New Partnerships Initiative: Democratic Loca Governance

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NEW PARTNERSHIPS INITIATIVE: LOCAL DEMOCRATIC GOVERNANCE

EXECUTIVE SUMMARY
OVERVIEW AND POLICY GUIDANCE
DEVELOPMENT RATIONALE - ENABLING ENVIRONMENT AND LOCAL CAPACITY - SEQUENCING AND LEVELS OF DEVELOPMENT - LESSONS LEARNED
CURRENT PROGRAM DESCRIPTION
AFRICA - ASIA/NEAR EAST - EUROPE/NEWLY INDEPENDENT STATES - LATIN AMERICA/CARIBBEAN
NEW PROGRAMMING IDEAS
POLICY DIALOGUE - CREATING DEMAND FOR REFORM - TECHNICAL ASSISTANCE - LOCAL POLITICAL DEVELOPMENT - DISPUTE RESOLUTION - PROGRAMMATIC LINKAGES WITH OTHER ISSUE AREAS
PERFORMANCE MEASUREMENT AND EVALUATION
NEW MANAGEMENT VEHICLES

NPI Core Report

Executive Summary

This focus report addresses the subject of Democratic Local Governance (DLG) in the context of USAID's New Partnerships Initiative (NPI). DLG combines three concepts that are fundamental to meeting the basic needs of the citizenry: political empowerment; decentralization; and effective governance. While each of these concepts has separately formed the basis of past USAID development strategies, NPI seeks to create policy and programmatic synergies among the three.

Effective local governance concerns the solution of community problems -- mobilizing human and material resources for the purposes of building public infrastructure, providing a broad range of services, and defining as well as maintaining legal behavi or. National governments can, and often do, perform these fundamental tasks, thus impacting directly on local communities. Most nation-states, however, have evolved a mixed political system wherein central and local governments share the state's authori ty. The universal challenge is whether the present mixture of central and local governance can be revised for the betterment of the citizenry as a whole.

The purpose of NPI's DLG component is to formulate an integrated strategy for building government and civil society at the local level. In this strategy, local-level political institutions should be viewed as complements to, rather than substitutes f or, their counterparts at the national level.

To be successful, democratic local governance must develop on two discrete levels. First, the national government must create laws and policies that empower local communities to conduct their own public affairs. Second, local actors--government offi cials, NGO leaders, and entrepreneurs--must acquire the skills, institutions, and material resources that will allow them to practice self-governance. The first level refers to the "enabling environment;" the second level refers to "capaci ty building."

USAID strategy will vary according to the particular political conditions of each targeted country. Two general approaches, "top-down" and "bottom-up," illustrate opposite extremes. Actual USAID country experience should fall som ewhere in between, with elements of both approaches incorporated in an overall strategy.

A top-down approach is appropriate to countries that have experienced a democratic transition at the level of the national government, but that have limited or no experience of democracy at the local level. In such countries, USAID can coordinate wit h other international donors in initiating a policy dialogue with the national government. The policy dialogue will allow for a discussion of the merits of and avenues for deepening democracy by spreading its practice to localities.

A bottom-up approach applies to countries that have not yet experienced a democratic transition at the national level. By pursuing such an approach, USAID would attempt to create the demand for democratic local governance. Such an approach would ent ail the following steps: the identification of reformist government officials and NGOs at the local level; the design and implementation by these reformers of modest pilot projects in democratic local governance; and the building of nationwide political a lliances (such as associations of mayors, civil society organizations interested in decentralization) to bring reformist pressure to bear on the national government.

A review of USAID's current portfolio reveals a large list of programs with relevance to the DLG component of NPI. The inventory highlights a strong emphasis on efforts to promote decentralization and to improve the services delivered by local govern ments, and a much lesser emphasis on efforts to promote the development of local-level democratic institutions or a more inclusive approach to community decision making. Many of the programs already underway should be reviewed with the specific democracy strategic objectives in mind and, where appropriate, modified accordingly.

The programmatic elements of the DLG component include: policy dialogue; creating a demand for reform; technical assistance; local political development; and community-level dispute resolution. Programming in these areas should initially focus on ce rtain regions or municipalities within a given country.

The DLG component of NPI should be implemented in a manner that builds upon the strengths of USAID field missions, including the ability to understand the political dynamics in a country and to work with other donors in pursuit of a policy dialogue. Effective DLG assistance will require the establishment of formal part-nership arrangements with nongovernmental actors who can provide the expertise and resources necessary for implementing programs in the field. The challenge for USAID is to devise mec hanisms that permit a multitude of nongovernmental actors to be available on short notice to respond to requests for assistance on DLG matters. Moreover, these mechanisms must either encourage organizations to work together or allow USAID personnel to fa cilitate a cooperative activity among different organizations.

Overview

This focus report addresses the Democratic Local Governance (DLG) component of the New Partnerships Initiative (NPI). The report is divided into five sections. The opening section presents general policy guidance for DLG. The section includes a rationale for DLG, emphasizing the equal importance of the national-level enabling environment and local-level capacity building. The first section also offers an approach to the sequencing of different types of DLG assistance depending on the development level of a particular country and also identifies lessons learned from past experience.
The second section provides an inventory of the Agency's current activities that might form the foundation of NPI's DLG component. The third section presents new programming ideas for consideration. The fourth section sketches out a results framework with specific performance indicators. The final section considers management vehicles for implementing DLG activities.

