Decentralization on the Example of the Yemeni Water Sector: Did Decentralization from 2000 to 2009 Improve the Urban Water Supply and Sanitation in Yemen?

Katharina Mewes Decentralization on the Example of the Yemeni Water Sector

VS RESEARCH

Katharina Mewes

Decentralization on the Example of the Yemeni Water Sector

VS RESEARCH

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1st Edition 2011 All rights reserved © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011 Editorial Office: Dorothee Koch | Anita Wilke VS Verlag für Sozialwissenschaften is a brand of Springer Fachmedien. Springer Fachmedien is part of Springer Science+Business Media. www.vs-verlag.de No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder. Registered and/or industrial names, trade names, trade descriptions etc. cited in this publication are part of the law for trade-mark protection and may not be used free in any form or by any means even if this is not specifically marked. Cover design: KünkelLopka Medienentwicklung, Heidelberg Printed on acid-free paper Printed in Germany ISBN 978-3-531-17882-0

Acknowledgement

It is a pleasure to thank all those who have encouraged and supported me during my research. First and foremost, I wish to thank my parents and my "host" mom Su Anne Schloo who have supported me with the editing and revising of the paper. Further my thanks and appreciations to my Yemeni "host" families and to Mohammed A. H. Al-Qumali who have enabled me to gain insights in the Yemeni society and the specifics of the local culture. I am grateful for the support and advice from my supervisor Dr. Martin Beck. Special thanks to Jochen Renger and Gerhard Lichtenthaeler (GTZ Water Sector Program) who have drawn my attention to the topic of the decentralization of the urban water supply and sanitation. Thanks to Barbara Gerhager, Mokhlesa AI-Zaeim, Anwer Sahooly, and Ziad Shawagfeh (GTZ Water Sector Program) for providing me with information, documents, and insights. Last but not least, thanks to all the participants who were available for interviews and provided me with information.

Katharina Mewes

Abstract

This paper introduces the reader to the theoretical and practical dimensions of decentralization in an accessible and systematic way. Based on the example of the reform process for the Yemeni Urban Water Supply and Sanitation (UWSS), it links the theoretical, conceptual, and methodological aspects of decentralization to empirie problems. Against the background of the increasing water scarcity in Yemen, areform process for the Urban Water Supply and Sanitation (UWSS) was initiated in 1997. The main elements of the reforms were decentralization, corporatization, commercialization, community participation, financial sustainability, private sector integration, and separation between service delivery, executive, and regulatory functions. Since the start of the reform process UWSS services have progressively been decentralized and the over-centralized National Water and Sanitation Authority (NWSA) has gradually been replaced by a system of UWSS utilities. In 2000 the first Iocal corporation (LC) for UWSS was established in Sana'a and, to date, fifteen LCs, seventeen LC branches, and eleven Autonomous Water Supply and Sanitation Utilities (AUWSSU) are responsible for UWSS services for 95% of the urban population. The UWSS reforms are weil underway and are showing results in terms of expanded service delivery and improved performance. However, there are several issues that need to be observed in order to consolidate the on-going decentralization and to produce the targeted outcomes. Furthermore, UWSS needs to respond to high population growth and water scarcity; freshwater availability in Yemen is one of the lowest in the world. Capacity building needs to be extended and more ownership and authority should be decentralized.

Contents

Abbreviations Tables Figures Introduction

13 ,15 ,17

,19

1. Theoretical and Practical Pre-Considerations

23

1.1 Methodology of This Paper

,24

1.2 Choice of Research Area and Timeframe

24

1.3 Choice of Survey Methodology and Conducting the Survey

,25

1.4 Data Evaluation

26

2. Decentralization Concept

,29

2.1 Waves of Decentralization

29

2.2 Theoretical Placement of Decentralization 2.2.1 Decentralization within Political Science 2.2.2 Economic Theory and Decentralization 2.2.3 Political Economies and Decentralization 2.2.4 System Theory and Decentralization 2.2.5 New-Institutionalism

33 33 37 41 42 44

10

Contents

2.3 Decentralization within the Political Debate of Development

Aid 2.3.1 Decentralization and Democratization 2.3.2 Decentralization and Economic Prosperity

,48 49 50

3. Decentralization: Concepts and Definitions

S3

3.1 Dimensions of Decentralization 3.1.1 Administrative Decentralization 3.1.2 Political Decentralization 3.1.3 Fiscal Decentralization

;;8 59 60 61

3.2 Forms of Decentralization 3.2.1 Deconcentration 3.2.2 Delegation.

63 63

64

3.2.3 Devolution 3.2.4 Hybrid Forms 3.2.4.1 Top-Down Principal Agency 3.2.4.2 Bottom-Up Principal Agency Model

65 65 66 66

3.2.5 Divestment

67

3.3 Sequences of Decentralization

67

3.4 Interim Conclusion

73

4. Success Criteria of Decentralization

77

4.1 Central Government

77

4.2 Sub-National Capacities

77

4.3 Coordination between National and Sub-National Institutions

78

4.4 Participation

78

Contents

11

4.5 Accountability

81

5. Decentralization in Yemen

85

5.1 The Yemeni Context

85

5.2. Status of Decentralization in Yemen

90

5.3 The Local Authority Law (LAL) 5.3.1 Central Organs 5.3.2 Sub-National Organs of the Govemorate Level 5.3.2.1 Local Council of the Governorate 5.3.2.2 Govemorate's Local Council 5.3.2.2.1 The Governor 5.3.2.2.2 The Ceneral Secretary 5.3.2.2.3 The Vnder-Secretary 5.3.2.2.4 The Executive Office 5.3.3 Sub-National Organs of the District Level 5.3.3.1 Local Council of the District 5.3.3.2 District's Local Council 5.3.3.2.1 The General Director 5.3.3.2.2 The General Secretary 5.3.3.2.3 The Executive Office 5.3.4 Summary of the Local Authority Law

93 94 95 95 97 98 100 100 101 103 104 106 106 106 107 107

5.4 National Decentralization Strategy

110

5.5 Financial Resources of the Local Authorities

111

6. Urban Water Supply and Sanitation (UWSS)

117

6.1 The Yemeni Water Sector

118

6.2 UWSS in Yemen

123

12

Contents

6.3 National Water Sector Strategy and Investment Program

126

6.4 The UWSS Reform Process 6.4.1 Status of the Decentralization of the UWSS 6.4.1.1 Institutional Change of the UWSS Structure 6.4.1.1.1 LCs 6.4.1.1.2 AUWSSUs 6.4.1.1.3 Legal Framework of the Decentralized UWSS Utilities 6.4.2 Case Study 6.4.3 Major Challenges Left 6.4.3.1 Institutional Govemance 6.4.3.2 Sector Supervision 6.4.3.3 Financial Sustainability 6.4.3.4 Pro-Poor Tariff, 6.4.3.5 Coordination Between the Local Council and the Local Corporation 6.4.4 "New-Institutionalistic" Analysis of the Institutional Change in the UWSS Sector

128 135 137 138 140

7. Conclusion and Future Outlook

157

References

173

141 144 147 147 l48 150 151 151 152

Abbreviations

AUWSSU

Autonomous Urban Water Supply and Sanitation Utility

BoD

Board of Directors

BMZ

(German) Federal Ministry for Economic Co operation and Development

COCA

Central Agency for Control and Audit

EPA

Environmental Protection Authority

GAREW

General Authority for Rural Water and Electricity

GARWSP

General Authority for Water Supply and Sanitation Projects

GTZ

Deutsche Gesellschaft für Technische Zusammenarbeit (German Technical Cooperation)

JAR KfW

Joint Annual Review Kreditanstalt für Wiederaufbau (German Development Bank)

LAL

Local Authority Law

LC

Local Corporation

lpcd

liters per capita per day

MAC

Management and Consulting GmbH Frankfurt

MAI

Ministry of Agriculture and Irrigation

MCF

Ministry of Civil Service

MDG

(United Nations) Millennium Development Goals

MEW

Ministry of Electricity and Water

MoF

Ministry of Finance

MoLA

Ministry of Local Administration

14

Abbreviations

Ministry of Oils and Minerals

MoM MoPIC MPWUP MWE

Ministry of Planning and International Cooperation Ministry of Public Works and Urban Planning Ministry of Water and Environment

NDS NWSA

National Decentralization Strategy National Water and Sanitation Authority

NWRA NWSSIP

National Water Resource Authority National Water Sector Strategy and Investment Program TS Technical Secretariat for Urban Water Reform UNDPDLDSP United Nations Development Program Decentralization and Local Development UWSS WHO

Support Program Urban Water Supply and Sanitation World Health Organization

Tables

Table 3.1: Table 5.1: Table 5.2: Table 5.3: Table 5.4: Table 5.5: Table 5.6: Table 5.7: Table 5.8: Table 6.1: Table 6.2: Table 6.3: Table 6.4: Table 6.5:

Sequences of Decentralization and Their Effects § 145-148 of the Yemeni Constitution Tasks and Responsibilities of the Local Council of the Governorate Tasks and Responsibilities of the Covernor Tasks and Responsibilities of the General Secretary Tasks and Responsibilities of the Under-Secretary Tasks and Responsibilities of the Executive Office Tasks and Responsibilities of the Local Council of the District Sources of Revenues for Capital Expenditures

96 ,98 100 101 103

The Rada'a Principles Guiding Principles for a Yemeni Water Policy

124 127

UWSS Service Coverage Target and Actual Spending on UWSS NWSSIP Update - Urban Population Covered by Water Supply Table 6.6: NWSSIP Update -Urban Population Covered by Water Sanitation Table 6.7: Decentralization Plan for UWSS Utilities Table 6.8: LC Sana'a - Performance Improvement Table 6.9: LC Sana'a - Coverage Development Table 6.10: Non-Conventional Options for UWSS Expansion,

72 ,91

104 112

131 132 133 134 136 145 145 147

Figures

Figure 5.1: Figure 5.2: Figure 5.3: Figure 5.4: Figure 6.1:

Administrative Map of Yemen Water Poverty Index. Local Authority Structure Management Structure of the Local Authorities Organization Chart of the Ministry of Water and Environment Figure 6.2: Yemen's Water and Environment Sector Figure 6.3: Overview of the Public UWSS Figure 6.4: Administrative Structure of the LCs - Board of Directors (BoD). Figure 6.5: Administrative Structure of the AUWSSUs Advisory Committee

86 88 97 .l02 120 .l22

Figure 6.6: Institutional Coverage of the UWSS in Yemen Figure 6.7: Proposed NJRWSS Govemance Structure

.l42 .l49

.130

139 141

Introduction

Water scarcity is noticeably increasing [in many developing countries] due to the inadequate response by water sector actors and strategies to high population growth, rapid urbanization, industrial development and the expansion of irrigated agriculture, generally with negative impacts on soils and watercourses (BMZ 2009: 8).

In Yemen, water scarcity plays a central role in the development. Water scarcity and over-exploitation of aquifers are not only the most complex development challenges in Yemen, but they further impact allother fields of development. Water is the basis for sustainable development and has strong links to economic development, (girls') education, public health, and state stability. Further, water becomes more and more a subject of conflicts. The water crisis in Yemen was first recognized in the mid 1980s when the critical equilibrium of available water resources and domestic water consumption began to break down. Due to an incentive structure that made water affordable for intensive agricu.ltural use and rising demands for domestic water consumption, caused by a high population growth and rural-urban migration, the groundwater became increasingly overexploited (Ministry of Water and Environment 2004: 4-5, Gerhager/ Sahooly/ Safan 2009: 7-8). Thus, Yemen is set to be one of the first countries of the world to run out of water (Evans 2009). For Sana'a, the capital of Yemen, the Yemeni Govemment and experts agree that at current rates the wells will run dry in about ten years. The water shortage is becoming more and more critical and is driving civil unrest. Families easily pay half of their income for water. The water available per person per year across Yemen amounts to between 100 to 200 cubic meters. K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_1, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

20

Introduction

This is far below the international water poverty line (CEH 2005, Water Monitoring Alliance 2005) of 1000 cubic meters (Evans 2009). Therefore, in the early 1990s areform process of the Urban Water Supply and Sanitation (UWSS) was initiated to tackle the water crisis in Yemen. In 2000, the Local Administration Law N°4 was issued, aiming at the implementation of a pro-decentralization policy. This law and law N°35, which was amended by law N°7 in 1997, paved the way for fostering decentralization of the water sector in Yemen, decentralization being the spearhead of the UWSS Policy and Strategy Reform Agenda, initiated by cabinet resolution 237, in November 1997 (Gerhager/ Sahooly / Safan 2009: 11). Since the reform process and decentralization of the UWSS began, the centralized structures of the National Water and Sanitation Authority (NWSA) have gradually been and continue to be replaced by a decentralized system of local corporations (LC) of UWSS, LC branches and autonomous urban water supply and sanitation utilities (AUWSSU). As most academics and development stakeholders today have universally come to recognize the importance of good govemance practices to alleviate poverty and conduct institutional change, they have increasingly turned towards the practice of decentralization. Decentralization is widely discussed within the political context of development aid. Decentralization reforms have been among the most important aspects of state modernization in developing countries, moving the research foeus to the institutional setting of the state. "It is estimated that 80 percent of developing countries including the transitional economies of Eastem and Central Europe are experimenting with some form of decentralization" (Xavier 2001, cited in Work 2002: 9). Given this background, this research paper aims to analyze the decentralization process of the Yemeni UWSS from 2000 to 2009 to determine if decentralization has improved the UWSS in Yemen. From arguments that are to be discussed in this research paper, it is assumed that decentralization impacts on the efficiency of UWSS, hence increases the number of households connected to the UWSS, raises the amount of wa-

Introduction

21

ter available per household and decreases the cost of water supply and sanitation for the urban population. More precisely, the research paper seeks to answer the following empirical questions: 1. Did the number of households connected to the UWSS system increase since the LCs and AUWSSUs have replaced the NWSA branches? 2. Has the amount of water available per household increased since the LCs and decentralized public utilities at the locallevel are in charge of the UWSS? 3. Did the cost of UWSS (water and sanitation fees) decrease for the household? 4. Has decentralization contributed to improve administrative coordination and to clarify responsibilities and competences between concemed institutions? 5. Did the sequence of different forms of decentralization have an impact on the performance of the LCs and decentralized public utilities at the locallevel? A qualitative research was conducted during a field research from October to December 2009. Major laws concerning the decentralization process in Yemen, reform programs of the UWSS, and studies about the Yemeni water sector were analyzed and expert interviews with representatives of the GTZ Technical Secretariat in the Ministry of Water and Environment, of the United Nations Development Program Decentralization and Local Development Support Project (DLDSP), and of the Ministry of Local Administration (MoLA) were conducted. In addition, informal meetings with the staff of the German Technical Cooperation (GTZ) Water Sector Program and representatives of NWSA were conducted. Decentralization is widely discussed in the literature. However, studies related to decentralization in Yemen mainly concentrate on fiscal decentralization. The UWSS has been evaluated in regards to the general reform process and the consolidation of the decentralization process. However, the related studies do not embed the empirieal outcomes in a theoretic concept, Thus, this research paper seeks to make the linkage

22

Introduction

between the theoretical framework and the empirie outcomes of decentralization in Yemen. The structure of the paper follows several steps. Chapter One presents theoretical and practical pre-considerations. Chapter Two, in the frame of a literature review, displays a historical as weIl as conceptual placement of the decentralization concept and illustrates the genesis of decentralization in the political debate of development aid. The framework of decentralization is illustrated to derive a theoretic approach for the analysis of the UWSS. Chapter Three limits the wider decentralization concept to a concrete working definition and introduces different dimensions, forms, and sequences of the decentralization to derive the hypotheses of the research. Chapter Four illustrates the success criteria of decentralization. Chapter Five introduces the Yemeni context and analyzes the major laws regarding decentralization. Chapter Six briefly illustrates the concept of UWSS, presents the Yemeni water sector, and analyzes the reform and decentralization process of the UWSS in Yemen. Based on the previous analysis, Chapter Seven presents and interprets the findings, places the decentralization process of the UWSS into the previously derived categories, and seeks to illustrate whether between 2000 and 2009 the UWSS was improved through decentralization. As this study is prepared to obtain a diploma, the German equivalent to the Master of Political Science, it has to integrate two subdivision of political science. Therefore, this paper illustrates in detail the framework and theoretical approaches to decentralization before analyzing decentralization in Yemen, in order to integrate both political theory and international relations into the paper.

1. Theoretical and Practical Pre-Considerations

The object of this research paper, decentralization, has been weIl analyzed in the past. This is a result of different disciplines that operate in the field of decentralization. The analysis of decentralization by political science, political economy, sociology, economics, management and administrative science and organization theory has led to a wide dimension of the content in the analysis of the concept of decentralization (Bünte 2003: 18). Therefore, this research paper includes three conceptual levels: frameworks, theories, and methods. The broadest level is the framework which organizes inquiry by speci.fying the general sets of variables of interest. The analyst uses a framework to identify which theories are relevant to a particular research question (Ostrom 1999, cited in Koontz 2003: 1). Several theories from a variety of disciplines may be compatible with a given phenomena examined. Hence, a framework allows integrating different theories that would otherwise be examined isolated from each other (Koontz 2003: 1). Thus, the framework of decentralization is illustrated in Chapter Two of this research paper. Theories are more specific than a framework. They describe patterns for interpreting data and understanding their larger significance. The theory to analyze the decentralization process of the UWSS is chosen in section 2.2.5. The models and methods, i.e, the premises and hypotheses derived from the theory, are the most specific of the three conceptual levels and are applied in the research paper, in section 6.4.1.1 and section 6.4.4 (Koontz 2003: 2).

K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_2, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

24

Theoretical and Practical Pre-Considerations

1.1 Methodology ofThis Paper In the first seetions of the paper, a literature review is conducted to determine the historical placement of the decentralization concept and to illustrate its continuous relevance. The normative and functional rationale of decentralization is discussed before linking it to various theoretic approaches dealing with decentralization. Different dimensions, forms, and sequences of decentralization are illustrated to derive a working definition for further analysis. The empirical part of the study that follows combines different analysis methodologies. To analyze and evaluate the decentralization process of the Yemeni water sector, an analysis of the essential laws, polieies, and decrees conceming decentralization is conducted. Then several studies, statisties, and documents regarding UWSS in Yemen are examined. In addition, some qualitative expert interviews are conducted with employees of the GTZ Technical Secretariat in the Ministry of Water and Environment, a United Nations Development Program Decentralization and Local Development Support Program (UNDP DLDSP) representative, the Deputy Minister of the Ministry of Local Administration (MoLA), his assistant, and the governor of Hajja. Further, informal meetings with the staff of the GTZ Water Sector Program and representatives of NWSA help to gather a broad understanding of decentralization in Yemen. The document analysis is very important for this research paper, as it ought to serve as the manifestation of the political will for decentralization of the Yemeni govemment.

1.2 Choice of Research Area and Timeframe "Urban water supply and sanitation in Yemen is seen as a prime area where the nation would like to move rapidly towards universal access to safe water and sanitation" (Ward et al 2009: 8). In addition, one of the objectives noted in the "Millennium Development Goals" (MDGs) is to

Choice of Survey Methodology and Conducting the Survey

25

halve the proportion of people without access to water and sanitation. This should be indicative enough to give relevance to UWSS. As decentralization has been chosen as a mean for the UWSS reform to increase UWSS coverage and to improve the UWSS service delivery, it should be examined whether decentralization from 2000 to 2009 improves the urban water supply and sanitation in Yemen. As the UWSS suffered from slow expansion of coverage, high costs, and poor services until the mid-1990s, areform process based on the concept of decentralization was initiated. Therefore, the foeus of this research is to determine if decentralization has improved the UWSS. As decentralization targets almost all govemorates of Yemen, the research is not restricted to a certain govemorate. However, as UWSS highly depends on loeal eonditions, abrief example of the LC in Sana'a is illustrated in seetion 6.4.2. This research paper covers mainly the period between 2000 and 2009. This period has been chosen for several reasons. On the one hand, the reform proeess of the UWSS has been implemented in the 1990s, resulting in the first NWSA branch being transformed into a LC in 2000. In order to examine institutional changes, a sufficient timeframe should be given. On the other hand, major laws conceming decentralization, such as the Local Administration Law in 2000 and the development of a draft "National Loeal Authority Strategy" in 2008, have been issued in this period.

1.3 Choice of Survey Methodology andConducting theSurvey This research is mainly based on a literature and doeument review. In addition, some expert interviews and meetings with experts working in the UWSS sector were eonducted. The expert interview suits best as a method because, as an expert, the interviewee with his/her tasks, responsibilities, and eompetenees is integrated in the organizational and institutional eontext and represents the concemed institution. The expert's first-hand experiences and know-

26

Theoretical and Practical Pre-Considerations

ledge is important for the survey. The objective of expert interviews is not the disclosure of individual biographies. The expert is only of interest as an office-holder or part of the functional elite within the context of an institution or organization. A person becomes a target object of an expert interview when he/she influences decision-making or problem-solving processes, or when he/she has privileged access to information about groups or persons in decision-making positions (Meuser/ Nagel 1991). For this research, the experts have been chosen because they work in fields relevant to the research object, the decentral:ization of the UWSS. Who is considered to be an expert, therefore, depends on the interest of the survey. Thus, a person is considered as an expert when it is assumed that he/she possesses knowledge which is not accessible for everyone in the domain (Meuser/ Nagel 1991). For this research, three expert interviews with representatives of the GTZ Technical Secretariat in the Ministry of Water and Environment, a representative of the UNDP DLDSP program, and one group interview with the Deputy Minister of Local Development of the Ministry of Local Administration (MoLA), his assistant, and the govemor of Hajja were conducted, In addition, the NWSA headquarter in Sana'a was visited and several informal meetings with the staff of the GTZ Water Sector Program were conducted. A list of interviewees and meeting partners is displayed in the annex, For the interviews, non-standardized interviews with an interview guide were chosen for ensuring that the direction of a certain topic is not lost and for preventing the interviewee from digressing to a different topic that is not relevant to the objective of the survey.

1.4 DataEvaluation The collected data is then evaluated based on the principals of the content analysis structure as proposed by Mayring (Behnke/ Bauer/ Behnke 2006: 339-341). However, as this research is not mainly based on interviews and the number of interviews conducted is rather small, the inter-

Data Evaluation

27

view data was only roughly comparable, as interview structures varied according to different focuses for different experts. However, in general, the evaluation strategy aims at comparing the expert interviews and analyzing the common, representative statements, universal knowledge, relevant structures, constructs of the reality, and interpretations (Behnke/ Bauer/ Behnke 2006: 339-341). The evaluation strategy aims at analyzing similarities and differences through a so-called thematic comparison based on typical statements, and it stresses thematic focuses. The thematic focuses of the interview guide are a result of previously developed categories that were derived from the decentralization concept, which was previously subject to modification before it could be operationalized (Behnke/ Bauer/ Behnke 2006: 339-341). The following steps were taken for the analysis. At the beginning the transcribed data of each interview was paraphrased and structured into thematic sequences. Next, the paraphrased passages were arranged according to contextual formulated headings. Then headings of similar content and similar text passages were summarized under common headings. After these steps were done for each interview, the content of all interviews was synthesized and all passages of similar content were arranged under common headings. Then the headings were transformed into terminologies and concepts of political science, A second phase of theoretical generalization follows the generalization of the empirical data (Behnke/ Bauer/ Behnke 2006: 348).

2. Decentralization Concept

From the beginning of development cooperation, decentralization was controversially discussed as a means for democratization and economic development. As a result, the institutional framework of the state reemerged into the research interests of development aid and development economies (Sauerland 1997: 15). Central points of this discourse and its historic political background are elaborated in the following section to illustrate the political relevance of the decentralization paradigm. Through the course of the theoretical development and discourse on democracy, many normative as weil as functional arguments for the decentralization of the state have been presented. The examination of decentralization can be connected to various theories of political, economic, and administrative disciplines. As Bünte (2003: 19) points out, in the concemed disciplines, decentralization is often displayed as independent variable for the explanation of economic development, administrative effectiveness, or democratic consolidation. However, these connections are to be discussed to evaluate the success criteria of decentralization.

2.1 Waves ofDecentralization The term decentralization is a fairly modem term. Therefore, a decentralized system has to be differentiated from a federal one. While the member states within a federal state legally dispose of original autonomy, this is not the case regarding the autonomy of decentralized units within a unitary state. UIn other words, the autonomy of member states [in a federation] has been established and guaranteed on a constitutional not K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_3, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

30

Decentralization Concept

merely legislative (statutory) level as it is the case with decentralized units" (Basta 1999: 30). Even though today science distinguishes the two concepts, they cannot be regarded separately in a historical review, as decentralization does not exist as adescription of old state systems, which can be described as such retrospectively. In the past, these state structures have all been summarized as federalism, To review the early origins of the decentralization concept, a review of the concept of federalism is necessary. However, this section only illustrates the relevance of decentralization; therefore, the timeframe starts with the 1950s. Since the 1950s, the question about which public services should be performed on which state level and what kind of political legitimization the concemed state level requires has been discussed within the political debate about development aid. Thus, decentralization has been considered as a means to enhance administrative efficiency, democratic participation, and territorial and social equality (Bünte 2003: 20). However, a swing between centralized and decentralized state and development concepts can be shown to follow political trends (Conyer 1983, Thedieck 2000). In the first phase of the 1950s, scientists were concemed with the question about the administrative structures of the post-colonial states. Most of the former colonies were highly centralized states focusing on guaranteeing the power of the colonial regimes. The following debate about decentralization was then mainly used by post-colonial elites to ensure their power. The debate was mainly normative, orienting itself on the European administrative systems. A functioning administration, whose decentralization was linked to the formation of a functioning, modem state, was center of the debate. However, the debate did not lead to the favored results, as only few developing countries established functioning administrations, while economic growth failed to materialize (Rüland 1993: 183). In the 1960s a centralized development paradigm arose, giving the state the leading role in economic development (Fuhr 1999: 26). The lack of a modem administrative steering system and effective planning

Waves of Decentralization

31

instruments were believed to be the major obstacles for economic development. Therefore, the establishment of technocratic, professional administrations based on the ideals of Max Weber was called for, In most developing countries, the pre-existing highly centralized state was strengthened, and the state, due to the weakness of other social agents, became the most powerful institution driving economic development. The central govemment became the main supplier of social services, as local administrations were mainly too weak to fulfill these tasks. The emergence of state-owned enterprises was supposed to establish the necessary infrastructure to drive economic development (Rondinelli 1999: 8). However, this centralized control over regulation and production and the high concentrations of political power with discretion over resource allocation led to corruption and cronyism. When most of the developing countries tumed out to be "dictatorships without development," (Rüland/ Werz 1985) decentralized state structures retumed to the political debate about development aid (Fuhr 1999: 26). The debate about decentralization and the optimal size and structure of government began. The discussion mainly aimed at increasing administrative efficiency within the development process. Increasing resentment about the unprofitable state-owned enterprises shifted the attention towards shortcomings of central planning. Weak administrative capabilities of national governments restricted the possibility of increasing and improving services. The most serious weaknesses included poor planning, administrative incompetence, lack of coordination between national and local institutions, ineffective management and supervision procedures, and lack of qualified staff (Rondinelli 1999: 8-9). As developmental strategies began to change towards a basicneeds approach to community development, which allowed fair growth and participatory planning and left the macro-economic planning of the past behind, the interest in decentralization increased. International donor organizations supported decentralization as a main instrument of social and economic development that is based on self-aid for local communities (Rondinelli 1999: 8-9). In the course of this

32

Decentralization Concept

debate, decentralization was often equated with privatization, delegation, and deconcentration.! In the 1990s, as areaction towards the "third wave of democratization'? (Huntington 1993), the political implications of decentralization were increasingly incorporated into the political debate. Decentralization was not only taken up by the development aid discourse, but further by the newly established transformation research, Both discourses took place mostly without enriching each other, while scientific exchange hardly took place (Bünte 2003: 23). However, political factors were stressed more within the theoretical debate about development aid, which might be related to the transformations of the decentralization concept as weIl as to the emphasis given to the political framework within the concept of good governance. In the 1980s, due to the consideration of increased efficiency, the decentralization concept was expanded to a degree that it also included deconcentration and delegation processes that did not include any transfer of legitimation. This changed gradually towards the 1990s, when the transfer of legitimacy was explicitly demanded by the decentralization concept. With the conception of politicalor democratic decentralization, a decentralization concept was established that focused on political processes, including democratization of the localleveis and participation within development processes (Bünte 2003: 23). This placed Iocal parliaments, civil society, and parties at the centre of consideration, Overall, foeus on political elements grew in significance, while foeus solelyon administrative structures decreased. This can not only be derived from various empirical case studies, but further from the UNDP and World Bank development concepts and programs, which give special attention to decentralization (UNDP 2006, World Bank 2001). These terms will be further explained in chapter 4.2. Between 1974 and 1990, the intemational system experienced what Samuel Huntington has termed "the third wave of democratization." During this period, approximately thirty countries, from southem and Eastem Europe to Latin America to Asia, transitioned to democracies while a handful of other countries significantly liberalized their political systems. 1

2

Waves of Decentralization

33

Outing the last decade, it has become widely acknowledged that political institutions are crucial for a country's economic development (Olsen 2000: 11). Therefore, a shift from the traditional foeus on the micro level towards a more macro-oriented approach has been made by development cooperation. The United Nations development programs (UNOP) points out that about 1180 percent of the developing countries, including the transitional economies of Eastem and Central Europe are experimenting with some form of decentralization" (Xavier 2001, cited in Work 2002: 9). This should be indication enough to reflect the relevance of decentralization.

