decentralization in iraq

8/12/2019 Decentralization in Iraq

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DECENTRALIZATION IN IRAQCHALLENGES AND SOLUTIONSFOR THE FEDERAL AND LOCAL GOVERNMENTS


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DECENTRALIZATION IN IRAQCHALLENGES AND SOLUTIONS

FOR THE FEDERAL AND LOCAL GOVERNMENTS

2011

INTERNATIONAL CONFERENCE ON DECENTRALIZATION,LOCAL GOVERNANCE AND SERVICE DELIVERY:

SHARING EXPERIENCE AND SUSTAINING PROGRESS IN URBAN IRAQ8 -10 MAY 2011, AMMAN, JORDAN


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MESSAGE FROM THE EXECUTIVE DIRECTOR

FOREWORD

INTRODUCTION

WHY DECENTRALIZATION CAN HELP IRAQMEET THE CHALLENGES OF URBANIZATION

HOW TO DRIVE FORWARD PROGRESSON DECENTRALIZATION

POLITICAL DECENTRALIZATION AND THE LEGALFRAMEWORK: WHY REFORM IS NEEDED ON THEASSIGNMENT OF RESPONSIBILITIES BETWEENDIFFERENT LEVELS OF GOVERNMENT

1. The current legal framework fordecentralization

2. Clarifying the assignment of responsibilities

3. No provision for dispute resolution

4. Recommendations and conclusions

EFFECTIVE STRATEGIES FOR FISCALDECENTRALIZATION AND MANAGEMENT OFLOCAL BUDGETS

1. The framework for fiscal decentralization

2. Creation of budgeting and managing capacity

3. Devolving fiscal power to local governments

4. Own-source revenues

5. Transferring money to local governments:shared revenues and intergovernmentaltransfers


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INTERNATIONAL CONFERENCE ON DECENTRALIZATION, LOCAL GOVERNANCE AND SERVICE DELIVERY:SHARING EXPERIENCE AND SUSTAINING PROGRESS IN URBAN IRAQ8 -10 MAY 2011, AMMAN, JORDAN

CONTENTS

BRINGING CITIZENS INTO THE DEMOCRATICPROCESS: THE VALUE OF COMMUNITYPARTICIPATION

1. Post-conflict redevelopment: examples fromother countries

2. Initiatives to encourage communityparticipation

3. The role of e-governance


IMPLEMENTING STRUCTURES FOR BETTERDELIVERY OF SERVICES

1. Accountability for service provision

2. Capacity building

3. Administrative structures for service delivery

4. Market finance for service delivery


APPENDICES

I. List of speakers and biographies

II. Case studies from Indonesia,China, Nepal and Turkey

III. Selected articles from the Iraq constitution

IV. Selected articles from Law 21 of 2008

V. Conclusions of the Conference Workshops

Copyright United Nations Human Settlements Programme(UN-HABITAT) 2011

All rights reservedUnited Nations Human Settlements Programme (UN-HABITAT)

P.O. Box 30030 00100 Nairobi GPO KENYATel: 254-020-7623120 (Central Office)www.unhabitat.org

HS/011/12E

DISCLAIMERThe designations employed and the presentation of material in this publication donot imply the expression of any opinion whatsoever on the part of the secretariat ofthe United Nations concerning the legal status of any county, territory, city or area orits authorities, or concerning the delimitation of its frontiers or boundaries regardingits economic system or degree of development. Excerpts may bereproducedwithout authorization, on condition that the source is indicated. Views expressedin this publication do not necessarily reflect those of the United Nations HumanSettlements Programme, the United Nations and its member states.

Cover photos iStockphoto.com/ericsphotography

ACKNOWLEDGEMENTS

Principal authors: Richard Forster, Nick MichellDesign and layout: Richard BoalConsultant editors: Fiona McCluney and Suman Kumar

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his report presents the outcomesof UN-HA BIAs InternationalConference on Decentralization,Local Governance and ServiceDelivery: Sharing Experience andSustaining Progress in Urban Iraq,which took place in Amman, Jordanfrom 8-10 May 2011.

Decentralization has been gainingincreasing attention as a means of

improving the provision of publicgoods and services as the importanceof reforming public-service deliveryhas moved to the forefront of thecurrent policy agenda. For manyyears, local governments have beenrecognized as key actors in theeconomic and social development ofany society and also as the startingpoint for democratic expression. Localauthorities can be representative,legitimate and efficient in steeringlocal urban development.

UN-HABIA is committedto supporting the process ofdecentralization in many countriesacross the world, highlighted in 2007and 2009, when the GoverningCouncil of UN-HABIAapproved two sets of guidelines,where member states of the UnitedNations committed themselves to thepromotion of decentralization andstrengthening of local authorities,and to providing access to basicservices for all. he guidelines weredesigned to assist policy reformsand legislative action at the countrylevel in two complementary areasof UN-HABIAs mandate. heywere prepared through an intensiveconsultative and participatory processinvolving many partners, includingUN agencies as well as national andlocal governments.

In developing countries,governments have experimented withdifferent forms of decentralizationto bring service delivery closer to thepeople. National governments areincreasingly sharing the responsibilityfor service provision with the localgovernments in a variety of publicarrangements that aim to increase theaccountability and responsiveness ofservice delivery. It has been widely

observed that decentralized servicedelivery can result in quicker gainsthan with a centralized system.

his is especially important in acountry like Iraq where 70 percent ofthe population is now living in cities,which are in a state of post-conflictreconstruction. he displacement ofcitizens and fragmentation of the citythrough conflict has left Baghdadwith 10 percent of its citizens inunacceptable conditions with limitedaccess to basic services.

Decentralization is one processto help improve access to servicesfor the urban population. he2005 Constitution of Iraq advancedthe reform process by establishinga model of decentralized politicaland administrative governmentthrough devolution of authority tothe governorates. In March 2008, theProvincial Powers Law defined theroles and responsibilities of both theelected local bodies and the associatedadministrative units at governorate,district and sub-district levels.

At both the political andadministrative levels, the law directstowards greater decentralization, whichrepresents a profound transformationfrom the way government decision-making process operated under the

previous totalitarian regime. Butwhile this law provides a strongbasis for the empowerment of localgovernments, it does not provide acomprehensive insight to establishan effective and efficient decentralizedsystem in the country.

he conference sought toaddress such challenges and providea focused practical perspective onhow decentralization in urban areaspromotes local government as aneffective tool for service delivery. Ihope this report can advance thecause of decentralization to thebenefit of Iraqs federal and localgovernments, its citizens, its non-governmental organizations, civilsociety and all international partnersand stakeholders working to developurban policies for Iraq.


Dr. Joan ClosExecutive Director, UN-HABIA

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he famous French historian andpolitical thinker Alexis de ocquevillenoted that Decentralization has, notonly an administrative value, but alsoa civic dimension, since it increasesthe opportunities for citizens to takeinterest in public affairs; it makes themget accustomed to using freedom.

his conference report presentsan objective analysis and way forward

specific to the context of Iraq, whilealso drawing on the expertise andbest practices of an internationalcadre of decentralization specialists.It provides valuable insights intothe interconnected challenges thatface Iraqs public service deliverymechanisms, together with concreterecommendations for both politicaland fiscal decentralization efforts.

he United Nations has longbeen at the forefront of supportingIraqs efforts towards improvedgovernance at the local level andthe delivery of quality services to itspeople. his exercise on furtheringdecentralization-inspired reforms willmake a significant contribution tothe UNs broader Iraq Public SectorModernisation programme. he workof this programme is guided by theinternational consensus that goodgovernance and sustainable humandevelopment are inseparable.

FOREWORD

It is my hope that by engagingwith local officials from all ofIraqs eighteen governorates as wellas representatives of the federalgovernment, this report willcontribute to countrywide reformsgeared at delivering on past promisesof decentralized service delivery. Itshould also prove particularly usefulfor government officials, policymakers, and those working to support

and enhance good local governancepractices in the region and beyond.

A great deal of effort went into thepreparation of this conference and itsreport, and on behalf of the UnitedNations Development Programmefor Iraq, I would like to thank UN-HABIA for such an importantcontribution to the UNs work inIraq. It is inclusive and forward-thinking contributions like this thatwill ultimately define this momentoustime in Iraqs history.

Peter BatchelorCountry DirectorUNDP Iraq

FOREWORD

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he conference brought togethereminent speakers from the WorldBank, OECD, and United NationsDevelopment Programme togetherwith experienced practitioners in thefield of local governance (for a full listof speakers, see Appendix 1).