I. Policy Guidance

DLG constitutes a fundamental part of USAID's overall democracy portfolio: it empowers citizens to participate directly in the democratic process. However, a country strategy based on DLG is not necessarily appropriate for all missions or all countries. Political liberalization at the national level is often a prerequisite for the establishment of democracy at the local level. Indeed, the provisional sequencing outlined in the Democracy Annex to the Guidelines for Strategic Plans remains applicable. The Guidelines suggest that USAID missions should focus first on supporting political openings (through NGOs, labor unions, and media) and then on building national-level institutions (elections, deliberative bodies, and judiciaries) before turning to issues of effective governance, including decentralization. Nonetheless, as will be discussed below, some DLG activities may be used to stimulate a political opening at the national level in appropriate circumstances.
A. DLG Rationale
Development problems -- as well as their solutions -- differ greatly from place to place. Several examples will demonstrate this obvious point. A poor hinterland experiencing the rapid exodus of young workers has very different problems than the urban center to where the workers migrate. The difficulties of managing community grazing lands are very different from those involved in administering a regional aquifer on which the community's farms depend. The design, financing and construction of a highway system pose quite distinct challenges as compared to those involving the routine maintenance of city streets or farm-to-market roads.
Both experience and common sense suggest that institutional solutions must befit the nature of a problem. Simply put, those closest to a problem possess several fundamental advantages over those farther away: stronger incentives for a solution, more accurate information, and lower costs in marshalling resources. Thus, all things being equal, local problems can best be solved by empowering the local community to take action. This is the simple but nonetheless powerful rationale that underlies the concept of democratic local governance.
Effective local government concerns the solution of community problems: that is, the mobilizing of human and material resources for the purpose of building public infrastructure, providing services, and defining as well as maintaining legal behavior. National governments can, and often do, perform these fundamental tasks, thus impacting directly on local communities. Most nation-states, however, have evolved a mixed political system wherein central and local governments share the state's authority. The universal challenge in the area of political development is whether the mixture can be revised for the betterment of the citizenry as a whole.
The purpose of NPI is to formulate an integrated strategy for building government and civil society at the local level. In this strategy, local-level political institutions should be viewed as complements to, rather than substitutes for, their counterparts at the national level. Thus NPI recognizes that the success of local institutions will be conditioned by the policies and performance of national institutions. At the same time, democratic local governance can have a profound impact on national politics and development. A viable DLG strategy must aim to strengthen not only local capacity, but also the national enabling environment, and the institutional linkages between the two.
An effective DLG strategy must also acknowledge the growing importance of cities in the developing world. Indeed, by the end of the decade, the world's human settlements will be more urban than rural. A common trait of the global urbanization phenomenon is the severe strain it places on local authorities and their ability to deliver services necessary for economic growth and human well-being. Further, urban areas play a crucial role in rural development by providing markets, specialized economic and social services, transportation and communications centers. Many of the economies of scale in government services can be effectively captured in urban areas.
Cities also offer a fruitful environment for an active civil society. The diversity of economic interests, ethnic groups and professional groups in close proximity is the stuff of which civil society is made. The process of rapid urbanization is a social and political experience of revolutionary proportions. Urban areas offer unique opportunities to strengthen democratic governance, deepen democratic practice and influence democratic conduct at the national level. As it did in Europe, the urbanization experience will shape political dialogue and political institutions for generations.
B. Enabling Environment and Local Capacity
Unless a national government is extremely weak, localities do not govern themselves in a political vacuum. Rather, localities operate under the political conditions set by the national government. Therefore, in order for local governance to be truly democratic, it must develop in a conducive environment. In other words, the national government must reflect a democratic orientation and must devolve real political power to localities, relying to the largest extent possible on information from local level decision makers.
Support for decentralization should link responsibility with resources. Changes will be required in national revenuesharing formulas and the ability of local authorities to raise revenue from taxes and fees. National resource transfers must be transparent and reliable. Intermediary institutions that transfer capital for infrastructure investments can be critical in increasing the volume of available resources and, if handled correctly, can provide the basis for a productive public debate around investment decisions.
Such a devolution entails the sufficient transfer of some of the major governmental processes and functions to the local level. However, unless civil society is permitted to organize without cumbersome and inhibiting regulations, this devolution may simply reinforce authoritarian tendencies. Thus, the political aspect of the enabling environment cannot be ignored, although the means for addressing a central government's reluctance to liberalize will vary by particular country circumstance.
A transfer of political power does not require a total transfer; national governments must retain the ability to unify the nation under a single set of overarching laws. At the same time, enough power must be devolved so as to enable local actors to devise local solutions to local problems within the broad confines of national laws and policies. Establishing a conducive legal and regulatory environment, however, does not ensure that the transfer of authority will occur; recalcitrant bureaucrats often will undercut and delay efforts to devolve power away from the center.
The minimum list of legal powers that local government units should be entitled to exercise include:

Capacity to make and modify binding rules within their specified geographic domain, subject to constitutional limitations and democratic principles;

Capacity to monitor compliance with those rules and to applythem equitably to all persons within the territory;

Capacity to resolve disputes occasioned by fair application of the jurisdiction's rules; and

Capacity to mobilize monetary, labor and in-kind resources to finance the jurisdiction's activities.

