Governance system for local governments – Part 1

Devolution, decentralization and financial delegation

Why local government? The World Bank in its 1997 report asserts that governments are more effective when they listen to businesses and citizens, and work in partnership with them in deciding and implementing policy. Where governments lack mechanisms to listen, they are not responsive to people’s interests.

The devolution of authority to local tiers of government and decentralization can bring in representation of local business and citizens’ interests. The visibility of the results achieved by the resources deployed in a specific geographic area maintains pressure on government functionaries. Public–private partnerships. including NGO–public partnerships have proved to be effective tools in fostering good governance.

The World Development Report (WDR 2004) has argued that the accountability of governments to local communities and marginalized social groups will increase by assigning service delivery functions to politicians who are closer to the people and make them electorally accountable.

The 1973 constitution did specify only two tiers of government – federal and provincial. It is only after the 18th Amendment in 2010 that a new clause – Article 140A – was introduced which states that “Each province shall, by law, establish a local government system and devolve political, administrative and financial responsibility and authority to the elected representatives of the local governments.”

The Supreme court has asserted and directed the holding of elections of local governments on several occasions. Unfortunately, unlike the detailed distribution of powers between the federal and the provincial governments clearly defined in the constitution, there is no such provision for local governments. This vagueness and ambiguity has been used by the provincial governments which have been struggling to come to some reasonable piece of legislation since 2010 on the functions and powers of this tier.

Logically, once the provincial governments were devolved, adequate powers accompanied by sufficient financial allocations out of the divisible tax pool and grants from the federal government there should have been similar decentralization and delegation to the local governments. How is it possible for Punjab, with a population of 110 million people and 36 districts covering an area of 205000 sq km, to respond to the disparate needs of citizens in the delivery of essential services? DG Khan and Faisalabad, for example, have very different requirements and a uniform one-shoe-fits-all approach that is the characteristic of an overcentralized system won’t simply work.

The present culture of concentrating authority in power centres at Islamabad, Lahore, Karachi, Peshawar and Quetta has not only alienated the population living in the peripheries, but reduced its productive potential also – and to no small extent. It is little surprise then that our research found 80 districts whose ordinary citizens are living in miserable conditions, according to the Deprivation Index, and remain almost criminally starved of their most basic needs.

The political parties that introduced this article in the constitution do not realize that meaningful empowerment of communities through decentralization and delegation of authority, in which the local government system plays a crucial role would in the long run promote greater trust, cohesion and harmony in our society and ensure access to basic public services in an efficient and equitable manner. These outcomes will not only help mobilize additional resources at the local level but also improve the efficiency of resource utilization.

The present state of disaffection and discontentment with the government would also be mitigated if public goods and services of everyday use to the citizens become available to them at the grassroots level. Local communities know their problems and their solutions much better than anybody else. It has also been found that for direct delivery by the government, the transfer of responsibility for these services to lower tiers of governance improves access by the poor.

Local government management of schools and hospitals involving communities and demand-side subsidies to the poor, monitored and under the oversight of government result in a favourable outcome in education and health. As these political parties will also contest elections, they will be represented at that tier of government too. Thus, the credit for citizen satisfaction, efficient allocation of resources and better access to essential services would go to the political parties themselves.

However, the myopic and self-centred approach adopted by all major political parties and resistance to empowerment and strengthening local governments is highly incomprehensible as in actual fact it simply entails the transfer of power from the provincial and national legislators and the ministers to the locally elected nazims or mayors of the districts. Those seeking to preserve their status, clout and influence should opt for local nazim positions rather than becoming MPAs or MNAs.

The 2001-2009 period: It would be useful to make an objective assessment of the local government system that existed in Pakistan between 2001 and 2009. There were many flaws in the 2001 system, including the fact that the functions of law and order, revenue records, and land administration and disaster management should have remained with neutral civil servants and not transferred to the nazims. In that event, the offices of the deputy/assistant commissioner should not have been abolished, thereby diluting the writ of the state.

