanction available at the district level in such provinces as Balochistan and NWFP have declined (Table 19). As aresult, gettingthe required approvals from the province opens the processto political interference, particularly inthose districts that are inpolitical opposition to the provincial government. Denying local govemment this technical sanction authority weakens the staff responsibility since the responsible officials are not district employees andhencecannot be heldresponsible for delays in execution. Furthermore, inthe case of Karachiand Khairpur, the funds for development schemes are releasedthrough account Iby the provincialfinance department. The procedure involves submission of approved PC1to that department, which thenreleasesthe funds for capital portionintwo equal installments. No maximum periodi s fixed for the releaseof funds, and the district governments cannot be certain about the timing of disbursement. Inmany of the districts studied, devolutionhas ledto reduction inthe EDOs' financial powers, particularly inrelation to those of the DCO. For example, inE l l a Saifullah, Bannu and Karachi, EDOs are category I1officers; previously the equivalent position hadcategory Ifinancial powers. As a result, spendingpowers of the ED0have been severely curtailed. By contrast, the financial sanction powers that were formerly accordedto provincial Secretarieshave now devolved to the DCO, and as the Principal Accounting Officer of adistrict, the DCO is a Category Iofficer. He therefore has higher financial sanction andprocurement powers than EDOs of the attached departments.This disparity has the effect of centralizing the budget preparation process and expenditure authorization within the districts, causing some delay in approvals and decisions, particularly affecting the Health and Education departments. Another example of the centralization of financial powers is that not all the officers incharge of Healthand Education departments have beendeclared Drawing and DisbursingOfficers (DDOs). Every department has a number of DDOs, responsible for drawing the pay for all the non- gazettedstaff. Incases where they have beendeclared DDOs, their powers are those of either category IIor category I11officers, a status that limits their powers of budget execution. The technical sanction problem is exacerbatedby the continuation in all provinces of the PHED insome form, either at the provincial headquartersor incircles where they serve as Superintending Engineers with highsanctioning authority. Most schemes of any importance are submitted outside the district for approval. Category Ifinancial powers means that the officers have no limits on their authority to incur liabilities on behalf of the govemment.Category I1and I11havedecreasinglimits. 71 Table 19: Execution of the Development Budget District Coordination Inall the 10TMAs studied, every expenditure is sanctioned, subject to budgetary allocations, by the tehsil nazim, and every check i s signedjointly by the TMO and the aazim. Compared with the district governments, therefore, the TMA budget execution remains a centralized operation inside the TMA. However, the technical staff inTMA need similarly enhances technical sanction powers. So far, only Punjab and the towns in Karachi have notified proper sanction powers'for the TO (I&S). Ideally, the TO (I&S) shouldhavesuch authority up to Rs. 1million, and inthe larger districts, senior level staff like SEs canbe given powers of up to Rs. 20 million. CitizenPower (Client Power) As the WDR argues, service delivery can also be improvedby improvingclient power, that is, strengthening the direct linkage between citizens and service providers. Inmany ways such an approach can be more effective than focusing on efforts to make service providers more accountableto policymakers and policymakers, inturn, to citizens. One shortcut i s to increase consumer power through participation. The LGO and PoliceOrder call for the creation of various bodies that can serve to improve this client power (Table 20). The study considers: 0 Citizen dispute resolution-including Departmental Complaints Cells and Citizen Police LiaisonCommittees. 0 Community managementof facilities-including Citizen Community Boards and School Management Committees. The potentialfor client power in Pakistan needs to be viewed in the context of a generally low level of citizen involvement incommunity organizations. According to the results of the CIET household survey (CIET: 2003), 2 percent of householdshad a male member, and 0.6 percent had afemale member, participating involuntary groups. No significant difference inthe levels of participation separatedurban andrural areas (CIET: 2003). Intheory, decentralization canhave a positive impact on community participation; greater citizen accessibility can reduce the costs and raise the benefits of community mobilization, and the large number of local politicians can act as catalystsfor this mobilization. 