The enabling environment also should authorize the election of local government officials and facilitate the participation of local civil society in decision making processes. Delinking national from local elections and proportional representation on municipal councils often serve as vehicles for increasing the responsiveness of local officials to their constituencies.
NPI seeks to provide space and capacity for local initiative within the framework of an effective national government. A weak and ineffective nation state does not offer a conducive enabling environment for democratic local governance. Increased capacity and authority at the local level does not mean that the center has been weakened; rather, it should mean that, in partnership, the society is better governed.
C. Sequencing and Levels of Development
Improved democratic local governance implies new roles and responsibilities for national and local governments. Establishing the enabling environment for democratic local governance is primarily the responsibility of national government, which must enact legislation and regulation. Nonetheless, underutilized authority frequently exists at the local level and local authorities can accelerate the process of establishing democratic local governance by lobbying the center for increased authority.
USAID strategy will vary according to the particular political conditions of each targeted country. Two general approaches, "top-down" and "bottom-up", illustrate opposite extremes. Actual USAID country experience should fall somewhere in between, with elements of both approaches incorporated in an overall strategy.
A top-down approach is appropriate for countries that have experienced a democratic transition at the level of the national government, but that have limited or no experience of democracy at the local level. In such countries, USAID can coordinate with other international donors in initiating a policy dialogue with the national government. The policy dialogue will allow for a discussion of the merits of and avenues for deepening democracy by spreading its practice to localities.
In transition countries, USAID is working with governments that are open to change, but which face heightened expectations from the people and lower-level governmental entities. USAID's role will be to support joint dialogue with central and local authorities and civil society organizations about the reorganization of power and authority. Capacity building is required at both levels to prepare them for new roles and responsibilities, and legislation is needed to address intergovern-mental relations, local charters and elections, revenue sharing and generation. Support for economic development will emphasize revenue generation and improved financial management at the local level and improved capacity to initiate and manage privatization activities.
A bottom-up approach applies to countries that have not yet experienced a democratic transition at the national level. By pursuing such an approach, USAID attempts to create the demand for democratic local governance. Such an approach would entail the following steps: the identification of reformist government officials and NGOs at the local level; the design and implementation by these reformers of modest pilot projects in democratic local governance; and the building of nation-wide political alliances (such as associations of mayors, civil society organizations interested in decentralization) to bring reformist pressure to bear on the national government.
This approach is particularly relevant to pre-transition countries with limited democratic experience at the national level. Here, USAID must identify windows of opportunity to increase devolution of authority to the local level. Program support may emphasize service delivery as a capacity building mechanism. Support for municipal associations emphasizes technical information sharing. Economic interventions focusses on improved and more transparent intergovernmental transfers and identification of underutilized revenue collection authority. Improved service delivery and infrastructure capacity will support economic development.
D. Lessons Learned
USAID experience suggests that, to be successful, democratic local governance must develop on two discrete levels. First, the national government must create laws and policies that empower local communities to conduct their own public affairs. Second, local actors--government officials, NGO leaders, and entrepreneurs--must acquire the skills, institutions, and material resources that will allow them to practice self-governance. The first level refers to the "enabling environment;" the second level refers to "capacity building."
From past experience in promoting democratic local governance, USAID has learned the following lessons concerning these two levels.
1. Enabling Environment

The political commitment of a national government is the most critical variable in the establishment of an enabling environment for democratic local governance.

Devolution of political authority to local communities can compound the problem of corruption as local government officials suddenly find themselves possessing greater public resources. Therefore a national government must set and enforce strict stan dards of performance and accountability with respect to the powers and resources it delegates to local governments.

Creating the demand for change at the local level is as important as creating the supply of expertise at the national level. Program planners should work to improve the policy setting by collaborating with allies, including advocacy NGOs, citizens' g roups, associations of local government officials and others, who share a common goal for democratic local governance.

Regional governments, which serve as links between national and local governments, must also be reformed in the process of devolving political power.

2. Capacity Building

Expanding the authority and capacity of local government to collect taxes is critical to enhancing public services and investment.

Development problems differ widely among local communities. Therefore flexibility and adaptiveness on the local level are critical.

Devolution of political authority works best when it is conducted in an gradual way - i.e. power should be devolved in a particular sphere only when a local government has achieved the capacity to exercise that specific power responsibly.

In building local capacity, an understanding of the nature of institutions (i.e. what rules govern the interaction of individuals) is as important as the introduction of technological innovation.

Local institutions represent valuable social capital that should serve as the basis of local self-governance.

Because many development problems extend beyond a single locality, communities must establish cooperative links on many different levels.

Regional cooperation lessens the North-South stigma and maintains pressure for change in one country based on the successful experiences of other countries.

Practitioners (rather than consultants alone) should be used as advisers. Peer relationships work well even when U.S. practitioners lack the language and cross-cultural skills of international consultants.