Key representatives of theIraqi government including Mr.Istabraq Al Shouk, Senior DeputyMinister for Housing, Mr. KamilChadirchi, Deputy Minister forAdministrative Affairs, and Mr.Ayad Al Safy, Deputy Minister forechnical Affairs, were joined byrepresentatives from all 18 of Iraqslocal provinces.

As Wafaa Fadhil, the chair of theIraq Local Government Associationnoted in her presentation, while Iraqhas set out its intention to movetowards a decentralized form of

government in its constitution of2005, the reality is that further legaland administrative reforms are needed,driven by the necessary political willand public support, before the countrycan move towards a genuine form ofdecentralized local government.

he conference aimed to outlinewhat those reforms should be and toprovide recommendations for furtherprogress on decentralization in Iraq.

he objective of this conferencewas to provide an opportunity forIraq Local Government Associationrepresentatives to learn, experienceand benefit from the process ofdecentralization, local governmentbuilding and service deliverypractised in several neighbouringand selected countries, said SumanKumar Karna, Local Governance andDecentralization Specialist with theUN-HABIA Iraq Programme inAmman. he conference aimed toprovide a focused practical perspectiveon how decentralization in urbanareas promotes local government as aneffective tool for service delivery.

UN-HABIA has been a keyagency in promoting the benefitsof good governance, which can beachieved through decentralization. Asthe United Nations agency for humansettlements, it is mandated by the UNGeneral Assembly to promote sociallyand environmentally sustainable townsand cities with the goal of providing

here is a gap between the theory ofdecentralization and the practice which explainsthe weakness in the delivery of services in Iraq.

Wafaa Fadhil, chair of the Iraq Local Government Associationspeaking at the International Conference on Decentralization,

Amman, May 8 2011.

From 8 to 10 May 2011, UN-HABITAT hosted a

three-day conference in Amman, Jordan to set out

a roadmap for Iraq to move towards a system of

effective decentralized government.

The conference addressed five topics:

CitiesWhy are they important?

he context and challenges ofdecentralization in Iraq

Decentralized urban governance

Fiscal decentralization

Decentralized service delivery andfinancing

INTRODUCTION

Iraqi local government officials were able to meet with decentralization experts during the three-day conference

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adequate shelter for all. he agencyswork on decentralization culminatedin the International Guidelines onDecentralization and the Strengtheningof Local Authorities,which wereapproved by the UN-HABIAGoverning Council in April 2007.

Decentralization of defined servicescan assist in improving service deliveryin Iraqs local communities and UN-

HABIA identified the conferenceas a tool to assist Iraqs urbandevelopment. Iraq needs to build andimprove its urban infrastructure toreduce poverty and stimulate socialand economic development. It is ahighly urbanized country with 66percent of the population residing incities and as the country experiencesstrong urban growth, that growthis putting increased pressure on thedelivery of local services. he three-dayevent allowed delegates to discuss bestinternational practices in the contextof the special characteristics of Iraq,which is in post-conflict rehabilitationwith a government that relies on oilrevenues for 90 percent of its GDP.

he experience of decentralizedgovernance in Iraq has so far beenminimal. After adopting a federal systemin 2003 following the invasion by theUS-led coalition, the Republic of IraqsConstitution of 2005 and Law 21 of2008 furthered the reform process byestablishing a model of decentralizedpolitical and administrative governmentthrough devolution of power to eighteenprovinces (governorates). But many

challenges remain, in particular, thedevolution of authority for the deliveryof services and an inter-governmentalpolicy on the transfer of revenues to localgovernments from oil and other resources.

he legal framework set by Law 21provided an important first step in thedecentralization process but the details ofthe functional and territorial assignmentsbetween central and local governmentstill need to be agreed, said FionaMcCluney, Programme Manager for theUN-HABIA Iraq Programme.

his report aims to address thesechallenges through a presentationof the views, advice and opinions of

Richard ForsterNick Michell

June 2011

the conference participants. We aregrateful in particular to those speakerswho conducted interviews followingthe conference. Speakers paperssubmitted for the conference can beaccessed at the UN-HABIA website:www.unhabitat.org. he sectionsthat follow highlight the challengesfacing Iraqs move to a system ofdecentralized government and a list ofrecommendations, which can be applied

to assist Iraqi representatives in the field.

o continue its mission to promotegood governance and sustainabledevelopment of Iraqs cities, UN-HABIA plans to bring togetherconference participants for two daysof field tours outside Iraq, whereparticipants will have the opportunityto see the results of the decentralizationprocess on the ground.

DECENTRALIZATION IN IRAQ

All eighteen governorates were represented at the conference

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he delegating of responsibilities to regionsand governorates is the main goal in achievingsustainable development in Iraq and the creationof better civilized cities.

Mr. Istabraq al-Shouk, Deputy Minister of Construction and Housing,in his opening address, International Conference on Decentralization,

May 8 2011, Amman

By 2030, it is expected that more than60 percent of the world population willlive in urban areas.1he Arab region isprojected to see its urban population morethan double, increasing by 251 millionbetween 2010 and 2050.2Iraq is nostranger to this rapid urbanization. Sixty-six percent of its population already residesin cities with the urban population set tomore than double from 20.4 million in2010 to 48.2 million in 2050.3

Such urban growth, if managedproperly, can bring benefits to Iraq.Historically cities have been enginesof growth and in his conferencepresentation4, Jamie Simpson indicatedthat a 10 percent increase in urbanpopulation can correlate to a 30 percentincrease in GDP. But as Mr. Simpsonemphasized, for cities to be a force forgood they must be managed properly.Cities do not work automatically andgood urban governance is critical forIraq given its rapid urbanization. hekey is to get the new decentralizationframework to function to provideadequate local services, to harnesscivic creativity, and to match fiscalarrangements to delegated responsibility.

If Iraq is to move from beingsolely dependent on oil as the mainsource of revenue, how cities functionand are being managed is going tobe a key issue and considering thisin the context of where functionalresponsibilities lie is the major themewe need to work on, said FionaMcCluney of UN-HABIA in herclosing comments at the conference.

Dr. Anwar Shah of the World Bankin his presentation on urban governanceemphasized how China is a goodexample of how a country can achieveimpressive economic growth andpoverty reduction in its cities throughstrong local government (see Figure 1.1).

Even in the absence of politicaldemocratization [in China],decentralization has delivered, interms of uplifting peoples lives aswell as giving a sense of participationin the affairs of the state, said Dr.Shah. China has very strong localgovernments and local governancehas acted as a catalyst for economicdevelopment and economic growth.5

But such growth needs propermanagement in cities. he movementfrom rural to urban populationsby necessity shifts political andadministrative responsibility fromcentral governments to municipal,regional and local governments.he challenge here is also forauthorities and governments to adoptdecentralization policies that maximizethe benefits of urbanization.6

he first challenge, that I canperceive from the discussions during theconference, is that there isnt a national

consensus for decentralization, saidJonas Rabinovitch, senior adviser atUNDESA, who chaired the conferencesession on Decentralized UrbanGovernance. Different institutions inIraq at different levels have differentviews. So on the one hand thereis a legal framework supportingdecentralization but in my view, fromwhat Ive seen, the national consensus isnot in place yet.

he lack of consensus is notsurprising. As Dr. G. ShabbirCheema, director of the Asia-Pacific Governance and DemocracyInitiative at the University of Hawaii,explained in his presentation,in the developing world everypolitical system has some elementsof centralization and someelements of decentralization. Somecountries have more administrativedecentralization while othershave more political and fiscaldecentralization.

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Figure 1.1 Chinas impressive growth in per capita income for urban residents

Source: Presentation by Anwar Shah at the UN-HABITAT International Conference onDecentralization, Amman, May 2011

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WHY DECENTRALIZATION CAN HELP IRAQ MEET THE CHALLENGES OF URBANIZATION

1UN-HABITAT: Urbanization, Facts and Figures2Conference paper prepared by Dr. G. Shabbir Cheema for the UN-HABITAT International Conference on Decentralization (Amman, 8 May 2011)3Conference presentation by Professor Om Prakash Mathur (Amman, 9 May 2011)4Conference presentation by Jamie Simpson of GHK Consultants (Amman, 8 May 2011)5See Appendix II6Conference paper prepared by Dr. G. Shabbir Cheema for the UN-HABITAT International Conference on Decentralization (Amman, 8 May 2011)


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Dr. Shabbir Cheema, Director, Asia-Pacific Governance and Democracy Initiative,

East-West Center, Honolulu, USA

Iraq needs to improve the delivery of urban services to reduce poverty and stimulate social and economic development

he key issue in the discussionon decentralization is about theright mix of centralization anddecentralization in the socio-political,economic and cultural context of thecountry in question. And differentlevels of government will have verydifferent views. his report seeks todistil the discussions at the conferenceinto recommendations to assist thedevelopment of decentralization in Iraq.