2.2

Theoretical Placement 0/Decentralization

2.2.1 Decentralization within Political Sci.ence Political sci.ence as the "supreme science'" tries to analyze the interrelated issues that lie between sociology, economics, jurisprudence and administrative science (Bünte 2003: 18). Thus, it is inherent to political science to analyze issues related to several of these theoretical approaches. Because of the subdivision of political science into political theory, international relations, political soci. 01 0 gy, political economics, and comparative politics, a research topic (paper) can generally be narrowed to one of these fields. Because the main interest of this research paper focuses on the state structures regarding decentralization and the effeet of decentralization on the UWSS, this paper can be subcategorized into two of the political fields: political theory, more specifically system theory, and political economy. An analysis of decentralization processes in a developing country is also related to international politics. Analyzing decentralization from

3

In Germany political science is often referred to as "Königswissenschaft,"

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Decentralization Concept

several perspectives, however, does not necessarily lead to a lack of clarity, as it would be inadequate to analyze decentralization from a single perspective. The decentralization concept actually addresses aspects of all subcategories of political science. Political sociology addresses corruption, which is often assumed to decrease through decentralization; political economy addresses fiscal decentralization and intergovernmental transfers; comparative politics compares decentralization strategies of different countries; and system theory analyzes state structures (Bünte 2003: 18). Furthermore, the scope of the decentralization terminology covers all three dimensions of political science: polity, policy, and politics. Polity relates to the institutional structures of decentralization in the sense of the formation of the state; policy relates to decentralization strategies as an aim and program component of politics, the realization of strategies and programs; and politics relates to the procedural aspects of decentralization, the stmggle for decisions (Bünte 2003: 18, Metzger 2000: 51, Nassmacher 1991). This research paper mainly focuses on the polity and policy dimension of decentralization, as politics, concerning, for instances parliamentary debates about ad-hoc transfers from national to sub-national entities, is only of secondary relevance. Still, a concrete classification into these dimensions cannot be made; instead it should be stressed that this research paper follows a heuristic approach, aiming at collecting systematic information to ascertain whether UWSS can be improved through decentralization. This leads to another classification of interest-oriented research. Habermas differentiates between two fundamental cognitive interests that direct human beings to acquire knowledge: a technical interest and a practical interest (Alemann/ Fomdran 1995: 59, Metzger 2000: 52). These two kinds of interests are "quasi-transcendental" because they necessarily derive from the socio-cultural form of life of the human species, which is dependent on "work" and "interaction."

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35

Through work, human beings are able to achieve goals and bring about material "wellbeing." However, the "success depends upon achieving technical mastery over the environment of action" (jackson 2000: 31-32). The importance of work for the human species directs knowledge towards a technical interest in the prediction and control of natural and social systems. Interaction requires human beings to secure and expand the possibilities for inter subjective understanding among those involved in a social system. This importance of interaction leads the human being to have a practical interest in the progress of mutual understanding (lackson 2000: 31-32). While Habermas devotes apre-eminent anthropological status to work and interaction, the analysis of power and the way it is exercised are just as important for understanding the past and present social arrangements. Therefore Habermas refers to a third cognitive interest, the emancipator interest. This is the interest of the human beings to free themselves from constraints imposed by power relations and to leam to control their own destiny (Iackson 2000: 31-32). Hence, this research paper, aiming to analyze the institutional changes due to decentralization, is primarily based on technical interest. In this sense the "political (re)engineering," the change of state structures and its influence on UWSS, is defined as "technical interest." Further, the paper can be subcategorized into the three major theoretic schools of social science. There are three major schools that historically appear in the social sciences: normative-ontological, empiricalanalytical (neopositive), and critical meta-theories. This "metatheoretical trios" continues to be of significance to political science. This paper uses a normative-ontological approach to exploring the research object. Specifically, it outlines a critical reflection of the improvement of UWSS through decentralization by analyzing the various decentralization concepts of several theoretical approaches. Still, largely the research paper follows the empiric-analytical premise, assuming that at the starting point of any research there needs to be "positive knowledge which is physically graspable (empirically)

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Decentralization Concept

and can be recorded through systematic analysis" (Alemann/ Forndran 1995: 51). For this, an extensive discussion of the relevant theories is illustrated. And in the framework of an empirical-analytical research design, the hypotheses are derived from it, operationalized and analyzed. Thus, this research paper is based on a comprehensive understanding of political science; decentralization is genuinely affected by political decisionmaking. These decisions are nearly inextricable from economic phenomena, but the primacy of political decision-making over economic decision-making is presumed. Hereby it is not denied that the reality might follow a different rational, maybe even the opposite ones. Economic pressures dominate politics. Still, this cannot be the understanding of a state, which has to orient itself on a different reference system, such as division of powers, justice, social security, or similar categories (Metzger 2000: 53). Counterarguments, namely the support of market-oriented decision-making processes, which reflexively dominate political decisions, might be valid and suitable for single processes, but they should nevertheless be rejected as a model of state steering (Metzger 2000: 53). A strict separation between political science and political economy poses difficulties for a work about decentralization. A political economics approach integrates research fields that are closely related to each other. However, especially for the analysis of decentralization, exact considerations are helpful and hindering at the same time. While on the one hand a political economics approach differentiates between economically determined and politically determined decisions, they might not be differentiated sufficiently, or may include too many sub-disciplines, such as sociology, psychology, or mathematics. Therefore, a constant separation of both disciplines (political science and national economy) is too exclusive a method of deriving information (Metzger 2000: 54). In this context, the theoretical reference should be the current theoretical premises of political science with a reference to an economic orientation. For a classification of this research paper, priority is given to a political scientific analysis. Hereby this research paper understands itself as a contribution towards practical, problem-oriented political scientific analysis, the results of which, even though not as a final result

37

Theoretical Placement of Decentralization

of a problem, might add to the debate about decentralization and influence political processes. Since decentralization is widely approached by different theories, the following seetion illustrates a brief summary of relevant theoretieal approaches that address decentralization.

2.2.2 Eeonomie Theory and Deeentralization The terminology that underlies every economic analysis can be charaeterized by three main elements based on the neoc1assieal eeonomie paradigm followed by authors such as E. Roy Weintraub (2002). First it is assumed that the individual aets rationally. Seeond, that the heuristie eoneept of humankind is "homo oeconomicus."! And third, that "methodologieal individualism'" is applied (Sauerland 1997: 29). These prineiples are widely discussed throughout the literature and therefore are not further illustrated here. Instead it seems more important to stress the integration of political science and economy. From the economic perspective, the above mentioned premises are normative. Eeonomists therefore follow a reduced terminology of norms that states that a non-empirie preeondition independent of time and Iocation is the basis of the research question. The background of this statement is then not further reviewed

The concept of homo oeconomicus has first been used by critics of [ohn Stuart Mill's work (1836) on political economy. MUIs states there "an arbitrary definition of man, as a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labor and physical self-denial with which they can be obtained." Thus, the concept is based on the assumption that human beings act to obtain the highest possible well-being for himself given available information for opportunities and other constraints on his ability to achieve his predetermined goals. 5 The principle of methodological individualism has its origin in the works of utilitarists and liberals in the 18th and 19th century, such as Jeremy Bentham and [ohn Stuart Mill. The principle is based on the assumption that all actions are performed by individuals and ' a social collective has no existence and reality outside of the individual member's action"(Mises, cited in Schulze 1997: 8). 4

11

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Decentralization Concept

but is taken instead as a given fact. Contrastingly political science uses explicit standardized term (Metzger 2000: 97). According to Tanzi (1995, cited in Metzger 2000: 97), the normative economic argumentation for decentralization can be divided into two categories: ex ante and ex post. Wall ace Oates "decentralization theorem" (1972) is an example of an ex ante argument. His argumentation is based on the assumption that all public goods have the same local characteristics. The national level benefits frorn certain public goods, e.g. defense, while the sub-national level benefits from other goods, e.g. street lights. According to Oates, a unit that determines the level of production of a certain public good has to include in the ideal case exact1y the number of individuals that consurne the good. His theorem states: For a public good - the consumption of which is defined over geographical subsets of the total population, and for which the cost of providing each level of output of the good in each jurisdiction are the same for the central and respective local governments - it will always be efficient (or at least as efficient) for local governments to provide the Pareto-efficiente level of output for their respective jurisdiction than for the central government to provide a specified and uniform level of output across the jurisdictions (Dates 1972:35, cited in Metzger 2000: 98).

In case of varying preferences between different regions, there is a certain possibility that there will be a surplus or a shortage of anational offered public good, which results in the assumption that without decentralization an inefficient allocation takes place (Metzger 2000: 98). But inherent in Oates's decentralization theorem there are also certain disadvantages, as it can be stated that under certain conditions a

6 It is also referred to Pareto efficiency as the "80:20" rule or the "law of the vital few." It states that a small proportion of causes produce a large proportion of results. Several economists have pointed out that practically in most industrial countries a small proportion of all the factories employ a disproportionate number of factory operatives. In some countries 15% of the firms employ 70% of the people.

Theoretical Placement of Decentralization

39

number of sub units ean be regarded as efficient, but from the perspeetive of administrative expenses it is not tolerable. Furthermore, it is important that the sub units not only reflect long-term faetors such as demography, but also short-term faetors such as technologieal changes, making them objects of eonstant change which is not aeeeptable from a stability- and administrative point of view. Moreover, reality shows that size and loeation, respectively distribution, of sub units are mainly dominated by historie, geographieal or ethnie factors rather than derived by efficiency faetors (Metzger 2000: 98). Young et a1. (2008:2) also refer to Oates's classie work that argues that deeentralized govemment is more likely to align its aetions with the preferenees and situations of its eonstituents, being less removed from them, but eonelude that using US data there is surprisingly little empirieal analysis of Oates's "deeentralization theorem." Tiebout's eonstruet of "voting by feet" (1956), which is the most important element of his thesis regarding deeentralization, can be seen as a normative ex post argument. The argument states that, through deeentralization, the preferenees eoneerning publie goods of different groups within the population ean be identified, loeal governments ean produee these goods and the groups ean pay tax priees that eorrespond to the benefits from these publie goods. Tiebout illustrates the point that effieient loeal governments eompete to attraet "perfeetly informed" individuals who move freely between loealities and ehoose the one that offers their optimal bundle of publie serviees and taxes. This leads to fertile eompetition whieh also includes tax eompetition as well as a Paretoeffieient result sinee the eompetition in loeal deeisions ensures that the allocation of resources is at an eeonomie equilibrium in which it is impossible to change the alloeation of resourees without improving the lot of one individual at the expense of another (Faguet 1997: 8). Tiebout's argumentation further aims at increased diversity. Diversity is valued beeause it offers eitizens greater choiee in publie services, sinee they ean deeide where to reside. It also assumes that experimentation and innovation in public policy is inereased, as deeentralization

40

Decentralization Concept

leads to a variety of policy approaches at the loeal level, some of which will be more successful than others (Faguet 1997: 7). But Tiebout's argument, neither in regards to mobility nor in regards to greater policy diversity, is empirically proven. Faguet points this out in the foIIowing passage: The mechanism which Tiebout posits - individual mobility in a context of fixed public service supply - amounts to moving voters around while holding politicians constant. This directly contradicts our experience of the world, where - save for extreme cases- it is individuals who are largely fixed and governments which, via elections, change. Even in a highly mobile country such as the United States, during any given electoral cycle the overwhelming majority of the population is geographically static, and it is their governments and politicians (local, state and national) that change (Faguet 1997: 8).

Thus, he states that this model is fundamentally flawed. Aceording to Tanzi (1995: 9) the economic literature evaluates decentralization positively from a theoretieal point of view. However, a practieal implementation often ineludes eomplex problems (Tanzi 1995: 9, eited in Metzger 2000: 99). Thus, economic theory assumes that decentralization enables the government to determine the preference structures of the individual households through inereased proximity between loeal government and the population. However, this takes the partieipation of both loeal officials and the population for granted. Participation, also, plays an important role in regards to inereased eeonomie efficiency, which is assumed to increase through decentralization, thereby promoting economic development. Another way in which it is assumed that deeentralization ean improve publie service and inerease efficiency is through the improved aceess to Iocal knowledge and preferences by loeal governments and through their increased responsiveness to the local needs (Zehner 2007: 25). However, the argument that the eentral government is not able to gather information about loeal preferenees (Braun! Grote 2000: 5) along with technical data coneerning the produetion and provision of publie services, or that important information will be lost in transit or be interpreted incorrectly at the center, or that some other sort of informational

Theoretical Placement of Decentralization

41

obstacle will arise seems rather illogical in an age when TV programs and internet reach almost every place in the world, However, it might be that local people have easier aecess to loeal knowledge, sinee they ean use existing social networks. This does not relate to the information per se, however, but rather to the agent who collects it (Faguet 1997: 8). Yet, if decentralization increases the level of accountability, as local governments are eloser to the loeal citizens, it ean be assumed that it leads to an improved resource allocation,

2.2.3 Political Economics? and Decentralization Deeentralization ean be analyzed from different perspeetives. The predominant perspectives of this research paper, political science and economy, can be combined in a political economics perspective. From a political science perspective, combating poverty and inequality of living standards is desirable, Existing politieal orders ean be eritieally analyzed based on their abilities to fulfill these goals. Decentralization, as apart of this political order or system, is therefore analyzed with regard to poverty and living eonditions. In this paper UWSS and its effects on the living conditions of the people is examined. From an economic point of view, decentralization, with reference to the previously illustrated eoneepts of "methodological individualism" and "homo oeeonomicus," is analyzed relative to the improvement in effieiency of state performance, the quality of which is evaluated with regard to basic state functions such as the allocation and redistribution of goods and services. This paper focuses on the improvements in performance efficiency of one state department, the Ministry of Water and Environment (MWE), and in particular on the Loeal Corporations (LCs) and the Autonomous Urban Water Supply and Sanitation Utilities (AUWSSUs), which are in charge of the allocation and the redistribution of water and sanitation services. This paper uses the term political economies equivalent to the German term "Staatswissenschaften/Staatstheorie."

7

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Decentralization Concept

A political economics approach is developed as foliows: The cross-eutting issue of both approaches, political science and economics, lies in the transfer of finances. From a financial perspective, economics asks for explicit and implicit monetary and non-monetary transfers between different institutional or organizational levels that are related to the same budget. From astate theoretic perspective of political science, the availability of financial resources means power through which the autonomy of different govemment sub levels, such as state departments and regional governments, might decrease or increase. Both theoretic approaches to decentralization, therefore, foeus on the steering of financial transfers as a basic state function. The availability of financial resourees, hence, implicates power. The autonomy of sub-national governments can be examined, therefore, either from a perspective of checks and balances" or from the autonomy of the local population (Metzger 2000: 100). Consequently, the degree of financial decentralization can be seen as the aim of political actions. The political actions are thus the object of efficiency, which is also demanded by the economics approach. From this perspective, an analysis of relevant decentralized 00ances becomes the basis of a political economics approach to decentralization. This already implies that financial decentralization is the key variable of a political economies empirical analysis. /I

2.2.4 System Theory and Decentralization For a theoretical background, Luhmann's system theory is suitable as a universal meta theory. However, the system theory according to Luhmann, as according to all older theories, needs to be considered only to some extent applicable in an intereultural context as it is partly eurocentric. The following premise is important for the analysis of decentralization, as it is implicitly the basis of the following theories: "System oriented social scientists do not speak about state functions, but rather

Theoretical Placement of Decentralization

43

about functions of the political-administrative system and define these as performances/ benefits for the society" (Mayntz 1985: 35). According to the theoretical premises of the system theory, system and system-surrounding environment, or rather the relation between system and environment, the population can be regarded as the environment and the (decentralized or non decentralized) politicaladministrative institutions can be regarded as the system. Hence, decentralization can be regarded as a measure to improve the relation between the system and its environment. Financial transfers, exduding tax-based financial transfers, can be regarded as the performance of the system towards its environment, as the national govemment through financial transfers to sub-national governments enables the sub-national govemments to deliver services to the citizens. Thus motives of selfsustainability strongly influence the system's decision about financial transfers (Metzger 2000: 101). From an economic perspective, a wide range of the politicaladministrative system can be regarded as system performances for the society, for instance to supply education, or a health system for the society. Even the monopoly of power of the state, assuming that it exists, can be regarded as a performance, although mainly other motives are decisive, such as the provision of an economic system and monetary stability (Metzger 2000: 101). In regard to the political-administrative system, the question about the need for steering the society must be considered. Depending on the complexity and diversity of the society, the need for steering it is more or less. Further, with the growing need to solve problems, the importance of quantitative and qualitative steering arises. Decentralization, thus, must propose a diversity that aims at more efficient, intelligent, and fitting solutions for the relationship between system and environment if it is to be considered an effective form of steering (Metzger 2000: 101). The means by which society is steered is assigned to institutions whose performance will be illustrated in the following section.

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Decentralization Concept

2.2.5 New-Institutionalism The following chapter aims at setting up the theoretical framework of this research paper from which the hypotheses that are empirically to be proofed are derived. Since the analysis of the decentralization process of the UWSS is an analysis of institutional change that occurs between central institutions, the MWE, or rather its subordinated NWSA, and decentralized Les, its branches, and AUWSSUs, new-institutionalisms seems to be a suitable concept for this research paper. It is assumed that institutions have a significant impact on political and economic state processes. The new-institutionalism theory assumes that institutions operate in an environment which consists of other institutions. Therefore, every institution is influenced by the broader institutional environment. While institutions influence the behavior of the actors, the actors with their decisions and actions impact the arrangement of the institution (Schulze 1997:8). Further, this research paper focuses on the sub-field of newinstitutionalism that is closely linked to the rational choice theory, the socalled rational choice institutionalism. Schulze states that rational choice institutionalism is based on the assumption that, following the principle of "methodological individualism," structures and institutions are the aggregated result of individual-rational choices. The image of human, derived from the economic theory, is the concept of I/homo oeconomicus" (Schulze 1997: 8). However, besides the assumption that humans seek to maximize their individual benefit, it is admitted that only restricted information is available, which results in asymmetries of information. Further the concept admits institutional restrietions, meaning that restrictions for the human behavior do not only result from resources such as income but also from social institutions, which set the framework of individual actions (Kirchgässner 1991: 72, cited in Schulze 1997: 9). Thus, institutions impact the behavior of the individual. They determine not only "the people's scope for action ('What can, may and

Theoretical Placement of Decentralization

45

should I do?'), but also the relative individual benefit of the various alternative actions for the actor concerned ('What course of action is most advantageous for me personally')" (Renger 2002: 52). Institutions are further means to over-come sub-optimal interaction and dilemma situations resulting from egoistic-rational behavior of different actors. In sum, institutions are the result of the individual need, which is derived through agreements between the concerned individuals who aim at increasing their individual benefit. Once established, institutions limit the opportunistic behavior of the actors and thereby allow overcoming dilemmas. Hence, institutions influence the action and decision-making strategy of actors without changing their preferences and goals. Contrastingly, stability and change of institutions depends on the benefit-calculation of the actors (Schulze 1997: 9). For this paper, institutions are defined as structures that demonstrate "sets of mies, compliance procedures, and moral and ethical behavior of individuals" (North 1990, cited in Wegerich 2002: 19). Institutions determine who is eligible to make decisions in a certain arena, what actions are allowed or constrained, what aggregation rules are used, what procedures must be followed, what information must and must not be provided, and what payoffs are assigned to individuals dependent on their actions. However, institutions are not only constraints on behavior, but also on roles and organizations. Similar in all three, constraints on behavior, roles, and organizations, is that they both enable and constrain the behavior of actors (Ostrom 1990: 51). Regarding institutional change, it should be pointed out that the origin of institutions and changes in institutions are often considered to be fundamentally different. In this view, origin is mainly characterized as a situation in which individuals move from having no mies to having a set of rules. Therefore, the origins of institutions are perceived as a major one-step transformation, whereas institutional change is perceived as involving incremental changed in existing rules, Consequently, establishing new institutions is viewed as non-incremental and costly, whereas changing existing institutions is viewed as incremental and not as costly (Ostrom 1990: 140).

46

Decentralization Concept

It should also be noted that not all institutions are equal and that they are structured hierarchically. Thus, the transaction costs of changing some institutions are lower than others. North and Ostrom argue that institutions of higher hierarchical levels are more costly and difficult to change than institutions Iower in the hierarchical Ievel (North 1990, cited in Wegerich 2002: 19, Ostrom 1990). In order to analyze a decentralization process it is important to distinguish between the powers of decision-making. These powers can be differentiated as (1) the power to create rules or modify existing rules, (2) the power to make decisions about how particular resources are used, (3) the power to implement and ensure compliance to new or altered rules, and (4) the power to adjudicate disputes that arise in the effort to create or modify mies and ensure their compliance (Agrawal/ Ribot 2002: 7). Ostrom distinguishes between three different levels of institutional ruIes: operational mies, collective-choice mies, and constitutionalchoice mies. It is important to keep in mind that "it is usually the case that operational rules are easier to change than collective-choice rules, and collective-choice rules are easier to change than constitutionaI-choice rules" (Ostrom 1990: 54). Operational mies are characterized through affecting the day-today decisions made by appropriators on (1) when, where, and how to withdraw resources, (2) who should monitor the actions of others and how, (3) what information must be exchanged or withheId, and (4) what rewards or sanctions are assigned to different actions and outcomes. ColIective-choice mies are rules that indirectly affect operational choices. Thus, they are used by appropriators, their officials, or external authorities in designing policies, i.e. the operational rules. ConstitutionaI-choice mies affect the operational activities and results because they determine who is eligible and what specific mies are used in crafting the set of colIective-choice mies that in turn affects the set of operational mies. Ostrom adds that operational rules are, further, influenced by formal and informal rules (Wegerich 2002: 20). Thus, to analyze decentralization processes, it is important to review how powers of decision-making are transferred.

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47

The discourse on institutional change emphasizes two approaches: the "bottom-up approach" that is driven by demand and the "topdown approach" that is driven by supply, Further, it is assumed that institutional change occurs either through change in relative priees or a shift in knowledge and ideas, North argues that changes in relative priees are main reason for a bottom-up driven institutional change. Binswanger states that "institutional change may occur as a result of advances in the supply of knowledge, supporting the supply driven top-down approach" (Binswanger/ Ruttan 1978: 334, cited in Wegerich 2002: 21). Looking at demand-indueed institutional ehanges, it is noticed that they mainly take place at the lower level of the rule hierarchy and influenee the daily routine of the actor, Thus, they oeeur at the operational-rules leveL However, they might also affeet the higher levels. Aeeording to Ostrom's theory, institutional changes at one level often affeet other levels. On the other hand, supply-induced institutional changes may take place at various levels, depending on the ideas and knowledge supplied, Thus, supply-indueed institutional changes ean affect changes at higher or lower levels (Wegerich 2002: 21). The refore, the decision to decentralize institutions is derived from the actor's assumption that through decentralization he maximizes the benefit for himself. For astate this means that through local governments the state ean perform more efficiently and respond better to loeal needs. The state benefits as the population is more satisfied by state's performance, while costs are likely to be reduced through decentralization.

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Decentralization Concept

2.3 Decentralization within the Political Debate of Development Aid According to the United Nations development programs (UNDP), about "80 percent of the developing countries, including the transitional economies of Eastem and Central Europe, are experimenting with some form of decentralization" (Xavier 2001, cited in Work 2002: 9). In the framework of the international debate on (Good-) Governance, decentralization plays a major role in the current research. International organizations are actively involved in the content and method for implementing decentralization. The United Nations (UN), for instance, with the "Decentralization and Local Development Support Program" (DLDSP), which ran from 2003 to 2008, and will be extended as anational program (Al-Syrai 2009: 6), launched a special program to foster decentralization in Yemen, while GTZ is currently engaged in the decentralization of the water sector as weIl as the decentralization of solid waste management in Yemen. This trend towards decentralization is mainly based on the positive effects attributed to it. However, these positive effects have by no me ans been proven. And there are just as many negative effects attributed to decentralization (Rondinelli et aL 1983, cited in Bünte 2003: 29). Generally the positive connotations are based on the following two aspects: democratization and economic prosperity. In addition, the potential to avert crises has been more recently attributed to decentralization (Mehler 2001). Still, this argument seems to be merely areaction to the trend towards crisis prevention within development aid, as it has not been proven to this day that decentralization can prevent or reduce a crisis. Although it has been shown that the integration of minorities can be improved through decentralization measures, as illustrated by Bünte, a conflict-reducing effect may not necessarily be the consequence (Bünte 2003: 26).