72 Table 20: Mechanisms for CitizenDispute Resolutionand CommunityManagementof Services and Facilities I I , educationalmaterials I I The overall conclusion from the field visits i s that it is too early to tell whether or not devolution has had any impact on client power for the better or the worse. A number of participatory mechanisms, such as Village and Neighborhood councils andinsaaf committees, are either not formed or are ineffective, while others, such as Citizen Community Boards and School Management Committees (a pre-devolutioninitiative) have yet to achieve their full potential. On the other hand, there are numerousexamplesfrom the districts visited andfrom others that suggest that innovative local leadership has had a positive impact on community mobilization and inturn on service delivery. Citizen dispute resolution DeDartmental Grievances Redressaland Comulaint Cells Intheory, keepingarecord of all complaints enablesan authority to findout the natureand numberof problems faced by the community it serves. Formalizedmechanisms of redressing grievances, moreover, can be engines for service delivery improvement. The Departmental Grievance RedressalandComplaints Cells envisagedby the LGOs, provide such potential avenues for citizen oversight of official actions and for improvingaccountability. However, these mechanisms are poorly developed in all districts. The most common method used was the installation of a complaints box in various offices. Officials however, tended to forget its existence.Insome placeslike Khairpur specific officials had been designated to redresspublic grievances, but no data were available as to the kind and number of complaints. A complaint cell had beenestablishedinBannu only. Innearly all the districts, senior officers continued to regard answering public complaints as an integral part of their job description, and both written and verbal complaints were common. Whether or not complaints resulted in action, however, seemed to dependon the perseveranceof the complainant rather than the presenceof any institutionalized mechanism. LGO mandates the appointment of a District Ombudsman for each district. This initiative i s modeled onthe relative success of the federal and provincial ombudsman systems, which-with all their faults-have beenable, by usingrelatively informalprocedures to provide relief at little cost to citizens. Unfortunately no DistrictOmbudsman has been appointed in any province. 73 The LGO also contains aprovision on right to information of citizens and disclosure of information by local government offices. It provides that each local government office must display in a prominentplace accessible to citizens information about its staffing and performance during the preceding month. This provision had not beenfollowed inany of the districts visited. Neither had any local government office taken any action to bring to the attention of citizens their rightto information about any office of the localgovernment. Citizen Police Liaison Committees The Citizen Police Liaison Committee i s a self-financing voluntary organization, which citizens can set up to assist the Public Safety Commission and the Police Complaints Authority. The CPLCs inKarachi andFaisalabad, the only two examples inthe study, were establishedbefore the promulgationof the Police Order and are somewhatdifferent from the CPLC it en~isaged.~' Similar indesignand focus, the FaisalabadCPLC i s patternedon that in Karachi. Both assist the public inregistration of FIRSand inresolving civil financial disputes with the active assistance of the police. Additionally, the CPLC inFaisalabadrenovated and equipped police stations, but neither was undertaking any capacity building or assisting the Public Safety Commissions. Infact inFaisalabadthere was resentmentamongthe DPSCmembersthat-because of its good relations with the police-the CPLC had taken over their role. Insummary, these two CPLCs are businessinitiatives, andmost of their membersare industrialists and traders. They undoubtedly helped improve channels for some citizen-police contact, but there i s little evidence this progress promotes a pro-poor orientation in service delivery. Community management of facilities Citizen Communitv Boards The provision for the establishment of CCBs inthe LGO is a significant departure for the government. It marks the first formal recognition that civil society has an important role to play in development and service delivery. A CCB is to be a non-elected voluntary organization, consisting of at least 25 members. It can, inprinciple, be establishedfor a variety of purposes, including initiating andimproving development projects, establishing cooperatives, forming monitoring bodies over police and other service providers andreinforcing the capacity of monitoring committees at the behest of the concernedcouncil. At least 25 percent of the total development budgetof each tier of local government (district, tehsil, and union) mustbe earmarkedfor projects identifiedby CCBs, and each CCB has to make a cash contribution of 20 percent inorder to tap into these funds for a specific project.70Moreover, these CCB development funds cannot be re-appropriated for other activities. Ifunusedat the end of the fiscal year, they mustbe carried forward to subsequentfinancial years. 69 Inaddition, a CPLC hasrecently been establishedin Quetta. These three c$,mprise the only CPLCs inPakistan. '' The Faisalabadand Karachi CPLCs do not undertakethe primary responsibilities as detailed in the Police Order 2002, for example, training of PSC members. The guidelinesspecify that inkind contributions by CCBs will be consideredas an add-onto the 20 percentcash requirementand not a replacementand will betaken into consideration inthe ranking and evaluation of the project proposal. 