BENEFITS OFDECENTRALIZATION

What is important before discussingthe grounds to establish consensus, is tostress that decentralization can bring keybenefits to an urbanizing Iraq.

One benefit of decentralizinggovernment is that delivery of servicescan be carried out more effectively.Despite the relatively high incomes inIraqs cities7, the increasing populations incities are putting a major burden on thedelivery of services, and service delivery isregarded as weak in urban areas. Ninety-four percent of citizens interviewed saidthey found services weak in Hilla.8

Decentralization can make forbetter service provision by providinggreater opportunities for community-based groups to lobby for greater accessto services such as primary health care,education and low-income housing.Proximity to demand base for a servicerenders response more effective andpromotes a more rationalized useof resources and this proximity alsoallows for closer monitoring by thebeneficiary population of projectsintended to serve them.9

In the majority of the casesdecentralization has led to improvedservice delivery at the local level, soalthough the evidence is mixed, it is

overwhelmingly in favour of decentralizedservice provision, said Dr. Shah.

Service delivery in Iraq is discussed insection II.D and is one the main driversfor the Iraqi local governments in seekingeffective devolution of powers.

Our main objective is tooffer quality services to citizens,which should be the duty of anygovernment, whether local orcentral, commented Wafaa Fadhil,Chair of the Iraq Local GovernmentAssociation during her conferencepresentation.

A second benefit conferred bydecentralization is the element ofcommunity participation, whichcan be encouraged by devolvedpowers. Decentralization can leadto an institutional frameworkthrough which various political,religious, social and ethnic groups atmulti-levels, including in cities andtowns, can participate in makingdecisions affecting them. his isclearly benefitting a region likeKurdistan, which has an autonomousgovernment within the federation. Ithelps the development of democraticvalues and skills among citizens,

thereby promoting the sustainability ofthe democratic process and also ensuresaccountability of political leaders andgovernment officials. It facilitates theexchange of information and promoteschecks and balances between thecentre and sub-national/local unitsof government and administration one of the key ingredients of goodgovernance.10Community participationas a pillar of Iraqi decentralization isdiscussed in section II.C.

Decentralized decision-makingcan also provide a better frameworkfor poverty reduction provided it isaccompanied by appropriate fiscaland administrative devolution ofpowers to local governments so thatthey can deliver services at the same

If Iraq is to move frombeing solely dependenton oil as the main sourceof revenue, how cities

function and are beingmanaged is going to be a

key issue.

Fiona McCluney , UN-HABITAT

level as the central government does.his is a key issue for Iraq given thedependency on oil revenues, as is theneed for equitable redistributionsof resources between different localgovernments (see section II.B).

Decentralization can accelerateeconomic development throughactive engagement of regional andlocal government units and localenterprises in economic activities.he transfer of authority andresources to local units of governmentand administration to design andimplement development programmesprovides more opportunities to localcitizens to play a more direct role inthe development process. As catalystsfor development and local change


7 The average monthly income for a family in Hilla district in Babil governorate in 2007 was about one-million Iraqi Dinars (USD 858.36) per month. Source: UNOPS,Assessment of Local Governance in Iraq: Report on the District of Hilla Babil Governorate (2010)8 UNOPS, Assessment of Local Governance in Iraq: Report on the District of Hilla Babil Governorate (2010)9Conference paper prepared by Dr G. Shabbir Cheema for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)

10Idem11Idem

agents, they can make decisions aboutlocation of services and determinelocal priorities.11

Decentralization is not just a meansto an end, it is an end itself as well, becausethe people empowerment is the key issuehere, said Dr. Shah. By moving thegovernments closer to the people youempower them to take decision makingin their own hands, to decide their ownwell-being and you have an uplift oflocal economic development issues.Dr. Shah revealed empirical evidence toshow how decentralization can lead tohigher GDP per capita (see figure 1.2,page 14), lower central government debt,lower corruption, more accountable andresponsive governance (see figure 1.3, page14) and a more durable political system.

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Finally, decentralization alsofacilitates the growth of civil societyorganizations and networks becauseit provides the greatest scope for

GETTING THE MIX RIGHT

Experience in developingcountries suggests that successfuldecentralization requires the rightingredients, appropriate timing, alarge degree of patience and somedegree of experimentation. It is nota straightforward process. As WafaaFadhil, ILGA chair, said in herpresentation: Decentralization is adouble edged sword: if we can use itproperly it will lead to the required

goals but if not, it will weaken theprovision of services.

First Iraq needs the rightingredients: through strong andcommitted political leadership,central government officials mustbe willing and able t o share power,authority, and financial resources.he transfer of functions andresources must be accompaniedby training and local capacitydevelopment programmes so thatlocal officials can effectively performthe decentralized functions.

But the ingredients are easy tostate. he challenge is not to designa decentralization programme, it is tobreach the gap between theory andpractice. Lots of governments haveambitious policies but nothing to showfor it in the field, said Dr. Cheema

he difficult and key point is tofind committed leadership. As onedelegate asked: how do you make agovernment become willing to sharepower and resources?

here must be enlightenedself-interest on the part of the centralgovernment, said Dr. Cheema.

hrough the conference andthis report, the aim is to showthe federal government of Iraqthat the economic growth of theurbanizing country, the quality ofservice delivery, the support fromempowered local governments anddevolution of responsibility to thosemore suited to carry out the tasks,means that decentralization is keyto the long-term interests of the

federal government. Competition,innovation and cooperation at thelocal level will make Iraqs federalgovernment stronger.

We cannot do something that givesthe impression to the [Iraqi] central

Figure 1.2 Higher GDP per capita with strong local governments

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Source: Presentation by Anwar Shah at the UN-HABITAT International Conference on Decentralization, Amman, May 2011

Figure 1.3 More accountable governance with strong local government

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the establishment of civil societyorganizations around local issues thatimpact directly on the lives of thepeople.12Iraq has very few effective civil

society organizations in its communities,with the Hilla local governmentassessment indicating that civil societyorganizations were very weak.13

Decentralizedservice delivery

Legalframework:

assignmentoffunctions

Structurefor

accountability

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decentralization

Humanresources

management

Community participation

Figure 1.4 he pillars of decentralization

government that we are challengingtheir sovereignty, said Mr. Rabinovitch.But we feel very comfortable now fromthe perspective of the UN secretariat,in sharing knowledge, information andexperience with them, showing thatdecentralization can help.

Source: Presentation by Dinesh Mehta, CEPT University, Ahmedabad.

Jonas Rabinovitch, UNDESA


12 Larry Diamond (1999) Developing Democracy :Toward Consolidation, Baltimore, Johns Hopkins University Press p. 12313UNOPS, Assessment of Local Governance in Iraq: Report on the District of Hilla Babil Governorate (2010)

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Fair LG:Fair local government refers to weak or moderate role of government in multi-order governance

Strong LG:Strong local government refers to a strong, expansive and autonomous role of local government

Strong SG:Stands for wider and stronger role of state and provincial governments (usually associated with weak local governments)


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THE CURRENT LEGALFRAMEWORK FORDECENTRALIZATION

Iraqs Constitution of 2005established a parliamentary system ofgovernment with a two-tier system:a federal government headed by aPrime Minister and his cabinet ofappointed ministers, and a systemof local government through theeighteen governorates (provinces).

hree of the governorates havespecial status: Erbil, Sulaymaniyahand Duhok in Kurdistan haveelected governors and councils(governing 60 municipalities each)and together form the KurdistanRegional Government. Article 117of the Constitution recognizes theKurdish Regional Government(KRG) as autonomous and thereforeentitled to have all of the hallmarks ofa government: its own constitution,its own parliament and its ownministries. Its relationship to thecentral government in Baghdadis federal in nature, and as befitsfederal relationships is definedconstitutionally. For instance, otherthan a few exclusive powers retainedby the central government in Article110 (like national security andforeign policy, see below), the KRGis expected to share policy-makingauthority with Baghdad with respect towater, education and health, but enjoysdecentralized decision making withrespect to all other public services.1

I think the biggest challenge inIraq is they have opted for a modelwhere they have given one provincespecial status but the status of the otherprovinces are completely under the

central government, said Anwar Shahof the World Bank, who spoke onurban governance at the conference.So the issue is more to decide whetherthey want to have a true federal systemor a decentralized local governancesystem and in my view decentralizedlocal governance works much better inthe context of Iraq.