II. Current Program Description
A review of USAID's current portfolio reveals a large list of programs with relevance to the DLG component of NPI. The inventory highlights an emphasis on efforts to promote decentralization and local governance services, and a much lesser accent on efforts to promote the development of local level democratic institutions or a more inclusive approach to community decision making. Many of the programs already underway should be reviewed with the four specific democ-racy strategic objectives in mind (see section V below) and, where appropriate, modified accordingly.
A. Africa
A component of the Mozambique mission's Democratic Initiatives Project is the financing of research concerning traditional authorities for local government structures within a national program of decentralization. The mission recently signed a $2.26 million cooperative agreement with the African American Institute to assist the Ministry of State Administration in undertaking this research.
USAID's Democracy/Governance Support Project in Ethiopia assists in the establishment of local and regional legislatures. Specifically, the assistance is designed to help the Ministry of Regional and Local Government: develop rules and procedures for the newly-elected regional legislatures and local councils; and conduct workshops that will train 100-200 new regional legislators.
In South Africa, USAID's Shelter and Urban Development Project is demonstrating that a partnership of communities, government, and the private sector can provide housing and urban infrastructure. Within this partnership, the public sector established the necessary enabling environment, and the private sector produces the actual housing and infrastructure. In addition, the mission's Housing and Urban Development Program contributed to the creation of the Institute for Local Governance and Development. This institute is working to develop the capacity of about 700 newly-unified municipal governments that had formerly been divided along racial lines.
B. Asia/Near East
In 1991, the national government of the Philippines passed a revolutionary Local Government Code. The code decentralizes authority and resources from the national government to local governments. In addition, the code mandates broad participation by local civil society in key decisionmaking bodies of local govern-ment. The Philippine Mission is in the process of initiating pilot projects with ten local governments. This assistance will use participatory methods to establish more efficient service in critical areas of local governance. These areas will include resource mobilization, investment prioritization and promotion, and environmental planning and management. The participatory process will revolve around the Local Government Code's provision for local special bodies (including a health board, school board, environmental board, and an overall development council) that must have at least 25 percent membership from local NGOs.
In 1987, the national government of Sri Lanka passed a constitutional amendment that provides significant political power to local governments. However, in the intervening years, progress has been slow in implementing this amendment. In order to facilitate the implementation, the mission will assist both local civil societies and local governments. The mission will strengthen local NGOs as a means to empower people and encourage broader participation in the identification and implementation of development activities. The mission also will strengthen village-level elected councils to work with local NGOs on development issues. Moreover, the mission will establish development funds that will be jointly administered by local civil society representatives and local government officials. These funds will be used to finance development activities that respond to local needs such as land and water use, resource management, water and sewage systems, and roads.
In the wake of Nepal's transition to democracy beginning in 1990, the national government passed a Local Government Act that devolves political and fiscal power to the local level. The act set up locally-elected bodies at the district and village levels. These new bodies can retain 90 percent of local property taxes and also receive block grants from the national government. Given these new opportunities for democratic local governance, the mission will assist the develop-ment of both local civil society ("user associations" for water, forests, etc.) and local government (village development committees). In addition, the mission will seek to increase the level of cooperation between the user associations and the village development committees.
In Indonesia, USAID's Municipal Finance for Environmental Infrastructure Project aims to: develop a viable and sustainable system of finance for local government; develop a local capacity to deliver technical assistance and training in municipal finance and urban management; improve the quality of urban environ-mental infrastructure; and increase the participation of the private sector in the provision of urban services. In addition, the Municipal Finance Program provides assistance to the central government in adopting an enabling framework for integrating urban environmental management with a system of improved, decentralized municipal finance and planning. As a result of this program, a ministerial decree was issued in 1994 that redistributes to local governments ten percent of the central government's property tax receipts.
USAID's Urban Environmental Infrastructure Support Project in Thailand assists in developing a sustainable system for financing urban environmental infrastructure. The project activities will be implemented by means of a newly-established Guaranty Corporation that is a cooperative venture between the government and the private sector.
USAID's Financial Institution Reform and Expansion Program in India seeks: to increase the participation of the private sector in the delivery of basic services and land development; to improve the capacity of local governments to plan, operate, and maintain basic services to low-income households; and to promote policies that will encourage the provision of environmental infrastructure through partnerships between municipal governments, state pollution boards, and private enterprises.