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2.3.1 Decentralization and Democratization The normative political approach assumes that participation is strengthened through decentralization, that the level of local democracy is raised, and, therefore, that decentralization contributes to democratic consolidation (Steinich 1997, Bünte 2003: 26). Since Tocqueville's "Democracy in America" and the publishing of the "Federalist Papers," it is assumed that decentralized political institutions help to prevent the concentration of power. Through the horizontal division of state functions, a division of power emerges. The distribution of power on different levels prevents the concentration of power. Furthermore, political actors of decentralized systems are obliged to communicate with each other, which increases the willingness for compromise and cooperation between different state levels (Bünte 2003: 27). According to the theoretical premises, citizens of decentralized government systems have more opportunities of participation (Zehner 2007: 24-25). Through local govemance, state action is more transparent and its effects are more evident to the citizens. Administrative and political action is visible for the citizen, since local decision-making affects the locallevels. This strengthens political activities and political socialization. Chances to realize civil interests are increased due to the "limitation of the political arena" (Rüland 1993: 181). The localization of the political action increases the possibilities for the realization of the political interest of the citizens and contributes to their political socialization. Tocqueville already pointed out this aspect when he described the communes as "schools for democracy" (Toqueville 1981, cited in Bünte 2003: 27). Thus, local government and administrative units offer a chance for achieving more transparency and responsiveness to public needs and can make a contribution towards fostering democracy. However, the reality often contradicts the optimism of the normative democratic approach since the increase in participation seldom takes place. Instead, local elites reinforce their key positions within the decision-making process. The control of political decision-making that shifts through decentralization from the center to local levels is claimed

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Decentralization Concept

by these local elites, who utilize it to strengthen their power (Agrun 2000). Powerful individuals and families can therefore be an obstacle for the envisioned expansion of participation. Traditional party structures or relations to the officials are often used to consolidate their position. Thus, power can be used even more ruthlessly by traditional elites against disadvantaged people on the local level than through central institutions (Slater 1989: 511, cited in Bünte 2003: 27). Considering these facts, it is necessary to analyze the conditions under which decentralization can increase participation and strengthen democratic structures. Therefore, it is assumed that besides existing participative institutions, a vibrant civil society is necessary to increase participation and support democratization. Thus, civil society can function as an alternative element of participation that calls to account the elected politicians and demands transparency (Merkel/ Lauth 1998, Bünte 2003: 28).

2.3.2 Decentralization and Economic Prosperity The role of the state and the administration in regards to the development process is discussed in the framework of the economic development discourse, which according to Bünte distinguishes itself through an imprecise definition of decentralization and focuses on processes of administrative decentralization that include as weIl privatization and deconcentration phenomena (Bünte 2003: 28). Since the 1960s, the theoretical premise of modemization gives the administration of developing countries the main role for economic and social development. Its dysfunction is therefore viewed as the impediment for modemization. To date, the lack of innovation and problemsolving abilities of administrations is seen as an essential factor for a lack of development (Bünte 2003: 28). Decentralization serves to overcome the clumsiness of national planning bureaucracies. Decisions should be made where their effects

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51

will take plaee. Further, loeal knowledge ean eontribute to the effeetive planning of governmental measures, which should then take place from the bottom to the top (Illy 1986: I, Rondinelli et a1. 1983, cited in Zehner 2007: 24-25). Deeentralization thereby stimu1ates 10ca1 development since 10ea1 eeonomie acti.vities are encouraged. In general, it is assumed that decentralization increases the efficiency of the planning of economic development and the steering functions of the state. Thus, efficient decentralized government and administrative structures are also key elements for structura1 poverty reduction (Steinich 1997). Additionally, through deeentralization, loea1 inequa1ities should be ba1anced and 1iving standards adjusted (Illy 1986: 13). Hence, socia1 and national unity should be strengthened. However, this is not necessarily the case. Due to differences in factors such as levels of incomes, existing resources, and service demands, local governments of different Iocations have different possibi1ities to obtain their finances. As local governments' finances often consist of taxes and fees, the income of the local population affects the financia1 situation of the govemment as weIl as its ability to cover the cost of its services. Therefore local inequa1ities might lead to performance inequalities between different loea1governments. Further, it is assumed that, in contrast to a centralized system, a decentralized system is better able to take loca1 preferences into consideration. According to the theory of public choice, this results in numerous decentralized communities, which offer different varieties of public goods from which the individual ean choose due to geographieal mobility (Tiebout 1977, cited in Bünte 2003: 29). Due to decentralization, state steering is improved, which results in increased efficiency. This happens, on the one hand, through increased efficiency of allocation since the responsiveness to public needs is higher in decentralized structures (Campbell 1991, cited in Bünte 2003: 29). On the other hand, productive efficiency is increased as the ownership of loca1 administrations towards citizens is greater and fewer bureaucratic levels are involved. Lower information and transaction costs and inereased efficiency are therefore attributed to decentra1ization (Fuhr 1999: 28).

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Decentralization Concept

However, these assumptions have not been sufficiently proven. Critics point out that decentralization embeds the risk of corruption, as the decentralization of power would accompany the decentralization process and thus transfer corruption from the central to the decentralized levels (Vito 2000, Olowu/ Wunsch 1995).

3. Decentralization: Concepts and Definitions

The variety of existing definitions and concepts of decentralization within the literature c1early indicates that different perspectives and incentive systems have been applied to a frequently used term. The result is a wide variety of partial and imprecise definitions of the term. The usage of the term decentralization by different scientific disciplines, such as political science (decentralization of government systems), sociology (decentralization of structures), political economy (financial decentralization), business administration (decentralization of firms), and administrative science (decentralization of administrative structures), makes a universal and semantically valid concept impossible. But even to limit the concept to the fields of political science and political economy, the main fields of this study, is hardly possible, as the following definitions derived from both fields, displayed below, indicate. According to Simon et a1., development politics, as a field crossing at least these two disciplines, often uses a concept of decentralization that is mainly not applicable for development politics (Simon/ Stockmayer/ Fuhr 1993: 24). Diana Conyers argues that "the language used in development studies [... ] is plagued by ambiguities and inconsistencies, which lead to confusion, misunderstanding, and conflict in discourse" (Conyers 1986: 594, cited in Cohen/ Peterson 1997: 29). Metzger (2000: 64) as weIl as Faust et a1. (2008: 15) remark that the majority of case studies is only loosely embedded in a consistent theoretical framework and rather tends to provide country-specific narratives, adding rather to the inconsistencies and the various concepts of decentralization. This results in a serious problem for carrying out meaningful, comparative, and empirical studies on decentralization. Regarding the considerable amount of literature on decentralization, it is rather surprising to see that basic definitions and normative K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_4, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

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Decentralization: Concepts and Definitions

expectations of decentralization still vary tremendously and remain controversial (Faust et al. 2008: 21). According to Rüland (1993: 181), decentralization means the transfer of sovereign decision and performance competences to autonomous or partly autonomous sub systems, mainly to member states, local authorities, and area municipalities. According to the principle of subsidiarity, "tasks should only be carried out at higher political or social levels if they cannot be adequately fulfilled at lower levels" (BMZ 2008: 5). This means that tasks are to be assigned to the lowest possible sub system, while higher sub systems or the central govemment can only take over the tasks if the sub systems below them cannot fulfill them. It further implies that responsibilities should be assigned from a bottom-up perspective. Thus, sub-national entities that have the administrative competences, according to the principle of subsidiarity, will engage in a fruitful competition that leads to policy innovation and policy imitation (Weingast 1995: 21 ff). At the same time, subsidiarity also illustrates the limits of decentralization, as it prevents each level of govemment from obtaining policy competences that would better be operated by the respective other leveL This further implicates that pushing decentralization too far can have negative consequences for the provision of public goods (Faust et al. 2008: 25). For instance, the central government should keep competences that guarantee the free movement of capital and labor within the national territory in order to allow sub-national entities to compete among each other (Weingast 1995: 21 ff). Rüland's (1993) definition implies an important aspect of the concept of decentralization. It sees decentralization as the simplification of steering. The principle of subsidiarity is to prevent unnecessary cost intensive interferences from taking place while assuming an increase in efficiency. Through generalizations, the definition tries to include as many forms and characteristics of decentralization as possible. Therefore the term "sub systems" is used to avoid the wide range of terminologies intemationally used for area municipalities or local authorities. Problematic remains the expression "autonomous" or "partly autonomous sub

Decentralization: Concepts and Definitions

55

systems" since, with this abstract formulation, the question about the concrete organization of steering or government systems is bypassed. Helpful is the avoidance of a connection between decentralization and democracy, as independent performance competences are demanded which also can take place without an explicit democratic system, as it is only concerned with the division of political-institutional power (Metzger 2000: 65- 66). Sauerland (1997) remarks that decentralization first of all implies that the territory of astate needs to be divided into geographically defined sub units. These sub units need to have their own legal personality or at least need to be in charge of independent competences in different policy areas. In this sense, the local self-govemance is carried out more or less independently of the central government. Sauerland mainly focuses on the division of political-institutional power (Sauerland 1997: 20). Sauerland's (1997) definition stresses the legal territorial side, while pointing out the necessary continuity and stability of decentralization. His reference to a legal system is of huge significance, since the legal system represents the long-term framework of political performance in decentralized states. The term Illegal personality" avoids a narrow wording in regards to democratic structures (Metzger 2000: 66). "The shift toward devolution is largely a reflection of the political evolution toward more democratic and participatory forms of governrnent that seek to improve the responsiveness and accountability of political leaders to their electorates [... ]" (Ter-Minassian 1997:36).

Ter-Minassian's definition shows the perspective of the International Monetary Fund, which is that decentralization, devolution, as a later illustrated sub form of decentralization, and democracy are presumed to be allied. This perspective needs to be regarded critically as it excludes decentralization measures in non-democratic countries ex ante, or rather postulates that decentralization measures implicitly aim at some form of democratization. This presents the risk that possibly efficient measures of decentralization may not take place or may not be considered because rulers fear that decentralization directly influences the political system (Metzger 2003: 67).

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Decentralization: Concepts and Definitions

The classical economic perspective of decentralization confines itself to an increased efficiency in the production of public goods resulting from a eloser proximity to the customers and an increased efficiency in decision-making (Fuhr 1999: 21). This is possible through the formation of preferences that can be regionally determined. The economic discourse thereby states that decentralization has a positive effect on the efficiency of administrative and economic structures of the state that are relevant to development. However, the following concems are to be considered. The implementation of inter regional eompetition can also inerease the unequal distribution of resources, due to reasons such as a disparity in the tax base and tax eollection or in the quality the administrations of different regions. Therefore, especially in regions of unequal eeonomie strength, deeentralization ean reinforee existing inequalities (Fuhr 1999: 22). Further, areduction in effieiency criteria risks ignoring political factors and their impact on the implementation of decentralization strategies. In many eases the transfer of "power" from the eentral govemment to sub-national levels is included in the definition of decentralization, suggesting a proeess-oriented perspective on decentralization as shown by Faletti (2005), who states "decentralization is a process of state reform eomposed by a set of publie polieies that transfer responsibilities, resourees, or authority from a higher to lower level of government in the eontext of a specific type of state" (Faletti 2005: 328). The BMZ defines decentralization as "the delegation of tasks, responsibilities, resourees and political decision-making authority to a country's medium (for example provinees, distriets, regions) and lower politieallevels (eities, loeal authorities, villages)" (BMZ 2008: 4). The World Bank regards deeentralization as "the transfer of authority and responsibility for public functions from the central govemment to intermediate and Iocal govemments or quasi-independent government organizations and/or the private seetor" (World Bank 2001a). Rondinelli's (1981: 2) definition, "the transfer of responsibility for planning, management, and resource-raising and allocation from the central govemment to (a) field units of central govem-

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57

ment ministries or agencies; (b) subordinate units or levels of govemment; (c) semi-autonomous public authorities or corporations; (d) areawide regional or functional authorities; or (e) NGOs/PVOs" is probably the most differentiated. However, these definitions, even though being similar, indicate that there is no commonly agreed on consensus about what is transferred. Silverman (1992: 1) states that "altemative forms of public sector decentralization have important differential effects on the performance of economic development programs and projects," which shows that the previously illustrated definitions and concepts of decentralization are based partlyon totally different reference systems. Simplification of steering, division of political-institutional power, legal continuity, democratization, increased efficiency, transfer of power, and influencing the success of development projects, are insufficient as single constructs for a political development program of decentralization if from their limited perspective each ignores the conceptions of decentralization held by the others. At the same time it is rather uncommon that a decentralization measure can be projected that can integrate all these mentioned inputs at the same time (Metzger 2000: 68). Therefore a more fungible, clear, and consistent definition of decentralization, one that considers the implementation and technical implications from the beginning, must be found. In a first step, all concepts that relate to organizational structures and procedures of non-central state structures should be part of a technical outline of decentralization (Metger 2000: 68). First to be examined are the existence, organization, and working method of sub-national entities, in a narrow sense, a polity analysis. This again can be sub divided into the categories of the research of federalism, horizontal decentralization and vertical decentralization. Horizontal decentralization refers to checks and balance structures between institutions of the same level. Faust et a1. refer to horizontal coherence of the decentralization process, meaning the degree of decentralization within one level of govemment. They assurne that some central ministries are more receptive to decentralization efforts than others. This also refers to the

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Decentralization: Concepts and Definitions

sub-national level; some provinees and loeal eommunities might be more willing to implement deeentralization polieies than others (Faust et al. 2008: 30-31). Vertical decentralization, which is the relevant form for this research paper, means the division or redistribution of political power between different govemmental or administrative levels. This redistribution might easily create conflicts between levels of governments, such as central ministries, govemorate, and district authorities. Faust et al. (2008: 30) remark that "some incoherence between these layers of govemment is unavoidable for a limited period of time. A permanently incoherent alloeation of responsibilities, resources, and legitimation between national and sub-national level" will, however, jeopardize the positive effects envisioned by decentralization processes. Further, vertical incoherence reduces the accountability of different levels of govemment with regards to their level-specifie responsibilities. The following section illustrates different dimensions, forms, and sequences of vertical deeentralization.

3.1 Dimensions 0/Decentralization According to a slowly emerging consensus, decentralization is subdivided into three major dimensions:" political, administrative, and fiscal decentralization, which might include several overlaps between the different dimensions. There are other dimensions of decentralization, for instanees territorial and market deeentralization, but they are not relevant for this research paper.

Different authors refer to administrative, political, and fiscal decentralization as either dimensions, types (Work 2002: 6) or forms (Cohen/ Stephen 1997: 1) of decentralization, while referring to deconcentration, delegation, and devolution as types (Cohen/ Stephen 1997: 1) or forms (Work 2006: 6) of decentralization. This paper refers to administrative, political, and fiscal decentralization as dimensions, and to deconcentration, delegation, and devolution as forms of decentralization.

8

Dimensions of Decentralization

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In order to determine how the quality of government is im-

proved by decentralization, it is essential to define what needs to be transferred in the decentralization process. Administrative, political and fiscal decentralization encompass mainly the transfer of competences and responsibilities. Transfer of responsibilities is primarily the subject of administrative decentralization, transfer of resources the subject of financial decentralization, and transfer of legitimacy the subject of political decentralization (Work 2002: 6). However, these single dimensions may overlap. Therefore the following classification is a heuristic one. Further, many authors subdivide administrative decentralization, as illustrated in section 3.2, into deconcentration, delegation, and devolution, when describing the different degrees of administrative decentralization.

3.1.1 Administrative Decentralization Administrative decentralization defines the hierarchical and functional distribution of tasks between central and local (non-central) govemment entities within the political-administrative organizational structures. It is the transfer of authority, responsibilities, and (financial) resources for the delivery of aselected number of public services from the central govemment to different sub-national levels. Administrative decentralization often occurs simultaneously with civil service reform. Faletti describes administrative decentralization as the "set of policies that transfer the administration and delivery of social services [... ] to sub-national govemments" (Faletti 2005: 329). Thereby, it could entail the devolution of decision-making authority over these policies, but it is not necessary. If at the same time revenues are transferred from the center to meet the cost of the administration and delivery of social services, administrative decentralization is funded and coincides with a fiscal decentralization measure. If sub-national governments bear these costs with their own existing revenues, it is not funded (Faletti 2005: 329).

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Decentralization: Concepts and Definitions

The ordering principle of administrative decentralization, according to which tasks and social services should be performed, is the principle of subsidiarity, While subsidiarity refers to the overall decentralization process, it originates from administrative decentralization. Mainly administrative decentralization is sub-divided into three forms, further illustrated in section 3.2. According to this classical definition, the transfer of responsibilities to authorities with limited independence from the centrallevel is described as delegation, to levels of governance that are autonomou s, devolution, and to regional or local units within the same organization, deconcentration. In contrast, Work categorizes only deconcentration and delegation as sub-forms of administrative decentralization, while he lists devolution as a sub-form of political decentralization (Work 2002: 6).

3.1.2 Political Decentralization Political decentralization deals with the change of political systems. It normally refers to situations where political power and authority are transferred to sub-national levels of government. It hereby means the transfer of decision-making power to the citizens or their elected representatives, which implicates the presence of functioning sub-national entities which are, if not elected democratically, still accountable to the citizens of the region. Thus, it gives more power in public decisionmaking to the citizens or their representatives and can also be described as a transfer of legitimation. The most obvious manifestations of this type of decentralization are elected and empowered sub-national forms of government ranging from village councils to state level bodies (Work 2002: 6). Hence, through a set of constitutional amendments or electoral reforms and the restructuring of institutions, new space for sub-national policies and local representation is opened or existing but dormant or ineffective space is activated. Work states that devolution is considered a form of political decentralization, while Falleti (2005: 329) assurnes that

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political decentralization policies are designed to devolve political authority or electoral capacities to sub-national actors. Political decentralization requires constitutional, legal and regulatory framework to ensure transparency and accountability, thus, leading to a fairly autonomous sub-national government. Advocates of political decentralization generally assume that decisions made on the locallevel with greater participation have stronger support, since they are more relevant to diverse interests in society than those made only by national authorities. The premise therefore states that political decentralization leads to more participation and representation of underprivileged groups on the local leveL This leads to empowered citizenship, improved services and reduced poverty (BÜßte2003: 40). According to Faust et al. successful political decentralization must encompass fundamental political freedoms, such as democratic elections at the sub-national level and the possibility of participating in local political decision-making (Faust et aL 2008: 27).

3.1.3 Fiscal Decentralization Fiscal decentralization is the most comprehensive and possibly the most measurable dimension of decentralization since it is linked to budgetary practices (Work 2002: 6). It is the direct transfer of fiscal resources from central government to sub-national level and thereby refers to the reallocation of resources to sub-national levels of government. It refers to the set of policies aiming to increase the revenues or fiscal autonomy of subnational governments. Fiscal decentralization policies can increase the transfers of revenues from the central government, create new subnational taxes, delegate tax authority that was previously national, or provide sub-national levels with autonomous rights to raise fees for specific goods and services, The transfer of fiscal resources as weIl as fiscal instruments to obtain financial resources at the sub-national level is necessary in order to enable sub-national authorities to fulfill their responsibilities (Faust et al 2008: 38). Therefore Faust et aL (2008: 26) see expend-

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Decentralization: Concepts and Definitions

iture autonomy as part of administrative decentralization while other authors regard expenditure autonomy as apart of the fiscal dimension (World Bank 2001e). Living conditions in different regions should be adjusted through a system of intergovernmental transfers. Nevertheless, fiscal decentralization should be in accordance with the principal of subsidiarity, which also sets the limit of fiscal decentralization, as certain fiscal responsibilities have to remain under control of the central government in order to prevent sub-national governments from engaging in ruinous competitions leading to macro-economic instability. Transfers of resources that are too large may easily result in macro-economic instability because resources may fizzle out and local taxes can drop. Faust et al (2008: 26) illustrate this in the following passage: If sub-national governments do not face borrowing constraints, they will tend to engage in unsustainable lending, thereby provoking macroeconornic instability. Thus, budget constraints imposed by the centre aim to keep sub-national debt at a tolerable level and prevent sub-national governments from transferring their deficits to the national level.

To create a transparent fiscal mechanism in regards to the allocation and expenditure of resources, fiscal decentralization needs to be based on clear, effective, and transparent legal norms that avoid the emergence of clientelistic networks and the discretional allocation of fiscal resources by sub-national and national agents. Nevertheless, this relates closely to the mechanisms of accountability, which again is interconnected to political decentralization. If elected politicians have to account for their finances and resources, they are more likely to use resources efficiently. However, problematic aspects of fiscal decentralization are often insufficient capacities of sub-national entities to collect and to manage taxes as weIl as to calculate budget plans. Wunsch (1991: 442) identifies the following perilous aspects: insufficient qualification of the staff of local administrations; insufficient capacities of local government to collect taxes; newly elected politicians who are overstrained with their jobs, especially the complexity of budget management (Wunsch 1991: 442)

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3.2 Forms of Decentralization While most of the literature classifies deconcentration, delegation, and devolution as subcategories of administrative decentralization, some authors such as Silverman and Metzger as weIl as the United Nations use this "terminological-trios" to describe the forms of decentralization. Silverman (1992: 1) further adds the top-down principal agency and bottom-up principal agency, which can be described as hybrid forms, as they are mixed forms of deconcentration, devolution, and delegation (Metzger 2000: 75). Work (2002: 6) adds divesbnent to the three commonly agreed onforms.

3.2.1 Deconcentration Deconcentration is often considered to be the weakest form of decentralization (World Bank 2001b). Further, it is the most common form of decentralization, often employed in the agricu.ltural service, primary education, preventive health, and population subsectors (Silverman 1992: 1). Silverman (1992: 1) also refers to it as the branch model system. Selected (administrative) functions are assigned to sub-national units within the sector ministries or they are integrated in the vertical structure of other sector-specific national agencies (Bünte 2003: 35). Cohen and Peterson (1997: 29) refer to the "transfers of authority over specified decisionmaking, financial, and management functions by administrative means to different levels under the jurisdictional authority of the central govemment." Thus, deconcentrated institutions can be seen as a branch office system. Sub-national units are an organizational part of the national level. Silverman (1992: 1) describes, in deconcentrated systems, govemment exists at locallevels in the form of discrete ministry offices, but they do not dispose over mechanisms for mandatory horizontal integration. Hence, "despite geographie dispersion of ministry offices and despite masses of central govemment employees stationed in branch offices, the impact of such a structure is to centralize power within central govem-

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Decentralization: Concepts and Definitions

ment" (Silverman 1992: 1). Therefore deconcentration strengthens the central state. In many cases deconcentration is carried out to position representatives of the central state at the local level to ensure political stability (Bünte 2003: 35). As responsibilities that are being transferred remain under the total control of the central government, some authors such as Faust et a1. (2008: 24) do not consider deconcentration to be part of decentralization, but a predecessor of it.

3.2.2 Delegation Delegation me ans the transfer of decision-making and administrative authority and/or responsibility for implementing or maintaining sector investments to parastatals and other semi-autonomous organizations not wholly controlled by the government, but legally accountable to it, such as state-owned enterprises and urban or regional development corporations. Governments delegate responsibilities by creating public enterprises or corporations, transportation authorities, special service districts, semi-autonomous school distriets, regional development corporations, or special project implementation units (Cohen/ Stephen 1997: 30). Silverman (1992: 1) further remarks that "functions are sometimes delegated to a parastatal which, in turn, deconcentrates responsibility for internal managerial and administrative systems to its own sub-national units. The act of delegating responsibility to an organization, however, does not, in itself, ensure internal deconcentration within that organization." Cohen and Peterson (1999: 27) also categorize privatization and public-privatepartnerships under delegation. However, this form of decentralization does not strengthen the subordinated political decision-making level and can therefore not be described as a genuine form of decentralization, in regards to the applied definition of decentralization, later illustrated in section 3.4 (Bünte 2003: 36).

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3.2.3 Devolution Devolution is often described as the strongest form of administrative decentralization because it ultimately leads to "empowering people politically" (Shah/ Thompson 2002: 3). Devolution occurs when authority is transferred by central governments to sub-national governmental units with corporate status granted under state legislation. "Federal states are by definition devolved, though the extent of legally defined and shared powers devolved by the federal govemment to lower-Ievel governmental units can be quite limited" (Cohen/ Peterson 1997: 29). Silverman (1992: 1) describes devolution as folIows: The essence of devolution is discretionary authority. In devolved systems, responsibilities for a range of operations encompassing more than one sector are assigned to loeal governments. To the extent that local governments have discretionary authority, they can do essentially what they decide to do; bound only by: (1) broad national poliey guidelines; (2) their own financial, human, and material eapacities; and (3) the physical environment within which they must operate. [One] essential characteristie of discretionary authority is that the oversight role of central governments is limited to ensuring that local governments have the authority to exercise discretion. The exercise of effective discretion by local government depends to a significant extent on their ability to generate the financial and staff resources to implement the decisions which they, themselves, make.

Devolution normally transfers responsibilities for services to municipal authorities that raise their own revenues, and have independent authority to make investment decisions. "In a devolved system, Iocal governments have clear and legally recognized geographical boundaries over which they exercise authority and within which they perform public functions" (World Bank 2001b).

3.2.4 Hybrid Forms Besides the above iIIustrated forms of decentralization, Silverman proposes additional hybrid forms. These forms illustrate mix-forms of de-

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Decentralization: Concepts and Definitions

concentration, devolution, and delegation, and are probably the forms that are most often found in practice (Metzger 2000: 75).

3.2.4.1 Top-Down Principal Agency Silverman (1992: 2) illustrates that "within the context of the top-down principal agency model, local governments exercise responsibilities on behalf of the central govemments or, sometimes, parastatals (such as electricity corporations)." Acting as principle agents, local governments are under the direction and supervision of central government agencies. This further implicates that the latter remain in charge of financing the costs with whatever programs are involved. However, this does not depend on the extent to which local governments are autonomous in respect to any other functions they might undertake. This means that in some cases, local govemments are, in their "entirety, no more than principal agents of central govemments; in other cases they serve as principal agents in parallel with the performance of other roles as weIl" (Silverman 1992: 2).

3.2.4.2 Bottom-Up Principal Agency Model The bottom-up form of principal agency model basically reverses the characteristics of the top-down principal agency model. This means that various levels of govemment or govemment parastatals act as agents of lower levels of govemment or directly as agents of beneficiaries, users, or clients. Thus, the source of discretionary authority to initiate contracts with government agencies and supervise their implementation is the opposite. Further, Silverman (1992: 2) introduces the concept of "force accounts" which means that one government agency contracts with another government agency to perform on its behalf. Thus, a Ioeal government's Health Department might eontraet with a Ministry of Publie Works to construct a clinic on behalf [of the Health Department], with the understanding that payment to the latter would be made by

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budget transfer from the former. The model introduced here includes such force-accounts, but it also encompasses a much broader range of arrangements between lower-Ievel government agencies, local communities, or individual users/ clients and higher-Ievel government agencies (Silverman 1992: 2).

3.2.5 Divestment

Work (2002: 7) further lists divestment as a form of decentralization. He describes divestment as the transfer of planning and administrative responsibilities or other public functions from govemment to voluntary, private or non-govemmental institutions, with clear benefits to and involvement of the public. "This often involves contracting out partial service provisions or administrative functions, deregulation or full privatization" (Work 2002: 7).