Law 21 of 2008 the Law ofGovernorates Not Incorporated IntoA Region as its name implies isapplicable to rest of the governorateswhich do not form part of theKurdistan region. he exception isKirkuk, which is awaiting a decisionon whether it will form part of theKurdistan region and so currentlyLaw 21 applies to 14 governorates(provinces). his law sets out theprocedures for the formation oflocal councils at the governoratelevel and at levels below (the qadaand nahiyacouncils which function

as district councils) as well asdefining the powers and duties oflocal councils. Law 21 provided fora major conceptual shift for Iraqwith the character of governoratecouncils changing from a bodycomposed of department heads,presided over by the governor, to anelected body, which itself chooses thegovernor. Lamar Cravens observedin his presentation paper for theconference that there is scope forfurther reform in this direction withthe direct election of the governorand constituent-based election ofcouncil members. Anwar Shah alsoargued for provincial councils tocomprise directly elected heads oflocal governments, which monitorand oversee a provincial governor whois also directly elected or appointedby the federal government subjectto confirmation by the ProvincialCouncil. Such reforms would needamendments to Law 21.

Each of Iraqs levels of governments is comprisedof different governmental bodies with differingauthority. It is the failure to understand thesedifferences, and the absence of a way of analyzingthem that is slowing Iraqs progress towardsachieving the promise of decentralization.

Lamar Cravens, Chief of Party,Iraq Local Governance ProgramPhase III

A: Political decentralization and the legal framework: why reform is needed on the

assignment of responsibilities between different levels of government

Erbil city is capital of one of three governorates with special status under the Iraqi constitution

HOW TO DRIVE FORWARD PROGRESS ON DECENTRALIZATION

1Conference paper prepared by Lamar Cravens for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)

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While the Constitution and Law 21form the main bulk of law governing therelationships between the different levelsof government, ministerial regulations,Prime Minister decrees and SupremeCourt opinions also form part of thelegal framework. As Lamar Cravensemphasized, this is important becauseunder the Constitution article 122 statesthat the governance of the provinces isto be determined by law so all of these

items apply and bind the provincialcouncils, including regulations fromlocal ministerial departments operatinginside a province. Article 7, Thirdof Law21 (see Appendix IV) specifically enjoinsa governorate council against taking anyaction that contravenes the Constitutionor other national law reinforcing that thecouncils are subject to the decision andopinions of law making institutions suchas the courts, prime ministers office andthe ministries.

CLARIFYING THEASSIGNMENT OFRESPONSIBILITIES

Article 110 of the Constitutiondescribes the areas of exclusiveauthority for the federal government.hese include foreign policy, defenceand citizenship (see Appendix III).

But for other matters such as theauthority for health and education inthe provinces, the Constitution doesnot indicate the current assignment ofresponsibilities between governments.here is only general language in article115 that the powers not stipulated asexclusive powers of the federal governmentbelong to the authorities of the regionsand governorates (see Appendix III).his would appear to offer a widepower to local governments to assumeauthority over items not listed in article110 but in fact there is clear intentionby the draftsman that the governoratesshould exercise any such powers insubordination to the federal government.

Article 122, Second of the Constitutionsays governorates must manage theiraffairs in accordance with the principlesof administrative decentralization andthe same deliberate reference is made inLaw 21 article 7, hird when referringto the powers of the provincial councilswhich must be exercised in accordancewith principles of administrativedecentralization and in a manner whichdoes not contravene federal law.

his subordination is reflected inreality. In the 15 governorates, which donot have regional government, the majorpublic functions are carried out by localdepartments of the central government.Staff are central government employeesand budgets and expenditure are thedecision of the federal government.2Although Article 115 reserves powers tothe provinces, a provincial council is nota provincial government: no province hasits own constitution or its own ministriesor directorates and departments.Instead, a province is, in the wordsof the constitution, an administrativeunit of the central governmentworking alongside the local ministerialdepartment of the federal government.3

he ministerial departments of thecentral government may share the sameterritorial jurisdiction as a provincialcouncil but they have very different powersor subject matter under their control. It isa grave error to equate a provincial councilwith provincial government because ofjurisdiction, said Mr. Cravens.

Until such time as those changes occur,provincial councils are still very weak, asthe majority of government decisionsremain in the hands of appointed officialsin departments, not elected ones.5

If as is necessary, Iraq undertakesthe necessary legal reforms, it isimportant according to case lawfrom 2011, that these are drafted bythe Council of Ministers and not

Parliament. Law 20 of 2010, whichwas approved by the PresidencyCouncil in January 2011, purportedto transfer staff, properties, budgetsand responsibilities from the Ministryof Municipalities and Public Worksto the provincial councils. Law 18of 2010 aimed to do the same forthe Ministry of Labour and SocialAffairs. he Supreme Court declaredboth laws to be unconstitutional onthe basis that the national parliamentcan only propose laws not draftthem. Drafting must be done by theCouncil of Ministers for presentationto the parliament.6

NO PROVISION FOR DISPUTERESOLUTION

Another weakness of the presentlegal system for decentralization isthat there is no forum or body wheredisputes between the different levelsof government can be heard to clarifyor interpret the existing law. Unlikeother neighbouring Arab countries,the ministry, which deals with localgovernance, the Ministry of State forProvincial Affairs, has no rulemakingauthority to determine how thecouncils work and interact withthe federal government. he lowerhouse of Parliament, the Council ofRepresentatives, is also not empoweredto deal with conflicts between theministerial departments and theprovincial councils. Article 45 of Law21 provides for the setting up of a HighCommission for Coordination Among

the Provinces (HCCP) to be nominallyauthorized to resolve disputes as part ofits charge to coordinate the provinces.Yet to date, the Commission has onlymet once (in 2009) and two more timessince and has yet to form a secretariator establish any independence from thePrime Minister, who chairs it.7

Additionally, the Supreme Courtis not authorized under its statutes to

hear cases from the provincial councils.Although Law 30 of 2005 permits thecourt to resolve disputes between thedifferent levels of governments, thecourt has refused in several cases in2010 (Cases 39, 54, 57, 61 and 63) tohear cases submitted by the provincialcouncils on the basis that it does nothave jurisdiction. here is thereforeno legislative, executive or judicialforum to resolve disputes betweenthe different levels of governmentand there should be legal reforms toprovide for this.

As article 116 of the Constitutionrecognizes, the federal governmentis committed to moving from adeconcentrated system of local branchesof national government to a federation ofdecentralized local governments. o getthere, Iraq first needs to undertake severallegal reforms to provide clear assignmentof responsibilities and to remove doubtover provisions in the current legalframework. Issues of capacity buildingand management of local budgets canonly come into play if the country hasa clear legal and political system fordecentralization to proceed.

As well as reform of theactual legal provisions, WafaaFadhil, chair of the Iraq LocalGovernment Association, called atthe conference for a mechanismfor transfer of authority from thefederal government. We need aplan of action for transfer of theconstitutional powers as well ascoordination through an independent

In his conference presentation,Mr. Cravens cited the example of theDirector General of Education withresponsibility for the governorates ofBabil, Karbala and Najaf. he head ofthe council in each of these provinces,the provincial governor, only hasterritorial jurisdiction within his provinceand has no jurisdiction over education inhis province (subject matter jurisdiction).So while the governor shares territorialjurisdiction with the DG of Education,he does not share jurisdiction foreducation, the particular subject matterof that authority.

he local branches of the centralgovernment derive their authorityand jurisdiction by law in the form ofministerial regulation.4Law 21 grantspowers to the councils but emphasizesthat such powers should not encroach onthe jurisdiction of the ministries, as theyare offices under federal jurisdiction(see Article 7 Sixth in Appendix IV).

As Mr. Cravens pointed out, theimportance of this is that, for the subjectmatter jurisdiction of the councils tobe changed to that of a ministerialdepartment, a change in the law wouldbe necessary. he Constitution and legalframework as it stands does not allowfor this even with the powers reservedby article 115 to local governments.he only way to clarify that the powersof the councils be changed to managethe functions of the local ministerialdepartment is through the legislature.

committee made up of membersof the Council of Representatives,the Council of Ministers and theProvinces to monitor if progress hasbeen made on this, said Ms. Fadhil.

Wafaa Fadhil, Chair, Iraq Local Government Association


Recommendations andconclusions

The power and authority of theprovincial councils in matters otherthan those expressly reserved tothe federal government needs tobe clarified by law. he currentconstitution and Law 21 do notgrant power to the councils to actindependently of the local ministriesof the federal government andspecifically state that powers of theprovincial councils must be exercisedin accordance with principles ofadministrative decentralization.

Despite article 122, Fifth, of theconstitution providing that thegovernorate councils will notbe subject to the control of anyministry, Law 21 clearly statesthat the powers of the electedcouncils must not encroach onthose of unelected officials inlocal ministerial departments andmost not contravene federal law.Such subordination means thatprovincial councils are very weakas decisions remain in the handsof unelected officials in localministries rather than with electedmember of the provincial council.his needs to be amended by law.

