Policy Implementation: The Experience of Decentralisation in Peru

Abel Canchari de la Cruz

1.

Introduction

This paper analyses the implementation of the decentralisation policy in Peru from 2002 to 2008. The focus is on four key dimensions: transference of responsibilities (devolution), economic decentralisation, fiscal decentralisation, and formation of regions. This article argues that the complexity of the policy, external factors, high dependency relationship and the top-down approach led to the slow and patchy implementation as well as frustration and unintended consequences.

2.

Approaches to policy implementation

After the stages of agenda-setting, policy formulation, and decision-making, policy implementation is among the most important stages of the policy-making process. Finally, during implementation, the theories, plans and blueprints are translated into actions in order to solve a given problem in the real world. For understanding the implementation process there are different approaches, but the most important ones are the top-down and bottom-up model. 2.1. Top-down approach

This approach is perhaps the most conventional and extensively applied by governments. This method acknowledges the policy process as a series of chains of command where decision-makers set objectives and actions which are carried out by the administrative machinery that serves the government (Clarke, 1992, cited in Howlett and Ramesh, 1995: 156). More precisely goals have to be clearly defined and understood, resources made available, the chain of command be capable of assembling and controlling resources, and the system able to communicate effectively and control those individuals and organizations involved in the performance of the tasks (Parsons, 1995: 464)

Pressman and Wildavsky (1984) in their book Implementation analysed a policy of job creation in the United States of America in order to show the importance of policy implementation, and demonstrating the importance of a top-down system for accomplishing policy objectives. In the same way, Christopher Hood (1976) identifies five such conditions for a perfect implementation in a top-down manner: i) that ideal implementation is a product of a unitary army-like organization, with clear lines of authority, ii) that norms would be enforced and objectives given, iii) that people would do what they are told and asked, iv) that there should be perfect communication in and between units of organization, and v) that there would be no pressure of time (cited in Parsons, 1995: 465) This top-down or rational approach assumes that during the policy implementation the solution given to the problem is grounded in valid and accurate information, and therefore the alternatives are well defined. However, in the real world, most of the policies do not fulfil those conditions which eventually contribute to policy failure or implementation gaps. 2.2. Bottom-up approach

Criticism to the aforementioned approach has led to this more flexible, democratic and participative model. In effect, this approach empowers frontline local agencies, professional and street level workers, and acknowledges that they play a major role for policy implementation. Howlett and Ramesh (1995: 157) remark that studies conducted in bottom-up fashion have shown that the success or failure of many programs often depends on the commitment and skills of the actors at the bottom directly involved in implementing programs. A bottom-up approach has the power to create synergies among the different stakeholders involved in a specific issue or problem. This model may be functional for a pertinent and sustainable policy implementation. In addition this model can help to central government to have an implementation process taking into account the diversity of the problems that the policy is intended to overcome. Weimer and Vining (2005) assert when they mention that the essential idea is to have a procedure that allows the policy to be reshaped to include the voice and interest of local stakeholders. Finally, bottom-up models place great emphasis on street-level bureaucrats (Evans and Harris, 2004) who shape the policy implementation: professionals have a key role in ensuring the performance of a policy...Teachers, for example, may develop ways of teaching or implementing government policy which actually result in outcomes which are quite different to those intended or desired by policymakers (Parsons, 1995: 469).

3. 3.1.

The decentralisation policy: an overview The rationale for decentralisation

Peru became fully independent from Spain in 1821. Since that period there have been fourteen attempts to introduce decentralisation in the country. Because of these unsuccessful efforts, Peru remains as one of the highly centralised countries in Latin America. For instance Lima, the capital department, has 8 million out of 28 million inhabitants, it consumes the 70% of the energy, the 80% of the financial transactions take place in Lima, and finally 48% of the Gross Domestic Product is generated in the capital. Consequently, the remaining 23 departments show poor indicators in terms of development (Programa Pro-Descentralizacion - Prodes, 2006a: 24). To sum up, the reasons for undertaking the decentralisation policy are: to promote sustained development and overcome traditional problems such as inequality, poverty and exclusion. 3.2. Legal framework

