What is Decentralization: Objectives, Types, Advantages & Limitations

What is Decentralization?

• Decentralization refers to the transfer of power and authority from central level government to the regional or lower levels.
• Decentralization is the sharing of power and resources in a political-administrative and territorial hierarchy.
• Decentralization is not a new concept. It is the restructuring or reorganizing of authority in the institutions of governance.
• According to UNDP, Decentralization, or decentralizing governance, refers to the “restructuring or reorganization of authority so that there is a system of co-responsibility between institutions of governance at the central, regional and local levels according to the principle of subsidiarity, thus increasing the overall quality and effectiveness of the system of governance, while increasing the authority and capacities of sub-national levels.”
• In other words, it means the transfer of control and decision-making from a centralized entity to a distributed network.
• In decentralization, the top management delegates decision-making responsibilities and daily operations to middle and lower subordinates.
• Decentralization can be understood as the orderly assignment of authority, throughout the levels of management, in an organization
• Each level has the authority to act and have responsibility to make decision making

Objectives of Decentralization

• To make the government more transparent, responsive and accountable
• To ensure the principle of subsidiarity (providing services from the lowest possible level)
• To improve the quality of services
• To empower regional and local governments
• To provide space for innovation in service delivery

Types of Decentralization

1. Political or democratic decentralization

• It involves the transfer of administrative, fiscal, and political power through the citizens or their elected representatives
• It gives citizens, or their representatives, more influence in the formulation and implementation of policies through democratization
• This concept implies that the selection of representatives from local electoral jurisdictions that allows citizens to know better their political representatives
• Example: Free election to vote the representative of the country

2. Administrative decentralization

• It seeks to redistribute authority, responsibility and financial resources among different levels of government
• It has 4 forms:

a) Deconcentration

• It is the weakest and inexpensive form of decentralization  used frequently in unitary states
• Here different levels of central government redistributes authority, financial and management responsibilities
• It uses administrative means to function properly. Thus it is also called as administrative decentralization
• This form of decentralization is mostly seen in developing countries

b) Delegation

• It is more extensive form of decentralization with semi-autonomous units.
• Delegation is the transfer of managerial responsibility.
• Through delegation central governments transfer responsibility for decision-making and administration to semi-autonomous organizations not wholly controlled by the central government, but ultimately accountable to it
• It is common form of decentralization which involves delegation of authorities and responsibilities

c) Devolution

• It is an administrative type of decentralization and has the most common understanding of decentralization
• Here the lower level units are legally constituted as separate governance bodies. Such transfer of authority are considered as devolution
• Quasi-autonomous units of local government with corporate status has authority for decision-making, finance, and management
• It is usually transferred to municipalities that elect their own mayors and councils, raise their own revenues, and have independent authority to make investment decisions.

d) Privatization

• Privatization refers to the transfer of ownership from the government institutions to the private firms/institutions.
• Privatization is the transfer of governmental function to private ownership.

3. Fiscal decentralization

• Financial responsibility is a core component of decentralization
• Adequate revenues are necessary to carry out decentralized functions. Thus it is either raised or transferred through the central government
• Fiscal decentralization takes many forms:

1. 1. User charges for self-financing or cost recovery
   2. Co-financing or co-production arrangements through which the users participate in providing services and infrastructure through monetary or labor contributions
   3. Local revenues are expanded through property or sales taxes, or indirect charges
   4. General revenues from taxes that are collected by the central government are shifted to local governments for general or specific uses
   5. Municipal borrowing authorization and loan guarantees for mobilization of either national or local government resources.

• Example: Legal authority to impose tax

4. Economic or market decentralization

• It is the most complete forms of decentralization from a government’s perspective
• It includes privatization and deregulation
• Responsibility for functions is shifted from the public to the private sector
• It allows functions that had been primarily or exclusively the responsibility of government to be carried out by businesses, community groups, cooperatives, private voluntary associations, and other non-government organizations
• Example: Electricity or broadcasting provided by various and competing companies

Importance/Advantages of Decentralization

• Decentralization reduces the burden of the top-level executives and furthermore extends their leadership potential
• Decentralization encourages self-sufficiency and confidence amongst subordinates through constantly challenging and finding solutions on day-to-day activities
• Decentralization ensures better decision making and quick response through better adaptations
• Decentralization contributes to the key elements of good governance
• Decentralization promotes public participation in economic, social and political affairs.
• It ensures accountability from every department and convenience for standard setting for growth measure.
• Decentralization improves delivery and utilization of the services.
• It increases morale and motivation of the subordinates
• Decentralization increases transparency and accountability of the works.
• The communication system becomes more effective and builds a strong relationship between superior and subordinates
• It propagates a sense of competition among various departments, to outperform others ultimately resulting in increased productivity
• It confers greater independence to the lower management levels and let them perform functions in the way that is most appropriate for their department or division
• It promotes effective supervision and control.

Limitations of Decentralization

• Decentralization has high initial administrative cost which can increase government spending
• Decentralization is not possible to follow uniform policies and standardized procedures at all levels
• It may lead to increasing conflicts among various areas due to pressure to increase output and revenues
• Decentralization may lead to lack of uniformity in the organizations.
• Too much fragmentation through decentralization can create difficulty in coordination and control
• Decentralization may limit the work efficiency and effectiveness: During the emergency situation, lower and middle level managers face complex and non-programmed problems and cannot take a decision due to limited authority.
• Unskilled and incapable subordinate level managers may take wrong decision, which may increase the risks and result in losses.
• Specialized nature of services like accounting, human resource, engineering, surgery etc. cannot be done through decentralization.
• Difficult to maintain equitable distribution of work to all the concerned agencies.

References and For More Information

http://web.undp.org/evaluation/documents/decentralization_working_report.PDF

https://www.fao.org/3/y4256e/y4256e05.htm

https://www.cifor.org/publications/pdf_files/interlaken/Compilation.pdf

https://aws.amazon.com/blockchain/decentralization-in-blockchain/