74 Box 17: CCB SuccessStory A CCB was formed in a newly settled area of Bahawalpurcity, an area that hadmainstreamdevelopmentin the city largely passedby. The CCB was formed with the primary aim of improvingthe seweragesystemof the neighborhood. Its membershipincluded a retiredbank manager,an auditor, a driver and an education worker. Although the UC nazim hadnot won the votes of the majority of the local population, he was still a supporter of the CCB, not acommon occurrence. The CCB was registeredinJune 2002, and completedits first major project, the placement of a sewerage line, by July 2003. Completedat a cost of roughly Rs. 3 million, itbenefits approximately 35 households in the community. The quality of the work was high-CCB members explained that they reducedthe distance betweentwo manholesfor easier and faster flow of water and hadalso increasedthe ratio of cement to sand from 1:7 to 1:4, which strengthened the structure. Fundswere receivedregularly from the union govemment, and accounts, ledgers, cashbooksand all other relevantrecords were maintained meticulously, Payments, evento masonsand contactors,were made by check to avoid any misuseof money. Upon the completion of scheme, the CCB preparedimpressivedetails of the final statements of expenditurefor the UC nazim's appraisal.Their accounts carriedtwo signatures: that of the CCB presidentand the general secretary. These books were maintainedproperly primarily due to the banking expertise of the CCB members as well as their good intentions. As far as the future plans of the CCB are concerned, they were very enthusiastic and willing to undertake more small-scaleprojects such as the buildingof aplayground, mosquesand roads for their locality in the coming years. They also believedthat they could play a role in awareness-raisingcampaignson political and social issues. For example, the CCB is already involved informally in settling local disputes.The CCB members claimed that the community in general hadconfidencein the board and came to them to resolve family problems, fights over children, cases of false registrationsof FIR, and so forth. They also claimedto have been able to work these problems out amicably. For instance,in the case of the false FIR, the CCB took it back from the police and resolved the matter locally. Source: ADBIDfIDIWB DSD Dataset 1. With a few notable exceptions, the districts visited have no functional CCBs. Inmost cases CCBs have not been registered, and where they have been registered, as inFaisalabad and Khairpur, in the main they have not received any development funds, although there are important exceptions. Several reasons account for this poor record. First, CCBs need to be registered before they can gain access to the funds earmarked for them. Registration has to be undertaken by the ED0 Community Development at the district level or TO Planning for tehsil-level schemes and Secretary Community Development for the union level. Ina number o f districts the relevant office was either vacant for a significant period o f time (as inKarachi) or lacked the capacity to undertake the registration (Bannu), Second, until recently the registration guidelines lacked clarity; as a result, some local governments adopted overly cumbersome processes. For example, a Bahawalpur requirement, now abolished, kept CCBs from registeringuntilthe 20 percent contribution was made, and this precondition in turn deterred citizens from contributing to an organization that did not have any legal status. Third, inmany poorer communities the 20 percent cash requirement is prohibitive. Fourth, especially inruralareas, many members do not have the education or trainingto develop the PC-1 for projects and to carry out projects. Finally, and most importantly, in many cases CCBs have not been a priority for the local government political leadership. Most councilors (save for a very few astute nazimeen) see CCBs as competitors for political credit and a source o f rigidity inthe development budget. The NRB has recognizedthis foot- dragging and insisted in buildingpressure for their development by requiringthat the 25 percent 75 set-aside be compounded, creating an increasingly large amount of resources, to provide an incentive for nazimeen and councils to get CCBs working. Ingeneral, there is agenerallack of awareness about-and insome cases hostility toward- CCBs among local electedrepresentatives.For example, the CIET survey revealsthat inthe second half of 2002, about half of the union councilors and 18 percent of the women councilors hadheard of CCBs (CIET: 2003). Inother cases, NGOrepresentativesstated that the local leadership opposed CCBs because they challengedthe government's monopoly over development. CCBs have also in some cases been victims of the politicaltussle between the province and local government. The lack of progress in forming CCBs has had some negative impacts on the already low levels of community involvement noted earlier. InFaisalabad, while over 300 CCBs havebeen registered, none had received any funds at the time of the district visit. Subsequently, 15 have obtained funding. Insome cases, the chairmen of the CCBs note that they have had to return the community's contributions. Some forward motion has occurred, however, where active involvement of councilors and community organizations resultedinsuccessfulCCBs. InBahawalpur, for example, the work of an active CCB has greatly improved the sewerage system of the neighborhood. (See Box 17) The key ingredients for this success story are support from the union government, as exemplified by regular releaseof funds, and an educatedand proactive membership. Another success story comes from district JheluminPunjab, where the district government, inpartnership with a union government and the National Rural Support Program (NRSP), has launched apilot project under which CCBs have beencreatedand are being provided on-the-job training through the implementation of physical infrastructure schemes (street pavement, sewer-drain construction and reservoir construction). The funding arrangementsare shared, with a community