In Tunisia, democracy is less advanced and, not surprisingly, the enabling environment for democratic local governance is much weaker. In this more constrained political environment, the RHUDO is developing a National Municipal Training Center that will work both on national policy reform and on training for municipal officials. In addition, the RHUDO is fostering cooperation between community groups and municipal officials. At the beginning, these new partner-ships are focused on identifying non-partisan, local development problems and then on devising solutions to these problems.
C. Europe/Newly Independent States
USAID's Public Administration Assistance Program in Central and Eastern Europe has five areas of emphasis: (1) fostering decentralization; (2) increasing transparency, accountability and openness in government; (3) improving effective-ness and efficiency in government; (4) clarifying roles and responsibilities between executive and legislative bodies; and (5) supporting the transition of government to a regulator of the economy. Programs are implemented at the central, regional, or local level, but the primary filter for determining the type of program to undertake is whether or not a country has decentralized or has the political will to decentralize. The program has no interest in strengthening a highly centralized government. Within the overall context of democracy programs, assistance for public administration is provided as countries move in the direction of consolidating a democratic political system.
Specific country programs underway include the following:
In Bulgaria the program has been implemented by the University of South Carolina since 1991 and consists of short-term advisors visiting local governments in Bulgaria for 3-6 week periods. The advisers assist local officials in such areas as: citizen and media relations; budgeting and financial management; mayor/council relations; general management; economic development; planning and zoning; regulatory issues; and management information systems. Also under the South Carolina program, USAID has placed a long-term advisor in Bulgaria to foster the development of municipal associations. Additional activities to assist local governments, particularly in the area of training, are under design.
In the Czech Republic the program focuses on three areas: municipal economic development; municipal procurement; and municipal citizen relations. The first two program areas are being implemented by KPMG-Peat Marwick, and the third program area is being implemented by the National Academy of Public Administration. Each program consists of a combination of long-term advisors in pilot cities, a general training course offered across the country, and the devel-opment of self-study materials to be distributed widely. The Program in the Czech Republic is expected to be completed by January 1997.
In Estonia the program focuses assistance in two areas: budgeting and financial administration, including capital improvement forecasting and financing; and general operations management, including procurement and personnel administration. Development Alternatives is the contractor implementing this program, which includes two long-term advisors working in four pilot cities, and the development and delivery of a general training course and self-study materials. The Estonia Program is expected to be completed by September 1996.
In Poland the program consists of a multi-pronged approach including assistance at all levels of government. The centerpiece of the Poland Program is a three-year project being implemented by Development Alternatives which includes the following components: reforming and restructuring voivodships, particularly in the area of economic and regional development; assisting the government on issues related to decentralization, intergovernmental relations and finance; and building in-service training capacity targeted towards the central government, focusing efforts in the above two areas. The U.S. Office of Personnel Management is undertaking a management training effort with Poland's National School of Public Administration to complement this assistance. In addition, USAID has placed a long-term advisor within the central government to provide assistance in implementing a new public procurement law.
In addition, Public Administration Country Programs are currently being bid or are under design in the following countries:
In Bosnia the program will be directed at strengthening the Federation of Bosnia-Herzegovina. Up to three long-term advisors will work with cantons and municipalities to address a wide range of issues from intergovernmental relations to basic service delivery and financial management. At the Federation level, a long-term advisor will be placed in the Ministry of Finance to begin working on issues of intergovernmental finance and relations as well as general management and organization. A contractor has not yet been selected to implement this program.
In Hungary the program will target small to medium size cities. Direct technical assistance in basic public management areas as well as in building citizen involvement in local government will be provided through three long-term advisors. Another long-term advisor will develop and deliver training courses to a larger num-ber of local governments throughout Hungary, and will work with local institutions to build capacity of those institutions to provide training. Assistance will also be provided to strengthen the Federation of Local Governments, and occasional advice will be provided to the Central Government Ministries and Offices working on local government and intergovernmental issues. A contractor has not yet been selected to implement this program.
Complementing these country-specific programs are regional activities. Through Rutgers University and the Foundation in Support of Local Democracy (FSLD), USAID is supporting a program to develop municipal training modules in procurement, management, and media relations. USAID is also supporting Milwaukee County's program to provide internships for local government officials from Poland in Milwaukee County government. Additional technical assistance activities are under design. This year, USAID has begun supporting an initiative called Dialog through the German Marshall Fund and the FSLD Training Center in Bialystok. Dialog is a community development project that facilitates citizen activeness on issues of importance or concern to the local community.
