Local Government Budgeting in Bangladesh
Local government budgeting in Bangladesh refers to the effects of influences and magnitude of autonomy in budgetary process and budgeting decisions of local government Union Councils on the perspective of Bangladesh.
The research on the influencing phenomena and autonomy at the budgetary process of local government Union Councils/Parishads (UPs) in Bangladesh is based on a combination of political psychology, applied economics, and public management issues.
Political psychology is an interdisciplinary academic field related to describing, in this study, how individuals as public institutional representatives make their decisions relating to budgeting considering the exogenous political and cognitive psychological factors, and thus it is dedicated to understanding politics, politicians, and political behavior from a psychological perspective.
The way Henley (1992) defines budgeting, it strongly reveals the concept of “applied economics.” Budgeting is a process of measuring and converting plans for the use of real (i.e., physical) resources into financial values (Henley 1992).
Public management issues include decentralization, local government finance, and local governance, as well as organization and budgeting theories and local government budgetary process.
A 2001 study of Khan observes that one of the vital concerns in relation to decentralization in Bangladesh is greater autonomy of the local state (Khan 2001). The principal premise of the current-round research is that a greater autonomy of the local state helps improve the effectiveness of decentralization. The other premise of the research is that demands for public goods and services are increasingly exceeding the supply at local governments in Bangladesh and elsewhere, particularly in developing countries.
The main purpose of the research is to explore the nature, cause, and consequences of the dimensions of influences and magnitude of autonomy in budgeting decisions of local government Union Councils in Bangladesh.
The research contributed in the literature stream of public administration, specifically in decentralization, in local government finance as well as budgeting, and in local governance studies. The study findings to some extent substantiated the rationality of conditional national government transfers to the sub-national governments in Bangladesh. Beyond the general theoretical and practical significance of the study, its findings led to inviting a fundamental debate on the national-local tax base system and appreciated the fact that central hindrance toward effective functioning of the local government Union Councils in Bangladesh is the crisis of ownership and competence of UP representatives.
Bangladesh, officially the People’s Republic of Bangladesh, is a sovereign state located in South Asia, whose capital is Dhaka and state language is Bengali (Talukdar 2014). Despite a long heritage of local government in Bangladesh, success of decentralization is mixed here, and it has brought a little pro-people innovation.
There are several distinct reasons for that: first, a weak intergovernmental relationship – poor status of balance of power between central and local governments and poorly set inherent links between and among local government institutions; second, disproportionate magnitude of administrative, political, and fiscal decentralization; third, the frequent changes of the system; fourth, imbalance between functions, finance, and functionaries; and fifth, absence of an aggregate local governance policy. The focus of the research is intrinsically linked to the all five reasons for the mixed success of decentralization in Bangladesh.
Until the recent development of decentralization in Bangladesh, only the Union Parishad – the lowest level unit of rural local government in Bangladesh – to some extent, had the devolutionary decentralization among the rural local government institutions there (Talukdar 2010). By now, Bangladesh has separate acts/laws for all local government institutions and elected councils for all such institutions.
The study has employed qualitative method with six case studies on criteria based purposively selected UPs at Sunamganj district in Bangladesh. The data collection techniques of the research include ‘in-depth interviews’ of chairpersons and secretaries of the unit of analysis (i.e., UPs), ‘focus group discussions’ of members of UPs, ‘document reviews’ of UPs, ‘media review’, and ‘researcher’s comprehensive observations’.
This study further employs an emergent framework. The emergent approach allows here understanding the concerns of research questions from the perspective of the elected representatives and secretaries to the UPs, that is, the research participants’ perceptions and concerns as they emerge, rather than their voice being refocused. Such emergent approach is going to follow the lens of some existing theories. The study draws on the grounded-theory approach to data collection, analysis, as well as interpretation, and thus its findings are closely linked to data and the context. There are some key variations between this approach and the full grounded-theory method defined by Glaser (1978, 1992).