3.3 Sequences 0/Decentralization It is assumed that the ideal decentralization process includes the three dimensions of decentralization, administrative, political, and fiscal decentralization, illustrated above. Faust et al. refer to the coherence between the three dimensions of decentralization, the balance between administrative, fiscal, and political decentralization (Faust et al. 2008: 29). Skowronek (1993) describes intergovernmental relations as a layered structure of institutional action, assuming that decentralization policies affect the fiscal, administrative, and politicallayers. Nevertheless, decentralization policy rarely affects all three intergovemmentallayers simultaneousIy, although it is possible. More often, different dimensions of decentralization are negotiated and implemented at different points of time, leading to a model of different sequences of decentralization (Skowronek 1993, cited in Faletti 2005: 331). However, decentralization processes could evolve differently from the ideal illustrated above, or only one or two dimensions might

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Decentralization: Concepts and Definitions

occur, the timing of policies could overlap, and successive reforms within each layer could affect those that follow (Faletti 2005: 333). Even though there is no commonly accepted position regarding the sequences of the three dimensions of decentralization, it is mainly assumed that decentralization processes are started at the national level. There are cases when the sub-national level is the driving force of decentralization processes while most of the actual cases lie in between these two extreme examples and are thus a combination of efforts between both national and sub-national levels. Moreover, a decentralization initiative that is started concurrently by the sub-national and national level is likely to achieve successful results where devolution is a mutually desired process. However, based on Falleti's considerations, the national level and the sub-national level have different preferences in regards to the sequence of when different dimensions of decentralization are implemented. Thus, Falleti (2005:330) states that "the national executive prefers administrative (A) to fiscal decentralization (F), which in turn is preferred to political decentralization (P), or A > F > P." The rationale behind this is that the national government prefers to transfer responsibilities rather than resources. If the central government is forced to transfer fiscalor political authority, it prefers to transfer fiscal authority and to retain political control, which helps it to influence the expenditure decisions made on the sub-national level. The same reasoning applies to explain the reverse order of the sub-national level government's reverse order of preferences, P > F > A. The sub-national level aims at political decentralization to gain political autonomy. Choosing between fiscal and administrative decentralization, sub-national govemments prefer fiscal decentralization, money and resources, over administrative decentralization, responsibilities (Faletti 2005: 330). Therefore, the level of government that implements the decentralization process will determine the first dimension of decentralization that is pursued. The dimension of decentralization that is first implemented, in turn, determines the next dimension, as it produces policy

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feedback that account for the order and characteristics of the reforms that follow (Faletti 2004: 7). Thus, if national interest prevails at the beginning of the decentralization process, administrative decentralization is likely to occur first. However, if fiscal resources do not accompany the transfer of responsibilities, the national level will strengthen its power vis-ä-vis the subnational level that will become even more dependent on (financial) transfers from the center to carry out the transferred tasks and responsibilities. If the decentralization process continues, the national-level chooses fiscal over political decentralization reforms. An unfunded administrative decentralization, thus, increases the dependency of the sub-national level on the national-level. Fiscal decentralization will follow under terms set by the national level, and political decentralization will be the third dimension and "therefore will not confer much autonomy to the sub-national level" (Faletti 2004: 7-8). Thus, "A~ F ~P" implicates that there is only little or no change in the redistribution of power to the sub-national level (Faletti 2005: 331). If, instead the sub-national interests prevail in the first round of negotiations, political decentralization will most likely happen first. This enhances the power and capacities of sub-national actors for the next round of reforms, as through political decentralization sub-national levels gain more political autonomy. Hence, in the second round of decentralization, the sub-national officials are most likely to demand fiscal decentralization and will influence the terms of the reform. Administrative decentralization will then foliowas the last type of reform, to compensate for the previous decentralization of resources. The administrative decentralization is thereby funded and will not affect the power of the sub-national government negatively. The final outcome of this trajectory of decentralization (P ~ F ~ A) that conforms to the preferences of the sub-national officials is likely to be a high degree of autonomy for the sub-national level with respect to the national level (Faletti 2004: 7). However, as Falleti (2005: 331) states, it is possible that "exogenous changes (such as midterm elections, a context of fiscal expansion, fiscal crisis, or a process of democratization) could produce reversals on

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Decentralization: Concepts and Definitions

the distribution of power between national and sub-national executives once the process of decentralization has started. This would lead to the alternative sequences P 7 A 7 F and A 7 P 7 F." Falleti illustrates four scenarios. In the first, the sub-national interest prevails at the beginning of the sequence, triggering political decentralization. Yet, reactive mechanisms, such as a fiscal crisis, undermine the sub-national demand for fiscal decentralization and lead to the prevalence of national interest, thus, to administrative decentralization, followed by fiscal decentralization in the last stage. This sequence can be disastrous for the sub-national level if the administrative decentralization is unfunded, since it will not be able to carry out its responsibilities, and its sub-national constituencies will blame it for poor performance. Generally this path leads to a meager change in balance of power. If administrative decentralization is funded, it might, however, lead to a moderate change in intergovernmental power (Faletti 2005: 332). In the second scenario, national interest prevails, putting administrative decentralization at the beginning of the trajectory. Due to reactive mechanisms, such as democratization, the central power is undermined, enabling the sub-national level to push political decentralization forward in the second round, which puts them in a better position to set the terms of the following fiscal decentralization. The outcome of this sequence would be a shift in balance of power in favor of the subnational level, but not as favorable as in the first scenario. Another possibility would be a tie between the national and subnational interests, which would either result in keeping the status quo, no decentralization process, or in the bargaining actors compromising their second most preferred outcome, fiscal decentralization. The effects of the fiscal decentralization will then determine the next step foward. In this sequence, time is especially crucial. If the national level prevails, the fiscal decentralization is followed shortly by administrative decentralization. The sub-national level receives new responsibilities without political autonomy, as political decentralization still has to follow, causing the balance of power to depend on how the sub-national entities deliver the newly transferred tasks and responsibilities. Yet, this sequence easily

Sequences of Decentralization

71

leads to the result that sub-national governments are more accountable to the central govemment than to their local constituencies, so that the administrative performance might likely be poor, resulting in little change in the intergovernmental power structure. If the sub-national level prevails, or the sub-national level has time after the fiscal decentralization to strengthen their support base, this sequence can lead to a medium increase in balance of power, even if political decentralization only takes place as the last step. Altematively, if after a tie of interests, fiscal decentralization is followed by political decentralization, and then administrative decentralization, a significant change in the balance of power occurs. In this scenario, sub-national govemments are able to build support and establish stronghold after the first two steps and gain greater autonomy from the national level (Faletti 2005: 332-333). To summarize the above, the different sequences and their effect on the degree of change in the intergovemmental balance of power are illustrated below in table 3.1.

72

Decentralization: Concepts and Definitions

Table 3.1: Sequences of Decentralization and Their Effects

Sequences of Decentralization and Their Effects Prevailing Interests In first Move

National

SubNational

National SubNational

Tie

1st Dimension of Dec. reform

~ Administra-

tive Decentralization

~Political

Decentralization

~ Administrative Decentralization ~Political

Decentralization Decentralization ~Fiscal

Feedback Mechanism

Dirnen2nd sion of Dec. reform

Selfreinforcing (powerreprod.)

Decentralization

Selfreinforcing (policy ratchet)

Decentralization

Reactive

Reactive

Reactive

SelfDe- reinforccentralization ing Source: Adapted from Falleti 2005:332 Tie

~Fiscal

~Fiscal

~Fiscal

~Political

Decentralization ~ Administrative Decentralization ~ Administrative Decentralization ~Political

Decentralization

3rd Dimension of Dec. reform

Degreeof Change in Intergovemmental Balance of Power

~Political

Decentralization

=Low

Adminis~ trative Decentralization

= High

De~Fiscal centralization

= Medium

Decentralization

= Mediuml Low

~Fiscal

~Political

Decentralization ~ Administrative Decentralization

= Mediuml Low = High

Interim Conclusion

73

3.4 Interim Conclusion It ean be stated that Silverman's (1992) additional forms to the three elassieal ones, deeoneentration, delegation, and devolution, prevent an unambiguous elassifieation of deeentralization forms. Further, Metzger (2000: 75) remarks that the "prineiple agency eonstruet" of Silverman eauses uneertainty, as it might easily be mixed up with the principleagent theory. He adds that Silverman's elassifieation of loeal govemments as "principle agents" eontradiets the premise of this theory. Silverman defines the financial baeker as the souree of power, which in the framework of the bottom-up approach is loeated at the loeallevel and in the framework of the top-down approach is loeated on the national level. However, Silverman does not differentiate between agent and prineipal and the hereto related possible interaetions and influenees regarding benefits (Metzger 2000: 76). As Silverman's hybrid forms relate to already existing forms of deeentralization, this research paper does not eonsider these hybrid forms to be forms of deeentralization. Aiming at analyzing the institutional settings of the Yemeni UWSS, this research paper sees deeentralization as a politieal proeess that is embedded in the reform proeess of the entire governmental and administrative system. Further, it is a set of state reforms. As such, deeentralization does not inelude the transfer of authority to non-state aetors, which exeludes divestment as a form of deeentralization for this paper. In the following, deeentralization relates to the transfer of tasks, responsibilities, resourees, and politieal deeision-making authority from the eentral government to intermediate and loeal govemments or quasiindependent government organizations. Also, as defined here, deeentralization reforms may take plaee in authoritarian as weil as democratie eontexts, which means that the eoneept of deeentralization and demoeratization should not be eonflated, as Falleti (2004: 3) suggests. However, eentralization and deeentralization are no "either-or" eonditions (World Bank 2001a). First of all, it ean be assumed that effieient deeentralization needs an effieient eentralized state, as eentralized

74

Decentralization: Concepts and Definitions

institutions have to transfer power, which requires that they previously exercised this power. Additionally, central ministries playa crucial role in "promoting and sustaining decentralization by developing appropriate and effective national policies and regulations for decentralization" (Gerhager/ Sahooly/ Salam 2009: 11), as weIl as in strengthening local institutional capacity to assume responsibility for new functions. Nevertheless, not all functions can and should be decentralized. An appropriate balance of centralization and decentralization is essential for the effective functioning of the government. Regarding the effects of each dimension of decentralization, Falletti (2004: 4) remarks that all dimensions have either positive or negative impacts on the autonomy of sub-national executives. "If administrative decentralization improves local and state bureaucracies, fosters training of local officials, or facilitates learning through the practice of delivering new responsibilities, it willlikely increase the organizational capacities of sub-national govemments" (Faletti 2004: 4). However, if it takes place without the transfer of funds, administrative decentralization may, instead, decrease the autonomy of sub-national officials, as they will be more dependent on subsequent national fiscal transfers or sub-national debt for the delivery of public social services (Faletti 2004: 4). Fiscal decentralization depends largely on the design of the implemented policy. Higher levels of automatie transfers generally increase the autonomy of sub-national govemments because they benefit from higher levels of resources without being responsible for the (political and bureaucratic) eosts of collecting those revenues. However, the "delegation of taxing authority to sub-national units that lack the administrative capacity to collect new taxes can set serious constraints on the local budgets and increase the dependency of the loeal officials on the transfers from the center" (Faletti 2004: 5). Therefore successful sub-national governments prefer to colleet their own taxes. Nevertheless, poor govemorates or municipalities are negatively affected if tax collection is decentralized, and, as a consequence, the horizontal re-distribution of transfers from rich to poor sub-national units is affected (Faletti 2004: 5).

Interim Conclusion

75

Contrastingly, Falleti (2004: 4) defines political decentralization as folIows: The set of constitutional amendments and electoral reforms designed to open new- or activate existing but dormant or ineffective - spaces for the representation of sub-national polities. Political decentralization policies are also designed to devolve electoral capacities to sub-national actors.

Political decentralization is assumed to always have a positive impact on the degree of sub-national's autonomy from the center, except when the separation of powers at the sub-national level, such as through the creation of sub-nationallegislatures or municipal councils, leads to the division of sub-national govemments, which decreases the power of subnational governments vis-ä-vis higher level authorities (Faletti 2005: 329). Faletti (2005: 329) therefore states that it is necessary to examine decentralization policies regarding their institutional design and its impact on the sub-national officials' autonomy with regard to the national executive. Further, it is assumed that the sequence of when and what dimension of decentralization is implemented affects the performance and efficiency of the decentralized units and should therefore be considered. Reinforcing this assumption, Braun and Grote (2000: 26), for instance, state that "political and administrative decentralization should precede fiscal decentralization. Otherwise, participation and accountability are not assured." Further, it can be stated that it is generally assumed that decentralization increases the efficiency and effectiveness of state functioning on the sub-national level.

4. Success Criteria of Decentralization

The success of decentralization not only depends on the sequence in which different dimensions of decentralization are implemented but also on the following elements; the central govemment, sub-national capacities, coordination between national and sub-national institutions, participation, and accountability.

4.1 Central Government The willingness of the central government to implement decentralization is a crucial element since the central ministries are mainly in charge of setting-up effective national policies and regulations to promote decentralization. Furthermore, the continuity in the centrallevel's commitment for decentralization policies is significant for the success of the decentralization process. In some cases, a decentralization policy may be enacted primarily as a symbolic measure. In this case there is a gap between formal pursuance and actual implementation of the decentralization policy by the central government (Bill/ Quarto/ Zini 2008: 220-221).

4.2 Sub-National Capacities Without sufficient institutional, technical, administrative, and human capacities, the sub-national level can hardly assurne responsibility for new functions. Therefore, successful decentralization requires either the transfer of trained staff from central institutions to the sub-national level or capacity building on the local level. Work (2002: 18) states that lack of capacity building, both in terms of human resources and financial supK. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_5, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

78

Success Criteria of Decentralization

port, has often been quoted as the prineipal obstaele in deeentralization processes. In addition to the transfer of qualified staff from central institutions or to eapacity building at the loeal level, the sharing of praetieal lessons and experienees between different sub-national units is advisable for the development of suffieient eapacities at the sub-national level. Capacity development is therefore a crucial factor for successful decentralization since the citizens will only support decentralization if the subnational level is able to earry out their tasks and responsibilities.

4.3 Coordination between National and Sub-National Institutions Through deeentralizing tasks, responsibilities, resourees, and politieal decision-making, authority is transferred from the eentral government to intermediate and loeal governments or quasi-independent government organizations. This leads to the redefinition of tasks, ideally accompanied by a elarifieation of eompetenees and responsibilities. However, in certain eases, the transfer leads to uneertain distribution and overlapping of responsibilities and eompetenees between eentral and deeentralized institutions, which reduces the accountability of different levels of govemments in regards to their specific responsibilities. Successful decentralization, therefore, requires elear alloeation of responsibilities, resourees, and legitimation and elear job definitions.

4.4 Participation Partieipation is one of the goals of deeentralization (BMZ 2008: 6). Through deeentralization, deeision-making authority is transferred to the sub-national level and is thereby literally closer to the people. It is assumed that this, as a result, heightens the possibility of the loeal population to influenee the decision-making proeess. However, the term partieipation is ambiguous and used in different contexts. Therefore it is necessary to define the term before illu-

Participation

79

strating its importance for decentralization. The World Bank defines participation as "the process by which people, especially disadvantaged people, influence policy formulation and control design alternatives, investment choices, management and monitoring of development interventions in their communities" (Metzger 2000: 81). Eckert (1996: 81) adds that participation is an instrument for the Iocal citizens to control resource allocation. Also significant to an understanding of participation is the distinction between granted participation and hard-earned participation that has been demanded by the citizens (Beckmann 1997: 7). This is a reflection on how the citizens esteem their participatory rights, as, in many cases, citizens who earn and demand participation will value it more (Beckmann 1997: 12-13). Another important distinction is the degree of participation, i.e. the degree to which participants take over decision-making responsibilities and competences (Beckmann 1997: 12-13). Vilmar (1983: 339-344) differentiates between three degrees of participation: non-binding participation, binding participation, and institutionalized participation. Non-binding participation is the right to obtain and to exchange information, to consult, and to take part in debates. This type of participation heightens the transparency of the decisionmaking process; however, the participants can only express their opinion and advise and influence the decision makers indirectly. Binding participation directly limits the decision-making authority through veto rights or compulsory consideration of arguments and interests of the local community. In both cases, non-binding and binding participation, the decision-making competence is still centralized. Jnstitutionalized participation, on the other hand, is the right to make decisions in certain fields independently. Hence, decision-making is decentralized and can be regarded as a form of self-governance requiring the sovereignty, competence, and responsibility of the participants. Decentralization and participation are closely linked to each other. Therefore Lietvack et aL (2009) and Seddon (1999: 15) refer to a "symbiotic relationship" between decentralization and participation. On the

80

Success Criteria of Decentralization

one hand, the proeess of deeentralization ean itself inerease the opportunities for partieipation by placing power and resourees at a eloser, more familiar, more easily influeneed level of govemment. Espeeially in environments with poor traditions of citizen participation, deeentralization ean be an important first step in creating regular, predictable opportunities for citizen-state interaction (Seddon 1999: 15). On the other hand, participation is an important prerequisite for sueeessful deeentralization, as sueeessful deeentralization requires some degree of loeal participation. "Sub-national govemments' proximity to their eonstituents will enable them to respond better to loeal needs and effieiently match publie spending to private needs only if information flows between citizens and Ioeal govemments" (Seddon 1999: 15). Aeeording to this understanding of partieipation, participation is a means to achieve need-oriented development, improved resouree alloeation and administrative effieiency as weIl as to increase aeeountability. Further it ean be stated that aecountability mainly emerges through participation, Therefore transpareney, eontrol, and effieiency are closely linked to participation, Key questions, then, are how partieipation can be exercised by the Ioeal population and what possibilities of partieipation they have, Buse and Nelles (1978) differentiate between actorrelated and structural conditions for participation. Actor-related eonditions refer to the population. Soeio-eeonomie status, socio-demographic faetors, individual attitudes, personalities, and expeetations of the participants all play an important role. Aceording to Buse and Nelles (1978), it has been proven that these factors influence the quality and intensity of partieipation. They eonclude that at the end of the 1970s, the higher the edueationallevel, ineome, and profession of the people, the higher the degree of partieipation. They also find that men tend to participate more than women, people below the age of 50 years participate more than older people, and ethnic minorities show less participation than the majority of the population, However, the main determinant for active partieipation is the politieal self-eonfidenee in terms of a conseiousness that participation may lead to change (Buse/ Nelles 1978: 45-48, cited in Zehner 2008: 29).

Accountability

81

Considering the above mentioned actor-related eonditions, the following factors positively influence political participation: information and pereeption of social problems and the suffering they eause, the ability to artieulate the individual or eolleetive interests, the willingness to partieipate, the politieal soeialization to participate, the motivation and gratification (material or immaterial) to participate, and sufficient time and financial resources to participate (Buse/ Nelles 1978: 50-56, cited in Zehner 2008: 29). Struetural eonditions of participation are related to politieal and soeial struetures that manifest themselves in politieal eonsensus-building and decision-making processes. In this regard, political actors have to arrange their politieal-administrative actions with these struetures (Busel Nelles 1978: 58, cited in Zehner 2008: 29). In eonelusion, it ean be stated that participation is an essential part of sueeessful deeentralization beeause aeeountability and Ioeal responsiveness, some of the main rationales for decentralization, cannot be realized when there are no mechanisms transferring information between the loeal governments and their eonstituents.

4.5 Accountability Another key element of deeentralization that is elosely related to participation is aeeountability. Agrawal and Ribot (2002: 9) remark that the effeetiveness of deeentralization hinges on accountability, They suggest that "if powers are decentralized to actors who are not aeeountable to their eonstituents, or who are aeeountable only to themselves or superior authorities within the strueture of the government, then deeentralization is not likely to aeeomplish its stated aims" (Agrawail Ribot 2002: 9). While partieipation inereases the role of the Ioeal population to provide inputs for Ioeal govemanee, aeeountability determines the degree to whieh institutions have to explain and justify their aetions. Unless sub-national institutions feel aeeountable to the loeal population, it is not ensured that they act on the preferences and needs of the local communi-

82

Success Criteria of Decentralization

ty. Therefore the theoretieally assumed advantage that deeentralization improves information about loeal needs and preferenees through the neamess between government and institutions depends on aeeountability (Braun/ Grote 2000: 5). There are two dimensions of aeeountability. On the one hand, aeeountability of government workers to eleeted officials, on the other hand, the elected offieials to the eitizens who eleeted them. The first type ean prove difficult to achieve sinee government workers, espeeially professionals in the fields such as education, agriculture, and health, the very sectors that are often deeentralized, frequently have eonsiderable incentive to evade control by loeally eleeted offieials. These government workers, particularly if they have a high education and sophisticated lifestyle, are hard to maintain in small remote towns and villages. Furthermore, they might fear that quality standards for service delivery will suffer if provided loeally. In ease of corruption, the supervision by distant managers through long chains of eommand offers more opportunities for fraud. Government officials at the national level tend to have similar reasons to resist decentralization initiatives, as they are much concemed about preserving the national standards and sometimes about opportunities for venality as weIl. Thus, it is not surprising that deeentralization initiatives often run into bureaueratie resistance from eentral ministries (Litvack at al. 2009a, Agrawal/ Ribot 2002: 9-10). Although decentralization is often regarded as a means to overeome eorruption, loeal government institutions ean also inerease eorruption, as loeal elites plaee themselves in key positions of the decisionmaking proeess to strengthen their influence and autonomy (Djogo/ Syaf 2004:15). As Faguet (1997: 6) states, "Politics in decentralized govemments may be more elosed than national polities, and more susceptible to interest-group eapture or manipulation by powerful agents." The seeond dimension of aeeountability, that of eleeted officials to the citizens, is best ensured through fair and free elections. However, sueeessful eleetions presume some sort of democratie struetures. And yet, if eleetions revolve around a given issue, such as serviee delivery or

Accountability

83

health, they tend to leave everything else out of the pieture, or elections may even be contested on non-local issues, such as the popularity of the national govemment (Faguet 1997:6). Therefore citizens need further instruments to enforce accountability, such as political parties, press, and civil society to address and publicize wrongdoing by politicians. Public meetings can also be an effective mechanism for encouraging citizens to express their views and oblige officials to answer them. In conclusion, the question of whether accountability increases or decreases with decentralization is an empirical one.

5. Decentralization in Yemen

5.1 The Yemeni Context The Republic of Yemen, as known today, was established in 1990 with the merger of the Yemen Arab Republie (or North Yemen) and the People's Demoeratie Republic of Yemen (or South Yemen). North Yemen had become independent in 1918 from the Ottoman Empire and South Yemen had become independent in 1967 from the United Kingdom. The eountry covers some 527,970 km-, It is administratively divided into 22 govemorates (21 govemorates plus Sana'a eapital) and 333 districts.? view figure 5.1. The eountry is charaeterized by an unequal geographie distribution of the population. About 73.7% of the population is eoncentrated in rural areas where people mainly live in clusters seldom exeeeding 500 people each. About 27.3% live in urban centers, The most populated govemorates inelude Sana'a, Taiz, Ibb, and Hodeidah. AIMahra, AI-Jawf, and Marib are the least densely populated govemorates (UNDP 2009).

The numbers vary slightly in different reports of the DLDSP from 20 - 22 govemorates and 326-333 districts. This may be partly due to inaccuracy, but also to the fact that Sana' a is counted as a govemorate, while the capital trust, is counted extra, because it does not fall under the responsibility of the govemor, thus is not part of the govemorate in a politicaladministrative sense. K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_6, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

9

86

Decentralization in Yemen

Figure 5.1: Administrative Map of Yemen

Sa'dah

Hadremaut

AI-Mahra

Source: adapted front Ward. Christopher/ et al. (2009): "Equityand Efficiency in Yemen's Urban Water Reform - A Sector Study and Poverty and Soda1 Impact Analysis," Ministry ct Waterand Environment, WorldBank,GTZ, Sana'a, p.121.

Yemen belongs to the group 01 "least developed counlries" (LDC) 01 the world. The Human Development Index (HDl) 2009 (represenling statistical values for 2007) ranks Yemen as 140th out 01 177 countries (UNDP 2009). About 42% 01 the oountry' s population lives under the poverty line (the GNI per capita 01 US $450 per annum, 16% 01 the population have below US $1 per day and 45%below US $2 per day) (UNDLDSP2008: 6). Poverty in Yemen is a product 01 multiple natural and human factors as weIl as inappropriate domestic policies and unfavorable exter-

nal conditions. Poverty has a streng rural attribute, as 83% 01 the poor

The Yemeni Context

87

and 87% of the food-deprived live in rural areas. It appears to be strongly related to large family sizes, high dependency rates, families headed by widows or widowers, low level of education, and vulnerability to drought and floods. Further, poverty has a regional disparity dimension. While poverty incidence rates reach 56% in Taiz, in Al-Baihda they reach only 15%. This is generally inversely correlated with the local per capita share in government expenditures. Thus, the importance of locationspeeific forms and causes of poverty provides a strong rational for polieies and programs that promote fiscal equalization and decentralize public sector planning and resource allocation (UNDLDSP 2003: 3-4). Water scarcity is one of the biggest problems in Yemen and constitutes a major challenge to achieve sustainable development in Yemen. According to the Water Poverty Index, illustrated in figure 5.2, the situation for Yemen is severe. Further, the lack of water contributes to the high poverty level.

88

Dec:enlmIIzalIC In Yemen

Source: adapted from © NERC - Center for Ecology and Hydrology 2005

The Yemeni Context

89

The agricultural sector continues to absorb 52% of the labor force while only contributing about 10% of the GDP (Federal Research Division 2008: 10). However, Yemen imports up to 75% of its food, which makes it extremely vulnerable to international price fluctuation (Al-Ariqi 2008). The national economy is heavily dependent on oil revenues (36.7% of the GDP) (UNDLDSP 2008: 6), while it is estimated that the Yemeni oil reservoirs will be depleted within the next 10 to 20 years (The Economist Intelligence Unit 2009: 3). The challenges facing Yemen in addressing poverty are great. Examples include adult illiteracy rate.!" which is among the worst in the world, low female primary school enrollment and completion rates, high infant and maternal mortality rates.l! as well as a fertility rate12 that is one of the highest in the world (UNDP 2009a). Yemen has a long history of conflict and civil war that continues to threaten development. Recently (September 2009), the conflict between the government and Houthis in Sa'ada has turned into a new round of civil war (International Crisis Group 2009).

Illiteracy among adult females is 65,3% compared to 26,9%for males. mortality rate per 1,000 live birth is 76, matemal mortality 370/100,000. The data is taken from UNDP sourees, however different sources e.g. GA fact book supply varying statistics. 12 Fertility rate (births per women) 6.0 10

11 Infant

90

Decentralization in Yemen

5.2. Status ojDecentralization in Yemen

Yemen has a long history of weak state structures. For eenturies tribalism has been a deeentralized socio-political organization fuIfiIIing the tasks of the state. The tribai system organized produetion, group proteetion, dispute management, and relations with non-tribal groups. In its territory the tribe was responsible for defense, keeping the peaee, guaranteeing the sanetity of Ioeal markets and either proteeting or preventing the passage of travelers (Carapieo 1998: 64). Thus, to date the main politieal challenge in Yemen is to build a modem state and extend its presence and authority in the periphery of the eountry. It is often noted that the government's power does not exeeed the borders of the eapital (Sana' a), Beeause of soeio-politieal factors, such as tribai struetures and the traditional values and culture within the Yemeni soeiety, overcoming this ehallenge depends on how the govemment engages with the tribes in the state-building and modemization effort. Since the relationship between the state and the tribes is a matter of state legitimization at the periphery and eenter-periphery powersharing agreements, decentralization is likely to play a major role for the state-building process in Yemen. After the unification, the political struggle to build a modem national eentral state and to integrate the eountry's regions and its eommodities has led to strong eentralism in Yemen. The government is challenged by persistent tribaI and regional resistance. Thus, it recognizes the need to improve the functioning of its government machinery and the utilization of its searce operating and developmental resourees. Even though, the Constitution of Yemen does not mention loeal government, artieles 145 - 148 provide the basis for bodies of Ioeal administration and thus decentralization in Yemen.