Since early 2002 (under the government of Alejandro Toledo) Peru has undertaken the most serious and comprehensive policy towards decentralisation which is seen as one of the most profound state reform of the last seven years. For that purpose, the same year, the Framework Law of Decentralisation (Law No. 27783) was enacted, which contains the scope, objectives, dimensions, stages, and the timeline for the decentralisation process. This Act, actually, implements one of the Chapters of the reformed Constitution regarding decentralisation, involving the three levels of government (national, regional and local), and takes into account dimensions such as: administrative, economic, fiscal and territorial decentralisation. Also this Law regulates the governmental relationship at various levels. Among the general principles of this policy we find the following: it is permanent, dynamic, irreversible, democratic, integral, subsidiary and gradual.

3.3.

Policy objective

The Law states that decentralisation is intended to develop an integrated, harmonious and sustainable country, through the separation of powers and functions, and the balanced exercise of power by three levels of government, so as to benefit the whole population. 3.4. Organisational arrangement

The National Council of Decentralization (hereafter NCD), was in charge of the day-to-day direction and policy implementation. The NCD had been created by Law as an independent and decentralised agency attached to the Presidency of the Council of Ministers and it was chaired by a representative of the President of the Republic. 3.5. Timeline

Since 2002, the policy has been implemented by other specific laws and during two governmental periods, there were specific events that have shaped the current performance of the policy under analysis. Table 1: Timeline of the decentralisation process and important laws
2002 Constitutional Reform Framework Law of Decentralisation Organic Law of Regional Governments 2003 Organic Law of Local Governments Law of Participatory Budgeting Law of Accreditation and Transference Law on Promotion of Decentralised Investment President: Alejandro Toledo President: Alan Garcia 2004 Law of Fiscal Decentralisation Law of Formation of Regions 2005 Supreme Decree for Referendum (Formation of Regions) 2006 Shock of Decentralisation Dismantling of the NCD. (October) 2007 Shock of Investment 2008 Organic Law of the Executive

4.

Policy implementation and problems

A policy may be put at risk because of one or more of the following three causes: bad execution, bad policy, or bad luck (Hogwood and Gunn, 1984: 197). In this case apparently there are implementation gaps due to bad execution and bad luck. The policy has been ineffectively implemented, and there were adverse external circumstances. Broadly speaking implementation problems may be caused by internal factors such as the human resources, and/or the organisation in charge of the policy, fundamentally, and due to external factors such as the economic, social and political environment, and the institutional context (Hilderbrand and Grindle, 1997). As it will be shown, the decentralisation policy itself was not bad. It was just not based upon inadequate information, defective reasoning, or hopelessly unrealistic assumptions Hogwood and Gunn (1984: 197). As mentioned elsewhere, the policy has an integral and multidimensional approach which makes it different from other decentralisation policies implemented across Latin America. Perhaps the main reason is that decentralisation is a wicked issue because it is complex, crosscutting, deeply embedded, and not being resolved so far (Rittel, 1973). 4.1. Dimensions of decentralisation and reasons behind implementation gaps

Borrowing the comprehensive framework developed by Prodes (2006, 2006a, 2006b) we can say that the decentralisation policy is being implemented considering eight dimensions which reflect the complexity and the multidimensional characteristic of this policy. In this paper, four main dimensions will be analysed: i) transference of responsibilities, ii) economic decentralisation, iii) fiscal decentralisation, and iv) formation of regions1: i) Transference of responsibilities (devolution): Grounded on the Law of Accreditation and

Transference, its aim is to move the decision making capacity to decentralised governmental bodies. The core of this dimension is the transference of social programmes to local governments, high profile projects to regional governments, and devolution of functions and competences to both level governments (Prodes, 2006b: 16).
1

The remaining complementary dimensions are: i) democratisation of public decisions, ii) rearrangement of the administrative system, iii) institutional strengthening of regional and local governments, and iv) information and policy dialogue.

