Decentralization in Madagascar

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).