An independent forum should beset up to resolve disputes betweenthe different levels of governmenttogether with the establishmentof an independent committeeto oversee transfer of powersfrom the federal ministries to theprovincial councils.

5Idem6Conference paper prepared by Lamar Cravens for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)7Idem

2Conference paper prepared by Dr. Ehtisham Ahmad for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)3Conference paper prepared by Lamar Cravens for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)4Idem

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Delegates heard that legal reforms are necessary before Iraq can move forward on the process of decentralization

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I think the biggest challenge is getting, whatI would call, the devolution of funding fromthe [Iraqi] federal government down to thegovernorates: unless that happens one will neverreally have true decentralization.

Professor Dinesh Mehta,CEP University, Ahmedabad

CURRENT FRAMEWORK FORFISCAL DECENTRALIZATION

Fiscal decentralization is characterized bylocal revenue generation by local officials,plus the collection, budgeting and

expenditure of locally-sourced funds.1

Article 44 of Law 21 provides forclear powers for the governorates to levylocal taxes as well as rights to receivetransfers from the federal government.

Despite the clear wordingof Article 44, the Ministry ofFinance and the courts have deniedgovernorates the right to levy localtaxes. In July 2010, the Council ofMinisters challenged a surcharge beinglevied by Basrah provincial council onthe issuance of passports on the basisthat no new taxes can be imposedother than by law. Te implicationdespite article 44 is that only nationallaw can introduce new taxes: localprovincial councils cannot themselveslevy taxes unless those levies areprovided for in national legislation.

Te Ministry of Finance has to bepersuaded that there are some taxes thatare best administered at the local level,the property tax for instance, said Dr.Ehtisham Ahmad, senior fellow at theLondon School of Economics, whomade his conference presentation onfiscal decentralization in Iraq.

Luiz de Mello, Counsellorto the Chief Economist at theOECD, who also presented on fiscaldecentralization, agrees. Of course, itis a country in reconstruction so it willtake a while for Iraq to put together aregister of properties and come up withthe infrastructure and the know-how

B: Effective strategies for fiscal decentralization and management of local budgets

to collect local taxes. Tis task is farfrom trivial but it should be no excusefor not doing anything at this stage,

said Mr. de Mello.

In the absence of local tax revenues,the reality is that almost all governoratemoney comes from transfers from thecentral governments Ministry of Finance.2

And the government transfersof revenue referred to in article 44amount to very small contributionsfrom the national budget. Except inthe case of the Kurdistan RegionalGovernment, which received 17percent of the national budgetnet of sovereign spending, the 15governorates received together around5 percent of the total budget. 3Tepractice has been for the amount

Professor Dinesh Mehta, CEPT University

1Conference paper prepared by Lamar Cravens for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)2Hilla does not have any internal income and is completely funded by central funding. The Ministry of Finance manages the state budget and allocates allowances to the governorates.3Paper prepared by Michel del Buono, senior economic adviser at UNAMI: Resources Assigned by Iraqs Central Government to Regional and Provincial Governments4Idem

going to each governorate to dependgenerally on the size of the relativepopulation, but more recently,

there is an additional allocation ofpetrodollars to those governoratesthat either produce or process crude oilat the rate of USD 1 per barrel of oil.In 2011, the 15 governorates receivedIQD 5.111 trillion (USD 4.368billion) including petrodollars of whichIQD 0.497 trillion was for operatingexpenditures and IQD 4.355 trillionfor investment expenditures.4For afull list of budget estimates for theprovinces see figure 2.1.

It is imperative for Iraq to movetowards locally sourced revenues andequitable transfers of oil revenues ifits proposed model of decentralizedgovernment is to take hold.

Thomas

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Chile is extremely dependent on natural resource revenue, particularly copper

2009 (Revised) 2010 (Proposed)

Province TotalProjects andReconstruction

Total OperatingExpenditures

TotalProjects andReconstruction

Total OperatingExpenditures

Basra 309.6 237.2 72.5 305.4 220.0 84.4

Ninewa 355.2 278.0 77.2 448.6 287.5 161.1

Baghdad 840.9 650.3 190.7 937.1 637.5 299.6

Dhi Qar 257.7 168.3 89.4 228.0 165.0 63.0

Diyalah 158.8 122.4 36.4 261.2 122.5 138.7

Babil 205.5 158.1 47.4 229.2 152.5 76.7

Anbar 180.1 132.6 47.5 197.4 130.0 67.4

Maysan 126.7 94.4 32.4 128.4 90.0 38.4

Wasit 138.9 107.1 31.8 153.7 102.5 51.2

Kirkuk 159.2 117.3 41.9 186.5 115.0 71.5

Najaf 146.3 109.7 36.6 153.8 110.0 43.8

Diwaniyah 160.7 102.0 58.7 179.6 131.0 48.6

Muthanna 895.9 66.3 23.3 955.6 65.0 30.6

Karbala 201.3 91.8 109.5 642.1 90.0 552.1

Sala ad-Din 184.0 114.8 69.3 201.9 112.5 89.4

Total 3,514.5 2,550.0 964.5 4,348.5 2,531.0 1,817.5

Figure 2.1 Budget Estimates for Provinces (in billion dinars).

According to Dr. Shah: Oneneeds to think about how [Iraqs] localgovernments can be empowered to raisesome finance locally because withoutraising finances locally there will not beany accountability if they simply rely ontransfers from the central government.

But, to get to a stage where revenuesharing and intergovernmental transfersare effective in assisting the economicdevelopment of communities, Iraqneeds to first implement transparentbudgeting systems before it can proceedto the devolution of fiscal powers andprovisions on sharing revenues.6

CREATION OF BUDGETINGAND MANAGING CAPACITY

For transparent management ofresources, Dr. Ahmad advised of the

need for uniform standards to beadopted for appropriating and spendingresources at local and federal levels ofgovernment. With the Iraqi Ministryof Finance having made moves towardsadopting international standards byadopting the IMFs GFS2001 budgetclassification, Dr Ahmad stressed thatthis should be extended to all sub-national levels so that they use the samebudget classifications for revenues andexpenses as the federal government.It would also be helpful to have agovernment financial informationmanagement system that can facilitatethe new budget classification. A furtheraid to transparency in dealing withfunds from oil resources would beto set up a treasury single account asa replacement for the DevelopmentFund for Iraq, which was put in placeby the Coalition Provisional Authorityto administer Iraqs revenues.

DEVOLVING FISCAL POWER TOLOCAL GOVERNMENTS

As was seen in the previous sectionthe devolution of responsibilitieshas to proceed step-by-step andrequires the introduction of alegal framework defining, for eachsector, the functions carried outby the federation and the regions/governorates. In the constitutionthere is no clear assignment oftaxation powers, the constitutionmentioning that fiscal policyorientation is assigned to the federalgovernment.7As noted above, forsuch powers to be exercised by localcouncils, there is a requirement foran actual fiscal law granting specifictax raising powers to the provinces,as current provisions in Law 21 havenot been upheld as sufficient to grantlocal powers of taxation.

Te system of tax collection is verycentralized with offices in Baghdad andfield offices in each governorate, whichcollects taxes and transfers them to thecentral treasury. Dr Ahmad believesthis should continue. Administrationshould remain central in the fields ofrevenue assessment and collection, andfor joint management of the oil sector.In those fields the federal governmentcan provide a service to all areas and

citizens of Iraq, with likely efficiencygains deriving from economies of scaleand coordination of effort, even wheredistribution of resulting revenues andtransfers is governed by a transparentformula, and with oversight by anintergovernmental mechanism.8

OWN-SOURCE REVENUES

Even if there is a system of sharedrevenues with equalization transfersbetween provinces (see below), it isimportant to implement a systemof local taxes over which the localgovernment has some control overrates. Own-source revenues arenecessary to ensure accountability oflocal governments. Tis is importantin ensuring incentives for efficientuse of the transfers and spending andthat sanctions against sub-nationaldefault are credible.9

Te message I would underscoreis that oil revenues are one source ofrevenue that they [local governments]have but should not be a substitute forother sources of revenue, said Luiz deMello. What happens a lot, especiallyin many developing countries, isthat, because it is so easy to collect oilmoney, these local governments dontcollect anything else, they just waitfor the handouts. Tats what shouldbe avoided in Iraq, because they havethe opportunity to do so by setting upthis system from scratch. Tere are, forinstance, taxes, and sources of revenue

that are ideal for local government,including property or sales taxes, thatthey should try and collect instead ofjust waiting for handouts from sharedoil revenue from the centre.