contribution of 20 percent, a district government contributionof 50 percent and an NRSP contributionof 30 percent from the Pakistan Poverty Alleviation Fund(PPAF). Schemes are identified on the basis of consensus among membersof the CCB, and the technical tasks of project design andcosting are done by NRSP. The project i s then managedand implemented jointly by NRSP and the CCB, with regular monitoring by the nazim, naib nazim and councilors of the union. To date, six projects at costing roughly Rs. 2 million have been completed. As noted inthe PRSP, government intends the recently established Devolution Trust for Community Empowerment (DTCE) to play a critical role in supporting CCBs. It is notjust to provide technical assistanceand capacity building to nascent CCBs and local governments to assist inmobilization, registration and project planning, but also to facilitate the emergenceof a devolution movement at the locallevel to help consolidate the refoms with citizens as well as the electedrepresentatives.DTCE will work with the National Rural Support Programme to mobilize andtrain communities and councilors. DTCEhas received commitments for fundingsupport from a number of bilateral donor agencies as well as from the UNDPwho will managethe fund School Management Committees A further level of administrative decentralization is available to the facility level. The various examples of this potential inPakistan all predatedevolution and include SMCs, PTAs and water committees.The logic of school-basedmanagement is that parents and the local community have better information about the quality of teaching inthe local schools and of the needs of the local school than central or even sub-national governments. Therefore, school managementcommittees 76 (SMCs) should have responsibility for managing school affairs. Empirical investigations of school autonomy, while few, appear to support this proposition." School Management Committees (SMCs) provide the starkest example examined by the study of attempts to create incentives for service providers to respondto views and concerns of service users. Inrecent years, SMCs have been revived, largely as a result of donor engagement at the provincial level. Namesvary with the provinces-SMCs inSindh and Punjab, ParentTeacher Associations (PTAs) in NWFP, ParentTeacher School Management Committees (PTSMCs) in Balochistan. The structure of the SMCs i s different from the old PTAs (whose membership was limitedto parents andteachers) and includes insome cases representativesfrom NGOS as well as from the local political leadership. As discussedbelow inthe section on Education, the initial results from the newly constituted SMCs are mixed but not without promise. " Two countries that have been studied in some detail areEl Salvador andNicaragua. In El Salvador, community- managedrural schools, calledEDUCO, were given significant decisionmaking authority and autonomy, including the ability to hire andfire teachers andprincipals, choosing textbooks and determining teaching methods, and responsibility for equipping and maintainingthe schools. One study found that EDUCO schools hadmuch higher parent involvement-measured by frequency of meetingswith teachers and visits to classrooms-than tradition schools, andconsequentlythat these schools had a lower incidence of student and teacher absenteeismthan traditional schools (Jimenez and Sawada: 1998). Moreover, this higher parent engagement occurred despite EDUCO parents beingon average poorer than the parentsintraditional schools, suggesting that institutional reformwas a decisive factor in the improved outcomes. InNicaragua,from 1993onwards school management functions havebeentransferred to a select numberof primary and secondary schools. These autonomous schools were given dejure responsibility over teacher management, and over the school plan andbudget. However, one empirical investigation found that de facto autonomy varied considerably across these autonomousschools, and that, after controlling for a variety of student and householdcharacteristics,there was a positive and statistically significant relationship between the degree of decisionmaking actually exercised and student achievement as measuredby test scores (Kingand Ozler: 1998). Furthermore,the ability of schools to monitor teacher activities and teacher staffing had the greatest impact on student achievement. 77 Appendix DATANINSTITUTIONS INTRANSITION O Table 21: Numbers of Local Governmentsafter Devolution overnmen Administrations a. In NWFP, single tehsil districts have been given the opportunity to subdivide tehils into what are termed "towns." However, these have neither the legal undeipinning nor the roles and responsibilities of city district towns. b. 5 of these district govemments have been newly cieatedand while they havethe district administration in place, the Election Commission has yet to hold the indirect elections for the nazim and naib nazim. c. Islamabadbecame a City District inNovember2002 with the passing of the Islamabad Capital Territory Local Government Ordinance. However this has yet to be implemented. Milestones Electiondates Dec. 2000 March 2001 May 2001 Aug. 2001 Sept. 2001 Total Numberof 18 20 20 31 11 10oa districts Numberof union 959 1,459 1577 1,677 353 6,022 councils Numberof union 20,076 30,639 33,117 35,217 7,413 126,462 council seats 78 Table 23: Local Electoral Arrangements for Pakistan in Comparative Perspective Country Number of Local Average population Modeof election of Mode of election GovernmentsB per local mayor of councilors government Argentina 1,100 30,818 D D Bo1ivia 311 27,703 D D Brazil 