5. From monumental to incremental - Reforming governance to enable convergence

5. From monumental to incremental - Reforming governance to enable convergence

To accelerate the pace of convergence between leading and lagging areas within Middle Eastern and North African countries, policy makers can move away from large-scale capital investments (building monuments) and refocus efforts on identifying local needs and tailoring solutions to address local market and coordination failures. This is an incremental approach, which will require incorporating feedback, having local service providers accountable to the local residents, and building local governance capacity in human and financial resources. To use a cliché, for effective territorial development in the Middle East and North Africa, the hard stuff will be the soft stuff. Whereas building monuments is rather straightforward, listening to local residents and incrementally changing the incentives and motivation of service providers such that they are agents of local residents and not only of their line ministries will be challenging.

In taking a locally sensitive approach, scale economies and externalities must be seriously considered. Small local authorities tend to face capacity and efficiency challenges because of their size. This is particularly so in the Middle East and North Africa, where many local authorities have been subdivided (resulting in very small scale) and have experienced historic under-resourcing and weak institutional frameworks. They also tend to have less capacity to hire skilled, specialized staff and invest in planning processes. In addition, certain public facilities (e.g., major hospitals, universities, railways, industrial zones) are only efficient when undertaken at scale, given a need for specialized inputs or large capital investments and other fixed costs, making provision by small local units inefficient and infeasible.

Small local authorities may also fail to manage the external effects of their actions properly, to the detriment of wider regional and national development. Investments, policies, and economic activities in one area often have external impacts on other areas. Some are positive (e.g., a district that hosts a vibrant city, benefiting surrounding districts as a source of jobs and services), whereas others are negative (e.g., pollution, congestion, or a race to the bottom in local tax competition). In either case, fragmented local authorities without dedicated coordination frameworks often fail to control negative spillovers or to develop shared assets jointly and may engage in wasteful “beggar thy neighbor” competition.

In this context, effective decentralization must be incremental and asymmetric, tailored to the varying capacities and needs of different localities. Decentralization efforts must increase scale and capacity, coordination, and local accountability. A good example is the vertical coordination seen in France’s state-region contracts (Contrats de Projets Etat–Région; CPERs)—5- to 7-year agreements between the national and regional governments (the highest level of local government) to deliver the highest-priority projects for development of the region. They promote effective regionled planning while aligning efforts of the local and central government and have been implemented in France since the mid-1980s.

CPERs are coordination tools; they do not make new resources available but instead align preexisting resources (from the region and the state) around the priorities set. The central government delineates broad categories of projects that are eligible for CPERs, within which regional governments propose their own priority projects, increasing the coherence and complementarity of regional plans. The national and regional governments together engage legally to deliver the projects, agreeing on their financing, delivery modalities and agencies, beneficiaries, and results indicators. CPERs also coordinate actors beyond the region and central governments; sectoral line ministries, national transport agencies, cross-regional bodies (e.g., in river basin and mountainous regions, for which cross-regional CPERs are made and added as annexes to regional contracts), and subregional bodies (e.g., metropolitan areas, nature areas) often cosign CPERs.