Mr. de Mello cited Chile forexample as another country thatis dependent on natural resourcerevenue, in Chiles case copper, andyet local governments there collectproperty taxes and other taxes.Although you have to keep in mindthat Chile is nowhere nearly asdecentralized as I believe Iraq is likelyto become, said Mr. de Mello.

In his conference paper, Dr Ahmadadvised of the need for nationallegislation to provide incentives tolocal governments to levy their owntaxes and fees. Other conferenceparticipants agreed that incentivizationis important in terms of locally raisedrevenues. Tat [local taxation] isnot going to happen unless strongdevolution takes place, said Anwar

Shah of the World Bank. With strongdevolution, people will say Well we dohave oil resources but we need moremore money to carry out the followingproject for local peoples needs. Localgovernments will not raise moneylocally even if they have the powers toin the absence of incentives.

As well as incentivizinggovernorates to raise taxes, it isimportant to harmonize tax policiesof sub-national units, by definingthe number of these levies, theirtax base and the bounds withinwhich tax rates can be applied, toavoid excessive and uncontrolledproliferation of local taxes.10

A delegate from the Iraq LocalGovernment Association asked whetherit made sense to proceed to fiscaldecentralization while corruption is rifein the country.

Luiz de Mello summarized theissue neatly. If you look at what the


6Conference paper prepared by Dr Etisham Ahmad and Giorgio Brosio for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)7Conference paper prepared by Dr Etisham Ahmad and Giorgio Brosio for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)

8Conference paper prepared by Dr Etisham Ahmad and Giorgio Brosio for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)9Idem10Idem

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literature says and if you look at theempirical evidence that is available,the message is pretty mixed. Onthe one hand you can argue thatdecentralization is a good instrumentfor fighting corruption because itbrings the government closer to thepeople. Tis may in turn facilitatesocial control over what localgovernments do. One can think ofexamples in support of this idea. Buton the other hand you could arguethat, in fact no, if you decentralize itjust makes it easy for the local elitesto capture the government.

Speakers agreed corruption was arisk but this faced every government,including central governments, andshould not be a reason for holding backthe benefits of fiscal decentralization.

I think there is a risk but ifeverything is done transparentlythen that risk can be overcome, aslocal people will know how much

money has been received and wherethat money went and the risk is eventhere with the centralized regime andcentralized government officials ifthere is no transparency in governmentoperations, commented Dr. Shah.

Iraq needs to put in place thebudget management measuresdescribed above. o come up withappropriate control mechanismsthat would prevent decentralizationfrom facilitating corruption, youcould have a top-down approachbased on transfers from the centralgovernment to the sub-nationalunits coupled with appropriateexpenditure management andaccounting systems, as well as aneffective supervisory body thatcould look into governmentaltransfers and monitor the use orfunds, explained Mr. de Mello.

According to Dr. Ahmad you needclear rules on no spending without

appropriation and the ability to trackmonies and how it is accounted for.All these are key elements of thebudget law but it is not being followedin Iraq. If the budget law was properlyimplemented, it would be hard tomisuse funds, not impossible, but itwould minimize the possibility.

TRANSFERRING MONEY

TO LOCAL GOVERNMENTS:SHARED REVENUES ANDINTERGOVERNMENTALTRANSFERS

According to Dr. Ahmad, theexpenditures of local governmentsin Iraq should be covered by asystem of shared revenues fromoil, complemented with a transfersystem that includes special purposetransfers to meet central governmentobjectives, such as minimum standardsand reaching minorities, and anequalization systems to ensure buy-in from the poorer regions to assuresimilar levels of services could beprovided for similar levels of tax effort.9

1. Shared revenuesAt the conference Dr. Ahmad proposedseveral options for sharing oil revenueincluding: production royalties,production shares, sharing profitsthrough shareholdings in national oilcompanies; and a share of a centralrevenues from current oil fields.

Te constitution regulates only thesharing of oil revenue deriving frompresently operating fields (article 112)stipulating that revenue be distributedin a fair manner and in proportion topopulation (see Appendix III).

Dr. Ahmad advised that theallocation of shared revenue amongindividual local governments bemade according to a combinationof the origin principle (ie. revenue isallocated to the jurisdiction where it is

The message I wouldunderscore is that oilrevenues are one sourceof revenue that they [local

governments] have butshould not be a substitutefor other sources ofrevenue.

Luiz de Mello, OECD

produced) because this will be attractiveto the revenue-producing regions andmay be needed as part of a politicaleconomy bargain to persuade suchregions to participate in the federalismarrangement.10

Any provisions on sharing oilrevenues will need amendments tothe constitution. o bring about thenecessary changes, a special committee,mandated by the constitution, willhave to present amendment proposals.Te parliament is called to approve orreject these proposals with a simplifiedprocedure requiring the majority of itsmembers.11

2. Intergovernmental transfersransfers between the federal and localgovernments will play an importantrole in Iraq to fill the gaps in individualallocations of shared revenue and toimplement national priorities in a highlydecentralized expenditure framework.

For Dr. Ahmad equalizationtransfers can be the glue that holdsthe Iraqi federation together. Teexisting mechanism for sharingrevenue on a per capita basis may notallow all regions the ability to financesimilar levels of public services witha comparable own revenue effort.Once you have decided whatservices each level of government isproviding and once you know what

your own sources of revenue are,you can move to a more advancedframework, said Dr. Ahmad.

He proposed an equalizationframework based on a combinationof expenditure needs and revenuecapacities. In that way you canmove away from populations in yourequalization framework and thedemands of Basrah or Kurdistan orwestern province can be met in a waywhich is consensual, said Dr. Ahmad.

As the setting up of equalizationsystems is complex, Dr. Ahmadadvised that the setting up of anindependent intergovernmentalcommission would be a sensibleinnovation to include bothmembers of the federal and localgovernments.12Tis commissionwould ensure the transparency of therevenues, which were being collectedand distributed by the centralgovernment.

Dr Ahmad cites Brazil as anexample of where transparentbudgeting and management ofresources is an essential componentof fiscal decentralization. In Brazilthey have every single account,they have government financialinformation management systems,they can track what goes whereand they have a budget framework.Tese are exactly the sorts of thingsthat we said are necessary for Iraq,said Dr. Ahmad.

Dr. Ehtisham Ahmad, London School of Economics


Recommendations andconclusions

It is imperative for Iraq to movetowards locally-sourced taxesand to establish an equitabletransfer of oil revenues ifthe model of decentralizedgovernment is to take hold.Without local revenues, there

can be no accountability forlocal governments, which relyonly on transfers from thefederal government.

Despite Article 44 of Law 21granting the governorates thepower to levy local taxes, thishas been denied by the courtsso new fiscal laws are neededto specify what types of taxcan be raised at the local level(eg. property taxes) and toincentivize provincial councilsto collect them.

Local governments should receivea share of revenues from oilcomplemented by an equalizationscheme based on expenditureneeds and revenue capacities.o implement this will requireamendments to the constitution.

An independent commissioncontaining members ofthe federal and provincialgovernments should be set upto monitor setting up of theequalization systems.

Transparent budgeting andmanagement of resourcesis key to effective fiscaldecentralization and uniformstandards based on the IMFsbudget classifications should beadopted by Iraq at both nationaland sub-national levels ofgovernment.

10Conference paper prepared by Dr Etisham Ahmad and Giorgio Brosio for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)11Idem12Conference paper prepared by Dr Etisham Ahmad and Giorgio Brosio for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)9Conference paper prepared by Dr Etisham Ahmad and Giorgio Brosio for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)

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When people feel engaged, they contribute betterand it helps in post-conflict redevelopment.

Jonas Rabinovitch,Senior Adviser, UNDESA, New York

Decentralization can bring the localcommunity into the democraticprocess not only by granting votingrights for the election of local officialsbut through active participation ofcitizens in influencing the decision-

making of local governments.

While admitting that each countryhas different challenges and make-up,Jonas Rabinovitch, in his conferencepresentation, said the lessons learnedfrom community participation ingovernments of other post-conflictcountries could be useful for possibleadaptation in Iraq. Te high level ofcivic engagement in Guatemala had led

C: Bringing citizens into the democratic process: the value of community participation

to previously marginalized indigenousgroups being brought into the localgovernment decision-making. He alsocited Rwanda where decentralizationwas part of the peace buildingprocess. Tere, through Community

Development Committees,community members could submitproposals to the local governmentcouncil and share responsibility formonitoring, evaluating and controllingdevelopment activities.