4,974 31,222 D D Columbia 1,034 34,429 D D Indonesia 370 567,000 I D Philippines 1,538 490,000 n.a. D Pakistan 101 1,443,000 I D Table 24: Impact of the Reforms on Each Level of Government Level of Impact Government/administration FederalGovemment * No change Remains with largely the same structure Provinces * The deconcentratedunits of the major service delivery line departments (staff, assets and budgets) devolved to local govemment. Provincial govemmentnow has no localrepresentationin the devolved service delivery sectors, exceptfor provincialfunctions, but head offices and directoratesremain unchanged Divisional tier of province * Abolished, except for police. Functions, staff and budgets allocated to districts District level province offices Groupedin 11"Groups of Offices" with creation of new offices of F&P, Law and Literacy. e The 11Groups, an electednazim and aZila Council createdto form the new tier of District Government: 97 district govemments and4 city district govemments created.72 Urban andrural local bodies The earlierjurisdictions redrawn to mergerural and urbanareas; in establishedunderLGO 1979 most cases the new precinctsremain coterminouswith the revenue tehsils, while in case of "city districts" the municipal areas were divided to form "towns;" provincial departmentsof Public Health Engineeringdevolved to this level (althoughnot in all provinces) 335 tehsil, taluka, or town municipaladministrations createdlargely with the municipal service delivery mandatesof the local bodies Union administrations Q Insome cases larger Unions havebeendivided and incase of urban * areas also Unions havebeencreated 6022 Union Administrations have beencreatedwith minimal executivefunctions but, legally, a potential to gain more functions Source: ADBDfID/WBDSD Dataset 1. '* ~- Balochistan has since further divided its districts. 79 Table 25: Health FacilitiesTransferred to District Governments and Local Government Department dispensaries Unani Shafakhanas 0 0 20 0 0 0 80 Requirement Ref.Legal Bannu Bahawalpur Faisalabad Karachi Khairpur Killa Provision saifuuah LWWW Preparationof Section112(6) of Incorporated Yes Yes Yes. revisedbudget by NWFP LGO inthe Lncorporated local govi. before 2001 budget ,nbudget inbudget in budget the close of the 112(12) of document jocument document document financial year SLGO2001 for the next 112(11) of financial PLGO 2001 year Approval of the Section 112(6) Approved at Yes Yes Approvedin revisedbudget ofNWFP LGO the time of :hebudget beforethe endof 2001 approvalof session. session. budget the financial year 112(12) of budget SLGO 2001 ended already. 112(11) of PLGO2001 Notification of the Section 11212) of June 2002 28.06.02 26.06.02 Yes June 2002 provincial shares NWEPLGO ' for the district 2001 govt. by the govt. 1Il(2) of SLGO from provincial 2001 allocableamount 112(1)of PLGO 200i - ' Presentationof the Section112(1)of 07.08.02* 09.07.02 25.06.02 budgetfor NWFP LGO approvalof the 2001 respectiveCouncil 112(l)OfSLGO 2001 11l(2) of PLGO 2001 Detailedscrutiny No legal - Informal No Yes and provision under recommendation NWFP LGO to the Council by 2001 the Budget 112(3)of SLGO Committee 2001 No legal provision in PLGO2001 Approval of the Section 112(3) of Yes Yes Yes Yes budgetby simple NWFPLGO majority of the 2001 total membership 112(4) of SLGO of the respective 2001 Council 112(3)of PLGO 2001 Approval of Section 112(1) No 9.07.02 29.06.02 29.06.02 budget Beforethe of NWFPLGO approved beginningof 2001 within 30 financial year 112(7) of SLGO days ofJune 2001 112(6) of PLGO 2001 Authcnticationof No legal Yes No No No Authenticated Schedule of provisionin on August Expenditureby NWFP 27,2002 nnzim? 112(9) of SLGO 2001 112(8) of PLGO 2001 81 Table 26: Implementationof BudgetReformsas Requiredby the LGO Requirement Ref. Legal Bannu Bahawalpur Faisalabad Karachi Khairpur Killa Provision Saifullah __lll-. Preparationof Section 112(6) of Yes Yes. Yes. Yes. r`es Jnder revisedbudget by NWP LGO Incorporated ireparation local govt. before 2001 inbudget the close of the 112(12)of document financial year SLGO 2001 112(11)of PLGO 2001 Approval of the Section 112 (6) Approvedat Yes Yes Approved in VO. 4ot approved revisedbudget of NWFPLGO the time of the budget illJuly4Ih, beforethe end of 2001 approval of session. !003 the financial year 112(12)of budget SLGO 2001 2003/04 112(11)of PLGO2001 Notification of the Section 112(2) of June 16, 25.06.03 24.06.03 Yes Yes gotified on provincial shares NWFPLGO ' 2003 une 28. for the district 2001 !003. govt. by thegovt. 11l(2) of SLGO from provincial 2001 allocableamount 112(1)ofPLGO 2001 Presentationof the Section 112(1) of 23.07.03 * 25.06.03 26.06.03 June 25 July 4 \lot presented budget for NWFP LGO 2003 2003 inti1July 4Ih approvalof the 2001 2003 respectiveCouncil 112(1)0fSLGO 2001 11l(2) of PLGO 2001 Detailed scrutiny No legal - Informal No Yes Yes - and provision under recommendation NWFP LGO to the Council by 2001 the Budget 112(3) of SLGO Committee 2001 No legal provisionin PLGO 2001 Approval of the Section 112(3) of Yes Yes Yes Yes Yes budgetby simple NWFP LGO majority of the 2001 total membership 112(4) of SLGO of the respective 2001 Council 112(3) of PLGO 2001 Approval of Section 112 (1) No 27.06.03 27.06.03 30.06.03 4.07.03 budgetBefore the of NWFPLGO beginningof 2001 financial year 112(7) of SLGO 2001 112(6) of PLGO 2001 - ` Authenticationof Nolegal Yes Yes No No Schedule of provision in Expenditureby NWFP nazim? 112(9) of SLGO ., 2001 112(8) of PLGO 2001 -Not available. Source: ADBlDfIDlWB DSDDataset 1. 