In the Newly-Independent States, an important aspect of the transition from a centralized political system to a pluralistic, democratic system of governance is the devolution of power to the local level, where people have a greater prospect of participating in government. NIS countries are at a very early stage in this transi-tion: local authorities are still unpracticed in democratic processes, have not been fully empowered to govern, and lack many of the requirements of an effective democratic structure. Therefore USAID's Municipal Finance and Management Project is helping to redress these deficiencies by strengthening those basic institutions of local government that promote openness, participation, and accountability.
The project has three main objectives: to introduce municipalities in the NIS to the best available techniques and systems for municipal management, budgeting, and finance in the context of democratic local governance and a free market economy; to introduce automated management information systems to carry out open, transparent, and accountable local municipal management and governance; and to establish and conduct programs locally and in the United States to train project participants in the techniques and skills needed to make management systems work. The project is helping counterpart cities in Russia, Ukraine, Kazakhstan and Kyrgzstan.
D. Latin America/Caribbean
In El Salvador, USAID's Municipalities in Action (MEA) project was the forerunner to the current Municipal Development project authorized in 1993. The MEA was successful in investing almost 1 billion colones (approximately $125 million) in municipalities for roads, schools and potable water. This provided mayors with experience in handling funds and increased confidence in their ability to respond to long-standing infrastructure problems. However, the MEA distorted the need for municipalities to create their own sources of revenue. Town meetings were not the forum envisioned in the Municipal Code, but became more of a "wish list" session. The Municipal Development Project now includes components for policy reform, municipal strengthening, citizen participation, and support to the municipal association.
In Honduras during the 1980s, housing guaranty loans were initiated to improve marginal communities. Implementing infrastructure projects within the existing municipal code was difficult and it became clear changes in policy were needed to improve local governance. Technical assistance was gradually redirected to influence policy decisions and in 1990 a new municipal law was approved which gave local governments control over their own resources, authority to manage taxes and service fees, as well as budgets and land use decisions for urban development. Simultaneously, USAID approved a seven-year municipal develop-ment project to improve the effectiveness of municipal governments in responding to citizen needs for land, public services and infrastructure.
In Nicaragua, USAID's recently-approved municipal development project focuses more on institution building than policy dialogue. It is designed to strengthen municipalities, providing technical assistance and a capital fund. As the project evolves, twelve to fifteen municipalities will be selected to participate. Emphasis will be placed on activities that are replicable. Decentralization will be promoted through the national municipal association.
In Haiti, USAID's local governance program, developed by the Office of Transition Initiative, provides a mechanism for an immediate response to the post-crisis situation in Haiti. Its basic premise--that development assistance usually lags behind actual need--was to ensure that money and personnel were deployed to areas outside of Port au Prince immediately following the permissive entry of multi-national forces. The program established 16 sites around the country as platforms for community action. It created a base from which political development activities could be combined with immediate recovery needs: jobs creation, infrastructure repair, providing local security, and microprojects. If a project engaged a wide range of community actors, and benefitted the community, then it was considered for funding. To date, the local governance program has developed over 264 projects in about a third of all communes in Haiti (over 40 of 134). In many areas the project has worked with the Special Forces teams sent to rural Haiti to provide security, but also to restart the communities where three years of repression had taken a serious toll on infrastructure and daily life.
In 1992, USAID established its Local Government Outreach Strategy (LOGROS) Project for Central America. The purpose of this regional project is to contribute to the transfer of authority and control over financial and human resources from central to local governments while helping to improve the response of local governments to citizen demands for improved services and political enfran-chisement. The LOGROS project consists of three components: policy dialogue and consensus mobilization; technical or problem solving; and financial through the Municipal Infrastructure Finance Loan (which is called PROMUNI). The project supports municipal associations and NGOs that complement municipalities in the decentralization process.
PROMUNI is the capital component of the LOGROS project and serves to demonstrate what municipalities can do with increased financial resources at the local level. A U.S. government guaranty to the Central American Bank for Economic Integration (CABEI) is used to on-lend funds to intermediary financial institutions (IFIs) for municipal projects which improve water, solid waste, roads, etc. Municipal development funds or credit programs, such as PROMUNI, can significantly improve the success of municipal development projects by freeing them from limited capital constraints, allowing cities to learn by doing (i.e. managing resources and systems at the local level).
Another regional project is called Women and Local Government in Latin America. A project of the International Union of Local Authorities, it is sponsored by USAID's Regional Housing and Urban Development Office in South America and the Office of Women in Development. This project aims to increase the participa-tion of women in local government by increasing the institutional capacity of local NGOs to undertake advocacy activities.