Status of Decentralization in Yemen

91

Table 5.1: § 145-148 of the Yemeni Constitution

§ 145- § 149 of the Constitution of the Republic of Yemen Article (145) The territory of the Republic of Yemen is divided into administrative Units. The law shall identify their number, borders, divisions and the objective criteria for the administrative divisions. The law shall also specify the method for nominating and electing, or selecting their chairpersons, and define their functions and the functions of heads of authorities within them. Article (146) The administrative units shall enjoy legal personality and shall have councils which must be freely and fairly elected both at the local and govemorate level, which shall exercise their functions within the borders of the administrative area. They shall propose programs, plans and investment budgets for the administrative district as well as supervise, monitor and audit the agencies of the local authority according to law. The law shall specify the means for nomination and election of the local authority, its administration and financial resources, the rights and duties of its members, its role in the execution of development plans and programs and all other rules, through considering the adoption of the principle of administrative and financial decentralization as the foundation of local administration system. Article (147) All the administrative units and the local councils are an inseparable part of the power of the state. The govemors shall be responsible before the President of the Republic and the Council of Ministers, whose decisions shall be binding on them in all cases. The law defines the methods of control over the actions of the local councils. Article (148) The state shall encourage and sponsor the local cooperative development organizations as they are one of the most important means of local development. Source: Constitution of the Republic of Yemen (as amended in 2001)

92

Decentralization in Yemen

The eoneemed artieles state that the territory of the Republie of Yemen is divided into administrative units with the status of legal personality. These units should have eouncils that must be freely and fairly eleeted, both at the loeal, thus distriet, and the govemorate level. All administrative units and loeal eouneils are an inseparable part of the power of the state and govemors are responsible before the President of the Republie as weIl as before the Couneil of Ministers. The deeisions of the President and the Couneil of Ministers are obligatory and must be exeeuted by the administrative units in all eases. Stressing the inseparable part of the power of the state indieates the unitary charaeter of the Yemeni state, narrowing the option of a federal system and loeal self-govemment. Furthermore article 147 emphasizes the vertieal aeeountability of the govemors to the President and the Couneil of Ministers. At the same time, a horizontal aeeountability exists between govemors and the Loeal Couneils, which will be further illustrated in section 5.3. In eonelusion, it ean be stated that the Constitution emphasizes the prineiples of administrative and fiseal deeentralization as the foundation of the loeal administration system but, however, does not mention politieal deeentralization. Henee, the Constitution seems to eoneeive Loeal Couneils as deviees for the state's administration to reach out at loealities, promoting greater partieipation in publie sector policy making and implementation, rather than as real instruments for loeal policies, who exercise autonomy and self-govemment. Therefore, the form of deeentralization envisioned by the Constitution ean be characterized as deeoneentration. Sub-national units and sector specifie national agencies funetion on the loeal level while still being integrated in the vertieal struetures of the state. Therefore, deeoncentration is assumed, in fact, to strengthen the eentral state and is eonsidered the weakest form of deeentralization, as illustrated in section 3.2.1. In February 2000, the Loeal Authority Law (LAL) was enaeted, followed in 2001 by its Executive Regulation in decree N°269, its Financial Bylaws in deeree N°24, and its Organizational Bylaw for Govemo-

Status of Decentralization in Yemen

93

rates and Distriets in deeree N°265, fostering a way towards deeentralization.

5.3 The Local Authority Law (LAL)

The idea to deeentralize the govemment in Yemen basieally started in 1995. Due to the big geographie area and the way the population is spread out over the eountry, it was realized that it is difficult to rule the Republie of Yemen through a eentralized government. Therefore a proeess of gradual development towards loeal govemanee was envisioned (Zemarn./ Mosawar/ Ali 2009: 1-2). In 2000, the Loeal Authority Law was issued as l1Law N°4/2000 eoneeming the Loeal Authority" (AI-Sulta AI-Mahalia). It states that the loeal authority system is based on the principle of administrative and finaneial deeentralization as weil as on the basis of the expansion of loeal partieipation in deci.sion-making proeesses and management eoneerning loeal issues, such as economie, soeial, and cultural development (§4).13 Loeal participation is ensured through the eleetion of loeal eouneils and its authorities who propose investment programs, plans, and budgets for administrative units and supervise its implementation in aeeordanee with the provision of this law. All organs of the Loeal Authority undertake their tasks and responsibilities in aeeordanee with the Yemeni Constitution, Yemen's general policies, and the provision of the LAL, as weil as the laws, resolutions, and mies in force (§15). Artiele five states that the territory of the Republie of Yemen is to be divided into administrative units that shall enjoy the status of a body eorporate. Further, the division on the level of the distriet and below may be amended by Republican Deeree after the approval of the Council of Ministers and upon the submission of the Minister (§7).

All following cited articles refer to articles of the Local Authority Law (LAL) Law N°4j2000.

13

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Decentralization in Yemen

Thus, the LAL establishes local government as a pillar of government providing the legal foundation for the Yemeni inter-governmental system, which is based on the following four principles: • Administrative Decentralization; • Financial Decentralization; • Broadened popular participation through elected local councils; and • Decentralization of service delivery. It should be noted that the term "local authority" refers to two levels of government, the govemorate and the district. Both levels are made-up of three organizational structures: local councils, secretariats, and executive organs, i.e. departments responsible for service delivery in sectors such as water, health, education. The following sub-sections introduce the LAL and its different levels of government.

5.3.1 CentralOrgans Through the executive organs., i.e, branches of line ministries and national agencies in local jurisdictions, the central organs are represented directly at the sub-national, govemorate and district level (§2). The branches of the central organs impact the locallevel through the formulation of general policies, the enactment of organizational regulations, and the control and the implementation of projects which are difficult to implement by the local councils. ThUS., the local councils can request central support, Further, projects that have a general national nature are supported by the centralorgans (§14a). On the sub-national level, the executive organs are deemed to be local organs and represent the technical, administrative, and executive organ of the local counci1. The Local Council supervises, manages, and controls their actions (§14c). Thus, the executive organs have a dual accountability - to the local councils (for the implementation of local plans

The Local Authority Law (LAL)

95

and budgets §14c) and to their respective central agencies (for national sector policies, programs and projects §14a).

5.3.2 Sub-National Organs of the Govemorate Level The sub-national level consists of the govemorates and districts. In the following section the main institutional organs of the govemorate level and their major tasks and responsibilities are illustrated.

5.3.2.1 Local Council of the Govemorate The Local Council is freely, equally, and directly elected in accordance with the Yemeni Constitution and the LAL (§8). All citizens within the scope of their administrative units have the right of nomination and election to the Local Council in accordance with the provision of the LAL and the General Elections Law (§9). The Local Council is comprised of at least 15 members, including the Chairman of the Council, elected by the districts to the Council (§16a). To represent all districts equally in the Local Council, one elected member of each distriet is in the Local Council of the govemorate (§16b). However, the members of the Local Council do not represent their district, but the entire govemorate (§17). From these members, the Local Council elects the Chairman of the Local Council, the General Secretary, the Chairman of the Planning, Development, and Finance Committee, the Chairman of the Service Committee, and the Chairman of the Committee for Social Affairs (§20). The following table illustrates the Local Council's tasks and responsibilities.

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Decentralization in Yemen

Table 5.2: Tasks and Responsibilities of the Local Council of the Govemorate

Main Tasks and Responsibilities of the Governorate's Local Council •

• •

•

• •

•

•

•

• • • •

Supervision, support and control over the Local Council of the districts and executive organs of the governorate, co-operative sodeties and associations, Control of the application of laws and regulations in force, or their implementation, Study, drafting, and adaptation of social and economic development plans for the governorate; carrying-out of surveys and evaluation of statistics to determine development priorities of the governorate, Discussion and approval of public construction drafts and environmental plans, prior to their submission to the concerned central institution that adopts and implements them, Supervision and evaluation of the implementation of projects, Study and evaluation of the application of the Local Authority system and its administrative division; proposal of adaptations to the central authorities, Budget planning and approval of accounts at the governorate level; consideration and approval of the financial situation and the level of the collection of local, joint, and central revenues, Determination of fees for services offered by the utilities of the executive organs of the governorate, unless laws and resolutions are already issued by the Council of Ministers, Consideration and approval of fundamentals and rules that organize citizens' contribution to essential service projects that simplify and improve the work of the executive organs, Oversight of the security situation and issuance of directives to improve security and stability of the governorate, Support of investment projects and tourism, Protection of natural resources, such as water, fish and marine life wealth; control of the implementation of regulations concerning this law, and Preservation of services and utilities projects to ensure their operation and safety.

Source: Law N°4/2000 (Local Authority Law) § 19

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The Local Authority Law (LAL)

5.3.2.2 Govemorate's Local Couneil

The following secti.on illustrates the different organs of the govemorate's Local Council. Further it illustrates how the President 01 the Local Couneil is also the head of the executive office of the concerned local administration unit, as illustrated in figure 5.3.

Figur< 5.3: Local Authority Structure Local Administration

-

Local Council

halrman 01tne lanning , Deveopm ent & Finance

omrmttee

~~ a i rm a n ot the

Execut ive Organ

Governor (Local Council's Presidenl)

I

I I

-

ervce cornmntee

Chairman 01the Social Affairs commmee

Dlrectors of the

c - Gov ernorate's

I

-

Y

Governorate Undersecretary

I Genera l Secretary I

I

(remainmg) Member s

I

Source: Adapted from: Romeo, Leonardo G./ EI Mensi, Mohammed (forthcoming): " The Difficult Road to Local Autonomy in Yemen: DecentraIization Reforms between Political Rationale and Bureaucratic Resistance in a Multi-Party Democracy of the Arabian Peninsula," in: J. Martinez-VazquuJ F. Vail1ancourt (00.): Decentralization in Developing Countries: Global Perspectives on the Obstacles to Fiscal Devolution. Edwar Elgar,

Cheltenharn, UK, Northampt<m. MA, USA.

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Decentralization in Yemen

5.3.2.2.1 The Govemor The Govemor has the rank of a minister and shall be appointed by a Republican Decree upon the nomination of the Minister of Local Administration and the following approval of the Council of Ministers (§38a). The tenure of the Govemor is four years and can be renewed in the same govemorate for another four years (§38b). However, since the amendment of law N°18/2008, the Govemors are indirectly elected by a college of govemorate and district councilors in their respective Govemorates. The Govemor is Chairman of the govemorate's Local Council and the representative of the executive authority, the local administration of the govemorate level (§39). He is accountable and responsible before the President of Yemen and the Council of Ministers, as well as before the Local Council of the govemorate (§40). The Govemor supervises the implementation of laws and general policies of the state in his management of the affairs of the govemorate. He directs the govemorate's executive organs, develops its resources, and preserves the public order (§41). The Govemor is the head of all civil servants working within the scope of the govemorate. He also nominates the heads of the executive organs of the govemorate and coordinates this with the concemed ministers (§43). His main tasks and responsibilities are illustrated in the following table .

Table 5.3: Tasks and Responsibilities of the Govemor

Main Tasks and Responsibilities of the Govemor • Chairing and organizing of meetings of the Local Council of the govemorate, implementing its resolutions and recommendations, and strengthening the development of the local society, • Chairing the Executive Office of the govemorate meetings,

The Local Authority Law (LAL)

• • • •

• • • • •

• • • • • • •

99

Issuing invitations to assemble extra-ordinary meetings of the loeal councils of the distriets, Supervising the preparatory work for the Local Couneil'sand the Executive Office's meetings, Following-up, controlling, and evaluating the progress of the govemorate's distriets work, Following-up the implementation of the reporting system related to planning, budgeting, and activities eonducted in the govemorate and distriet, Preserving public funds and protecting publie rights and liberties, Implementing laws, resolutions, and directives of the central authorities among the executive organs of the administrative units, Coordinating with central authorities in regards to publie affairs of the govemorate, Signing contraets related to projects exeeuted by the govemorate's executive organs, after announcing their tenders, Carrying out arrangements with the eoneemed central authorities to ensure provision of the supply of materials to the population of the govemorate, as weil as following-up their distribution, Adopting measures to prepare for disasters and emergencies; eoordinating efforts to alleviate the effects of disasters, Coordinating between the local couneils of the distriets and solving problems between them and executive organs, Reinforcing the judiciary in case of disputes, Representing the govemorate and its local council before the judiciary and others Informing the Managing Committee of the Local Council of the nominations of the heads of the executive organs, Submitting regular reports to the Minister related to the activity of the Local Authority'sorgans, Directing communication and letters between the executive organs and the central authority and other govemorates.

Source: Law N°4/2000 (Local Authority Law) § 41, § 44-46.

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Decentralization in Yemen

5.3.2.2.2 The General Secretary The General Secretary of the Govemorate's Local Couneil shall be considered the deputy of the govemor. He assists the govemor in managing the affairs of the govemorate and substitutes for him if he is absent, or the post becomes vacant (§47). He is also in charge of the following tasks and responsibilities outlined in table 5.4.

Table 5.4: Tasks and Responsibilities of the General Secretary

Main Tasks and Responsibilities of the General Secretary • Preparing meetings for the Local Council, • Following-up on the preparation of development plans and their implementation as well as submitting regular reports about them to the Govemor, • Following-up the work of the committees constituted by the Couneil, • Proposing administrative and operational expenses to conduct the Couneil's work, • Coordinating relations and efforts with different soeial, vocational, and creative soeieties, organizations, and foundations in accordance with the laws in force. Source: Law N°4/2000 (Local Authority Law) § 22.

5.3.2.2.3 The Under-Secretary Each govemorate shall have one or more under-secretaries with the rank of a Ministry Deputy Minister who is appointed by a Republican Decree, following the approval of the Couneil of Ministers, upon the nomination

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101

by the Minister (§49). Table 5.5 illustrates the tasks and responsibilities of the Under-Secretary.

Table 5.5: Tasks and Responsibilities of the Under-Secretary

Main Tasks and ResRonsibilities of the Under- Secreta!y' • Supervision over the management of the activity of one or more sectors in the govemorate or over public affairs within a certain geographie scope, in accordance with the resolution of his appointment. Source: Law N°4/2000 (Local Authority Law) § 50.

5.3.2.2.4 The Executive Office Each govemorate shall have an Executive Office that is comprised of the following: • The Govemor of the govemorate who is the Chairman of the Executive Office, • The General Secretary of the Local Council who is the Vice Chairman, • The Govemorate Under-Secretary, or Under-Secretaries if more than one, who are the members, and • The directors of the executive organs of the govemorate who are also members (§52). The Executive Office exercises its tasks and responsibilities in a collective manner (§53). The following figure illustrates the management structure of the local authorities, i.e. the executive offices. And table 5.6 illustrates the tasks and responsibilities of the executive offices.

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DecentraIization in Yemen

Figure 5.4: Management Structure of the Lccal Authorities

Executiv e Office

-

Managing _ Co mmitt ee

ha lrman 01lhe tennmq , Deveo pment & Financ ornrmttee

I I

f-

hai rm an of the ervce Co mmittee Ch airman of Ihe Socia l Affalrs Commiltee

Gov erno r

\

~

I Ge ne ral Secretary

I

(re rnainmq ] Mem bers

Directors of I he Governorate' s Exec uti ve Or gan

Gov erno rate Un ders ec retary

I

I

Source: Adapted front: Romeo, Leonardo GJ EI Menst, Mohammed (forthconung): "The Difficult Road tu Local Autonomy in Yemen: Decentraliza.tion Reforms between Pclitlcal Rationale and Bureauc:rati.c Resistance in a Multi-Party Democracy of the Araman Peninsula....' in: J. Martinez-Vazquez/ F. Vaillancourt (ed.): Decentralization in Developing Countries: Global Perspectives on the Obstacles 10 Fisca1 Devolution. Edwar Elgar, Cheltenham, UK. Norlhampt<m, MA. USA

The Local Authority Law (LAL)

103

Table 5.6: Tasks and Responsibilities of the Executive Office

Main Tasks and Responsibilities of the Executive Office • Drafting development plans and the annual budget for the governorate. This should be tabled before the Local Council before referral to the Plan and Budget Committee, • Coordinating the planning and executive activities of the executive organs of the govemorate, • Reviewing reports related to the implementation of plans, programs, and activities undertaken by the executive organs and evaluating the level of performance, • Supervising the work of the executive organs and supporting them in executing their tasks, • Discussing means to ensure the implementation of central and govemorate resolutions, • Formulating plans and programs for the collection of financial resources to raise collection competences, evaluating their implementation, • Adopting measures to tackle natural disasters and activating civil defense activities, • Studying and evaluating the administrative situation in the governorate, proposing means to improve and develop the sub-national levels performance, and • Supporting the Govemor and the Local Council. Source: Law N°4/2000 (Local Authority Law) § 53.

5.3.3 Sub-National Organs of the District Level The following section illustrates the main institutional organs of the district level and their major tasks and responsibilities.

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Decentralization in Yemen

5.3.3.1 Loeal Council of the Distriet The Loeal Couneil of the distriet, apart from its chairman, is originally appointed in aeeordanee with the provision of the LAL. The number of members of the district's Loeal Council varies aeeording to the population of the distriet. A distriet that has a population of 35.000 or less has a loeal council made up of 18 members. A distriet whose population exeeeds 35.000 but is less than 75.000 has 20 members. A distriet with more than 75.000 inhabitants but less than 150.000 has 26 loeal council members. And a distriet with more than 150.000 inhabitants has 30 loeal eouneil members (§59). The Higher Eleetion Committee shall divide the distriets into loeal eleetoral distriets whereby one member in the distriet's loeal council represents eaeh distriet (§60). The tasks and responsibilities of the distriets' loeal councils are illustrated in the following table. Table 5.7: Tasks and Responsibilities of the Local Council of the District

Main Tasks and Responsibilities of the District's Local Council • Studying, drafting, adapting, and supervising social and eeonomie development plans for the distriet with a special focus on providing essential services to the loeal society: eondueting surveys and evaluating statisties to determine development priorities of the distriet and to evaluate projeets, • Proposal of draft plans and annual budgets to the govemorate's Loeal Council that needs to ratify them, • Study and approval of building plan drafts, which are then to be submitted to and ratified by the govemorate's Loeal Council, • Supervision of the executive organs of the distriet level and evaluation of their performance, holding their heads aeeountable and, if neeessary, withdrawing eonfidenee from them, • Study and discussion about the financial situation, the level of eollection of eentral, loeal, and joint revenues, and determination of the eauses of shorteomings,

The Local Authority Law (LAL)

• •

• •

• •

• •

•

• •

105

Control of the application of laws, regulations, and resolutions in force, Determining of fees for services offered by the utilities of the executive organs of the govemorate, unless laws and resolutions are already issued by the Council of Ministers, Monitoring the security situation and issuing recommendations to improve security and stability of the citizens, Study and discussion of the supply situation in the district and the development of necessary measures to deliver services to the citizens, Discussion of public affairs concerning the district's citizens and the issuance of recommendations regarding these affaires, Care for the development of water resources by promoting the founding of dams and water weirs, protecting water from depletion and pollution in accordance with scientific studies and water legislation in force, Promotion and implementation of district's development plans including such tasks as illiteracy eradication, Promotion and supervision of the establishment of cooperative societies, as weIl as associations of a social, vocational, and creative nature, and the provision of facilities for them, Supervision of societies of social nature to ensure coordination and complementation of their programs with the district's integrated development plans, Support and promotion of tourism and the protection of antiquities and antique regions, and Promotion of investment on the district level.

Source: Law N°4/2000 (Local Authority Law) § 61.

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Decentralization in Yemen

5.3.3.2 District's Local Council

The following section illustrates the different organs of the distriefs Local Council. As previously illustrated for the Local Council of the Governorate, the General Director of the district's Local Council is also the head of the district's executive office.

5.3.3.2.1 The General Director

Each district shall have a General Director appointed by aresolution of the Prime Minister of the Local Administration upon the nomination of the Minister of the Local Administration (§81). The General Director of the district is Chairman of the district's Local Council and the senior executive official (§82). The tenure of the General Director of the district is four years and can be renewed in the same district for another four years. The General Director of the district, under the supervision of the Governor, shall implement the laws and general policies of the state, direct the executive organs of the district, manage their resources, and preserve the public order (§84). He is accountable and responsible before the President of Yemen, the Council of Ministers, the Govemor, and the Local Council of the district. The General Director is the head of all civil servants working in the scope of the district. He is in charge of supervising and controlling their performance (§89). His tasks are mainly the same as the Governor, but are restricted to the district level. For further details, it should be referred to article 84 of the LAL.

5.3.3.2.2 The General Secretary

The General Secretary of the Distriefs Local Council shall be the deputy of the General Director of the district. He assists the General Director in managing the affairs of the Local Council of the district (§64). His tasks

The Local Authority Law (LAL)

107

and responsibilities mainly comprise the ones of the General Secretary of the govemorate's Local Council at the district level.

5.3.3.2.3 The Executive Office Each distriet shall have an Executive Office that is comprised of the following: • The General Director of the distriet who is the Chairman of the Executive Office, • The General Secretary of the Local Council of the district who is the Vice Chairman, and • The directors of the executive organs of the district who are members (§91). The Executive Office exercises its tasks and responsibilities in a collective manner. Its tasks and responsibilities are mainly the same as the ones of the Executive Office of the govemorate, but at the distriet level (§92).

5.3.4. Summary of the Local Authority Law With the LAL, Local Authorities were established at the govemorate and distriet level. Listed below are the positions that comprise the Local Authorities: • An elected local council: a govemorate and a district Iocal council who is responsible for adopting plans, programs, and investment budgets of the respective administrative unit; overseeing their implementation; and assessing the performance of the Iocal executive organs (the service delivery units). Each council elects among its members a Secretary General of the Council and establishes three mandatory committees for "Planning and Development," "Service Delivery," and "Social Affairs." • An appointed chief executive: A Govemor on govemorate level or a General Director on district level, who are each the Chair-

108

Decentralization in Yemen

•

man of the Loeal Couneils and the head of the loeal administrations. With the introduction of law N°18 in May 2008, govemors are indireetly elected by a college of distriet and govemorate eouneilors in their respeetive govemorates. The Executive Organs: branches in line with the ministries and national agencies of the loeal jurisdietions. Through the governors and distriet direetors, they have a dual-accountability": vertieally to their respeetive eentral ageneies, for national sector polieies, programs, and projects; horizontally to the loeal eouneils, for the implementation of Ioeal plans and budgets. 11

The Ministry of Finanee (MoF) is in charge of finaneial management and eontrol functions at both govemorate and distriet level through deeoneentrated finanee offices and aeeounting units. Further, the budget of the loeal authority is alloeated by the eentral govemment through the MoF. The distriet loeal authorities reeeive a eapital transfer through an annual planning and budgeting proeess. The govemorates reeeive their budget on shared revenues generated at the district level (UNDLDSP 2008a: 16). The revenues eolleeted in the distriets of a eoneemed govemorate are partly kept by the distriet while a eertain portion is shared with the govemorate, illustrated below in seetion 5.5. The branches of the Ministry of Civil Service (MCS) are in charge of all personal management funetions on behalf of the loeal authorities, which reduees the aeeountability of the executive organs to the eouneils. Furthermore, they are in charge of legality and procedural eontroL Even though, in theory, the couneils ean dismiss their respeetive govemor or distriet direetor, an impeachment proeedure is required, whieh is often lengthy and uneertain, while the ultimate authority rests with the eentral authority, the MCS (UNDLDSP 2008a: 15-16). The branch offices of the Ministry of Planning and Intemational Cooperation (MoPIC) at the govemorate level are the extension of the ministry; however, they have limited interaction or participation in loeal development plans. The auditing of govemorate and distriet finanees is carried out by branches of the Central Agency for Control and Audit

The Local Authority Law (LAL)

109

(COCA) that operate at the govemorate level. The Ministry of Local Administration (MoLA) uses the secretariats at the govemorate and district level to monitor and report on the functions of the councils and their committees (UNDLDSP 2008a: 15-16). The service sector executive offices are present in most of the districts and govemorates. Even though they are an integral part of the local authority, they are accountable to their central ministries. They "contain their own administrative support deparbnents, which duplicate the functions that a [secretariat] support department should provide" (UNDLDSP 2008a: 16). In a review of the institutional character of the system of local authority, it must be noted that the nature of the current LAL has not created a genuine local authority system in Yemen. Article 10 reaffirms article 147 of the Constitution, stating that "every one of the administrative units and the local councils is deemed to be an integral part of the state authority," implicating that only upward accountability of the local authority to the state is in place. Nonetheless, horizontal accountability of the local administration to the council, as weIl as downward accountability of the councils to their local constituency, is not properly institutionalized. Further, the above mentioned central ministries limit the autonomy of the local councils. Thus, it can be concluded that although local councils were established to devolve power and encourage local participation in planning and delivering public services, the form of decentralization in Yemen is in practice a mix of devolution and deconcentration. The national ministries continue to playamajor role while different laws and regulations govem the operation of primary and sector ministries, partly contradicting the LAL. Consequently, the current situation of decentralization in Yemen has led to inconsistencies and duplication between central and local institutions, confusing the local decision-making and reporting procedures as weIl as the functional set-up for local authority (UNDLDSP 2008a: 17).

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Decentralization in Yemen

5.4 National Decentralization Strategy In 2004, the Inter-Ministerial Committee to support Decentralization, chaired by the Prime Minister, was established, and MoLA was assigned to design aNational Deeentralization Strategy (NDS) (Ministry of Legal Affairs and Parliamentary Affairs 2004). Nevertheless, there was little strategie elarity, and many in the MoLA saw the strategy just as a means to implement the LAL rather than as a poliey framework for a new set of eonstitutional and legal provisions. Thus, the NDS was finally eompleted in 2008, benefiting from the UNDLDSP support, annually held Loeal Couneils Congresses, and discussions held during four regional workshops. In August 2008, the "National Loeal Authority Strategy," also ealled "National Strategy for the Transition to a Loeal Government System by 2015," was issued (MoLA 2008). However, the document eontains few clearly defined goals, while mainly reeounting the history and formation of the current loeal authority system and displaying unneeessary detailed reeommendations. It does, however, inelude some important aspects: (1) Deeentralization reforms are justified primarily by the eontribution they ean make to the politieal projeet of building a "modem state" in Yemen. (2) The purpose of the reform is to ereate a professional, effieient, and effeetive loeal govemment system that is eapable of achieving loeal development in the framework of a eomprehensive, sustainable national development. Thus, it should eontribute to the national eeonomie growth and bring about loeal development (MoLA 2008: 4). (3) Good international practiees and lessons leamed should be followed, such as the UN guidelines for decentralization that stress loeal autonomy and self-govemanee (Zemam/ Mosawar/ Ali 2009: 2). (4) The development of the neeessary legal and institutional framework is mentioned, indicating the option for a new loeal government aet replaeing the LAL. (5) The NDS states five strategie objeetives: • To enable loeal government units to pursue good govemanee practiees and to manage loeal development

Financial Resources of the Local Authorities

111

To develop the necessary legal and institutional framework and financial and human resources capacities for a local government system • To set-up transparent, effective rules and practices for holding local governments accountable to their constituencies • To set-up rules and practices for control and supervision of local governments by the central government • To promote and strengthen local community participation in 10cal affairs and to create effective partnership between local government units and local community organizations (MoLA 2008: 3). The strategy outlines a set of policies that can be grouped in four areas: (1) system's institutional architecture, (2) fiscal and financial management arrangements, (3) functional assignments between the different system levels, and (4) (human) capacity building (MoLA 2008: 11). •

5.5 Finaneial Resourees 0/the Loeal Authorities As illustrated in section 5.3, the LAL is based on the principles of administrative and financial decentralization. Keeping in mind section 3.1, fiscal decentralization is the transfer of fiscal resources from the central to the sub-national government, thus, the reallocation of resources. Fiscal decentralization policies are therefore characterized by: • increasing the transfer of revenues from the central to sub-national government, and • creating new revenue sourees, such as sub-national taxes and higher fees. Hence, fiscal decentralization plays a major role for the autonomy of local authorities and their ability to fulfill their tasks and responsibilities. The revenues of the Yemeni Local Authority systems are categorized according to the type of expenditures that are to be financed. There are (1) revenues dedicated for mandatory recurrent expenditures, such as wages and operating costs of the local executive organs, which are de-

112

Decentralization in Yemen

rived from central transfers, and (2) revenues dedieated for capital expenditures, which are derived from both central and local sources (§123). The revenues for recurrent expenditures constitute 95% of all intergovernmental transfers. However, the volume of revenues for recurrent expenditure has been set and no assessments and evaluations of local expenditure needs or cost recoveries for local services have been made. Instead, a transferable pool of revenues has been set to the amount of money spent on operations and personnel costs of the deconcentrated state agencies in 2001. Since then, the amount of transfers has almost remained the same without adjustments for population growth and inflation rates. As a result, only approximately 5% of revenues for recurrent expenditure can be spent on operation and maintenance costs other than wages and salaries of the executive organs' staff (UNDLDSP 2008a: 43). The revenues dedieated for capital expenditures are derived from multiple sources, classified in four types: (1) Local resources of the distriet, (2) joint resources at the govemorate level, (3) joint general revenues, and (4) central subsidies (§123), as illustrated in table 5.8 below.