82 Table 27: APT AuthoritiesintheDistricts Balochistan Sindh NWFP Punjab KillaSaifuUah Karachi Khairpur Bannu Bahawalpur Faisalabad c I I - i 3a 3 a3 3 3 1 h 8n - x 0 0 a x a not avi cem b. Inconsultation with the district nazim. Source: ADB/DffD/WBDSDDataset 1. 83 Table 28: Honoraria for Members of DistrictMonitoring Committees 1Committee I KS IKarachi I Bannu I Bahawalpur Khairpur members Faisdabad I District nazim Yes Yes Yes District naib nazim Yes Yes Yes Yes Yes Yes Res. Dis. Yes No No Councilor* Yes Yes Yes Yes Yes Yes Tehsil nazim Yes Yes Yes Yes No Yes Tehsil naib nuzim Yes No Yes Yes No Yes Union nazim . Yes No Yes Yes No Yes Union naib nazim Yes No No N O No No Union councilor *Those who occupy reservedseats (women,peasants, workers, and minorities). Source: ADBIDflDIWB DSDDataset 1. Nature of Killa Karachi Bannu Bahawalpur Khairpur Faisalabad Cases Saifullah Institution from 1/1/01 to 5 4 9 55,615 9,072 - 7,072 - 31/12/01 Disposal from 1/1/01to 569 49,088 7,745 21763 4,755 48,608 31/I2/01 Table 30: Comparison of sanctionedand actual strength of police (October 2003) Source: ADBIDfIDMrB DSDDataset 1. 84 Table 31: StaffingStrengthofJudges, October 2003 Magistrateg Total 125 I 86 a. The Sessions Judge has iurisdiction over three districts namely Loralai, Killa Saifullah, and Barkhan. b. There are five Diitrict aid SessionsJudges in Karachi and oneDistrict Judge havingjurisdiction over small causes. c. An appellate as well as court of first instance in areas subject to the Balochistan Civil Disputes (Application of Shariat) Regulation 1976.The Mujlis-i-Shooru having authority in Killa Saifullah also hasjurisdiction over Sanjavi tehsil of District Ziarat and Bori Tehsil of Loralai District. Caseloadpertains to the whole of the Mujlis-i-shooru's jurisdiction. d. The Senior Civiljudges in Sindh also havecriminal powers of the Assistant Sessionsjudge. e. The Civil Judge Loralai has nojurisdiction over civil disputesin Killa Saifullah except where the governmentis one of the parties. f. A court of first instancefor civil disputes in areas subjectto the Balochistan Civil Disputes(Application of Shariat) Regulation 1976. g. Former executive magistrateson loanto thejudiciary andperforming the work of the defunct executive magistracy. Source: ADB/DfID/WB DSDDataset 1. 85 DATA VERTICAL PROGRAMS ON Table 32 lists a sample of highly vertical programs in education, health, and water and sanitation. Some o f these programs are specific to the sector, such as ESR and LHW while others, such as KPPand the various Tameeri programs in the provinces, are more generally for local development works, such as farm-to-market roads, drains, and school construction and upgrading. The table also gives an estimate of how vertical these programs are (High, Medium, and Low), measured by which level of govemment i s responsible for planning and operational design for the program budgeting and financing, and expenditure control. How vertical? Higher level of government responsible for: M 8 7 gg2 3.g .E j gg% &I2 5 - g e Y ! L l O !25 & O Q 2 2 Federal-provincial Health - - LHW The National Programfor Family Planning and Primary Health Care, better M H H known as the Lady HealthWorker (LHW) program. LHWs are women from the community with at least Grade 8 educationand who meet certain other criteria and who are selectedby the staff of the nearby basic health unit (BHU) indiscussion with village leaders.The LHWs arepaid a small stipendto provide simple preventive, promotive, and curative services in the communities where they live. These services includepromotion and provision of family planning services, nutrition promotion, prevention of childhood infectious diseases through immunization, health education, and treatment of diseases like acuterespiratory tract infectionsand diarrhea. This i s the only health vertical program that is fully funded by the federal government (salaries, medicines, and POL are paid by the federal government, via the provincial coordinator- that is, funds are transferreddirectly from federal govt. To PLAs of provincial coordinator and then releasedonwards to accounts of individual LHWs). District health authorities and representatives of the provincial health coordinator of the programjointly recruit LHWs, .ED0 H's representative, the Idistrict coordinator of the program, supervises them. Parallel supervision by the provincial coordinator also exists. Provincial-local (donor-funded)' Education Sindh Supportedby the World Bank's Sindh Structural Adjustment Credit, the M M M Education Education Reform program consists of provincial vertical programs for the Reform provision of free textbooks and funds for School ManagementCommittees. Program Planning, budgeting, and expenditure control is with th;: province. Textbook allocationsper school and funds per SMC are identified by the province, and in both cases funds are transferred from Account 1 into the PLAs of DCOs. There have been major delays in the releaseof funds, particularly from the DCOs onwards to the accounts of the SMCs. 86 How vertical? Higher level of government responsible for: w zz 2.8 M'5 '52!gz &G B ,% .E 0 '- Q 0 - 2 3 gg 33 Water and ,nitsttion -- DFID DFIDRuralWater Supply andSanitationProgram(RWSS) is designedto M M L RWSS improve the institutional capacityof the tehsik to deliver low cost,appropriate NWFP and sustainable drinking water and sanitation services. The program (initially project for designedprior to devolution) has been redesigned with the needs of the new Watsan local government system as its focus, given that planning and implementation of Water and sanitation services are now the responsibility of TMAs. There is a scheme selection committee (SSC) in each