The executive authority of the newly created post of district coordination officer – DCO – was diluted as magisterial powers were taken away from him or her although s/he was expected to perform duties relating to maintenance of law and order, removal of encroachments, price controls, and the like. As the powers of recruitment, transfers, postings, and disciplinary actions continued to remain vested in the provincial departments, the diarchy proved to be fatal for the effective functioning of the devolved departments.

The gap between law and actual practice remained wide to the detriment of the public at large. Corruption at the district government level could not be contained given the inadequate supervisory arrangements evolved by the provincial governments. The provincial secretaries retained considerable administrative authority over the district bureaucrats and used these powers to undercut the efficacy of the elective nazims. A tripartite confrontational mode in which the provincial ministers and secretaries aligned themselves against the district nazims was responsible for most of the practical difficulties faced by the citizens in access to services.

The degree of fiscal decentralization remained limited because the districts continued to depend upon the province for resources, didn’t have the powers to collect new taxes, and didn’t have the capacity to levy service or user charges. On the expenditure side, the fixed and growing expense of salaries, wages, and allowances paid to the staff devolved to the district governments (although they continue to be provincial servants) did not leave much surplus for either maintenance, operational, and development expenditure.

Over 90 per cent of expenditure of local governments was financed by transfers from the provincial governments. Lack of enhancement in local fiscal powers was a major weakness in the process of fiscal decentralization.

The share of local governments in the provincial allocable pool was about 40 per cent but their share in total public expenditure was only 13 per cent. Resource mobilization at the provincial and local levels remained substantially under-exploited. Land revenue accounted for less than one per cent of the agricultural income while the effective rate of property taxation of rental incomes was about five per cent as opposed to the statutory rate of 20 per cent or more.

 The fragmentation of development projects into small schemes catered to the narrow interests of the local communities without any sense of priority, linkages, or widespread coverage.

Ideally, the transfer of resources from urban to rural areas should be a welcome move but such a transfer in the absence of a district-wide plan without specifying the goals to be achieved and assessing the cost-benefit of the approved schemes can be counterproductive. Urban-rural integration did not recognize or cater to the needs of growing urbanization.

Hasnain concludes on the basis of his study that in order to keep his voters happy, the district nazim would have very little choice but to acquiesce to the pressures exerted by the union and tehsil Nazims to allocate resources equally. The difference between ‘equal’ and ‘equitable’ distribution of resources should be understood as it is at the crux of the problem.

Under an ‘equal’ distribution scheme there is no clear relationship between the needs of the community and the intended interventions. Rich and poor communities will receive the same amount irrespective of the intensity of their need. ‘Equitable’ distribution takes into account the differences in the initial endowments and conditions of the intended beneficiaries. Those who are poor, marginalized, live in remote or geographically disadvantaged areas and cannot earn decent incomes on their own should receive higher allocations than those who are better off. Public resources thus supplement the private incomes of the poor to help out of poverty.

Two innovative features of the 2001 system are worth mentioning. The reservation of one-third seats for women and others for peasants, workers, minorities, the marginalized classes of our society, was an extremely commendable step. Similarly, the integration of the rural and urban administrative units at the tehsil level would have allowed the rural areas to benefit equally from the larger envelope of pooled resources available to the Tehsil Council. Even if the underlying patron-client relationship persists, the scope for inclusion of clients who were traditionally denied access under a MNA/MPA centred system, will be much wider under a decentralized and devolved system.

However, despite these flaws, empirical studies and surveys point to the net positive achievements of the local government system. The Social Audit Survey 2009-10 of 12,000 households drawn from 21 districts in all four provinces found that 56 per cent favoured the continuation of the local government system with high proportions in Punjab and Sindh. The level of satisfaction with the union councils was 33.8 per cent but the situation regarding support and social acceptability of women’s participation seemed to have improved. Sixty per cent of female union councilors were of the view that people in their constituencies were happy with them.