Almost all the influencing phenomena – source of resources, previous year budget, scarcity of resources, local demands, political and personal traits of the Chair, local problems, legal aspects, UP competence aspects, and council management – hold both de jure and de facto characters, except political and personal traits of UP Chairs, and legal aspect. There is no de jure ground for political and personal traits of UP Chairs, excluding the fact that they must be elected by the electorate of the community, while the legal aspect holds entirely de jure nature.
A rising scale of community demands; a limited scope of revenues; an excessive dependence on governmental transfers as well as a high magnitude of conditionality of the transfers; an absence of highly competent and responsible UP leadership as well as councils; the government politics with local government, i.e., keeping UPs highly dependent both administratively (e.g., staff shortage and legal dominations) and financially (e.g., leaving UPs with very limited revenue sources); and the legal constraints all help make excessive as well as diversified effects of the influencing phenomena in the UP budgeting process and decisions.
Box 1 shows how causal relations govern the causal mechanism as well as influence in UP budgeting decisions and beyond.
Box 1 Theoretical Skeleton of How Causes Govern the Influence Mechanism in Union Council Budgeting and Beyond
First, scarcity and sources of resources have their influence in making UPs resource-centric focused that is alike Pfeffer and Salanci’s (1978) resource dependence theory. These, in effect, make UPs heavily dependent on excessive conditional intergovernmental and slightly on nongovernmental transfers for undertaking their assigned responsibilities and delivering best possible public services.
Second, government transfers are likely to be based on the previous year actual transfers and revised budgets and the performances as well as outcomes of the previous year transfers in local governance. In effect, last year’s actual government transfers tailored the revised budget of the local government Union Councils. The government’s response to the new year budget is not necessarily based on the proposed budget only but also heavily based on the government’s politics of the budgetary process and decisions – i.e., budgetary incrementalism approach of the government that principally counts the performances as well as outcomes of the previous year transfers also that is alike to the well-expressed Wildavsky’s seminal work, “The Politics of the Budgetary Process” (Wildavsky 1964).
Third, evolving local problems and increasing demands make UPs concerned regarding external environments to assume and adapt with contingency factors and make them interconnected with other local government institutes in their areas as well as dependent on national government and non-government for financial support and technical cooperation. Thus, these aspects stress interorganizational relations (Baker et al. 2011) and allow UPs more interactions with their environments that is alike Thompson’s (1967) and Lawrence and Lorsch’s (1967) structural contingency theory.
Fourth, applications of the relevant government law, rules, and regulations and their dominance go beyond budgeting decisions of UPs to their management as well as local governance. UP competence aspect matters in their management, planning, and budgeting processes and helps build UP confidence and competitive advantages, effects of which go to the local governance.
Fifth, political and personal traits of the Chair influence UPs not only in getting competitive advantage in planning and budgeting process and decisions but also in building a self-responsible Union Council and participatory management as well as robust local governance architecture. Political affiliation and leadership quality also help build political and social networking, and thus ruling party-affiliated UP Chairs could have access to some special grants, but they still lose some opportunities if there are strained relations with the concerned Member of Parliament (MP).
Sixth, UP council management encompasses a UP management culture leading to the magnitude of transparency and accountability in UP budgeting decisions. Such accountability mechanism helps pave the pathway of robust local governance.
The research reveals that the influence of concerned phenomena in UP budgeting decision-making process does not certainly collide with the autonomy of UPs in the budgetary decisions, but their effects are evident with varying degrees and dimensions on the budgetary autonomy of UPs, even to the UP overall management and local governance.
The indicator-based empirical analysis reveals that the magnitude of influences is almost double than that of the budgetary autonomy of UPs at Sunamganj district in Bangladesh. The local government UPs seem to be homogeneous in Bangladesh. Thus, the budgetary autonomy of local government Union Councils is a serious apprehension in the study of decentralization and local governance in Bangladesh.
Management of public services could be improved in terms of accountability and performance, if they are entrusted to the local level officials, compared to the far detached national bureaucrats (Ostrom et al. 1993). But empirical observations support that there are lots of other deliberations here. Rationality of the government conditions and control on local government Union Councils in Bangladesh is tied to the crisis of self-responsibility as well as competence of Union Council Chairs and members.