Some social programmes have been transferred to local governments, for instance the nutritional (Pronaa), infrastructure (Foncodes) and rural roads programmes (Provias rural) have been fully transferred. So far, the main problem is the lack of managerial skills for an effective and efficient management of the social programmes which call for effective capacity enhancement actions. Regarding the transference of high profile projects to regional governments, we observe that they have been transferred from 2003 to 2006. However the transference of functions or competences remains as the challenge because so far almost 88% of the functions have been transferred, with the rest still centrally controlled. It is worth mentioning that the economic resources for executing those functions have not been transferred (Prodes, 2006: 15-19 and Secretaria de Descentralizacion, 2008: 1). As a result, it was mainly a nominal transference and not a real devolution of functions at all. This patchy or partial implementation may be explained if we consider that this dimension depends on other dimensions such as fiscal decentralisation institutional strengthening and the rearrangement of the administrative system. As every reform has winners and losers, in this case, the underlying factor seems to be politics. As Bardach has pointed out in his book The Implementation Game, policy implementation is a game of bargaining, persuasion, and manoeuvring under conditions of uncertainty (Cited in Parsons 1995: 470). During implementation different stakeholders play to win as much control as possible, and endeavouring to play the system so as to achieve their own goals and objectives (Parsons, 1995: 470). It seems that there was no political will because the total transference of functions represents relocation of power from central to sub national governments, which have been under control of regional or local political movements, generally opposed to the ruling political party. Finally, another explanation for this can be the resistance to change inside the headquarters of the ministries due to the fear of losing power. In the end human behaviour and attitudes may influence policy implementation (Hogwood and Gunn: 212). Since an effective transference may lead to both, reduction of personnel at the central level (lost of job) and reallocation or transference of personnel for positions at sub-national governments. ii) Economic decentralisation: this dimension is aimed at encouraging economic development

in the hinterlands of the country, which requires the establishment of favourable conditions for the private sector (Prodes, 2006b: 16). Its implementation is based on the Law on Promotion of Decentralised Investment.

This component is complex and it seems that there is no clear strategy for promoting economic decentralisation. The evidence is that the task is difficult per se because promoting private investment in departments with poor economic performance is a daunting mission, especially when those areas lack infrastructure, skilled labour force and incentives because of its conditions of isolation. For that reason some sub-national governments were successful in just promoting foreign investment related to the mining sector or performing marginal activities for economic development. The vast majority of regional governments lack of capacity for developing strategies or policies for creating the conditions for private investment. So far the mission of promoting private investment is still a task of the central government. Also, this dimension was affected by organisational limitations in the regional governments. Even though the legal framework is quite comprehensive, the the structure, processes, resources, and management styles of decentralised governments affect the achievement of specific goals. In this case promoting private investment is a new role which is difficult to be carried out by still traditional organisations which need to be strengthened for this new function. (Hilderbrand and Grindle, 1997: 37). Moreover, the organisational weakness of regional governments, plus the complexity of the task that was not fully specified in correct sequence has contributed to the slowness of implementation. Hogwood and Gunn assert that for moving towards agreed objectives [it is important] to specify, in complete detail and perfect sequence, the task to be performed by each participant (1984: 205). Notwithstanding that implementing decentralisation was the main objective of the NCD, in fact there were other agencies involved directly or indirectly; for instance, the different ministries, the sub-national government, the private sector, and so on. Hogwood and Gunn, remind us that a perfect implementation requires that there is a single implementing agency which need not to depend on other agencies for success, or if other agencies must be involved, that the dependency relationships are minimal in number and importance (Ibid: 202). In this case the dependency relationship is extended and blurred which also creates lack of organisational accountability. Finally, achieving economic development in impoverished regions is a policy with outcomes and impacts to be seen in a long-term period. Thus, in five years of implementation we have seen seemingly trial and error attempts but not serious efforts for implementing a sound policy for decentralised economic development in unfavourable conditions.

iii)

