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Decentralization of Governance and Economic Development

The Sri Lankan Experience after Establishment of Provincial Councils

Tikiri Nimal Herath, School of Economics and Information Systems, University of Wollongong, Northfields Avenue, Wollongong NSW 2522, Australia.

Economists have theoretically shown that decentralization of governance promotes growth and development. However, this is not so according to the empirical evi-dence which sometimes shows divergent results. In the meantime, more and more countries decentralize their governance. This article reviews Sri Lanka's experience of decentralization during the past 15 years. The article compares the pre- and post- decentralized economic status under Provincial Councils and examines the relationship of the degree of decentralization with poverty and the per capita income of the country. Findings show that the actual degree of decentralization is very low and it is not significantly conducive to increase per capita income, there is a huge imbalance in development among regions, and public officials at lower layers of government are not competent to reap the benefits of decentralization. For the effective functioning of decentralized governance in developing countries, the article recommends, first, to empower lower layers of government with more clearly defined functions that do not overlap with the central government; second, to develop a proper mechanism enabling lower tiers of government to reap the benefits of decentralization; third, to take prompt action to enable public officials to be familiar with the decentralized role of the state and principles of public expenditure.

Key Words: JEL: P16 • Decentralization • Market Failures • Provincial Councils • Role of the State

South Asia Economic Journal, Vol. 10, No. 1, 157-185 (2009)
DOI: 10.1177/139156140901000107


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