In South Africa, Mr. Rabinovitchreferred to the legal frameworks set upin 1994 as part of the post-apartheidconstitution whereby community

participation was encouraged inmunicipal development planningand so community members feltempowered to participate andinfluence social, economic andpolitical decisions affecting them.1

Unfortunately in Iraqs case,community participation has beenlimited at the most local level. Te Hillaand Sulaymaniyah Local GovernmentAssessments confirm at the district levelthe lack of female representation on thecouncils and the lack of consultationwith citizens (see box). As Dr. KawaFaraj pointed out during his conferencepresentation on Sulaymaniyah, there is

Local government assessment: community participation is very weak in Iraq

According to the findings2from reports in the Hilla and Sulaymaniyah regions presented by Dr. Ali HadiHumaidi Al-Shokrawy and Dr. Kawa Mohammad Faraj:

There are weak partnerships between the local government and citizens. Meetings and sessions are open tocitizens and media, but citizens rarely attend

The governments response to the needs of local citizens is weak. There is litt le transparency, trust,communication, and participation between the local government and the citizens

In Hilla 83.5 percent of citizens view the level of effectiveness of local authorities performance as weak

Local government rarely consults with citizens and does not organize referenda to address issues pertaining to

public policies in the region There are limited partnerships between private sector and civil society organizations

There is an absence of special budgets for districts and the local authority does not have any financialindependence with funding being 100 percent centralized

There is a predominance of political and/or partisan power-sharing in choosing the leaders of localadministrations

Bodies and organizations of the local authority are subjected to the monitoring of the central authority

There is a lack of female representatives within the local council

There are not enough programmes aimed at reducing poverty and unemployment, or improving the status of women

Despite mechanisms to prevent it, t here is still endemic corruption

1Conference presentation by Jonas Rabinovitch at the International Conference on Decentralization, Local Governance and Service Delivery (Amman, May 8-10 2011)2Conference presentation by Dr. Ali Hadi Humaidi Al-Shokrawy of the University of Babil and Dr. Kawa Faraj of the University of Sulaymaniyah (Amman, May 8 2011)



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not just an absence of citizen participationin district administration meetings butthere is a lack of awareness of most citizensof their right to attend meetings.

In order to drive communityparticipation, Ed Cornies, Chiefechnical Adviser at UNDP in urkey,emphasized at the conference thatit is necessary to develop a cultureof dialogue between administrativeauthorities, politicians, citizens, socialgroups, associations, representatives ofindustry and other operators.

He cited several initiatives inEuropean countries to empower citizensthrough community participation:

Neighbourhood advisory councils;

Advisory committees on selectedtechnical issues;

Referenda on major local issues;

Involving community groups in thedelivery of selected services;

Participatory budgeting;

Citizen panels/juries;

Citizen participation awards;

V broadcasts of council meetings;and

Question and answer sessions atcouncil meetings.

Many of these do not exist in Iraqand some may not be appropriatethough the lack of referenda on localissues was highlighted by the Hilla andSulaymaniyah assessments.

Another item from Mr. Cornieslist formed part of a separate discussion whether participatory budgeting wassuitable for Iraq. Professor GiorgioBrosios presentation explained howparticipatory budgeting has beenimplemented in other countriesto allow non-elected citizens toparticipate in the decisions on wherebudget should be allocated for localprojects and services. Participatorybudgeting developed in Brazil in the1980s as part of the establishmentof democracy and civic participationin local government after decades ofmilitary dictatorship and has spreadto other Latin American countriesand many European ones. But whileIraq shares a common history ofmoving from military dictatorship todecentralized governance, conferenceparticipants were sceptical aboutthe value of participatory budgetingfor Iraq until it has first developedtransparent budgeting systems andproper fiscal decentralization with ownsource revenues (see section II, B).

Professor Brosio3explained thatthere are fundamental issues relating toIraqs need to first implement transparentbudgeting systems with tracking of allaccounts and transfers as well as the needfor hard budget constraints.

Participatory budgeting was pioneered in Brazilian cities such as Porto Alegre

If you go and do participatorybudgeting without these preconditionsyou have a free for all, I mean itsdisastrous, to put it mildly, said Dr.Ahmad, co-author of the presentation.

Luiz de Mello agreed. You alreadyneed to have a very well developedsystem of budgeting at local level sothat the local authorities can comeup to the citizens and have a menu ofoptions from which they can choose.Tey have to have a very carefulcost benefit analysis of what they areproposing so that people know exactlywhat to choose from, and a goodsystem of disseminating informationon how local governments functionand how they prioritize the plans thatthey are proposing for public choice.

Participatory budgeting is apossible future mechanism for Iraqilocal governments but as this reporthas stated in previous sections, thereare fundamental legal, politicaland administrative steps to beundertaken before moving to thistype of engagement.

Tere are huge risks withparticipatory budgeting and I think acountry like Iraq should not experimentat the beginning, said Anwar Shah.Iraq needs to build the foundationsof local democracy and governanceand once that foundation is built youcan put all this icing on the cake, likeparticipatory budgeting and variousmeans of participation but not before.

THE ROLE OF E-GOVERNANCE

In his presentation, Jonas Rabinovitchalso highlighted the benefits of theapplication of Information andCommunications echnologies(IC) to add transparency andaccountability to the post-conflictreconstruction process. Te impact ofIC in assisting in service delivery isconsidered in the next section but asecond aspect to e-governance is theempowerment of citizens through

enhanced civic participation.

As Ed Cornies revealed, localauthorities in Europe are putting vastamounts of information regardingservices and political issues on theweb to ease access to informationfor citizens as well as to facilitate thepayment of taxes and utility chargesthrough Internet banking. Te Internet


Ed Cornies, UNDP, Ankara, Turkey

4UNOPS, Assessment of Local Governance in Iraq: Reports on the District of Hilla, Babil Governorate and Sayd Sadiq & Sharazour Districts, Sulaymaniyah Governorate (2010)3Professor of Public Finance and Local Government, University of Turin, Italy

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Recommendations and conclusions

Community participation in Iraqs local councils has been limited witha lack of processes for consultation with citizens.

To address this, councils need to develop dialogue with citizens throughfor example the development of Internet sites and media communications,through referenda on local issues and through citizens attendance atcouncil meetings.

It is too early for Iraq to consider participatory budgeting, which should beimplemented only when there is strong local governance in place.

allows local governments to promoteawareness of citizen participationopportunities including attendance atmeetings and to receive feedback andestablish grievance procedures. Amongthe recommendations of the Hilla

and Sulaymaniyah Local GovernmentAssessments are the setting up ofa local council website and even apossible private television channelto inform citizens and mobilizecommunity participation.4



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DECENTRALIZATION IN IRAQ HOW TO DRIVE FORWARD PROGRESS ON DECENTRALIZATION

UN-HABITAT is planning field trips for Iraqi local government representatives as a follow-up to the conference

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As has been discussed in sectionsII.A and B, it is fundamental beforelooking at local service delivery to firstassign the respective responsibilitiesfor service provision between differentlevels of governments and to provide

adequate financial provision for aparticular level of government todeliver the devolved services. Oncethese fundamentals for decentralizedservice delivery are in place, the keyingredients to establish high-qualitylocal service delivery are to establishsystems of accountability and to developthe technical capacity of local bodies tomanage service delivery.

During the conference there was a lot of debateamong the federal and local government officials,

which was very interesting to see, with bothclamouring for power. It is an issue that manycountries face. Do you devolve power now and

wait for the capacity, or do you build capacity firstand then devolve more authority and power?

Professor Dinesh Mehta,CEP University, Ahmedabad

D: Implementing structures for better delivery of services

ACCOUNTABILITY FORSERVICE PROVISION

As Professor Dinesh Mehta madeclear in his conference presentation,accountability should be upwards from

the local body managing services to thefederal government in terms of meetingcriteria for revenue transfers anddownwards in terms of accountabilityto citizens. Downwards accountability iscritical so people have a say in how theservices are run and so they have a voiceand forum to voice their satisfactionand dissatisfaction, said ProfessorMehta (see figure 2.2).

Trough upwards accountability,service providers must providereports including financial data tostate or national bodies and can beincentivized on performance. Teymust set up internal accountability

mechanisms including analysis ofeffectiveness of service delivery(reaching targets) and efficiencyof delivery (cost effectiveness).Trough downwards accountability,there needs to be accountability tolocal citizens who are the consumersof services and who should haveaccess to an effective system ofgrievance redressal.1

Figure 2.2 Structures of accountability for delivery of urban services

Source: Presentation at the UN-HABITAT International Conference on Decentralization by Professor Dinesh Mehta, Amman, 9 May 2011

State andNational Governments

Reform-linked funding,Regulatory compliance

Performance benchmarking,Self regulation

Utility / ULB AssociationsUPWARDACCOUNTABILITY

Grievance redressal, reportcards, Public dissemination

Citizens and ConsumersDOWNWARDACCOUNTABILITY

Accountabilityfor regularoperations

INTERNALACCOUNTABILITY

Internalaccountability for

performance resultsURBAN LOCAL BODY

1Conference presentation by Dinesh Mehta for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)



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In this respect, Jonas Rabinovitchexplained how e-governance can assistwith local service delivery. Online frontoffice systems can be used to delivercertificates to citizens, to handle taxand fee payments, and to administera grievance and complaints proceduresupporting the physical delivery ofservices to residents.2

Each transfer of resources

is accompanied by very specificresponsibilities and accountabilitymechanisms and part of mypresentation was to highlight howe-government can support transparencyobjectives and accountabilityobjectives, said Mr. Rabinovitch.

