SWEEPING changes were carried out in June, 2005 in the Local Government Ordinances, 2001, provoking a national controversy. The ordinances issued by the governors of the provinces were almost identical and covered all areas of local governance, ranging from administration to elections.
These reforms came in the backdrop of various studies commissioned by the National Reconstruction Bureau as well as findings of a study titled, “Devolution in Pakistan” conducted jointly by the World Bank, the Asian Development Bank and the Department of International Development of UK in July, 2004.
The reforms aim at improving governance in the specific socio-political and economic environment of the country. How far can be the objectives be advanced by these reforms needs an analysis of the system’s working during last four years.
First an insight is required on global thrust towards devolution. Devolution is intended to democratize our societies by giving a voice to the people in the political, administrative and fiscal governance and to derive economic benefits by avoiding inefficiencies and wastages of resources inherent in a centralized system of governance. Hence, the efforts of governments the world over to decentralize the systems of governance.
Second, there was a long standing demand to reinforce the third tier of the government and vest it with the functional responsibilities that directly affect the people at local level and devolve the authority and responsibility to the people for governance.
In its report of 1983, the Local Government Commission observed that “a local government as a third organ of the state as distinct from the provincial and federal governments should grow as independent self-reliant institution”.
This view was very reiterated in the report of the Sixth National Finance Commission of 1997: “the federal and provincial governments should make efforts to strengthen local bodies institutions in their respective jurisdictions by sharing revenues and jurisdiction of functions”. But the Devolution Plan was implemented from August, 2001.
The amendments in the Local Government (Amendment) Ordinance, 2005 were designed to clip the political, administrative and financial powers which, it was felt, has reduced the role of the provincial governments, as was evident from the hostility of the provincial governments towards local and district governments.
But the imbalance in power distribution between provincial and local governments was not the only reason for the friction. It also arose from an imbalance of power between the federation and the provincial governments. The joint study poignantly summed up this position: “until the relations between the federal government and provincial governments are adjusted so as to complete devolution, such tensions can be expected. The provinces unambiguously considered that they lost power and influence as a result of devolution.
It is in this background that the President of Pakistan had advised the federal government on February 23, 2005 to review and do away with concurrent list in the Constitution and adopt a formula of 50:50 resource distribution between the federal and provincial governments out of the Divisible Pool under next NFC Award. The advice of the president is under active consideration.
The amendments were aimed to tackle some practical difficulties faced in the implementation of the original LGO. The objective was to strike a balance between rights and responsibilities among the provincial and local governments and the federation and ensure smooth functioning of the three-tier system. While some existing institutional arrangements required strengthening, a need was felt to create new arrangements.
It is commonly perceived, and rightly so to a large extent, that the local governments remained starved of resources during last four years on account of their high dependence on ‘resource transfers’ from the provincial ‘divisible pool’. There were two reasons for it. First, the LGO, 2001 assigned weak fiscal bases which could not generate sufficient local resources. Second, the efforts of local governments to raise revenues were scuttled by the provinces due to ambiguities in the law.
A sample survey of six districts and 12 tehsils revealed that the share of own revenues in total revenues of the districts ranged between one per cent and 13.6 per cent except Karachi where own revenues constituted 48.8 per cent in 2003-04. As for TMAs, the position was much better than districts due to assignment of a potential base of revenue in property tax to them.
Hence, own revenues of TMAs/Towns as a percentage contributed a share ranging between 35.6 to 56.3 per cent. By amending section 116 of LGO 2001, the local governments have been enabled to maximize revenues from assigned tax bases within the ambit of the national fiscal policy.
The provinces violated sub-section 1(a) of section 120-D on vertical distribution of resources between the provincial governments and local government. The formula laid down by the Provincial Finance Commission Awards for the distribution of resources from ‘Provincial Consolidated Fund’ comprising tax and non-tax revenue and capital receipts and federal transfers out of federal divisible pool as well as straight transfers were not faithfully adhered to.
The provincial consolidated fund was to be bifurcated into the provincial retained amount and the provincial allocable amount on the basis of actual expenditure level of 2001-02. The provinces skirted this provision with impunity. The Punjab and NWFP governments excluded sizeable chunk of resources from the ‘divisible pool’ as provincial obligatory expenditures; The Sind government did not include non-tax revenue and Balochistan government did not reckon capital receipts.
This violation became possible because the LGO, 2001 had not laid down an elaborate procedure for constitution of Provincial Finance Commission, its functions, duties, power and procedures. Sections 120-A to 120-M of the amended Ordinance, 2005 remove this lacuna.
Devolution was intended to empower communities in conceptualization, planning, implementation and management of the development projects, falling under functional responsibilities of the local governments. But, the federal government as well as provincial governments deprived the local governments from full funding of community-conceived projects and made an inroad into their domain by initiating and implementing vertical programmes in education, health, water and sanitation. Some of these programmes were sector specific while others such as Khushhal Pakistan Programme, Drought Emergency Relief Programme etc were for local development works, such as farm to market roads, drains and school construction and up-gradation.
These vertical programmes implemented outside the effective control of the local governments delve deeply into the development planning and budgeting of the local governments and stifle the preferences of communities in conceptualization of the projects. It is for this reason that the share of local governments in the annual development programmes (ADPs) during last four years has remained limited.
The share of the local governments in the Punjab totalled Rs9 billion or 20 per cent in the overall ADP of Rs43.4 billion in 2004-05, 0.963 billion or six per cent in overall ADP of Rs16.2 billion in the NWFP, about Rs5.36 billion or 42 per cent in the ADP of Rs12.78 billion in Balochistan and Rs5.66 billion or 46 per cent in ADP of Rs12.3 billion in Sindh.
The anomalies have arisen largely due to the lack of an institutional mechanism in the LGO, 2001. With a view to removing these, the functions of coordination in the development planning and review of implementation status of development schemes have been entrusted to the Provincial Local Government Commission through the amendments carried out in section 132 of the Ordinance. This aims to remove the discord between local governments and the provinces as also among district and tehsil nazims of zila and tehsils and national and provincial legislators.
The apex body, namely, Local Government Commission created under LGO, 2001 which is charged with the responsibility of smooth functioning of the system did not enjoy an autonomous status under the LGO, 2001. The amendments now carried out in Section 131 of the LGO, 2001 are aimed at making the body fully autonomous by establishing a separate Secretariat of the Commission with sections for each level of local government i.e. districts, tehsils and unions, providing a separate budget instead of fund, notifying organogram and schedule of establishment of the Commission and provisioning of a separate Drawing and Disbursing Officer as well as Principal Accounting Officer in the Provincial Local Government Commission.
The challenge to managerial authority in the districts arose from the transfer of large number of staff from provincial services. These officials were inured in a bureaucratic style of governance and had no training in the field of participatory governance. These officials also looked towards the Establishment in the provinces for orders. This sometimes generated a rivalry between the elected Nazims and the officials due to “conflict of interests”. In order to tide over the bottleneck in the smooth functioning of the local governments, the amended Ordinance, 2005 has added a Section – 140A – for creation of a district service for running the local government. The service is to be created by December 31, 2005.
The Ordinances, 2005 contains many other amendments, aimed at priming the wheels of the Devolution Plan. However, it must be emphasized that the devolution will only be complete and successful when the functions from federal level are transferred and resources are shared between and federal and provincial governments on an equitable basis by assignment of tax bases to provinces and transfer of resources to them from the federal “divisible pool”, commensurate with their functional responsibilities.
