PROPOSAL TO THE SWISS AGENCY FOR DEVELOPMENT AND COOPERATION (SDC) FY04 FUNDING PROPOSAL REVISED JUNE 6, 2003

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1 PROPOSAL TO THE SWISS AGENCY FOR DEVELOPMENT AND COOPERATION (SDC) FY04 FUNDING PROPOSAL REVISED JUNE 6, 2003 FISCAL DECENTRALIZATION I. Basic Program Information: Fiscal Decentralization 1. Thematic Program: Governance and Decentralization: Fiscal decentralization 2. Component/Activity Title: Fiscal Decentralization 3. Task Manager and Contact Information Robert Ebel, WBIRC, World Bank Institute 1818 H Street, NW Washington, DC United States TEL: FAX: Time Frame: July 1, June 30, 2004 (WB Fiscal FY 04) 5. Target Regions: FY 04 Country Focus includes: Guatemala, Nicaragua, Mozambique, Sudan: Regionally Francophone Africa, Sub-Saharan Africa. Other opportunities exist (e.g., rapid-response) for MNA(Jordan, Yemen, West Bank-Gaza and Iran); and E. Asia (Indonesia) 6. Target Audience: Capacity building for clients engaged in the policy development in the field of intergovernmental relations and local public finance. Clients include policymakers and their staffs, applied academics and practitioners. <><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><

2 II. Detailed Program Information Brief Program Description: The achievement of the 2015 Millennium Development Goals will depend in large part on whether developing countries can get their public finances right. That is, can they design a sustainable program that not only utilizes the public finance tools for pro-poor growth, but also recognizes the importance of a country having an fiscal system that its citizens can understand and control? Here it is critical to stress the intergovernmental (local and central) fiscal nature of the platform for a successful MDG strategy. At least six of the goals demand there be in place a well designed system of fiscal coordination. Moreover, all six have and an important (indeed, an often dominant) local public goods character: extreme poverty, universal primary education, gender equality, child mortality, environmental sustainability and global partnerships for development. The WBI Fiscal Decentralization Program provides not only an anti-poverty discipline; but also an anti-poverty dimension. Objective: Attacking poverty by (i) leveraging the skills and resources of the poor, so that people will have an ownership and control to share knowledge, build capacity, and forge partnerships for learning and (ii) sorting out the intergovernmental relationships so that citizens can shape a system of governance they understand, control, and can be accountable for. A Fiscal Decentralization program Logical Framework (LOGFRAME) that relates the Fiscal team s programmatic approach has been carefully developed to relate the WBI Decentralization activities to the MDGs has been developed and is available for SDC review. To accomplish these objectives, an emphasis is placed on the utilization and networking of donor experts (and institutions) into the WBI network of communities of practice. Because of the Swiss expertise in intergovernmental relations (e.g., federalism) this utilization and networking of Swiss experts is easily accomplished. Contents and Design: The World Bank Institute s program on Fiscal Decentralization is based on the (documented) premise, that a well designed fiscal system is key to not only efficiency in the delivery and financing of pro-poor public services, but also to the achievement of a country s broader goals of poverty reduction, economic growth and stability, and, for some countries, nation building and the prevention of conflict. To deliver on this premise, the WBI program on Fiscal Decentralization provides systematic programmatic approach viz., a set of tools (learning vehicles) that can be applied to address the challenges and achieve the objectives identified above. There are there are three such reinforcing vehicles, each with a clear set of actions and results:

3 Learning Courses The program offers a tested and robust core learning course Intergovernmental Fiscal Relations and Local Financial Management. The course is designed to provide (i) the state-of-the art thinking on its topics in public finance development economics; (ii) a flexible design that allows the course to be tailored to not only audiences having different skills; but also to those having different policy frameworks (e.g., urban vs. rural, large vs. small jurisdictions; middle income vs. poor countries); and (iii) a model that can be successfully wholesaled such that country clients take ownership and then further tailor the knowledge in-country. Action Learning and Strategic Policy Advice Country clients often ask for targeted policy advice on a topic. This request may be that of an emerging issue for which the request is to bring global and/or regional knowledge to the country table; or it may be just in time skills learning. Illustrations in FY 03 range from a program in subnational statistical capacity building, facilitating South South capacity building between Brazil, Mozambique and other Lusophone African countries, supporting a Swiss-led global dialogue on Federalism through the International Conference on Federalism (St. Gallen, August 2002), training and innovations in knowledge dissemination using digital radio, and the development of new programs in budgeting and financial management for Low Income Countries Under Stress (LICUS). In FY 04 increasing attention will be directed toward a countryfocus with emphasis on LICUS.. Promoting Knowledge Networks Institutionally, the Fiscal Decentralization program is leveraged through an expending set of created Communities of Practice: e.g., the Municipal Development Programs in both Sub-Saharan Africa and Francophone Africa, and the Fiscal Decentralization Initiative for Central and Eastern Europe and Central Asia (FDI). This is scaling up at it best, often allowing WBI/SDC to exit by serving as only a knowledge hub for leveraging distance and other electronic learning worldwide (e.g., newly installing a powerful web-search engine that that allows the a web search to be integrated with client sites, such as the nine language ECA-based Local Government Information Network). Current plans (FY04) are to establish a training program to expand the reach of this site to other regions (initially, E. Asia -- Indonesia). Expected Output: Beginning FY 04 the WBI Decentralization Program proposes to align its SDC partnership events in a manner consistent with a country-focused approach, and in this context, a special emphasis on LICUS countries. The selected countries will include only those on where the is a clear overall of Swiss/WBI interests and/or where