CAPACITY BUILDING

Even with clearer rules on assignment ofresponsibilities and the finance to fulfilthose responsibilities, a key challenge forIraq is developing a civil service technicallyexperienced and competent enough toensure improved service of delivery.

Were talking about a very complexstructure involving thousands of civil

servants working for the Iraqi governmentand capacity is a challenge if we areto decentralize certain administrativefunctions, said Mr. Rabinovitch.

Participants differed in their viewson whether capacity should be the focus

before powers are devolved. Anwar Shahsaid World Bank research in Colombiashowed building capacity beforedevolution was not necessary. Te WorldBank study compared cities with hightechnical capacity and those with lowercapacity and after devolution, the citieswith low technical capacity achievedbetter delivery of services.

You can transfer overnight all the

central officials, and federal officials tothe provincial and local level, as was donein Indonesia, or you can do it gradually,as has been done in Tailand but whatis critical is that the local governmentshave the powers to decide what positionsthey want to have, how many people

they want to hire and if the centralgovernment is able to transfer somepersonnel to fill these positions asdesired, said Dr. Shah. But even ifthat doesnt happen local governments,if they have the resources and theyhave the responsibilities, will be ableto hire people. So technical capacityto me is only of secondary importancebecause technical capacity assumes thateverything will be delivered by the localgovernments itself whereas the newparadigm is that local governments actas a coordinator or catalyst and are apurchaser of services but not necessarilya direct provider of services.

Professor Mehta agreed saying thatwhether or not there is a major transferof central government officials to localgovernment, local governments willassume the capacity through experience.Te way they do it in some countriesis that there is a whole array of peoplethat are local government and theymove from one local government toanother but they are the people thatare most experienced and trained, likeaccountants, and these are the kindof people that move from one localgovernment to another.

Dr. Ahmad said that the transfer ofpersonnel should only be undertakenwhen budgeting and managementcapabilities were in place. Experiencein other countries had shown that the

transition to the new system has to beproperly sequenced to avoid errors.3In Latin America for example, sharingof revenues before responsibilitieshad been properly assigned proveddetrimental to the effectiveness ofdecentralization.

Te proper sequence of stepsundertaken by Iraq should be asfollows4:

establishment of budgeting andmanaging capabilities prior todevolution;

the transfer of personnel tosubnational control;

the assignment of hiring,remuneration and managementof career responsibilities to thesubnational government units wherepersonnel has been transferred;

the transfer of property ofinfrastructure and equipment tosubnational governments in theirnewly assumed functions, togetherwith responsibility for maintenanceand operations; and

the gradual assumption of fullfunctional assignments in the samesector (primary education, basichealth care etc).

In terms of training personnel.Jonas Rabinovitch cited the UnitedNations Public AdministrationCountry Studies as an online toolto assist development. It will notprovide the Iraqi government with amagical formula as to how to do theirown reform, they have competentpeople already working on that,explained Mr. Rabinovitch. But itwill provide them with referencesand information about capacitydevelopment, existing codes ofconduct for the civil service, existinginstitutional settings, a network ofchief operation officers worldwide,samples of legislation for electronicgovernment development and samplesof policies for electronic governmentdevelopment. So its a resource to findout what is happening and how, inother UN member states. I think itcould be immediately useful in termsof information sharing and eventuallyfurther support cooperation with allUN agencies.

ADMINISTRATIVESTRUCTURES FOR SERVICEDELIVERY

Brazil and France were cited byconference speakers as examples of howmunicipalities had addressed issuesof service delivery by joining togetherin inter-municipal consortia. As part

Were talking about avery complex structureinvolving thousands of

civil servants working forthe Iraqi government andcapacity is a challenge ifwe are to decentralize

certain administrativefunctions.

Jonas Rabinovitch, UNDESA

World Bank research in Colombia showed building capacity before devolution was not necessary


2Conference paper prepared by Jonas Rabinovitch for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)

3Conference paper prepared by Dr Etisham Ahmad and Giorgio Brosio for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)4Idem

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of the process of amalgamation inseeking to deliver efficient serviceswhile keeping government close tothe people, Ed Cornies highlightedthe establishment of inter-municipalspecial bodies in Europe whichenable municipalities to pool theirresources in order to more effectivelycarry out area wide responsibilitiessuch as sewerage, waste disposal,water and transport while at the

same time keeping their ownmunicipal structure5. In France thesebodies have their own source revenueand taxing power and 91 percent ofmunicipalities belonged to 2,588inter-municipal bodies representing87 percent of the total population.As Mr. Cornies said such bodiesbecome less effective in terms oflocal governance if their members areappointed rather than elected.

In his presentation, Luiz de Mellosaid Brazil had a long history ofdelivering healthcare services throughinter-municipal consortia. Tis hashelped subnational governments dealwith diseconomies of scale and cross-border externalities, which mightotherwise discourage the provisionof services at the local level.6 Suchdiseconomies of scale can be strongeven in labour-intensive sectors,such as health and education. Whenhealthcare was decentralized to themunicipalities in the 1990s, theestablishment of inter-municipalconsortia enabled the smallermunicipalities to overcome the lackof technical capacity and financialmeans to deliver specialised healthcare services.

Latin America has a wealth ofdifferent country experiences in whatworks well and what doesnt. Teexperience of Latin America is almostlike a natural laboratory for the Iraqisto learn from. said Mr. de Mello.

Brazil uses inter-municipality consortia to address service delivery like healthcare


Service delivery: case study on waste management

In his conference presentation, Professor Amin explained how decentralizationcan play a significant role in the improvement of basic services delivery throughan example case study on waste management.7

Moving away from a centralized approach and implementing an integrateddecentralized system for the supply of waste management services, means thateach stakeholder in the management chain has a functional limitation. Withan integrated supply of waste management both the formal and informal sector

will mutually function and interact for mutual benefit. A decentralized model,if successful, can lead to numerous benefits, including producing compost,improving recycling, reducing greenhouse gases, harnessing carbon trading,reducing the cost of waste management services, creating jobs for the poor,improving health and the environment.

An example of a successful decentralized wastewater project is thewastewater treatment system in Khulna, Bangladesh. Te Khulna CityCorporation, at the time, was unable to provide water supply to all of theirdesignated areas. Only 30 percent of the households had access to piped waterand in the dry seasons some areas suffered acutely due to water shortages.Consequently more than 80 percent of illnesses were related to waterborne andwater related diseases like diarrhoea, dysentery, fungal and skin diseases.

In 2000, PRISM, a non-governmental organization, established a duckweedbased wastewater treatment plant on the land provided by Khulna Agriculturalraining Institute (AI).

Te objectives of the project were to improve water and sanitation services, toreuse treated water for irrigation and fish culture, and to reduce the environmentalimpact of untreated wastewater. Te plant treats wastewater from drains and thewastewater flows using gravity to the wastewater treatment plant. Duckweed, asmall aquatic plant, is used for tertiary treatment of contaminated water.

Te project was hugely successful. Te main sources of direct revenue comefrom fish sales (70-80 percent of income), selling duckweed (4-5 percent) and theadditional revenue-generating activities related to the selling of cultivated fruit andvegetables and of cow milk. Te AI plant provides duckweed to local residentsto feed fish and approximately 20 local farmers receive treated wastewater fromthe AI plant to irrigate their fields.

People were able to connect their households wastewater pipe to the maindrain, improving the local sanitary conditions and creating awareness among localpeople of the need to manage wastewater. In addition, environmental awarenesswas a major positive outcome, whereby local residents, notably women are nowmore aware and express concern about the health risks associated with the use ofpolluted water for various domestic activities and for irrigating crops.

5Conference paper prepared by Ed Cornies for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)6Conference paper prepared by Luiz de Mello for the UN-HABITAT International Conference on Decentralization (Amman, May 2011)7Presentation by Professor ATM Arul Amin, Department of Environmental Science & Management, School of Engineering & Applied Sciences, North South University (NSU),Dhaka, Bangladesh, at the International Conference on Decentralization (Amman, May 2011)

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