Fiscal decentralisation: this dimension seeks to increase the financial autonomy of

decentralised governments to fulfil their responsibilities. The strategy for that purpose is to assign certain taxes and define a system of complementary intergovernmental transfers, especially in underdeveloped regions (Prodes, 2006b: 16). An important issue to consider is that just one department, after Lima, would be able to finance their expenditures with resources from the collection of national taxes in their jurisdiction. According to the Law of Fiscal Decentralisation, the transfer of resources to regional governments is done gradually, through two stages: the first one related to resource transfers from the national level, and the second stage allocating a certain percentage of national taxes and resources. The advantage of this is that sub-national governments are increasing the total amount of transference from national government. Between 2003 and 2006 their share rose from 29% to 35% (Prodes 2006b: 76). However, the concern is how to distribute resources from mining royalties because it has increased almost 305% in the period 2000-2005 (Prodes 2006b: 76). The main problem with the current system of intergovernmental transfer is the inequity in the distribution of the mining royalties because according to the existing structure, for 2005, regions such as Moquegua had a per capita transfer of US$ 127, whereas another region Lambayeque had US$ 4.This inequity, partially created by the international prices of minerals and for the formula used for allocating resources created this contradictory situation of some regional and local governments being incapable of absorbing the large amount of resources available, and on the other hand other governments lacking resources for very basic investment. iv) Formation of regions: this dimension deals with the reconfiguration of the political and

administrative division of the country in order to overcome the limitations of existing departments and promote their integration into regions, as blocks of political and economic counterweight to the power of Lima (Prodes, 2006b: 16). Perhaps the implementation of this dimension is the most difficult and the one with the most severe drawbacks, so far. By the year 2005 there were five proposals of regions (made up by more than two departments). In 2005 there was a referendum for the formation of regions where the proposals were rejected in all the departments (except Arequipa), by the 69% of the voters (Prodes, 2006b: 6). Consequently there are no regions so far. The first reason for this implementation failure is that the proposals for regions were designed following a top-down process. They were centrally elaborated by the NCD and it lacked meetings for discussing

and shaping the proposals with the citizenry and other stakeholders (civil society organisations and the private sector) from the departments involved in the proposals. Consequently, there were poorly informed population regarding the advantages and disadvantages of the new regions and how they will affect their wellbeing. Why were there such limitations? One explanation is that the process was carried out for meeting deadlines stated in the Law. So this setback was mainly provoked for time constraints or lack of time management which did not allowed a bottom-up process. The second reason could be considered as a constraint exerted by the context. Some claim that for people it is difficult to change the status quo: culturally, people are identified with their department, so chauvinism, the strong belief that their department is the most important, is regarded as one of the underlying problems for this implementations failure. When a proposal states, for instance, that three current departments will be joined up in a new region, people tend to think that they will lose the name of the department, the current capital of the department, their identity, and eventually resources. Further, there was a collective fear to a new kind of centralisation in the context of the new regions. Regarding external circumstances that impose constraints, Hogwood and Gunn, argue that: some obstacles to implementation are outside the control of administrators because they are external to the policy and the implementing agency... these constraints are obvious and there is little that administrators can do to overcome them (1984: 199). It is believed that during the policy-making process, these cultural and social external conditions were not borne in mind and therefore there were no contingency plans for controlling or limiting their negative influence. During 2006 and 2007, this stopped implementation led to a frustration and discouraged to move forward, but during 2008 the government unveiled a new plan which focuses on just one or two pilot region so as to test the policy before its widespread implementation. However, it seems the strategy has not changed (path-dependency) and therefore the likelihood to repeat the traditional method is high even though there is room for applying a bottom-up approach.

5.

Concluding remarks

Analysing this experience we can conclude that there is evidence of implementation gaps, despite the fact that the policy is sound enough. This may confirm what has been said by Hogwood and Gunn (1984: 197) governments are better at legislating [policy formulation] than at effecting desired changes [policy implementation]. Policy implementation per se is a difficult task, and the decentralisation policy has proven to be more complex because of its multidimensional and cross-sectoral characteristic. Slowness of implementation, patchy or partial implementation and unintended consequences are among the examples of implementation failure in the Peruvian experience. The policy under analysis started when a Law was enacted after a participatory process, however its implementation was mainly a top-down process, and it needed other laws for specific dimensions of decentralisation. The external conditions such as economic, social and cultural conditions played a major role exerting negative influence for its success. To finish, decentralisation policies have a high dependency relationship. That is to say that even though there is one single organisation directing the policy, there is a network of organisations such as the regional and local governments, the private sector, the civil society organisations, and so on which play a major role for the policy implementation. If they do not perform the given task and when the mechanism for coordination fails, it has a direct negative impact on the policy implementation.

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