III. New Programming Ideas

As evidenced from the above sample of current USAID programs, DLG potentially covers a broad swath of activities. Nonetheless, for purposes of USAID programming under NPI, the DLG category should not be viewed as all-encompassing. Instead, based on the development rationale for the initiative and the experience of previous programs outlined above, the following program areas should receive priority consideration.
A. Policy Dialogue
USAID, working together with other donors, can contribute to the establishment of a conducive enabling environment for effective democratic local governance through policy dialogue with the national government. The nature of the policy dialogue will depend on many factors, not the least of which is the national government's reason for engaging in the dialogue. The working rela-tionships will also depend on whether the push or decision to shift from centralized, concentrated authority is coming from the President and his/her "aparat," or is being forced on the nation's titular leadership by elements of the power structure outside of the formal government structure, which the leadership feels it must bow to in this instance.
The policy dialogue process often benefits immeasurably by exposing key decisionmakers to the experience of the U.S., or culturally more relevant neighbor states where the DLG process is more advanced. Such study tours often increases the comfort level of government officials, who are often being asked to make radical changes in how their society is governed, and also provides an opportunity to review specific options and to discuss the process with someone who has recently experienced a similar exercise.
Initially, the policy level dialogue will most probably involve only the Ambassador and the Mission Director with the host country government. Once initial agreement to move forward is reached, the baton passes to other players for execution. This may include technical experts retained by USAID, who benefit from being brought into the process early on.
The policy dialogue approach requires an understanding of the "road map" of power within the country, including identification of the specific groups comprising the coalition proposing reforms in this area. The USAID assistance package, to the extent possible, should strengthen their position. The explicit, although not necessarily direct, presence of USAID in the financing and operational stages of enabling activity sends a clear signal to the national government and civil society regarding U.S. government policy direction. In many countries, such an endorse-ment carries considerable weight for change.
If the decision has been made to proceed with a "top-down" approach, USAID's focus should not move from the policy dialogue until there is agreement on what will be done. Little or no "technical" work should be undertaken at lower levels of the government until political decisions have been taken. This is even more important tactically if the titular national leadership is responding to pressure, whether internal or external, in moving to empower local communities.
B. Creating Demand for Reform
In most circumstances, reliance should not be placed solely on policy dialogue. Perhaps more important, donors should contribute to creating the demand within a country for changes in laws and policies. This often is a labor intensive activity, requiring knowledge of the key political actors, an understanding of the legal framework and an ability to move quickly to take advantage of opportunities.
Partnerships should be encouraged between central and local government authorities, but this often will require the existence of a nationally organized local government sector. Support for associations of municipalities, mayors or local advocacy groups (horizontal levels of cooperation) enables them to participate in the terms and sequencing of the decentralization process. At the same time, caution must be exercised in relying on national level "institutes," which oversee and often provide services to local level governments. In many cases, they simply do not enjoy the confidence of locally elected officials and, by confining interaction on decentralization initiatives to such institutes, donors encourage a top-down approach and send the wrong message to all concerned parties.
C. Technical Assistance
Another level of programming activities relates to the specific requirements for creating the enabling environment. In this regard, technical assistance and, in some cases, material support for the development of constitutions and legislation at the national level and corresponding charters at the local level are critical. Among the key issues that must be addressed in these documents are taxing authority, responsibility for resource allocations and processes for selecting leaders.
D. Local Political Development
A holistic approach to the attainment of democratic governance requires supporting political development at the local level. If local governments are to embrace, display and embody the virtues of transparency, accountability, participation and effective use of resources, such performance must be assisted, required and monitored by an informed citizenry. By their nature, these are political acts. The political process is the empowering component of this system; civic society must successfully demand democratic governance.
Education and information are critical in this regard. This can be accom-plished through locally operated radio stations or newspapers that address local issues, legal aid clinics, legal rights promoters and support for the dissemination of information generated at the national level (e.g., budget, legislative decisions, treaties affecting basic rights, etc.) that will allow for more involved decision-making.
Also important is the development of political skills for use in elections and in decisionmaking fora. The focus should be on institutional decisionmakers (local administrators and elected officials), traditional decisionmakers (chiefs, religious leaders, etc.) and on groups that traditionally have not been represented in the decisionmaking process. In this regard, establishment of a forum for women's political leadership and activism will ensure more meaningful participation and increase the capacity of local government to reflect the concerns of the populace that it serves.
In some contexts, support for the establishment of new rules, procedures and structures might be appropriate. These may include:

Local citizens advisory councils or public fora where government officials meet ordinary citizens;

Watchdog organizations for monitoring abuse by government officials, including the police;

Open budget hearings that specifically invite public input;

Instituting code of ethics and public disclosure laws for elected officials and administrative professionals; and

Conducting public opinion surveys and evaluations on needs, wants and satisfaction.

E. Dispute Resolution
Another area of focus for DLG activities involves local dispute resolution. The emphasis may vary in different settings on: 1) the formal judicial system; 2) administrative mechanisms for resolving disputes; 3) support for NGOs that disseminate and pressure for the enforcement of legal rights; and 4) alternative dispute resolution. Several issues and bottlenecks relating to assistance efforts in the judicial sector directed at the local level should be factored into planning exercises. For example, many developing societies have a system of valid traditional mediation practices, which work well and are quite equitable, thus limiting the need for change and modernization. In these circumstances, conflicts may emerge between modern laws and traditional dispute resolution mechanisms.
F. Programmatic Linkages with Other Issue Areas
Because all three components of NPI operate at the local level, USAID programming in this area should concentrate on certain regions or municipalities in each pilot country. In this way, the synergies flowing from each NPI initiative will create a whole better than the sum of its parts. Specific linkages envisioned between the DLG component and the other two components are as follows:
Small Business - Local governments create the enabling environment for small business to develop and grow, or alternatively, inhibit the development of small business in their community. USAID institution-building assistance to local governments under NPI will include assistance in economic planning and imple-mentation so as to foster the development of small business. At the planning stage, local business leaders and groups, as well as citizens, should be included in the development of an economic plan for a community, either through regular consultations or through an advisory board or commission. Technical assistance and training to local governments in setting up such a board or commission may be provided under the NPI/DLG.
Local governments may also unintentionally create an unfriendly regulatory environment for the development of small businesses. For example, local zoning laws may require minimum size restrictions for business sites that are out of reach for smaller firms, forcing small businesses to operate outside of these rules, thereby denying them access to necessary urban services such as water, power and sewer. The ability to obtain licenses and permits may also inhibit the ability of small businesses to flourish in a community. Technical assistance and training in creating a more friendly regulatory environment may be provided to local governments under the NPI/DLG.
One area that might be particularly useful in terms of creating a more pro-active environment for small business development in local communities is the introduction of open and transparent public procurement systems. In local communities, most procurements are of a small value that can be met by a small businesses. Much in the way that public procurement in the U.S. fosters the development of small business, opening up procurement processes in local governments in other parts of the world may also play an important role in the creation and building of small business.
NGOs - NGOs play an important role in facilitating communication between local governments and their citizens, and in educating citizens as to their rights and responsibilities. Technical assistance and training may expose local governments to various ways to foster citizen involvement, including through local NGOs.
NGOs, such as associations of mayors or associa6tions of cities, can also play an advocacy role in pressuring the central government for policy reforms and decentralization. USAID assistance under the DLG component of NPI may foster the development of such NGOs. Alternatively, NGOs can be a mechanism for the delivery of services locally. For example, NGOs can often influence local govern-ment programs by example through the development of innovative new approaches and models that are then adopted by government.

