Local Public Finance and Capacity Building in Asia

Issues and Challenges

image of Local Public Finance and Capacity Building in Asia

Subnational governments’ capacity to effectively fund and deliver public services are crucial for the realisation of the benefits of decentralisation. However, subnational capacities often suffer from significant weaknesses, ranging from inadequate assignments of own-revenues, through to flaws in tax administration, the design of intergovernmental transfers, spending assignments and various aspects of public financial management. The volume discusses how better diagnostics and more strategic reforms can contribute to easing the resource constraints on subnational governments, as well as creating appropriate incentives for these governments to improve performance. The volume includes studies of the enabling conditions for subnational capacity building in Asia, as well as focused studies of China and India's fiscal relations challenges.


Subnational capacity building: An international perspective of the Asia Pacific region

This chapter provides an overview of decentralisation trends and challenges in the Asia-Pacific region, and the enabling conditions that support subnational capacity building. The subnational landscape in the Asia-Pacific region is highly diverse when looking at territorial organisation, decentralisation patterns, subnational finances and capacities. Since the 1990s, decentralisation reforms have been carried out in many Asia-Pacific countries, transferring responsibilities and fiscal resources to subnational governments. These reforms translated into high fiscal decentralisation indicators – above world averages – but several bottlenecks to effective multi-level governance remain. Unclear assignments of responsibilities across levels of government and weak fiscal decentralisation are the most prominent challenges. The chapter provides an international perspective on the enabling conditions that support subnational capacity building, a key condition for decentralisation systems to work more effectively.


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