Decentralization and Local Governance in Asia and the Pacific

Fiscal Decentralization and Poverty Reduction

The empowerment of communities by fiscally strengthening their local governments and the entire system of sub-national government finance are an integral part of the policies and strategies needed for achieving the MDGs.

In an increasing number of countries, UNDP is requested to assist in the development of the policy framework for fiscal decentralization through advice and piloting of mechanisms for the financing of services and infrastructure at the local level. In contribution to these efforts globally and regionally, Asia-Pacific Regional Centre has produced the following documents:

(UNDP 2005) Fiscal Decentralization and Poverty Reduction primer intends to provide an introduction to the main principles of fiscal decentralization, to examine linkages between poverty reduction and fiscal decentralization, to briefly describe major comparative experiences, and to clarify UNDP's approaches and entry points. It should be read in conjunction with the UNDP Practice Notes on Decentralization, Local Governance and Urban/Rural Development and Public Administration Reform, which provide an overview of the broader issues and UNDP's position on these.

This note on Conceptual Basis for Performance Based Grant Systems and Selected International Experiences introduces the concept of performance-based grant systems (PGs), presents a brief overview of the international experiences and major design issues for any PG system, and finally outlines some of the key design issues to be considered in future discussions in Nepal on replication/roll-out of the PG system, currently applied under the Decentralized Financing and Development Programme (DFDP).