tehsil headedby the tehsil or town nazim and includes the main tehsil officers including TMO, TOs (Infrastructure) (Finance) (Planning). The schemes prioritized and chosenby this committee will be sent to the tehsil or town council for endorsement (as per the LGO).As this program is province wide, the overall implementationof the program is the responsibility of LGERDD with technical support from the Sarhad Rural Support Program.SRSP is also responsiblefor working with the fehsil to develop their capacity to work with citizens in identifying needs. The Minister, LGERDDheads the project SteeringCommittee at provincial level which includes representatives of P&D, Finance, Health, Schools and Literacy, Social Welfare and Women's Development. The provincial committee provides policy guidelines andoverall monitoring, including setting the prioritization and selection criteria. Finance flows from the Provinceto a separate rehsil project account on the basis of the schemes approved for that tehsil. --- DERA Drought EmergencyRelief Assistance. Fundedby the federal government, M H M with World bank assistance, the program is executed by the provincial P&D department.That is, provincial P&D departmentidentifiesthe schemes, and funds are transferredvia Account 1. District officials in both Balochistan and NWFP were very critical of these schemes, as sites are selected by MPAs with very little input from the districts. InNWFP the provincial government has recently establishedSEcircle offices, on the behest of MPAs and some senior W&S departmentofficials, to effectively control the vertical programs --- DIMRC Drought Impact Mitigation andRelief Component (DMRC). Similar to M H M DERA. Federally funded, with ADB assistance. -- PCWSSP Punjab Community Water Supply and Sanitation Program. This ADB funded L M M project will haveits own ProjectDirector basedin Lahore while six Deputy Project Directors (DPD) have been placed in six circles covering four to five districts each. The schemes will be identified in collaboration with tehsil and district government while execution will be done by DPD and after completion these would behandedover to communities for O&M - I 87 How vertical? Higher level of government responsible for: 00 -- Tameer Each province has allowed individual MPAs to identify developmentschemes H H H programs o f up to Rs. 10million. These schemes can be identifiedfor any sector and area under the provincial domain and therefore in all areas devolved to the district andtehsil governments.In Punjab, a District SteeringCommittee, consisting of the MPA from the district, the DCO, ED0F&P, and the TOs Infrastructureof all the tehsils, identifies the schemes.Oncethese schemes are identified, they are then sent to the District Development Committee (chaired by the DCO) for technical approval. Therefore both scheme identification and scheme approval can have de facto little "district input." In Sindh, the guidelines issuedby P&D statethat "schemes identified by the elected representativescan beexecutedby the ProvincialDepartmentor by the Districts-lected representatives while forwarding the proposalsmay indicate the agency accordingly for preparationas well as execution of their I development schemes." The PDWPcan give technical sanction to schemes even inthose sectors that fall under the purview of the districts. a. This chart omits proposedWorld Bank projects that are now unlikely to proceed:the Community BasedMaternal and Child Health Project (to support the Lady Health Worker program); the Punjab Municipal ServicesImprovement Project (to improve urbanmunicipal services-water supply, sewerage, sanitation); and the NWFP Community Infrastructure Project 2 (local infrastructure). Source: ADBIDfIDIWB DSD Dataset I. Table 33 sets out some of the input-based conditional grants that, although less vertical, are conditioned on inputs (that is, earmarked, preventing flexible planning andbudgeting) and require that the recipient sub-national government provide distinct arrangements for expenditure control. Table 33: LessVertical Programs(Delegated Expenditures) How vertical? Higher level of govemment responsible for: 2 3 ,.& M s- g .cM.o"Q .gg g 2 .E5 o v-3 ML; 6 g m u % g a o u 2 % ESR The Education Sector Reform program (ESR) is a federally funded program that M H M has the following components: introductionof a technical stream in secondary schools; science education in secondary schools; adult literacy; establishment of EFA units, early childhood education; rehabilitation of primary school facilities; and quality assurance(teacher training, national educationassessment). Of these the rehabilitationof school facilities i s by far the biggestcomponent. The federal government does the macroplanning, such as the size of the allocation for each of these thrust area, while implementation rests with the districts. I Health 88 Table 33: Less Vertical Programs (Delegated Expenditures) How vertical? Higher level of government responsible for: I3= t EPI The ExtendedProgram on Immunizationprovides childhood vaccination for L sevendiseases. The federal government,through the provincial coordinator, provides vaccines and equipment (purchased from UNICEF), including vehicles. Salaries of vaccination staff are paid by the district governments in Punjab, NWFP, and Balochistan, and by the Province in Sindh. The districts, through Account 4, pay for the POL, and other non-salary inputs in all the four provinces. All vaccination planning, as well as supervision of staff, is done at the district MCP Malaria Control Program. The federal government supplies the insecticides, anti M L malarial