The satisfaction levels of households with various public services varied but by 2009-10 satisfaction with roads, sewerage and sanitation, garbage disposal, water supply, health and education had improved although in percentage terms only less than half of the households expressed satisfaction with the services. Public education, at 58 per cent, showed the highest level of satisfaction.

The Social Policy Development Centre (SPDC) carried out a survey of 12 districts in the four provinces and found that the rate of enhancement in literacy of the population and access to water supply and sanitation had perceptibly increased during the post-devolution period. However, there were no indications of any impact of devolution on health indicators. The process of devolution was beginning to contribute to a quicker improvement in enrolment at the primary level and literacy in Pakistan.

At a micro level, Cheema and Mohmand analyzed a dataset of 364 households in the rural tehsil of Jaranwala in Faisalabad District to gain some insights regarding the types of households which gain and lose through electoral decentralization and whether the change in the post-reform provision between different household types is equitable. The empirical results of their study showed that increased access to development funds and heightened mandates for union nazims have resulted in a significant increase in union level provisions within a short span of time. They further found that the increase in the post-reform provision in nazim villages is less elite-based as it encompasses small peasants, minority peasant biradaris, and non-agricultural castes.

Hasnain reports on the basis of a survey carried out in 2005 that over 60 per cent of the households stated that they would approach a union councilor or Nazim to resolve their problems in comparison to only 10 per cent who said they would approach members of the provincial or national assembly. This reflects the increase in accessibility of policymakers after devolution. A system in which bureaucrats control the development departments provides neither access nor accountability. Having a system of elected nazims and councilors who remain responsive to the needs of their citizens is better because these officials are liable to lose their offices if they do not fulfil their responsibilities and duties. The best one can do with a recalcitrant bureaucrat is to transfer him out of a particular district but that does not resolve the inherent problem of access to the poor.

Cheema, Khawaja and Qadir in their study found that three types of changes were brought about by the 2001 devolution. One, changes in the decision-making level of the service – from provincial bureaucrats to district level bureaucracy. Two, changes in the decision-maker’s accountability – from bureaucrats to elected representatives at the district level; and three, changes in the fiscal resources available to the service.

The education department, primary healthcare and the management of district and tehsil hospitals experienced a change of the first type, where the decisions previously made by the provincial secretariat and the provincial cabinet were transferred to the district nazim and executive district officers.

The municipal services provided by the local government, the rural development department, and the public health engineering departments of the provincial government became the sole functional responsibility of the tehsil municipal administration. This was a fundamental change because the power to allocate resources, prioritize projects, and deliver results moved away from 48 provincial departments to 6000 units of local government whereas prior to devolution, the deconcentrated provincial bureaucracy at the district level was accountable to their non-elected provincial secretariat. The 2001 devolution made them accountable to the elected heads of districts and tehsil governments. Under the previous system, the de-facto head of the district administration was the district commissioner who would report to the non-elected commissioner while after devolution he reported to the elected district nazim (mayor).

Their study also found that a ‘rule-based’ fiscal transfer system between the provinces and the local governments was established under the 2001 Devolution Plan. Approximately 40 per cent of the provincial consolidated fund was distributed among local governments with due weightage given to backwardness in order to ensure some form of equity across districts in the allocation of development funds. The other innovation was that these budgetary transfers did not lapse at the end of the year but continued to be retained by the relevant local governments, providing for flexibility and presumably some improvement in the efficiency of resource allocation

Proposed governance system for local governments: In light of the experience of the 2001 LGO, let us now examine what needs to be done to avoid the weaknesses of the previous system and implement the spirit of Article 140A using political, administrative and financial dimensions of devolution.

The remainder of this piece will be published in next week’s issue.

Dr. Ishrat Husain
Dr. Ishrat Husain
Dr Hussain is a former governor of the State Bank of Pakistan.


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