Table 5.8: Sources of Revenues for Capital Expenditures Revenue type Local Resources ofthe District

Source

Recipient

Taxes:

Distriets (all resources are collected by the district in its own favor)

• • •

50% of the "Zakat" (Islamic alms tax) On self-employment On entertainment and sport events Revenues of the executive organs: • Fees for services provided by executive organs • Yield of investment made by executive organs

Fees:

• • •

For advertisement and publicity For building permits For establishing commercial facilities

113

Financial Resources of the Local Authorities •

Joint Resources atthe Govemorate Level

For notarization of contracts and documents • For civil registration • For underground holes, e.g. for water tanks • Surcharges on fees for slaughterhouses, meat and fish markets • For urban landscaping and sanitation • For vaccination of animals • For registering commercial activities • For education service and infrastructure maintenance • For streets, places, transportation and parking • For exploitation of quarries and coast shores • For occupationallicences • Surcharges on electricity, water, and telephone bills • Surcharges on transportation of stones, gravel, and loads • Surcharges on postal services • For tourism service and hotels Fines (related to the fees listed above) Grants: • Grants, wills, and contributions from individuals and corporations • Foreign aid through central ergans Taxes: • 50% of the "Zakat" (Islamic alms tax) • On revenues from real estates • On JlQat" consumption (Qat, scientifically known as Catha edulis, is a medium-sized shrub or tree known for its leaves, which release stimulating substances (amphetamines) when chewed) • On self-employment Fees:

• • •

For commercial registration For driving licenses For vehicle registrations

Distriets (250/0)

Govemorate (250/0)

Other Distriets in the Govemorate (share the remaining 500/0 on an equal basis)

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Decentralization in Yemen

• • • • • • • •

• • • • •

For operating a driving school For change of ownership of transportation means For health and medical services For health certificates For fishing permits For drilling artisan weHs For renewing and obtaining passports Customs fees on parcels at entry points in the govemorate For licenses to operate health and education facilities, and pharmacies and drugstores For licenses to operate agricultural nurseries and farms For building plans and surveys For licenses to own firearms For work and residence permits for foreigners

Fines:

• •

For traffic violation For lack of worker's medical fitness card

Grants:

•

Joint General Revenues

Grants, wills, and contributions from individuals and corporations • Foreign aid through central ergans General purpose: • Fees imposed on air and sea travel tickets • Surcharges on sale of petroleum products Specific purpose: • 30% of the annual revenues for the Road Maintenance Fund • 30% of the annual revenues for the Agriculture and Fisheries Fund • 30% of the annual revenues for the Youth Care and Sports Fund Annual financial subsidies

All disbids

Central All districts Subsidies Source: Local Administration Law §123-124 and Republican Decree 269/2000

Financial Resources of the Local Authorities

115

However, according to Amin (2006), both the local resources of the district and the joint resources at the govemorate level are regulated by the central govemment, which determines their bases and rates. This may discourage the local authorities from optimizing their potential, especially as these revenues are hardly worth collecting due to their modest yield. Another major difficulty for the Yemeni local revenue system is the absence of areal property tax, a common basis for local government's finances elsewhere. In conclusion, despite the general decentralization trend in Yemen, the local authorities remain extremely dependent on financial transfers from the central government (UNDLDSP 2008a: 42). As the govemor of Hajja states, the "big chunk of money is coming [... ] from what we call [..] investment plan" (Zemam/ Mosawar/ Ali 2009: 8). And the budget for the investment plan comes from the MoF, thus from the central govemment. The govemor has no control over how much investment budget he receives. Because the demand in Ministry of Finance is very high, the MoF picks some projects in each govemorate and allocates the money according to their evaluations (Zemam/ Mosawar/ Ali 2009: 8).

6. Urban Water Supply and Sanitation (UWSS)

Water and sanitation have a significant impact on development, and to provide UWSS services is a major target for development cooperation. The significance of clean water and sanitation is summed up in the Human Development Report: Clean water and sanitation can make or break human development. They are fundamental to what people can do and what they can become - to their capabilities. Access to water is not just a fundamental human right and an intrinsically important indicator for human progress. It also gives substance to other human rights and is a condition for attaining wider human development goals (Watkins et aL 2006:27).

Target ten of the "Millennium Development Goals" (MDG) is to halve the proportion of people without access to water and sanitation by 2015 (World Bank 2001c). Thus, a key component of water sector reforms is expanding and safeguarding access to clean drinking water and basic sanitation as weIl as improving wastewater management (BMZ 2006: 8). However, the provision of water supply and sanitation services to the urban population alone requires major investments and sound policies. Another major challenge for the UWSS lies in building competent, efficient, business-like, and service-oriented institutions that are able to sustain themselves. In the ideal case, customers cover the costs of operation and maintenance. However, especially in developing countries, this is rarely the case (World Bank 2001c). As water supply and sanitation services are natural monopolies and have significant extemalities, some form of regulation that complements the ownership is needed regardless of the institutional structure of the service provision. Regulations and monitoring are important to increase transparency and control the performance (World Bank 2001d). K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_7, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

118

Urban Water Supply and Sanitation (UWSS)

The regulatory framework of the UWSS consists of the set of mies and processes that are binding for the UWSS provider. This framework includes formal mies, such as laws, contracts, and bylaws, as weil as informal mies, such as personal commitments and financial incentives. It also defines how regulatory functions are allocated to various institutions, which can include a ministry, an autonomous regulatory agency, an asset-holding company, or a private expert group (Hunt/ Tremolet 2006: 2-3).

6.1 The Yemeni Water Sector Before the unification of the Yemen Arab Republic (or North Yemen) and the People's Democratic Republic of Yemen (or South Yemen), data on water resources were not collected for the entire country. Thus, there were only scattered informational resources available after 1990, and various state agencies dealt with water related issues. Not until 1995, under the Presidential decree N°154/1995, was aNational Water Resource Authority (NWRA) established, and some of the state agencies dealing with water merged with NWRA (Richards 2002: 5). However, institutional defragmentation continued to exist until 2002 when the Water Law, Law N°33/2002., was passed and 2003 when the Ministry of Water and Environment (MWE) was established. Since then, most of the water sector agencies are administratively linked to the MWE., with the notable exception of the Department for Irrigation and Dams, which stayed with the Ministry of Agriculture and Irrigation (MAI) (Al-Asbahi 2005: 4). However, with the establishment of the MWE, the institutional set-up of the sector agencies needed to be re-structured and the MWE' s institutional structure had to be consolidated. Its mandate, internal horizontal and vertical relations and relations with various authorities and the water supply and sanitation corporations, had to be clarified (MWE 2004: 18).

The Yemeni Water Sector

119

Institutionally, the Yemeni water sector includes four main and five subordinate institutions: the MWE integrating NWRA., NWSA., GARWSP., EPA., and LCs., the Ministry of Public Works and Urban Planning (MPWUP), the MAI, and the Ministry of Oil and Minerals (MoM). In addition, the MoF, the MoLA, and the Ministry of Planning and International Cooperation (MoPIC) are influential stakeholders of the water sector, as illustrated below. • The MWE., through the NWRA, is responsible for water resource management, planning, and monitoring, and for law enforcement, legislations, and public awareness. Accordingly, the MWE is responsible for sector governance. Its activities center on providing policy formulation, decision-making, centralized data collection, monitoring, and planning at the national level for the water sector of Yemen. Within the MWE, the National Water and Sanitation Authority (NWSA) and Local Corporations (LCs) are in charge of urban water supply and sanitation. This includes planning and developing water supply and sanitation services, implementing sewage systems, and constructing and operating treatment plants. Thus the NWRA, NWSA, LCs, as weil as the General Authority for Water Supply and Sanitation Projects (GARWSP) and the Environmental Protection Authority (EPA) are subordinate to the MWE (MWE 2004: 12).

120

Urbm Water Supply and Sanlfalion (UWSS)

FJ.awe 6.1: OrgaDization Chart of the Ministly of Water and Environment Organizalion (Ilart ol lhe MIIII.ny 01Walef and Environ menl

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The Yemeni Water Sector

• •

•

•

121

dams and canals (Al-Asbahi 2005: 5). In March 2002, the MAI was also given the responsibility for rural water supply and sanitation, which was previously carried out by the former General Authority for Rural Water and Electricity (GAREW) (Richards 2002: 5). The Ministry of Oils and Minerals (MoM) is responsible for mineral resources and geological surveys. The Ministry of Local Administration (MoLA) is responsible for the legal and institutional framework of the water supply and sanitation in rural areas. Thus, it mandated in the Local Authority Law (LAL) for the local councils to manage and control water resources in coordination and cooperation with the NWRA. The Ministry of Planning and International Cooperation (MoPIC) is responsible for managing the public investment program, because it is the counterpart for donor financing agencies. The Ministry of Finances (MoF), is extremely influential in the sector because it authorizes public investment and other subsidizes; therefore, it is one of the main institutions that impacts on the LCs and AUWSSUs. The MoF protects the "public fiduciary interest by overseeing the application of public funds" (Ward et aL 2009: 93) and it reserves the right to intervene in the financial affairs of the UWSS utilities to ensure that these partly heavily subsidized bodies behave in a financially prudent and accountable way.

122

u ...... W.tI!r Su.pply .nd Smritlltiml. (UWSS)

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UWSS in Yemen

123

6.2 UWSS in Yemen

In the 1990s, areform process for the UWSS was initiated because NWSA's service coverage, then in charge of UWSS, was poor, national tariffs were too low to cover operation and maintenance costs, investment was not distributed adequately nor implemented efficiently, and the proportion of unaccounted for water handled by urban water supply utilities reached almost 45-50% of the water production. A significant part of these losses was due to administrative malfunction and due to physical losses caused by poor maintenance. Furthermore, cities' and industrial wastewater were discharged into aquifers in urban areas, making areform of the UWSS urgently necessary (Gerhager/ Sahooly/ Salam 2008: 7). Thus, due to poor functioning and inadequate service provision of the over-centralized NWSA and NWSA' s resistance to change, the World Bank proposed a sector reform study to facilitate the implementation and sustainability of future projects. The major problems surrounding NWSA' s functioning were many and included the following: only technical functions and selected financial functions were assigned to the NWSA branches; tariffs were set by the national government at levels insufficient to cover the operation and maintenance cost; revenues were controlled by the NWSA headquarters in Sana'a; budgets allocated to the branches were inadequate; civil service salaries were too low to motivate staff; the NWSA headquarters was responsible for hiring and firing staff of its branches; NWSA was unable to maintain adequate staffing levels for efficient management; and NWSA' s procedure and management systems were inadequate to run its branches in a more efficient and cost recovery basis (Gerhager/ Sahooly/ Salam 2008: 10). At the same time, the Embassy of the Kingdom of the Netherlands, the GTZ, and the World Bank, who were technically and financially assisting the NWSA branch in Rada'a, supported the NWSA in transforming its branch in Rada'a into the first autonomous branch of NWSA, leading to the "Rada'a Principles" that became a key element of the decentralization process of the UWSS (Gerhager/ Sahooly/ Salam 2008: 7).

124

Urban Water Supply and Sanitation (UWSS)

Table 6.1: The Rada'a Principles

The Rada'a Principles • "The Branch will operate independently of NWSA Head Office while remaining accountable to NWSA on regulatory matters and to the Minister of [Water and Environment] on policy issues. • The Branch will be accountable to the community it serves through a Local Advisory Committee which will monitor and review the Branch's activities. • The Branch will set its own local cost-recovery tariff, apply this upon approval by the Minister, operate its own billing system and retain revenues in its own bank accounts separate from any NWSA authority, while paying an overhead contribution to NWSA Head Office for regulatory/technical services. • The Branch will appoint its own staff, except for the three main management posts, which will be via Ministerial resolution on agreed criteria. • The Branch will apply a staff incentive scheme based on actual performance to supplement staff remuneration according to civil service standards. • The Branch will prepare monthly operational reports and quarterly and annual statements of account for NWSA Head Office and the Minister of [Water and Environment]. • The Branch will have its accounts audited by a private auditor appointed by the Central Audit Board while retaining the right of NWSA also to audit the Branch accounts as necessary." Source: Gerhager, B./ Sahooly, A./ Salam, S. (2009):"Yemen Urban Water Supply and Sanitation Sector Reform," MWE/ GTZ Yemen, p. 11.

In 1995, based on the World Bank's reform study "Yemen Water Supply and Sanitation Sector Policy and Strategy Study," (Kalbermatten 1996) GTZ launched the "Technical Secretariat (TS) Reform of the Institutional Framework in the Urban Water and Sanitation Sector" fadlitating the reform process and conducting intensive investigations among stakeholders. In 1997, the modified study became the basis of Cabinet Resolu-

UWSS in Yemen

125

tion N°237/1997, the "Urban Water Supply and Sanitation Policy and Strategy Reform Agenda" (Gerhager/ Sahooly/ Salam 2009: 8). The main elements of the reforms were decentralization, corporatization, commercialization, community participation, capacity building, private sector participation, financial sustainability, and separation between service delivery, executive, and regulatory functions. A general trend towards decentralization actually triggered the reform process. As a result, the LAL (Law N°4/2000) and the amendment of Law N°35/1991 into Law N°7/199714 paved the way for the water sector policy and strategy recommendations to reform the UWSS sector in accordance with decentralization principles (Gerhager/ Sahooly/ Salam 2009: 13). Since the start of the UWSS reform process, the over-centralized NWSA with its headquarters in Sana'a and branches in various cities throughout the country has gradually been replaced by a decentralized system of UWSS Local Corporations (LCs) and their branches and Autonomous UWSS Utilities (AUWSSUs) (Gerhager/ Sahooly/ Salam 2009: 8), and the government is gradually departing from its traditional role of a "sole investor and service provider towards that of a facilitator and regulator" (MWE 2004: 12).

14 Law N°7/1997 concems public corporations, authorities, and companies. It "states that public corporations must perform their operations in accordance with financial and economical principles, can enter into credit agreements, and must formulate a plan to pay off these credits. Furthermore, public corporations can distribute part of their net profits to provide employee incentives and are supervised by a Board of Directors." (Gerhager / Sahooly / Salam 2009: 13)

126

Urban Water Supply and Sanitation (UWSS)

6.3 National Water Sector Strategy and Investment Program (NWSSIP) After its establishment in 2003, the MWE, in charge of the most complex development challenge in Yemen, water scarcity, initiated a participatory process with all stakeholders to elaborate avision of its priorities and the needed approaches to address water and environmental issues, Hence, in 2004, the National Water Sector Strategy and Investment Program 20052009 (NWSSIP) was published. This document, in addition to the Water Law, Law N°33/2002, became the guideline document of Yemen's water sector. The NWSSIP defined policies and strategies and created a comprehensive Investment plan and a detailed action plan, including goals and indicators (MWE 2004: 2). The Yemeni Water Sector management has the following objectives: • coordinating between all sector agencies in pursuit of policy goals, • accomplishing a water strategy and water policies, • integrating water policies into national policies of sustainable growth and poverty reduction, • ensuring that sector financing effectively supports the sector goals, and • monitoring and evaluating the performance and progress towards the sector goals (MWE 2004: 18). Further. NWSSIP outlines the guiding principles for a Yemeni water policy that can be subdivided into (1) principles of good natural resource management, (2) social and economic principles, and (3) institutional principles, as illustrated in table 6.2.

National Water Sector Strategy and Investment Program (NWSSIP)

127

Table 6.2: Guiding Principles for a Yemeni Water Policy Prindples of Good Natural Resource Management • Integrated water resource management and the basin management approach. • Management of the resource for achieving efficiency and sustainability.

Soda! and Economic Prindples

Institutional Prindples

•

•

Priority to domestic uses, with due consideration to equity and poverty aspects . • Allocative efficiency, so that water can flow to the use that pays the highest return, respecting basic domestic water needs for the poor. • Water supply concems that are balanced by demand management measures, including the use of economic incentives to reduce the demand. • Enhancement of national and household food security through market-driven growth rather than selfsufficiency. • Fiscal, agricultural and trade policies to be factored into water sector policv, Source: MWE (2004): “NWSSIP 2005Ȭ2009,” p. 16.

•

• •

•

Priority to water sector govemance and capacity building Decentralization, participation and user organization are key policy principles. Emphasis on the private sector, Clear definition of the public sector' s role in financing, Separation of regulatory function from service delivery fuctions.

As set out by Cabinet Resolution 237/1997, the NWSSIP objectives for the UWSS consist of the following: • increasing the percentage of population covered with UWSS services, • supporting the financial sustainability of UWSS utilities, • separating sector regulatory and service-provision functions,

128

Urban Water Supply and Sanitation (UWSS)

• supporting decentralization, • developing knowledge and skills, and • involving the community and the private sector (MWE 2004: 23). Since Yemen adapted the MDGs, the goal for UWSS is to expand the coverage and improve the quality of UWSS, with priority given to the poor. Through decentralization it is envisioned to establish autonomous UWSS utilities. The MWE (2004: 23) points out the following: In line with international best practice, responsibility for provision of such

services is being progressively decentralized, and govemment's role is shifting towards that of policy making, regulation, monitoring and providing support. The role of the private sector and of the community in financing and running the sector is to increase. In due course, the Local Water Supply and Sanitation Corporations are expected to become fully independent, financially and administratively.

However, challenges for the UWSS remain. Even though the Yemeni government has made significant efforts to expand the coverage and quality of UWSS services, the high population growth remains a major problem for the UWSS. To reach the MDGs, an annual investment rate of US $15 million is required and additional quantities of groundwater are needed. In 2003, the total groundwater abstraction just for urban use and only by public utilities, therefore not induding abstractions by private suppliers, was about 75 million cubic meters. In 2015 estimated 175 million cubic meters per year will be needed (MWE 2004: 24), providing the annual per capita share of renewable water resources does not exceed 125 cubic meters (the international average is 7500 cubic meters) (MWE 2004: 4).

6.4 The UWSS Reform Process The reform process of the UWSS, which was launched in the beginning of 2000 with the corporatization of the NWSA Sana'a branch, is essentially based on the principles of decentralization and corporatization. Since then, fifteen NWSA branches have been transformed into autonomous local water supply and sanitation corporations (Les) at the governorate

The UWSS Reform Process

129

level. And eleven autonomous urban water supply and sanitation utilities (AUWSSUs) have been decentralized (Gerhager/ Sahooly/ Salam 2009: 21). There are still sixteen NWSA branches remaining; however, these branches are very small utilities that are sometimes on the edge of being more rural than urban (Gerhager 2009: 1). Most of these NWSA branches have only between 2,000 and 4,000 connections and are generally weak. It is planned to decentralize them in the future (Sahooly 2009: 1). The ISSWU World Bank Program is preparing six NWSA branches for decentralization (Mott MacDonald 2009). Currently, the LCs and AUWSSUs are responsible for 95% of the UWSS sector while NWSA branches are in charge of only 5%. However, responsibility is not to be confused with coverage. The decentralized utilities are responsible for 95% of the urban population, but there is not yet a 95% UWSS coverage (Gerhager 2009: 1). Figure 6.3 illustrated the status of the UWSS decentralization process. Looking at the figure, it should be stressed once more, that even though the number of NWSA branches is high, they are only in charge of 5% of the urban population.

130

Urban Watet Supplyand Sanitation (UWSS)

Figure 6.3, Overview of the Public UWSS Overview of the Public Urban water Supply and

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According 10 Joini Armual Review 2007 GAR Ill), ucban walec supply coverage increased from 2.4 million urban residents in 2002 to 3.6 million in 2007. Urban sanitation coverage increased from 1.3 million residents in 2002 io 2.0 million residenis in 2007 (see table 6.3) GAR 2007).

131

The UWSS Reform Process

Table 6.3: UWSS Service Coverage

UWSS Service Coverage Base year 2002 Population covered 2.4 million

Actual2007 %

Population covered 3.6 million

NWSSIP target 2009 %

Population covered 4.9 million

%

Water 47% 56% 71% supply Water 1.3 million 25% 2.0 million 31% 3.6 million 52% sanitation Source: "Joint Annual Report 2007" in: MWE (2008): "(NWSSIP Update," Final draft (has not yet been officially approved), Sana'a, p. 70. MWE (2004): "NWSSIP 2005-2009," Sana'a, p. 23.

Regarding the institutional reform process, 95% of the urban population served in 2007 was supplied by autonomous utilities. However, financial autonomy was not reached in 2007 (MWE 2008: 69-70). Despite being an improvement, these figures fall short of the expectations of the NWSSIP targets. The major reason for this shortfall is the financial investment target, which was based on an average annual investment of US $150 million but has not been achieved. Allocated finances by governrnent and donors have averaged only 62% of the NWSSIP requirements (see table 6.4). Furthermore, institutional constraints, both on the financing and budget side and on the implementation side, have reduced the actual spending to 45%, less than half of the proposed levels. Nonetheless, the trend is improving, with both financial approval and actual disbursement well up in 2007 (MWE 2008: 70).

132

Urban Water Supply and Sanitation (UWSS)

Table 6.4: Target and Actual Spending on UWSS

Target and Actual Spending on UWSS ($millions) Approved NWSSIP target 2005

% of NWSSIP target

150

Disbursed

% of target

NWSSIP

150

64

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45

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2006

100

66%

76

51%

2007

117

78%

83

55%

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94

62%

68

45%

Source: "Joint Annual Report 2007" in: MWE (2008): "(NWSSIP Update," Final draft (has not yet been officially approved), Sana'a, p. 70.

In general the customer satisfaction of many utilities has improved, and the utilities have adopted a more business-like approach. Investment efficiency in 2007 was US $2.38 instead of the NWSSIP target of US $2.17 cost per household connection. Nevertheless, unaccounted for water still averaged 28% in 2007, indicating that operational efficiency requires attention (MWE 2008: 70). In sum, it tumed out that the NWSSIP expectations were overambitious, and a review of NWSSIP was needed. Institutional strengthening was necessary to achieve the revised objectives. A final draft for the NWSSIP Update was issued in 2008, however remains to be approved, mainly following the same objectives as the original NWSSIP. The major changes indude the following: • Coverage targets have been adapted to implementation capacity and financial availability (see table 6.4). • Coverage may indude regulated private supply and decentralized sanitation.

133

The UWSS Reform Process

• • •

•

•

• • • •

The private sector is to be involved in both service provision and outsourcing of funetions. New deeentralized technologies are integrated into the investment program. The utility deeentralization program is to be eompleted by 2015, eoupled with strengthening the autonomy of the utilities on a business basis. Capacity building is strengthened to develop institutional eapability to improve service delivery and implement the enlarged investment program. Investment and management by the utilities focuses on improved service delivery through management and rehabilitation investment, rather than on network expansion. More investment and management is devoted to water quality. The publie sector role is strengthened and focused on poliey making, regulation, monitoring, and support functions. Water resourees are secured. The poverty focus is to be sharpened (MWE 2008: 71).

Table 6.5: NWSSIP Update - Urban Population Covered by Water Supply Public networks Urban Population

Household connections

Population covered

Private supply %

Population covered

%

Baseyear 5.20 million -------- 2.40 million 47 ----------- ---2002 tatest actual 6.40 million 512,333 3.60 million ---56 ----------2007 NWSSIP Update 859,060 9.76 million 6.00 million 60 0.49 million 5 target 2015 Source : Source: MWE (2008): "(NWSSIP Update," Final draft (has not yet been officially approved), Sana'a, p. 74.

134

Urban Water Supply and Sanitation (UWSS)

As was the case for the water supply coverage targets, the sanitation coverage targets have been reduced for the same practical reasons. The public utilities have neither the capacity nor the financing to implement the targets envisioned by NWSSIP. In addition, due to the difficult Yemeni topography and the low flow of waste water, practical and economie difficulties have been encountered with network sewerage and centralized treatment systems (MWE 2008: 76). These problems with the centralized systems have led to considerations of decentralized sanitation systems and are therefore given priority in the NWSSIP Update. Hence, the proposed "action plan provides a study of options for decentralized sanitation and treatment to be carried out by 2010 and for strategie planning to incorporate the load coming from decentralized systems. The investment program also provides for 86,377 households to be connected to decentralized systems by 2015" (see table 6.6) (MWE 2008: 76).

Table 6.6: NWSSIP Update - Urban Population Covered by Water Sanitation Public centralized networks Urban Population

Household connections

Population covered

Decentralized systems %

Population covered

%

-------Base year 5.20 ---1.30 million 25 --------2002 -million Latest 6.40 ---284,545 2.00 million 31 --------actual2007 million NWSSIP 9.76 Update 458,785 3.21 million 33 0.61 million 6 million target 2015 Source: MWE (2008): "(NWSSIP Update," Final draft (has not yet been officially approved), Sana'a, p. 76

The UWSS Reform Process

135

Nevertheless, the targets of the NWSSIP Update remain indicative. The NWSSIP Update still needs to be approved by the Ministry and will probably be reviewed and adjusted in the "mid-term review," presented at the JAR 2011 (MWE 2008: 74).

6.4.1 Status of the Decentralization of the UWSS "The focus of the UWSS reform mechanism is on reforming sector institutions to enable them to be managed in a sustainable way" (Gerhager/ Sahooly/ Salam 2009: 13). Therefore, one of the key elements of the UWSS reform is decentralization, Different tasks, responsibilities, resources, and political decision-making authority have been transferred from the MWE to the UWSS utilities. The decentralization process of the UWSS started in line with the "Rada'a Principles," and since that time, those utilities that were able to cover their operation and maintenance cost have been decentralized (Gerhager/ Sahooly/ Salam 2009: 16). Consequently, in the last nine years, more and more NWSA branches located in govemorate capitals have been transformed into LCs, and NWSA branches located in secondary towns on the district level have been transformed into LC branches (MAC 2008: 6). The general process to decentralize a NWSA branch was to analyze the institutional situation of the concemed NWSA branch and then to design interventions for its institutional strengthening through technical and financial support, Mainly the following topics were to be tackled by the newly independent utility (see table 6.7).

136

Urban Water Supply and Sanitation (UWSS)

Table 6.7: Decentralization Plan for UWSS Utilities

Decentralization Plan for UWSS Utilities Inc1uded: • • • • • • • •

• • • •

• • •

Setting-up a supervisory board with local administration and customer representation and instructing its members on their tasks . Identifying investment needs. Strengthening local decision-making and introducing of modern managementtools. Setting-up an organization structure and chart with the minimum possible number of staff per 1000 connections. Applying commercial accounting and reporting practice . Installing the necessary computer software for billing, accounting, payroll, inventory, and the Performance Indicator Information System (PIlS). Training utilities staff in computer skills and use systems and analysis for utility management. Supporting human resource planning in line with a transparent selection process and the appointment of management staff by the Minister of MWE. Hiring of subordinate staff by the utility and reducing overstaffing, when needed. Drawing-up job descriptions and training need assessment. Configuring and implementing staff training programs. Analyzing tariff in relation to cost estimates, adjusting them to cover operation and maintenance cost, and introducing and operating the "pro poor lifeline tariff." Re-evaluating asset and introducing asset management and depreciation accounts. Introducing the concept of consumer satisfaction and consumer relation departments. Setting-up service agreements e.g. for maintenance between Local Corporations and utilities within their administrative boundaries. Strengthening private sector participation through the outsourcing of services.