Both the UP representatives and the general citizens put less emphasis on formal accountability tools and concerns, but more on the social accountability with traditional and informal practices (Ahmed et al. 2016:42). Observation of the current research supports Ahmed et al. (2016). Thus, the UPs’ social contributions and performance would be highly appreciated if those could be documented properly.
Nonetheless, field observations also reveal that institutional ownership as well as competence of UPs to manage their revenue and expenditure portfolio sensibly is a serious concern that justifies the conditionality and guidelines of government transfers to them.
Nonetheless, Ahmed et al.’s (2016) response is not evidence based and still could be treated as anecdote. Further study to understand the political psychology of UP representatives regarding their interest for being elected is a must.
By influence of the positions they (elected members and chairs) can grab many lucrative businesses and make money. The people do not think that UP representatives are making money from UPs rather they utilize UP leadership identity in exploiting many other lucrative money-making ventures. (Ahmed et al. 2016: 45)
Practical contribution of the study proves the fact of maximum level local revenue collection cannot solve the autonomy crisis of UPs considering the current revenue base and legal constraints.
Maximum possible amount of UP own revenue compared to the budget
Aggregate budget 2016–2017
Maximum possible amount/scope of own revenue
Uttar Sukhair Rajapur
The research solves this problem providing the two options: first, increasing local tax base/net by trading off national government resource base at the local level and second, tax from the all local sources should be collected by local governments and then this collected tax shall contribute equitably to the national government as well.
By putting the both options above, the research just invites an academic debate. Yet the solution alone cannot solve the autonomy crisis of UPs unless the legal constraint (GOB 2009: Sect. 54:3) is resolved.
Beyond the theoretical and practical contributions of the study, the research observations somehow support both the principal and secondary premises of this research mentioned in the introduction of this research brief. In the former case, research shows that autonomy of the local state alone cannot improve the effectiveness of decentralization. It must go with local government ownership, competence, and accountability framework.
The observations of this study and literature review strengthen the latter case that the demands for public goods and services are increasingly exceeding the supply at local governments in Bangladesh and elsewhere, particularly in developing countries. Yet the revenue assignments of local governments in most developing countries including Bangladesh are often very poorly designed and very limited.
The research proves that the maximum possible amount that can be collected from the local revenue assignments is relatively very insufficient compared to the aggregate budget of a year. Thus, the maximum level local revenue collection cannot solve the autonomy crisis of UPs considering the current revenue base and legal constraints.
Consequently, increasing local tax base/net by trading off national government resource base at the local level along with the legal reforms is one way to establish minimum autonomy through growing its own resource capacity. But this alone cannot provide the resources needed to an UP considering its growing local problems and increasing community demands.
Thus, it requires flexible as well as less conditional intergovernmental transfers following its approved budget submitted to the government. Government’s incrementalism approach in transferring funds based on the previous year transferred amount and performance audit should not be stereotyped; rather it must be responsive to the UP-approved budget submitted to the appropriate authority of the government. Otherwise, the citizenry involvement, as well as stakeholder consultative processes, for example, ward shaba meetings and UP open-budget meetings, might superficially become counterfeit.
Local governments in Bangladesh, particularly Union Councils, have yet to grow a high sense of self-responsibility, commitment, as well as competent leadership and capable councils. Once this grows, the basis for lessening government conditions to the intergovernmental transfers and/or increasing local tax base of the local government will pave the way.
The research, also, takes a stance that reducing government control and increasing competent as well as responsible UP councils and leadership should go side by side. Furthermore, it suggests placing here robust oversight and accountability mechanisms.
Importantly, two issues, found in this research, require further study.
First, the further study requires an in-depth understanding of how the influencing phenomena affect beyond the UP budgeting decisions to its overall management and local governance. In other words, to what extent do these influencing phenomena affect the autonomy of UPs in their overall management and local governance?
Second, further study is necessary to understand the reasons why UP representatives are interested in being elected and what kind of incentives are attractive for them to be elected despite their salary and formal benefits being very poor.
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