medicinesand money for spraying campaigns to the provincial coordinator of the program. Insecticides and medicines are then delivered to the district inkind, whereas the money goes through the treasury under the provincial account. All the employees are now on the pay roll of the district under the control of theED0(H). -- TB Directly observed treatment system (DOTS)program for controlling the M L DOTS tuberculosis. Inthis program patients are diagnosed and their treatment done under close supervision of arelative or any other person who ensures that the patient takes medicines on time. The provincial governmentpurchasesand supplies the medicines and reagentsthrough a provincial coordinator; existing district and provincial healthfacilities are utilized for diagnosis andfollow up. Planning, such as geographical prioritization, as well as coordination and supervision of the BHUs is done by the districts, -- Water an( KPP Under the KPP the federal government transfers the funds to the districts L H MI administration (or district governments), which are to be spent as per their priorities on smallcivil works schemes. The federal governmentspecifies the L criteria for scheme selection-there was only a negativelist of sectors and areas for which thesefunds can not be used ,and a cap on the size of the scheme-and the districts identify the schemes. In all provinces except Sindh funds are transferredinto Account 4; in Sindh they are transferredvia Account 1. Provincit Punjab Supportedby the World Bank, the reforms focus on improving access through Education the rehabilitation of primary schools, and improving quality throughteacher Sector training and free textbook provision. The centerpieceof this program i s the Terms of PartnershipAgreements betweenthe provincial government and participatingdistricts. Basedon these agreements, the province will provide conditionalgrants to districts in Account 4, outside the PFC framework. These grants will be conditional on a number of items such as increasededucation expenditure allocations, meeting of reform targets, andmeeting of other education indicator targets. Sindh ADB programmatic loan focusing on education, health, andwater supply and Devolved sanitation services. Under the program, the province anddistricts will enter Social into contractual agreements whereby the province will provide a conditional block graqt to local governments (through account IV) to undertake social Program sector development according to local priorities within the definedprogram scope. This grant will be conditional on a number of activities such as allocationof funds to SMCs, incentive schemes for girls, and public-private partnerships. 89 Table 33: Less Vertical Programs (DelegatedExpenditures) How vertical? Higher level of govemment responsible for: , Southern ADB project sector investment loanfocusing on municipal services, including Punjab water, sanitation, solid waste managementand minor supportfor local credit Basic activities. Under the program, inthe first year, TMAs will be eligible to T Urban receive grants for implementation of water and sanitation activities, provided Service they also met basic access conditions-including demonstratingavailability to Project technical staff, contracting and supervisioncapacity, and completionof surveys to determine water fee collection potential and to prepareaction plans for reduction in arrears.Inthe secondandsubsequentyears, the balanceof resourcesfromTMAs that have not met these conditions will be available to competitive allocationto TMAs on the basis of performance.Grants will then I be fully conditional on TMA performanceand will have establishedthe basis for PFC conditional grantsfor municipal services in the future. 1 1. In addition to vertical programs targetedat all districts, other, smaller, vertical programs ope e inselected di! only. For example, the Tawana Pakistanis a school nutrition program currently being implemented in26 districts through nongovernmental organizations that receivefunds from the district government. 2. This chart omits proposedWorld Bank projects that are now unlikely to proceed: the Community BasedMaternal and Child Health Project (to support the Lady Health Worker program); the Punjab Municipal ServicesImprovement Project (to improve urban municipal services-water supply, sewerage, sanitation); and the NWFP Community Infrastructure Project 2 (local infrastructure). Source: ADBIDflDIWB DSDDataset 1. 90 Glossary Anjuman Society or organization Challan Indictment Gully koocha Street andneighborhood Grampanchayat Local council (India) Insaaf Justice Insaaf committee Local committee whose function i s to help citizens pursuecomplaints about the functioning of subordinatecourts Jirga Traditional or tribal council Kotwal Police officer in Moghul times Kutchery Local magistratecourts Majlis-i-shoora Consultativecouncil Madrassah Islamic religious school Markaz Headquartersor center Mohtasib Ombudsman Muk mu-ka) An arrangement; referenceto corrupt deals madeby police Musalihat Reconciliation Musalihat Anjuman (orAnjuman- Society, organization, or committee for reconciliation i-Musalihat) Naib nazim Deputy mayor Nazim Mayor Nazimeen Mayors Panchayat Council Qazi Judgeunder Islamic law Shariat Islamic law Sifarish Recommendationof apatron Taluka Town (same meaning as tehsil, but usedsolely in Sindh) Tehbazari Use of pedestrianwalkways for the selling of merchandise Tehsil Town Thana Police station Zakat Alms Zila District Ziladar District officer (historical term) 91 References Ahmad, NuzhatandSyedAshraf Wasti. 2003. 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