Source: Gerhager, B./ Sahooly, A./ Salam, S. (2009): "Yemen UWSS Sector Reform," MWE/ GTZ Yemen, Sana'a, p. 16.

The UWSS Reform Process

137

6.4.1.1 Institutional Change of the UWSS Structure As previously discussed in section 2.2.5, institutions are influenced by their environment, which mainly consists of other institutions. A focus, therefore, should be placed on how the newly established institutions are influenced by the pre-existing institutional UWSS framework and how they impact their institutional environment. Following the premise of "rational choice institutionaIism," it is assumed that new institutions are created in order to reduce costs and improve efficiency and that institutions impact the behavior of individuals and determine their scope of action. Therefore, how the institutional set-up of the UWSS impacts society and how it determines peopIe's actions in regards to water supply and sanitation should be analyzed. Institutions have been described, in section 2.2.5, as means to over-come dilemmas resulting from egoistic-rational behavior of different actors. In regards to water, institutions are needed to ensure the sustainability of water resources, preventing individual actors who only focus on their personal benefit from over-exploiting and misusing water. The UWSS institutions set constraints on actors' behavior as they determine rules and regulations regarding water supply and sanitation. In order to analyze the institutional change of the UWSS sector, Ostrom's "three levels of institutional rules" (operational mies, coIIective-choice rules, and constitutional-choice rules) should be kept in mind. As illustrated in section 2.2.5, they can be defined as foliows: • Operational mies are the day-to-day decisions made by appropriators on (1) when, where, and how to withdraw resources, (2) who should monitor the actions of others and how, (3) what information must be exchanged or withheld, and (4) what rewards or sanctions are assigned to different actions and outcomes. • CoIIective-choice mies indirect1y affect operational choices as they are used to design policies, which in turn are used to create the operational rules.

138

Urban Water Supply and Sanitation (UWSS)

•

ConstitutionaI-choice rules concern the operational activities and results since they decide who is eligible and what specific rules are the basis for designing collective-choice rules that in turn affects the set of operational rules (Wegerich 2002: 20). In addition to heeding institutional rules, it should be determined whether the institutional change within the UWSS was driven from the "topdown" or from the "bottom-up." As discussed in section 2.2.5, changes in relative prices are a frequent reason for institutional change driven from the "bottom-up," and changes driven from the "top-down" mainly occur when new knowledge and ideas lead to an institutional change. With the implementation of the UWSS reform accompanied by the UWSS decentralization process, a process of institutional change of the UWSS sector was initiated. The aim was to transform the overcentralized NWSA with its headquarters in Sana'a and its branches in different cities throughout the country. To accomplish this, NWSA branches were gradually replaced by a decentralized system of UWSS Local Corporations (LCs) and their branches and Autonomous UWSS Utilities (AUWSSUs). In the course of the UWSS decentralization process, different models emerged concerning the newly set-up institutions. In general, LCs and AUWSSUs were established as independent units and cost centers, with most AUWSSUs being completely independent in their day to day work, only depending on the respective LC with regards to the annual budgeting process of the MWE' s investment funds.

6.4.1.1.1 Local Corporations (LCs) LCs are located in the capitals of the governorates. They are supervised by a Board of Directors (BoD) which is chaired by the respective Governor. Some of them have branches in the administrative boundaries of the same governorate. LC branches, in comparison to the AUWSSUs, have not yet become independent of the LCs. The branches still receive their

139 finances front the LC and the LC Is involved in their billing (Sahooly 2009,11). However, in same cases where the LC has not been able to cope with its responsibilities, NWSA has continued to support the ccneemed

AUWSSU, e.g, Al-Mahweetand Ataq (Ward et al. 2009: 48). Besides the local governorate's govemment. the Local Council. the MWE is also fnvolved in the LC affairs. The exact mechanism ior supervision cf each LC is defined in the Presidential Decree issu.ed fm tts

establishment (MAC2008: 6-7). Figure 6.4: Admini.trative Structare Gi the LCs - Board of Di1ecton (BoD)

LC's Board of Diredora r-r-

IGovern or ot l11e 800)

..

Rep resem.li . e 01 the

"

Di,eelor olt"" Mof

B•• J>Ch Office in t ....

GoWfllOf."

Di rector alt"" MoPIC

St.,lth Office in Il>e

(cn~~man

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H

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-

i-

Ge' ...... 1 Di'&o:lor 0"....

rc

Rep,""nt.",.. 01I""

I-

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Source. own graphic- Mlnistry of Legal.Affalrs and Decree N° 20/2001"

um,,"

Parliamentary Affairs.. " Republian

140

Urban Water Supply and Sanitation (UWSS)

6.4.1.1.2 Autonomous Urban Water Supply and Sanitation Utilities (AUWSSUs) AUWSSUs are loeated in so ealled seeondary provineial towns, mainly on the distriet level. AUWSSUs do not have their own eorporate status as the LCs do. Even though they are pereeived as autonomous regarding almost all aspeets of operation, maintenanee, and administration of the facilities, they do not have a legal personality. Thus they are subordinate to the LCs (MAC 2008: 7). They eoordinate their annual investment budget with the LC, reeeive their investment budget through the LC, and are supported by the LC in the implementation of big investment programs (Sahooly 2009: 11). The AUWSSUs are supervised by an Advisory Committee whieh, exeept for the "Rada'a Prineiples," is not defined by any law. This indieates the need for a legal framework to regulate the relationship between the LCs and the AUWSSUs (MAC 2008: 7). [ust like the respective governor is a member in the BoD of the LCs, members of the distriet's loeal eouncil are representatives in the Advisory Committee. For example, the distriet's loeal eouneil's General Direetor, the head of the district's Loeal Couneil's Service Committee, and a representative for the loeal eommunity are all representatives in the Advisory Committee. Hereby, it is envisioned that the representative for the loeal eommunity reeeive the UWSS services that enable them to represent the customers' views (Sahooly 2009: 13, Shawagfeh 2009: 3-4).

1<1 Figare 6.5: Adm1nl......t1ve Stractare of the AVWSSU,I- AClYiJory Comm1ttee

AUWSSU'. Adviamy Committee

rl H

General OIf9ClOf 0 1 me

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..

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Scnna!. own graphic:-Ministry of Electricity md Wd1!r (n.d.)

6.4.1.1.3 Legal Framework of the Deomtralized UWSS Utilities

The LCs ere estab1ished by Republican Decree8 that :reIy on the provision cf Law N"35/1991, which was amen.ded by Law N"7/19tn. Law N"7/1997 concems public corporatians, organi;I:at:ions, and rompanies but nevertheless depicts the basis for the establishment of the LCs. Furthermore the LCs have replaced the brand1es of the NWSA. which is I1Ol: a public corporation. Gove:rnoratell that da not have their awn LC oontinue to be served by NW5A branches. Curren1:I.y sixteen NWSA branches remain

142

Urban Water Supply and Sanitation (UWSS)

and two AUWSSUs are run by NWSA. illustraled in figure 6.6 and figure 6.3 (MAC 2008: 11).

Figure 6.6: Institutional Coverage of the UWSS in Yemen

Sa'dal1

A.1 ·Mah,a

Hadram aut

, I;] Ocverrcratee w ith Lcccr Corpo'"ations (LCs)

D Gove rnora tes wi thoot Lcca l Corpor 3tions (LCs)

.. ~~~ ~:~ t~I~1e:'ln

Co Go ve morat es with Aulonomo us P ublic Utohtoes

@ Go vemo rates wllh NWSA Br.m d1es

Sourcer adapted from Ward. Otristopherl et al. (2009): HEquity and Effidency in Yemen's Urban Water Reform - A Sector Study and Poverty and Soda! Impact Analysis/ Ministry of Waterend Environment WorldBank. GTZ, Sana'a,p.121.

In general, it can be staled that the LCs issued after 2001 are more specific in defining the central organs to which the oorporalion shall submit for

financial and accounting audit and control, such as the MWE, the MoF, and the COCA. All LCs are corporale bodies and, as such, enjoy financial

The UWSS Reform Process

143

autonomy. They all fall under the supervision of the MWE, and all LCs exercise the same functions and tasks within their geographical service areas. All LCs have the same financial system and are funded from similar sources. They are all managed by a BoD headed by the govemor of the govemorate in which the LC is located. Even though the BoD is the supreme administrative authority of the LC, its decisions need to be approved by the MWE, which must place an objection to any decisions within one month of their submittal, otherwise the decisions are considered approved, Furthermore, the Minister's authority for objection is limited to the condition that the decisions of the LC's BoD contradict established laws, bylaws, or regulations (MAC 2008: 11-12). The LCs are commercial enterprises, As such they are of commercial nature and their investment projects enjoy all privileges and exemptions provided for in the Investment Law (MAC 2008: 12). The LCs have a full time General Director who is nominated by the MWE and appointed by a Prime Ministers Decree, Although in compliance with the Law N°7j1997, LCs' employees are civil servants and therefore subject to the Civil Service Law. Thus, LCs are true corporate bodies with financial autonomy to a great extent, and the MWE' s supervision is limited and qualified, However, in practice the financial system provided for the LCs interferes with their autonomous nature (MAC 2008: 12). The AUWSSUs are established by ministerial decrees issued by the Minister of Water and Environment. Nevertheless, the ministerial decrees were described to be insufficient as legal instruments for the establishment of autonomous bodies by the Management and Consulting GmbH Frankfurt (MAC) consultants, They outline in their report, "Consolidating the Decentralization in the UWSS," that from "a legal point of view it is not sound to provide for the establishment of a branch (irrespective of the given name) of a corporation and at the same time describe it as a corporate body and autonomous entity (separate legal person)" (MAC 2008: 12, MWE 2007, MWE 2007a). The MAC (2008: 12) report states the bodies founded by the respective ministerial decrees lack basic specifications of a corporate body or autonomous entity. Missing specifi-

144

Urban Water Supply and Sanitation (UWSS)

cations include tasks and functions, management structure, and funding and financial systems, However, in practice it seems that no major problems arise due to the ministerial decree. On the contrary, the reason why the AUWSSUs are established by ministerial decree is to facilitate the establishment of the AUWSSUs. Seeking apresidential, i.e. a Republican decree, takes much more time (Sahooly 2009: 12). However, according to the MAC report (2008: 12) the form of the institution established is contradictory and legally unsound. Thus, it is virtually impossible to define with a by-Iaw alone the relation between the LCs branches and the AUWSSUs. The related MAC (2008) report, therefore, suggests transforming the current system of LCs and AUWSSUs into independent public companies, But this has so far only been a suggestion and needs to be further evaluated by the MWE (Sahooly 2009: 3).

6.4.2 Case Study The following section will describe the progress made of the LC Sana'a, which was the first NSWA branch to be transformed into an autonomous LC. In 1999 an institutional and technical capacity analysis for the NSWA branch in Sana'a was conducted. The analysis focused on staffing, tariffs, business procedures, and infrastructure and proposed alease contract for the utility. The lease contract envisioned cutting in half the amount of unaccounted for water, increasing sewer connections 5-fold, and raising collection efficiency from 60 to 95%. However, the lease contract option was not implemented and the LC continued to implement the identified interventions under the corporate structure (Gerhager/ Sahooly/ Salam 2009: 18). Even though the LC Sana'a still faces major challenges, one of them financial self-sustainability, the situation with respect to unaccounted for water and sewer connections has improved greatly, even though they do not reach the lease targets. On the other hand, collection

145

The UWSS Reform Process

efficiency is even higher than anticipated by the lease contract, view table 6.8 below (Gerhager/ Sahooly/ Salam 2009: 18). Table 6.8: LC Sana'a - Performance Improvement

LC Sana'a - Performance Improvement Unaccounted

for

water

(%)

Sewer connection Collectionv (%)

1999

2007

Lease target in 8110 years

50

38

25

19,000

70,245

90,000

60

97

95

Source: Gerhager. B./ Sahooly, A./ Salam, S. (2009): "Yemen UWSS Sector Reform," MWE/ GTZ Yemen, Sana'a, p. 18.

As illustrated in table 6.9, the LC Sana'a has increased its UWSS coverage, however cannot cope with the high population growth. Therefore the percentage of the population covered with UWSS slightly decreased from 2005 to 2007. Table 6.9: LC Sana'a - Coverage Development

LC Sana'a - Coverage Development Water supply

Water sanitation

Population covered

%

Number of households

Population covered

%

Number of households

200516

672,939

45

78,018

538,794

32

62,564

2006

696,141

41

80,741

560,259

33

65,147

2007

551,054

32

82,344

469,105

28

70,245

Source: Hanesh 2007, Smets 2007, JAR 2007, JAR 2006

15 Collection Efficiency is defined as: Total collected operational revenues (water sales, sanitation fees, service charges and other revenues excluding new connection fees) as a percentage of total billed operational revenues (Hanesh et al. 2007: 18). 16 The % of the population covered in 2005 is estimate. It should be remarked that the Joint Annual Report was conducted for the first time in 2005.

146

Urban Water Supply and Sanitation (UWSS)

The financial autonomy of the LC Sana'a is very limited and there are major problems with the MoF. The MoF is blocking depreciation reserves in cash accounts at the Central Bank and is deducting repayment installments. Further the government interferes in the LCs management. //According to the LC, the ta riffs are set 'by government': the investments are financed 'by govemment'; and the LC cannot manage [even] its cash balances in buying [telephone] bills" (Ward et al. 2009: 45). On the cost side, several factors, such as the choice of expensive technologies, scarce water resources, and limited potential for hiking business rates, make the Sana'a LC a high cost operation. The situation became even more grave when the diesel price was raised in 2008 and the President promised that water prices would not increase (Ward et al. 2009: 45). As a result, LC Sana'a is barely covering its operation and maintenance cost. Due to govemment's interference, there has been no tariff increase since 2001, when a 300% price hike created political problems. Consequently, the LC's options to improve its financial situation are limited (Ward et al. 2009: 45). Because huge investments are needed to expand the coverage in Sana'a, non-conventional options that introduce new business models and integrate the private sector are proposed to expand the UWSS services. These options could include service or management contracts, concessions, and partnerships with private vendors (Ward et al. 2009: 85). Examples are illustrated in table 6.10.

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147

Table 6.10: Non-Conventional Options for UWSS Expansion

Non-Conventional Options for UWSS Expansion in Sana'a • • • • • • • •

regulating private wells selling water, regulating the tanker fleet and providing certificates to hygienically suitable tankers, providing water to tankers from specific municipal wells, regulating construction of cesspits (technical assistance and specifications), providing sewerage network feeding points for vacuum trucks (against fees), stimulating private investment in small water networks and eventually decentralized cluster sewerage solutions, providing of output-based aid approaches, and promoting the harvesting of rooftop rainwater.

Source: Ward, Christopher/ et al. (2009): "Equity and Efficiency in Yemen's Urban Water Reform - A Sector Study and Poverty and Social Impact Analysis," MWE, World Bank, GTZ, Sana'a, p.13.

This little case study already indicates that there are still interferences of central ministries that restriet the autonomy of the LC. Further, the performance of each LC heavily depends on the local conditions. Water resourees, management, and the relation to the local council and the MWE have been defined as the key factors for the functioning of a LC. Other major challenges remain, as illustrated in the following seetion.

6.4.3 Major Challenges Left 6.4.3.1. lnstitutional Govemance As illustrated in section 5.3, through decentralization, institutions are transferred to the govemorate and the district level. The govemorate and district levels are also reflected in the UWSS decentralization process,

148

Urban Water Supply and Sanitation (UWSS)

where they cause a major challenge regarding the institutional governance, which alludes to the corporate structure of the LCs. The LC branches and AUWSSUs located on the district level, develop more and more towards autonomous utilities, "which may legally be rooted to a large extent in the future ownership of the assets by the distriets" (MAC 2008: 9). Because the role of the local councils on the distriet level is currently increasing, the consultants of MAC (2008) indicated in their report, "Consolidating the Decentralization in the UWSS," that a similar solution should also be provided for the LCs as indicated in the following excerpt: An analysis of the legal provisions around the Local Corporations indicates that neither the existing ownership structure, nor the current form of corporate govemance might be the best suited one for further developing the sector and gradually facilitating a stronger rationalization and commercialization of the utilities, heading towards complete self-sustainability (MAC 2008: 9).

In order to consolidate the UWSS decentralization on the distriet level, recommendations have been made to transform govemance structures away from the LC towards public companies. As public companies, the utilities would no longer be part of the local authorities. They would instead function as independent economic units subject to the Yemeni commerciallaw (MAC 2008: 9). However, so far this has been only a proposal and remains to be discussed.

6.4.3.2 Sector Supervision A draft law on "Regulation of National Urban Water Supply and Sanitation Services," which will probably transform the current sector supervision, has been issued. Currently, the sector supervision is the responsibility of the LCs, whose BoDs comprise representatives of the relevant ministries and of the local authorities. In addition, the MWE and other sector authorities carry out regulatory and supervision functions (MAC 2008: 9).

149

DIe UWSSReform J'rocesB

PIans have been made to establish aNational Water and Sanitation Regulatory Authority (NJRWSS). Consultants have been assigned "to produce a detailed framework for the establishment and deveIopment of an urban Water and Sanitation Service Regu1atory Authority for Yemen" (!pA 2007: 1). The report suggests the organizational governance structure of the NJRWSS as illustrated in figure 6.7. Figcue6.7: Proposed NJRWSS Govemance Stracture Pro posed Governance Structu re of th e Nationa l Water & Wastewater Regulatory Organisation Partlament

: wäie;·&-E;;~i;oo-meiit-coiiiiiilffeel

,

I

I Prime Minister

l -----jnrre eter General

I l . gal Advisor

[Jlr. Ctoral. : T~f iff

Regulation

S t~ k'hOldfrs I

I Regulatory Council

I

...............................................J

[J ir. ctof ~t. :

[J i r.cto r~ t. :

Service Quality Control

Communicalion Customer R. lati on

s enerar Services

Source: IPA (2007): ~tablishment and Development of aNational W.ter and Sanitation Regu1atory Authority," drall Bnal repo:rt,. Mfnistry of Water and Environment, !PA Edinburgb..Srotland" p. 3.

The establislunent of such a regulatory organizatian would not only improve the sector sapervisicn, but also ta.ekle the problem of reguIating

150

Urban Water Supply and Sanitation (UWSS)

private sector providers, which are basically unregulated even though they play an important role in water supply (Ward et al. 2009: 8). The establishment of a regulatory organization is one of the targets of the GTZ supported Technical Secretariat of the MWE (Sahooly 2009: 3). Nevertheless, since the parliament has not yet approved the establishment of the NJRWSS, as illustrated above, a cabinet decree for the formation of an interim unit to create a regulatory authority has so far been drafted by the Technical Secretariat of the MWE. According to Mr. Sahooly (2009: 3), the Team Leader of this Technical Secretariat, the interim unit will probably be announced in two to three months. However, it might take another six to eight months before it will be functional and before capable staff will be found and trained.

6.4.3.3 Financial Sustainability It is envisioned that UWSS service utilities, the Les and AUWSSUs, cover at least their operation and maintenance cost. However, at present, cost recovery practices vary between different utilities and strongly depend on the local situation. The UWSS tariff system envisions tariffs that are set at a level that at least covers the costs for operation, maintenance, and depreciation of electro-mechanical equipment (MWE 2004: 24). Even though many utilities currently manage to cover operational costs, revenues are insufficient to cover capital and invesbnent costs. Therefore, utilities depend on transfers from the govemment's sector budget. As illustrated in section 5.5, fiscal decentralization, despite being envisioned by the LAL, has not yet fully taken place. Decentralized utilities are still only partly autonomous managerially because they remain dependent on govemment subsidies for their invesbnent programs (Ward et al. 2009: 8). At the same time, an increase of the tariffs to achieve full cost recovery is difficult due to the high level of poverty in Yemen (Gerhager/ Sahooly/ Salam 2009: 24).

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6.4.3.4 Pro-Poor Tariff To date there are no accurate mechanisms to identify the poor among the consumers of the UWSS services. Therefore, all customers benefit from the "pro-poor tariff," which is charged for the first block of the tariff system, 5m 3 to 10m 3 . Consequently people who could actually pay adequately for the UWSS services are charged only the lifeline rate if they do not exceed 10m3 of water per month. To improve the financial sustainability of the UWSS utilities, the tariff system should be revised (Sahooly 2009: 7). While several developing countries use a coupon system to support the poor, the Yemeni govemment does not regard a coupon system as feasible for Yemen because so far it is very difficult to identify the poor. Extensive surveys would be needed as weIl as people of integrity who carry out the surveys and identify the poor (Sahooly 2009: 7).

6.4.3.5 Coordination Between the Local Council and the Local Corporation Different interviewees mentioned that in several cases disputes between the LCs and the govemorate's local council occurred. While the representatives of the MWE remark that the chairman of the local council, the govemor, partly sees himself responsible for the LC, the representatives of the MoLA state that the govemor, even though he is the Chairman of the BoD, does not have enough power to really influence decisionmaking processes because the MWE has the final say in those (Sahooly 2009: 9, Shawagfeh 2009: 2-4, Zemaml Mosawar/ Ali 2009: 3-5). The Deputy Minister of MoLA, for instance, stated that the LC' s do not give any real power to the govemor. Instead the LCs seem to feel that "the govemor [... ] is nice to be [the chairman] for the photographer" (Zemam/ Mosawar/ Ali 2009: 4). Thus several problems have occurred between the local council and the local corporations. For instance, in the LC Sayun, the govemor

152

Urban Water Supply and Sanitation (UWSS)

dismissed the General Director of the LC. When the minister of the MWE, who is responsible for the appointment of the LC's General Director, refused the dismissal, a conflict arose between the minister and the govemor that was only solved after several months (Sahooly 2009: 9, Shawagfeh 2009: 4). Regarding tariff adjustment, the govemor, as the chairman of the BoD, ensures, on the one hand that community interests are represented. On the other hand, he is in a trap because he wants to be re-elected and thus might not be willing to support needed tariff increases (Gerhager 2009: 3). Therefore, it seems that competences and responsibilities between the govemorate's local council and the LC's BoD are not yet clear to the concemed parties. As the deputy minister of the MoLA, Mr. Zemam (2009: 5) stated: "There is a grey area [that] we need to cover."

6.4.4 "New-Institutionalistic" Analysis of the Institutional Change in the UWSSSector This seetion examines the hypotheses previously derived in seetion 2.2.5 and seetion 6.4.1.1. One of the elements to be examined is the institutional context of the decentralized UWSS utilities and their reciprocal impact. The new-institutionalism approach assurnes that institutions are influenced by their environment, which mainly consists of other institutions. Therefore, how the newly established institutions, the LCs and AUWSSUs, are influenced by the pre-existing institutional UWSS framework and how the Les and AUWSSUs impact their institutional environment, the institutions of the water sector, previously illustrated in section 6.1, are analyzed. Because policy, regulation, and investment finance decisions have remained with the MWE, the MWE directly impacts on the utilities. All LCs are set up on the same decentralized model under a BoD, but significant powers are retained at the center, the MWE and the MoF. This becomes evident by the fact the BoD can be overruled by a ministerial

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153

decision of the MWE and the general manager is appointed by the MWE, the central govemment (Ward et aL 2009: 48). Even though the LCs and AUWSSUs were established as independent units, the MWE and the MoF heavily intervene in and have an impact on the performance of the new institutions. Ward et aL (2009: 46) point out that they should have more autonony: According to the decrees that established the utilities, they are commercial enterprises with financial autonomy under the supervision of the MWE. A key feature of that autonomy is that [a] utility should have control over its own resources, and should be able to take all measures needed to manage its working capital effectively.

Nevertheless, financial autonomy is not fully granted to the decentralized UWSS utilities despite the fact that the legal framework for the LCs envisions them to be financially autonomous because all utilities remain dependent on transfers from the government for their capital investment. Capital cost recovery of the utilities is generally low and only some of the utilities cover their operation and maintenance cost (Sahooly 2009: 6). This leads inevitably to the intervention and supervision of the MoF on utilities' finances. Further, the MoF has appointed financial managers in the utilities to increase its influence (Ward et aL 2009: 46-47). Another constraint on the financial autonomy of the UWSS utilities is that depreciation reserves have to be deposited at the Central Bank and can only be released by approval of the MoF and MWE. Hence, utilities cannot manage their working capital. The LC Sana'a for instance would like to put money in high interest Treasury Funds or foreign exchange deposits, but the MoF has prevented this (Sahooly 2009: 5-6). Oue to these constraints, utilities become tied into the cumbersome procedures of public finances. The LC Sana'a asserted that, in 2007, it could only get disbursement of 75% of the approved investment budget because budgets were released too late by the MoF (Ward et aL 2009: 46-47). Another assumption of the new-institutional approach is that institutions have an impact on the behavior of individuals and determine their scope of action. The decentralized UWSS utilities provide the urban society with an additional choice of how to receive their water supply

154

Urban Water Supply and Sanitation (UWSS)

and sanitation services, in case they are within the coverage area of the network. As the network tariffs are fairly low compared to non-network alternative water supply sources, the LCs, its branches, and the AUWSSUs offer a less expensive option for water. According to the "Customer Satisfaction Survey in UWSS in Seven Towns in Yemen," conducted in 2008, 71% of the interviewed households were satisfied with the water supply. However, 25% of the interviewed households were dissatisfied. Some because water supply was frequently interrupted. The majority of the dissatisfied households, however, complained that they were not connected to the public water network (GTZ 2009: 9). Through the water supply and low prices for water, people save money and time, which they can use for other needs. In this way, the UWSS services have an impact on the behavior of the people. A way of directly impacting the behavior of individuals is the tariff system. The "pro-poor tariff" is not only a me ans to support the poor, it further encourages the economic usage of water because everyone who exceeds 10m3 water monthly is charged the normal tariff for the complete amount of water consumed. Thus "tariff is one of the ways to conserve water" (Sahooly 2009: 7-8) because the eheaper the water, the more "people open the tap" (Sahooly 2009: 8), and the more they pay for water, the more they economize their water use (Sahooly 2009: 8). Regarding Ostrom's (1990) change of rules, there have been changes on almost all of the three levels. As illustrated in seetion 5.2 and 5.3, the Constitution and the LAL are the main constitutional choice rules for the Yemeni context. They determine how decentralization policies are designed and implemented and determine the collective-choice rules since they offer the policy designer the basic framework from which to derive its policies. The collective-choice rules are then determining the operational rules, as policies affect the day-to-day decisions and, thus, how the UWSS utilities perform their work. With the issuing of the LAL in 2000 and the amendment of Law N°35/1991 by Law N°7/1997 the constitutional choice rules have been adapted towards decentralization, leading to new policies, i.e, new collec-

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155

tive-choice rules, resulting in the issuance of Cabinet Resolution N° 237/1997, setting the basis for the UWSS reform. In the framework of the UWSS reform, the daily work process, i.e. the operational rules, have been changed tremendousIy. As decentralization has shifted the decision-making authority to the Iocal level, the performance of the decentralized UWSS utilities has generally improved and has become more independent. Before the initiation of the decentralization process, everything went through the NWSA headquarters in Sana'a, leading to slow working procedures and deteriorating services (Shawagfeh 2009: 1). All billing was done in the NWSA headquarters. So for instance, the NWSA branch Aden had to send information, often by car, to people in NWSA, and the bill, even though it was supposed to be monthly, was only done after three months, after receiving the response from NWSA. Also if branches wanted to invest something or to buy something, they always had to come to NWSA (Sahooly 2009: 4). Another problem was that under NWSA the investment nearly did not triekle down to the govemorates (Gerhager 2009: 1). However, since being transformed into LCs and AUWSSUs, the UWSS utilities draft their annual investment plans and receive investment budget through the MWE and MoF. Even though the budget plan might not fully be approved, at least a share of the national investment budget it transferred to each LC, which then implements it and transfers part of it to its respective AUWSSUs. Thus, decentralization was a great step torward getting the investment where it should be (Gerhager 2009: 1). The initiator of the UWSS decentralization process was the MWE. Therefore it is a "top-down" approach. As discussed in seetion 2.2.5, "top-down" driven institutional changes mainly occur as a resuit of new knowledge and ideas. This has also been the case in Yemen. While a general trend towards decentralization can be perceived in the 1990s, the Yemeni Government and the MWE were further encouraged to decentralize through donors, such as the World Bank, which financed a study of the Yemeni UWSS. This study suggested decentralization, among other measures, as a means to reform and to improve the UWSS sector (Gerhager/ Sahooly/ Salam 2009: 10).

