Decentralization in Madagascar

by World Bank Group

Decentralization in Madagascar is part of the World Bank Country Study series. These reports are published with the approval of the subject government to communicate the results of the Bank's work on the economic and related conditions of member countries to governments and to the development community. This study takes stock of Madagascar's first 10 years of decentralization. As with many other developing countries, Madagascar's decentralization process has seen reversals, uncertainties and lack of clarity. This explains why Madagascar remains a highly centralized country with only about 3 to 4 percent of expenditures spent below the center and with very few prerogatives decentralized to the local level. Notwithstanding the structural impediments to decentralization in poor countries, many positive lessons can be drawn from the Madagascar case that point to the potentials of the decentralization process. This study provides a detailed analysis of local government finances and develops a methodology for measuring local financing needs. Based on this analysis, the study argues that a lot can be gained from simplifying administrative arrangements and fiscal relationships. Instead of a full-blown and ambitious decentralization strategy, the study suggests a number of reforms, which would go a long way by making the current structure work better. These reforms include: (i) A full transfer of the (limited) local competencies to communes, particularly local revenue collection; (ii) Increasing transfers to rural communes so that per capita allocations would be the same across communes - rural and urban; and (iii) Assigning revenues to one level of government only, except for some very specific types of taxes (such as on natural resources).

110 pages, Paperback

First published August 30, 2004

About the author

The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and most famous development bank in the world and is an observer at the United Nations Development Group. The bank is based in Washington, D.C. and provided around $61 billion in loans and assistance to "developing" and transition countries in the 2014 fiscal year. The bank's stated mission is to achieve the twin goals of ending extreme poverty and building shared prosperity. Its five organizations are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).

The World Bank's (the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation and rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, and electricity), large industrial construction projects, and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the country's economy as a whole. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution, or not, such as in the World Bank financed constructions of paper mills along the Rio Uruguay in 2006.