IV. Performance Measurement and Evaluation

The DLG component falls within the democracy sector of USAID's strategic framework. Successful DLG efforts should contribute to improvements in all four democracy sector objectives: strengthened respect for rule of law and human rights; more credible and genuine elections; strengthened civil society; and more accountable governance. Moreover, increasing local government participation in basic government functions is identified as a specific program strategy under the "more accountable governance" objective.
The following results framework is for use at the operating unit level. Specific indicators are suggested for several of the program activities that form of the DLG component of the NPI.
Strategic Objective
SO: Increase democratic local governance in Country X.
Indicators:

Citizens' accessibility to the decision-making and budgeting process at the local level.

Percentage of national-level revenues allocated to local governments.

Percentage of locally-collected revenues in the budgets of local governments.

Program Objectives
PO 1: Create an enabling environment for DLG at the national level of Country X.
Indicators:

Revision of the national constitution or passage of legislation that devolves political and fiscal power to localities.

Number of taxation instruments granted to local governments.

Political and fiscal independence granted to local governments as evidenced by election of local leaders and ability of local leaders to allocate resources.

Degree of national-level executive and judicial enforcement of constitutional and legislative changes.

PO 2: Build capacity for DLG in Country X.
Indicators:

Number of NGO, business, or professional coalitions that advocate for DLG reform at the national level.

Number and size of private-sector and civil-society organizations participating in the local political process.

Number and functional range of services provided by local governments.

Number of public-private consortia for service delivery at the local level.

Number of local-level consultative mechanisms that institutionalize citizen participation in the decision-making process.

Number of women in positions of leadership as elected local officials, in advocacy organizations and as owners of small businesses.

In addition to the measurement of performance at the country and program levels, USAID is initiating a major cross-country evaluation of democratic local governance. This exercise, like previous CDIE evaluations of rule of law and civil society programs, will distill and analyze the pertinent experience of both USAID and other donors during the last several years. Unlike previous decentralization evaluations, which emphasized public administration of one sort or another, the proposed evaluation will focus on the democratic aspects and implications of decentralization.
As currently envisaged, the study will begin in the fall of 1995, with several field studies beginning in early 1996. The initial field studies will form the basis of an initial multi-donor review in the spring of 1996, as part of a seminar organized by USAID for the DAC working group on Participatory Development and Good Governance. A final synthesis report will be ready in early 1997.

V. New Management Vehicles

The DLG component of NPI should be initiated in a manner that plays upon the strengths of USAID field missions--including the ability to understand the political dynamics in a country and to work with other donors in pursuit of a policy dialogue--and nongovernmental actors in the United States, who have worked on political development, decentralization and empowerment issues for quite some time. At the same time, the DLG component requires the development of technical expertise within USAID to assist with the assessment process, which is required to initiate an effective policy dialogue and to identify appropriate programs. Effective programming also will require the establishment of formal partnership arrangements with particular nongovernmental actors, who can provide the requisite expertise and resources necessary for implementing programs in the field.
Many U.S. nongovernmental actors have expertise in specific areas germane to the DLG component. These include: constitutional arrangements; local government management; political institution building; encouraging political participation of women; working with advocacy NGOs to promote policy reform; encouraging consensus building among disparate political actors; and educating the public about government institutions, policymaking and participation. Some nongovernmental actors, however, assume that they can respond to all requests for assistance posed by a particular country setting. USAID bureaucratic procedures, which seek to limit the number of contracts an operational unit is responsible for, often encourage such posturing.
The challenge for USAID is to devise mechanisms that permit a multitude of nongovernmental actors to be available on short notice to respond to requests for assistance on DLG matters. These mechanisms must either encourage groups to work together or allow USAID personnel to facilitate a cooperative activity among different groups in support of a particular objective relating to democratic local governance.
In addition, USAID should utilize the following criteria in selecting among partner organizations:

Democratic orientation as reflected in organizational charter, speeches by leaders and institutional formation;

Strong preference for entities that are inclusive and participatory, and promote participation of minorities and women in formulation of policy and implementation of programs;

Organizational commitment to work on policy issues through advocacy or monitoring;

Involvement in activities with urban center focus; and

Capacity to implement programs that have a sustainable component.

Some reorganization within USAID missions also may prove helpful.
USAID/Niger, for example, has recently established an Office of Democracy, Governance and Local Participation, which is responsible for issues relating to democracy, human rights, governance, decentralization, local participation and partnership relations with PVO/NGOs. The establishment of a consultative group to help the mission select a democratic local governance approach and choose from among different program options is another possibility.
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Last Updated on: December 22, 2000