156

Urban Water Supply and Sanitation (UWSS)

Decentralization was perceived as a means to improve the UWSS services, which will be further illustrated in the following section.

7. Conclusion and Future Outlook

This research paper has examined the progress of the decentralization progress with the challenging reforms that Yemen is undertaking. In particular the UWSS sector has been studied, coming to the conclusion that overall, since the UWSS reform process was initiated and especially since 2000 when the first LC was decentralized, service delivery and the functioning at the locallevel have improved significantly. Nevertheless it remains questionable whether these positive developments are primarily attributed to decentralization or rather to the increased donor support and the general effort to reform the UWSS sector. In order to achieve the development goals that were set in terms of improving the access, the quality, the reliability, and the affordability of UWSS services as weIl as to improve the efficiency of service delivery the service was assigned to whomever can deli ver it in best quality and less cost. However, if the former NWSA branches would have received the same support and attention as the decentralized UWSS utilities, maybe their improvements would be similar. According to statistics of the NWSA headquarters (NWSA 2005, NWSA 2008), the remaining NWSA branches have expanded their UWSS coverage and improved their performances. However, as previously illustrated in section 6.4, remaining NWSA branches are only responsible for 5% of the urban population. Further, it has been indicated that NWSA statistics do not always display the actual performance of the NWSA branches (Sahooly 2009: 1). Therefore, to compare the decentralized utilities' performance with the NWSA branches' performance site visits and a more extensive study would have been necessary. As stated in the Constitutions and the LAL, the decentralization process in Yemen is based on administrative and fiscal decentralization. Despite the periodically stressed political will for decentralization, there does not yet seem to be sufficient effort to implement a comprehensive K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0_8, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

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deeentralization. As Langley and Al-Iryani (2008: 12) state, deeentralization is the most likely poliey to preserve the Yemeni unity, eneourage eeonomie development, and strengthen President 5alih's hold on power in the long term. Nevertheless, the regime needs to be eonvineed that deeentralization is not a zero sum game. On the eontrary, "by relinquishing some authority, the eentral government will aetually gain politieally and finaneially in the end" (Longley/ Al-Iryani 2008: 12). 50 far, however, deeentralization seems not to be a poliey choiee derived from atme eommitment towards deeentralization, but rather a means to eonsolidate President 5aleh's position. Henee, the government mainly refers to deeentralization when the regime's praetiee of divide and rule" does not funetion and the legitimization of the politieal regime seems to be threatened (Longley/ Al-Iryani 2008: 7). A eore problem for progress towards deeentralization in Yemen is that the politieal system is eentralized around the President. Loeal and national institutions "are part of the politieallandseape, but they are not the locus of power" (Longley/ AI-Iryani 2008: 8). Instead the President rules Yemen based on a eomplex network of patron-elient relations. Complete decentralization would limit the President's authority and his aeeess to resourees, which would eonsequently affeet the networks of patronage for technoeratie and politieal elients in the capital (Longley/ AI-Iryani 2008: 8). Therefore, in theory Ioeal eouneils are administratively independent and finaneially viabIe, but in reality they are rather a "window dressing for a highly eentralized system" (Longley/ AI-Iryani 2008: 8). Consequently, as previously illustrated in section 5.2 and seetion 5.3.4, the prevalent form of deeentralization in Yemen is deeoneentration. The eentral govemment uses deeentralization as a mean to strengthen its power and to inerease its influenee on the loeallevel. The eentral govemment still interferes in the administrative and finaneial rights of the loeal eouneil, despite administrative and financial deeentralization. The Ioeal eouneils do not enjoy real power eoneeming the delivery of publie serviees beeause the deeoneentrated branches of U

Conclusion and Future Outlook

159

the line ministries are still in charge of it, being the executive organs of the govemorate or the district, One of the core issues is that local councils have not yet become an organized or autonomous political force pushing reforms "from below." What is needed is a way to implement top-level political decisions on the local levels because, until now, the impetus for decentralization has mainly come from the very top. This, as illustrated in section 3.3 affects the way decentralization is implemented and whether a real change of the balance of intergovernmental power takes place. Decentralization in Yemen, as implemented so far, has therefore only caused little change in the redistribution of power to sub-national levels. The "National Local Authority Strategy" is a step towards decentralization and local govemance in Yemen, but its translation into a national program for decentralization remains achallenge. Although the "National Local Authority Strategy" stresses that "the local government units shall enjoy full financial and administrative independence" (MoLA 2008: 7) and that interventions from the central govemment are restricted, options for central interference that might easily be used as a pretext remain for the following cases: (1) threat to national unity, (2) violation of the law, and (3) delay in the local development due to bad performance of the local govemment unit (MoLA 2008: 7). The "National Local Authority Strategy" further emphasizes that "local government units shall be subject, even though they are administratively and financially independent, to central control" (MoLA 2008: 7), stressing just like the Constitution, as illustrated in section 5.2, the central control, Accordingly, the central govemment should monitor the local govemment units' activities to ensure that general state policies and relevant laws and regulations are followed (MoLA 2008: 7). Nevertheless, since the issuing of the LAL in 2000, not much progress has been made, which indicates major bureaucratic resistances. It remains to be seen whether the "National Local Authority Strategy" can overcome this resistance and can pave the way for comprehensive decentralization.

160

Conclusion and Future Outlook

So far, MoLA, which is mainly responsible for the implementation of deeentralization and for the loeal authority system, seems to face some difficulties. On the one hand it has limited influenee on the action of other ministries, especially the MoF. On the other hand, it has to overeome internal ineentives to fund and manage loeal development instead of handing the responsibility to the emerging loeal govemments. MoLA' s institutional strueture does not always match its intended role in supporting and establishing loeal govemment, and institutional development and eapacity building are needed (UNDP/ UNCDF 2008: 29-31). To enable the loeal governments to perform, a general mandate is needed to ensure their loeal autonomy. The loeal couneils need to obtain finaneial independenee or need to be granted at least a eertain amount of finaneial transfers. Currently the annual eentral subsidies depend on the eentral budget, which varies from year to year, and on the MoF, which dedieates eertain amounts to eertain projeets. The influenee of the MoF must be re-defined and existing laws must be implemented as Langley and Al-Iryani (2008: 10) point out in the following passage: Currently, the central government is notorious for denying local eouncils their lawful, meager share of national revenues and for interfering in their administrative tasks. The central government must eease in micromanaging loeal government affairs, and govemorate local eouncils should be guaranteed broad rights to negotiate investment contracts within their territory.

In addition to financial independenee, another ehallenge for loeal eouneils is capacity building for publie revenue and expenditure management, one of the greatest challenges to promote loeal eeonomie development and initiatives for revenue generation. Presently, the loeal authorities depend on central transfers. Even though there are severalloeal revenues, the existing sourees of revenue are uneategorized and some of them, espeeially on the distriet level, are not produetive. Revenue management is further eomplieated by the sharing system. As illustrated in seetion 5.5, some of the national revenues are shared with the loeal authorities, the so-ealled joint general revenues. The joint govemorate revenues are shared with the distriets of

Conclusion and Future Outlook

161

the respective governorate. Allowing the local authorities to keep more of the revenues they collect would probably increase the collection incentives, resulting in more collected revenues (UNDP/ UNCDF 2008: 41-42). Therefore the existing revenue system should be reviewed and the proportion of self-generated revenues should be increased in order for the local councils to become less dependent on central subsidies. Capacity building and institutional support are needed at the govemorate and district level. Overlapping of tasks and responsibilities between different govemment bodies of the local, govemorate and district level, on the one hand, and the central ministries, on the other hand, limit the government's efficiency. A well-functioning, integrated local govemance structure with effective departments and a coherent and incorporated relationship towards the administrative, legislative, and executive branches still needs to be established (UNDP/ UNCDP 2008: 2931).

Another constraint is the lack of clear job-descriptions. This becomes evident not only within the local authority, but even more when line ministries have their own sub-structure carrying out similar tasks or delivering similar services to those of the local government. In this case duplication occurs and the system becomes inefficient (UNDP/ UNCDF 2008: 57). Furthermore, the coverage of operation and maintenance costs often proves to be difficult because the central govemment is only minimally committed to cover operation and maintenance costs of the local councils while the LAL states that local councils can only spend their money on capital investments (Phillips 2007: 16). In brief, it is evident that the current financial structure undermines the local councils' potential for autonomy (Phillips 2007: 16). Moreover, the rapid process of decentralization has partly resulted in unclear distribution and imprecise definitions of competences and responsibilities between different institutional levels, creating overlaps of competences and responsibilities that lead to conflicts between different institutions or the absence of ownership.

162

Conclusion and Future Outlook

Over-staffing and insufficient qualifications require human resource development and technical support not only for the decentralized entities but also for the centralized institutions. It should be kept in mind that successful decentralization requires effective central institutions that set up the framework for decentralization and strengthen the decentralized entities, Examination of the UWSS sector shows that the overall performance of the decentralized utilities has greatly improved. Thus, since decentralization, the efficiency of the UWSS sector has improved, In particular, smaller towns that have received external support, for instance by GTZ and World Bank, and coastal towns that do not face pressing water constraints have improved their service standards significantly. However, some large towns in the highlands, especially where the population growth is fast, systems are old, and water resources are limited, are encountering severe problems in providing even limited services (Ward et al 2009: 9). Households connected to the UWSS network have experienced a significant increase in UWSS access, up to 50% nationally (2002-2009). Nonetheless, coverage rates vary widely, depending on the local characteristics. Many coastal towns count 100% coverage, whereas some of the highland towns have only 40% coverage and cannot keep up with the rapid population growth (Ward et al. 2009: 13). Other constraints are the huge size of the investment required to expand the network and the lack of sufficient water resources. For Ibb governorate, for instance, new water connections were stopped due to a lack of water sources (Ward et al 2009: 14). Therefore, it might be an alternative to integrate so-called non-conventional options into the UWSS system, such as those practiced in Sana'a and illustrated earlier in table 6.4.2.2. The increase of the amount of water available per household has to be examined with respect to the water scarcity in Yemen. The increase of water availability per household is not a target of the UWSS reform as such. Instead, the main target is to increase the UWSS coverage. However, as long as a household is connected to the network, it receives a cer-

Conclusion and Future Outlook

163

tain amount of water, ideally at least 50 liters per capita per day (lpcd) (Wards et al. 2009: 15). Therefore, instead of a constantly increasing amount of water for each household, the UWSS reform should envision networks that provide a minimum amount of water derived from the WHO standards. WHO recommends a minimum of 20 liters of fresh water per person per day (WHO 2009, Bery/ Rosebaum 2009). However, there is no intemationally agreed upon quantity of water that should be guaranteed. The MDGs, for instance, despite aiming at halving the proportion of people who are unable to reach or to afford safe drinking water by 2015, do not specify in what quantity water should be supplied (Millennium Project 2006). Nevertheless, there are areas in Yemen, such as Taiz, that cannot even supply the minimum amount. Further constraints like the lack of electricity result in cases where generally well-functioning utilities, such as the LC Sana'a, are temporarily not able to supply the minimum amount of lpcd. Thus, the hypothesis, whether the amount of water available per household increased since the LCs and decentralized public uti.lities are in charge of the UWSS, has not proven to be suitable for the Yemeni context as an indicator to examine the UWSS improvement through decentralization. An examination of the cost of UWSS compared to non-network alternative water supply sources reveals that the network tariffs remain low. "The average share of total monthly household expenditure on water is about 1.10%, which amounts to about YR 1,363," or about US $7 (Gerhager/ Sahooly/ Salam 2009: 25). At this rate, tariffs in most towns are easily affordable and the willingness to pay is generally quite high, except for sanitation. The UWSS tariff system expects tariffs to be set at a level that at least covers the costs for operation, maintenance, and depreciation of electrome chanical equipment. Therefore, since decentralization, tariffs have been more responsive to the utilities needs and are variable between different utilities' catchm.ent areas. Hence, in areas where supply is very costly, the tariffs are higher, as for instance in AI-Mahweet (Ward et al 2009: 11).

164

Conclusion and Future Outlook

In general decentralization brought initial tariff increases to enable the operation and maintenance cost recovery. This represented a sharp contrast to the previous national tariff system where tariffs had not been changed for the preceding eight years (Ward et al. 2009: 39). Nevertheless, poor people benefit substantially from the UWSS services because an affordable lifeline rate is charged on the first block or bracket of 5 to 10 cubic meters. The lifeline tariff is based on the assumption that "the water and sanitation bill accounts for no more than 5% of the monthly household income of the poor" (Gerhager/ Sahooly/ Salam 2009: 25). It covers less than half of the supply cost of the first 5 to 10 m 3 and must therefore be cross-subsidized by the upper blocks and general subsidies (Ward et al. 2009: 15-16). Compounding this problem, the better-off currently also benefit from the lifeline rate because the first 5 to 10 m 3 are charged the lifeline rate regardless of the financial status of the client, as long as their usage does not exceed 10 m 3 (MWE 2004: 25). Therefore, the tariff-system needs to be evaluated and re-structured to improve the financial sustainability of the UWSS utilities. However, revising the tariff-system is difficult because even though the idea of cost recovery as a principle to setting-up tariffs is good, in some cases, such as Ibb, the local government has been opposed to tariff increases, leading to problems within the LC' s BoD because the local government has a major say in the LC' s Board. Thus, under the current structure, tendencies for the BoD to take apopulist pro-consumer and pro-elector stance and neglect their obligations to pursue the reform goals and to move the utilities towards self-sustainability may easily arise (Ward et al. 2009: 42). Another problem might be seen in the fact that tariffs depend on the local conditions; the lifeline tariff is six times higher in AI-Mahweet than in other regions (Ward et aL 2009: 42). This leads to regional inequalities that affect mainly the poor. An option to balance these regional inequalities could be a tariff system that is cost recovery oriented but balanced through central subsidies. They might even be financed through transfers of different utilities. Utilities that eam surpluses, such as Aden,

165

Conclusion and Future Outlook

could transfer a certain amount of their surpluses to utilities that have high expenditures, such as AI-Mahweet, to ensure a nation-wide balanced lifeline tariff rate. Additional compensation would be guaranteed through central funds. Conceming the clarification of responsibilities and competences, major problems remain. Even though decentralization contributed to a redefinition of responsibilities and competences, new conflicts continue to arise between the local councils and the LCs, as illustrated in seetion 6.4.3.5. Unclear job descriptions and reporting accountabilities have led to interventionism of the MWE and MoF (Ward et a1. 2009: 33). Therefore, clear institutional goals and consistent human resource development and support and training in management skills are needed for the utilities. Job descriptions and clear responsibilities and competences are also emphasized by the "National Local Authority Strategy." One of its pillars consists of the reorganization and clarification of tasks and functions of the central organizations (ministries, authorities, and national programs) and of the local govemment organizations on the govemorate and district level as weIl as the regulation of the relations among the different layers of administrations on the central, govemorate, and distriet levels (MoLA 2008: 15-16). Financial management, despite being legally the responsibility of the LCs and the AUWSSUs, is constrained by the govemance structure and the utilities' dependency on central govemment transfers. Therefore, the MoF perceives the utilities as under its supervision, and does not hesitate to intervene and to control" (Ward et a1. 2009: 47). Consequently, it is advisable to revise and restructure the financial powers and accountabilities of the utilities and the rights and duties of the Boards. A desirable option would be to delink the utilities from the MoF' sinterventions. This could best be accomplished by complete decentralization and the establishment of genuine financial viability (self-sustainability) of the utilities (Ward et a1. 2009: 47). The major conflict line, however, seems to lie between the local councils and the LCs. The MoLA interviewees clearly mentioned that the U

166

Conclusion and Future Outlook

water sector pursues decentralization with a different concept" than MoLA has outlined for decentralization in Yemen (Zemam/ Mosawar/ Ali 2009: 3). Tensions between the local councils and the LCs, as illustrated by different interviewees, indicate that there is an urgent need to clarify the role the local council takes within the LCs' BoD. In addition, a mechanism to monitor whether the local council acts according to these rules and guidelines for sanction in case of violations are needed. Decentralization of the UWSS sector has taken place in the same dimensions as the general decentralization process in Yemen. The MWE is the driving force behind decentralization. It envisions the UWSS service improvement in terms of efficiency, i.e. access, quality, reliability and affordability and therefore the service delivery was assigned to whom can deli ver the service in best quality and at least cost, thus the MWE based the UWSS reform process on the principle of decentralization. Hence, it is a top-down driven decentralization process that was likely derived through a change of ideas and new knowledge. As mentioned earlier, a World Bank study suggested decentralization as a main pillar to reform the UWSS sector. Nevertheless, the MWE still has concems about losing control over the sector and therefore tries to control the decentralization process (Ward et al. 2009: 49). As discussed in section 3.3, the preferred sequence of decentralization driven from the central level is administrative decentralization, followed by fiscal decentralization, and in a final step political decentralization. The rationale behind this sequence is assumed to be that a central ministry, thus the MWE, prefers to transfer responsibilities rather than resources and that if it is forced to transfer fiscalor political authority, it prefers to transfer fiscal authority instead of political, so as to retain political control, which helps it to influence the expenditure decisions made on the sub-national leveL This structure can also be perceived for the decentralization process of the UWSS. Administrative decentralization is mainly completed since the decentralized UWSS utilities are in charge of the service delivery. U

Conclusion and Future Outlook

167

Fiscal decentralization, however, remains partly limited. The decentralized utilities are supposed to cover their operation and maintenance costs and are autonomous in their decisions to use this part of their budget, mainly the money they eam through service provision. Obtained surpluses, however, are restricted to use for capital investment and are to be saved in the Central Bank. To withdraw money from their depreciation accounts at the Central Bank, the utilities need permission of the MWE, which sends arequest to the MoF. Thus, the utilities' financial autonomy is limited. The major restriction of fiscal decentralization, however, lies in the utilities' dependency on central subsidies and transfers, Therefore, it can be stated that fiscal decentralization is not yet completely achieved in the UWSS sector. Even more challenges remain for the political decentralization. First, the legal framework needs to be adapted by Constitutional amendments or the change of the LAL, which so far only mention administrative and fiscal decentralization. As the Deputy Minister of the MoLA mentioned, the Constitution remains an obstacle towards real local govemance (Zemam/ Mosawar/ Ali 2009: 9-10). Second, the LCs should be given autonomy to elect their General Director themselves. And third, the Minister of MWE should no longer be in charge of approving the decisions made by the LC's BoD. Previous analysis of the forms of decentralization show that decentralization of the UWSS sector seems to be in a transition from deconcentration to delegation. The LCs and AUWSSUs have decision-making authority even though they still rely on finances from the MWE and the Minister of the MWE must still approve the decision made at the local level. However, the utilities are responsible for most of the projects' implementation and they design and propose projects to the MWE. As illustrated in section 4, different criteria impact the success of the decentralization process. As mentioned above, sub-national capacities, like capacities in Yemen in general, remain a major challenge. Education in Yemen is generally poor. Therefore it is often difficult to find qualified staff. AI-Harithi remarks that only look of the UWSS staff is technicians (AI-Harithi 2009: 4). Yet so far, it has not been a prob-

168

Conclusion and Future Outlook

lern to fill the positions in the UWSS utilities. In many cases there is rather a problem of over-staffing. As the Yemeni private sector is too weak to absorb the previous NWSA staff, it is difficult" to fire people sinee only few alternative jobs are available for them and unemployment is high in Yemen. Thus, it has even been mentioned by one interviewee that utilities sometimes pay people and ask them to stay home, so the utilities are not crowded with people who do not have any responsibilities or tasks (Gerhager 2009: 4). To improve qualifications, human resource development is a major pillar of many development cooperations' programs and should continue to be an integrated part of the UWSS reform process. However, another challenge regarding capacity is the public's level of understanding. Interviewees indicated that it was a major difficulty to make people understand the concept of local councils. There are still some citizens who cannot distinguish between "the members of [the] local council and the member of [the] parliament" (Zemam/ Mosawar/ Ali 2009: 3). Decentralization is supposed to create aceountable utilities that intend to improve services for their customers. However, so far the concept of social accountability, utilities towards customers and vice-versa, is still weak in Yemen (Ward et al. 2009: 36). Actor related and structural conditions for participation have been illustrated in seetion 4.4. The LCs offer options for participation; their BoDs include not only representatives of the local eouncils, but also representatives of the consumers, including business consumers. In the AUWSSUs, local consumers are represented in the Advisory Committee that consults on key issues, such as net expansion plans, the block tariff, and lifeline rates (Ward et al. 2009: 36). Another mechanism to improve accountability and loeal participation is the establishment of "Customer Relations Units." Currently twelve of the fifteen LCs have established such a unit to inform customers and handle eomplaints (Ward et al. 2009: 36). These complaint centers" have been well-accepted by the Yemeni society. However, for the Yemeni society it is often not clear that they can stand-up and complain if IJ

IJ

Conclusion and Future Outlook

169

something is not working. Normally "if you don't know someone in the utility, you don't go there" and complain (Gerhager 2009: 6-7). Hence, the socio-political environment in Yemen, which is dominated by social hierarchies, traditional elites, and tribai structures, impacts participation. The Yemeni environment is characterized by a system of patronage with the local sheikhs 'caring' for and protecting their people Gones 2005: 303). Therefore the concept of participation, in terms of every community member having the same share and the same voting weight, is not yet fully integrated in the Yemeni society. However, local elites are not necessarily a force against community participation; they can also be part of and encourage community participation Gones 2005: 305). The support for decentralization by the Yemeni water sector and its concemed institutions is generally wide, so that chances to consolidate the decentralization of the UWSS sector are high. The MWE, which has inherited the UWSS reform program from its predecessor ministries, strongly supports decentralization. It is the government agency responsible for designing and implementing the UWSS reform. However, since it is still a relatively new ministry established in 2003, it is not a major force in the cabinet. The MWE shows partial weaknesses on policy analysis and implementation. Nevertheless, through the Technical Secretariat for Urban Water Reform (TS), which is strongly supported by GTZ, these weaknesses are compensated. The TS is recognized as the driving force of the UWSS reform, receives strong donor support, is well-resourced, and is fully committed to decentralization and a "business-Iike approach" for the utilities. Thus, the MWE generally supports decentralization, although it is likely that some managers within the MWE may retain a preference for a subsidized public service provision (Ward et al. 2009: 93). However, NWSA, subordinated to the MWE, shows strong resistance to the UWSS decentralization, because further decentralization and the creation of a sector regulator are likely to lead to the phasing out of NWSA (Ward et al. 2009: 93-94). For the MoF, it can also be assumed that it is "likely to support a business-like approach as this is expected over time to reduce public

170

Conclusion and Future Outlook

transfers" (Ward et aL 2009: 93). Nevertheless, as long as central money is being given to the utilities, the MoF is likely to remain interventionist. Regarding, the UWSS service expansion, the MoF is likely to be reserved, as this involves high levels of public investment and subsidies (Ward et aL 2009: 93). The MoPIC as the custodian of the MDGs" is in strong favor of expanding the UWSS. Therefore, it supports the UWSS reform and the utility decentralization. Since MoPIC is responsible for the poverty reduction strategies, it will also strongly support pro-poor initiatives (Ward et al. 2009: 93). The MoLA, which is responsible for the local authorities, strongly supports decentralization. However, as mentioned in section 5.3.4, decentralization still mainly takes place in the form of deconcentration. MoLA is powerful in the cabinet and influential over the local councils. It strongly supports the shift of UWSS service provision to the local level and to the local councils. MoLA does, however, have concems about quality of service and tariff levels. Therefore, it wants the local council to have a major say in the LCs' BoD. Even though MoLA accepts that utilities should have a pro-poor sensitive mandate, it is unwilling to accept increased cross-subsidy as this could push up prices for business, reduce local employment and antagonize general consumers who form an important political constituency (Ward et al. 2009: 93). In conclusion, the govemance structure introduced under decentralization worked weIl where utilities were able to provide services responding to the local needs. However, where service provision was poor or coverage was low, tensions frequently emerged between the utility's management, its BoD, and the central government institutions (Ward et al. 2009: 12). The following issues remain key problems: (1) the split between utility ownership and corporate govemance that weakens responsibility, (2) the split between the regulatory function and the supervision function, which is ill defined and creates confusion and interventionism, and (3) the lack of financial autonomy (due to incomplete fiscal decentraliza11

Conclusion and Future Outlook

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tion) that leads to the necessity of intergovernmental transfers and causes dependency (Ward et al. 2009: 12). In order to consolidate decentralization in the future, both ownership and authority over the utilities should be decentralized to local level institutions (Ward et al. 2009: 13). Furthermore, attention should be given to consolidate the decentralization process, to clarify responsibilities and competences of different UWSS institutions, and to support human resource development at all levels during the decentralization process in order to continue the path towards successful decentralization oftheUWSS.

References

Primary Sources Documents and Reports Hanesh, Abdul Qader, et al. (2007): "Performance Indicators Information System (PIlS Annual Report 2006)," Ministry of Water and Environment, Sana' a. JAR (2007):"Joint Annual Review of NWSSIP 06/07 Documentation," Ministry of Water and Enviroment, Sana'a, CD-Rom. JAR (2006):"Joint Annual Review of NWSSIP 05/06 Documentation," Ministry of Water and Enviroment, Sana'a, CD-Rom. Mott Mac Donald (2009): "Inception Workshop Power Point Presentation," ISSWU Project, Sana'a. Ministry of Legal Affairs and Parliamentary Affairs (2000):"Law N°4 of 2000 conceming the Local Authority," Local Authority Law, Sana' a. Ministry of Legal Affairs and Parliamentary Affairs (2000a): "Republican Decree N° 269 of 2000 concerning the Executive Regulation of the Local Authority Law," Sana' a. Ministry of Legal Affairs and Parliamentary Affairs (2001): "Republican Decree N° 24 of 2001 concerning the Financial Bylaw of Local Authority," Sana' a. Ministry of Legal Affairs and Parliamentary Affairs (2001a): "Republican Decree N° 20 of 2001 for Establishing Taiz Govemorate Local Water Supply and Sanitation Corporation," Sana'a. Ministry of Legal Affairs and Parliamentary Affairs (2001b): "Constitution of the Republic of Yemen (as amended in 2001)," Sana' a. Ministry of Legal Affairs and Parliamentary Affairs (2004): "Prime Minister Decree N° 112 of 2004 concerning the Establishment of the Technical Committee to Support Decentralization and Determine its Tasks and Responsibilities," Sana' a.

K. Mewes, Decentralization on the Example of the Yemeni Water Sector, DOI 10.1007/978-3-531-93051-0, © VS Verlag für Sozialwissenschaften | Springer Fachmedien Wiesbaden GmbH 2011

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