4 agreement has been made as to mutual agreement of both SDC and WBI (discussions were also held on this topic in Bern on 19 December 2002). The proposed FY 04 activities include (listed in proposed order of priority). 1. SDC/WBI Mozambique/Brazil South-South Core course. Learning Objective and Swiss Knowledge. The Mozambique program, which is one of the only South- South capacity enhancement programs in the World Bank, leverages the high profile work of SDC in Mozambique with the World Bank Institute s well developed learning partnership with Lusophone Brazil(ESAF training center of the Brazil Ministry of Finance). While by its nature capacity building activities, including perhaps especially, South-South activities, entail two-way learning; the primary objective of this activity is to give Mozambique a common-language expertise base (Brazil) on a systematic and permanent basis. 2. Swiss Institute of Federalism (IF). Combined study tour (to Switzerland) and core course on intergovernmental for clients in post-conflict countries, including: Sudan, Ethiopia, Rwanda and Sri Lanka. This support is not reflected in Table 1 below. Learning Objective and Swiss Knowledge. Whereas the Swiss IF has generated a large knowledge base on the role and importance of a well designed system of decentralized governance in post-conflict countries, it is yet to pull this all together into a systematic training function. This funding will allow the University of Fribourg-based IF ( in partnership with the University of St. Gallen) to develop a new course on Federalism in Post Conflict Counties. 3. SDC/WBI. Nicaragua and Guatemala Core Courses in Intergovernmental Relations and Local Public Finance. Learning Objective and Swiss Knowledge WBI in partnership with the country offices of SDC will be able to use both the Nicaragua and Guatemala Programs to develop not only a "core course approach to both countries, but, in the case of Guatemala for the region. The opportunity for learning will be enhanced by developing all the course materials in Spanish. 4. Development of guide for assessing capacity needs for effective local governance in traditional (e.g., tribal) cultures. Learning Objective and Swiss Knowledge The World Bank Legal Department will be added to the SDC/WBI partnership in the exploration of a critical (and yet,still, cutting edge) topic: a workshop to develop an understanding of the role of tribal (indigenous) relations and structures as local governments. To date we know of systematic training -plus-learning activity on this topic, which is increasingly important as" traditional counties" (e.g., Sudan turn to intergovernmental l(decentralization )policy as a vehicle for developing national unity coming-out of a history of conflict. 5. Swiss Experts Networked. Individuals to participate in various WB and WB partner events. Note that Swiss experts are also networked into activities 1-5 above. This item # 6 is for circumstances for which there is special request for an expert speaker for an international. Learning Objective and Swiss Knowledge One of the clear lessons of the SDC/WBI partnership in Governance and Decentralization has been that getting Swiss networked into the World Bank set

5 of global partners programs not only takes advantage of Swiss expertise, but leads to log term, direct Swiss-other partner relationships. 6. WBI. General Support to knowledge development (internet, web, rapid response/development of LICUS-responsive capacity budgeting /enhancement materials). Learning Objective and Swiss Knowledge (Please see discussion in paragraphs 9-11 above) 7. Francophone. Develop a Francophone course on decentralization. Learning Objective and Swiss Knowledge For the past two years experts from the University of Fribourg, University of Montreal, and the University of Paris have offered a core course in French for West Africa. Whereas the faculty and course material of are of high quality, the team has been disappointed its ability to find a solid regional partner. Thus, for FY 04 (and, of course, in consultation with our partners), we have determined to not again just offer a course in the region, but, rather use a scaled back sum to work on a curriculum in and look to develop a local partnership.