Hi and welcome to the third session of your second module.
In this session I'm going to talk about
two basic concepts: The principle of subsidiarity and decentralization.
It is important to learn these concepts because they help in explaining
limitations and scope for revenue generating activities often of a local body.
Municipal governments build infrastructure in
cities and provide us services such as water supply,
solid waste management, sewerage,
drainage and so on.
However, all cities are not the same.
Do you agree that around the world some cities have very good infrastructure and
the infrastructure in some other cities is very poor or inadequate.
Even in your own country,
you will find that some cities have better infrastructure than the others.
It may mean that some of the city governments are
richer and they have relatively higher capacity.
Now that makes me think,
why do some cities have better infrastructure than the others?
How do cities get richer than the others?
And how do some city governments generate more revenue than the others?
And can any city become rich?
There are two factors that can help in answering my questions.
These factors explain the reasons of high or low level of income often of a local body.
One, pricing.
Our local bodies provide us services but how
much do they charge to the users for the services that they are providing?
And the second is authority.
How much freedom does the city government has in taking decisions related
to the service provision and for determining price for the services?
Or do you think that most of the decisions are taken at the higher levels of government?
I will attribute the second set of reasons;
authority, as enabling conditions.
It is logical to say that a municipal corporation
will generate more revenue when they put high price on the services.
However, it is important to remind you that municipal organisations function
under mandates and regulatory obligations
which are set up by the higher levels of government.
Municipal bodies are often not entirely free to determine
the price of municipal services at par with the market prices.
So it is important to understand the extent to
which a municipal organisation can determine the price of a service.
The level of authority is explained by the concept of decentralization.
What is decentralization?
Let's take an example of Ghana.
It has 10 regions. These regions consist 216 districts.
Greater Accra region which is one of the 10 regions in Ghana has 16 districts.
Within these 16 districts,
there are seven municipal districts,
two metropolitan districts and rest of the districts have several towns and cities.
Each city or town is governed by a local government.
So what does this example tell us?
The city of Accra is located within the Accra Metropolis District.
Accra Metropolis District is located within the greater Accra region.
And the greater Accra region is within the boundaries of country Ghana.
At each level of this administrative division, there is a government.
In simple words this illustration shows us that
the district level government is higher than the city level government.
Regional level government is higher than the district level government.
Similarly, national level government is higher than the regional level government.
This is a generalized governance structure in democratic countries.
However, it is interesting to look at
this governance structure as a relation of
authority between the different levels of government.
This distribution of powers or we can say delegation of
authority between different levels of governments is not the same in every country.
In some countries, national governments has
more authority over its lower level governments.
Similarly, a state or provincial level government
may have much more authority over city level governments.
Decentralization is a mechanism for
distributing powers among different levels of government.
In general, we can say,
that the more power delegated to lower levels of government,
the higher the level of decentralization.
Decentralization is further explained
in detail in the readings provided with this session.
So you must go through your readings after you are finished watching this video.
This understanding of decentralized governance is
leading us to another important question and that is,
how to determine which powers shall remain at which level of government.
And this question can be answered through the principle of subsidiarity.
The principle of subsidiarity states that,
"Decisions related to a service shall be taken at
the level of government which is most near to the users of the service."
For example, decisions related to water supply service
in a city shall be taken at the city level government.
Whereas, decisions related to
national defense can preferably be taken at the national level government.
I would like you to notice that who are the users of water supply service in a city,
it is all the residents of that city.
And who are the users of National Defense Service?
It is all the citizens of the country.
The concept of subsidiarity is believed to be more than 200 years
old but it still provides the basis for the modern urban governance.
It is important for us to remember that the principle of subsidiarity builds
strong argumentation justifying the need for decentralized governance.
I would like you to spend some time on
the readings and watching the external links that we have shared
with you along with
this video session on concept of decentralization and the principle of subsidiarity.
In the next video I will discuss with you
the conclusions and lessons learned from the reading material on these basic concepts.
It will help us in going a step further in understanding the topic of municipal revenues.
Somesh SharmaExpert, Environment and Sustainable Development Planning
Jaap SpronkProfessor of Financial Management Science
Meine Pieter van DijkProfessor of Urban Management in Emerging Economies
Bernadette SsanyuVisiting Lecturer
