The Economic Role of Public Administration in Central Asia(2)

4. Decentralization and devolution

4.1. The logic of decentralization in the post-Soviet world

The move towards new forms of governing determines the development of the public administration worldwide over the last decades. Both developed and developing countries are actively involved in the decentralization process (Marks and Hooghe, 2004). In the post- Soviet world shift of authority between different levels of government became part of the overall complex process of economic transition: territorial decentralization of power and devolution of services to municipal self-governance level are often considered as key elements of successful transformation and thus directly linked to the issue of administrative reform (Verheijen, 2002). However both decentralized and centralized forms of governance have their advantages and disadvantages, depending upon the specific form and instruments of decentralization and the framework institutions determining the interplay of the center and the periphery in the particular decentralization scheme (Treisman, 2007). Most post-Soviet de-jure allowed different forms of administrative, but not political decentralization, establishing a clear hierarchy between the central and the regional authority (with the only exception of Russia as a formally federal country, as well as Ukraine, Moldova and Georgia with autonomous territories). Even Russia established in1994 ahighly centralized structure of fiscal federalism with relatively limited authority of the regions; in fact, differences between de-jure federal Russia and de-jure unitary Ukraine, Belarus or Kazakhstan are smaller than one would expect, though present (Dabla-Norris, 2000; Lavrov, 2004). On the other hand, Treisman (2006) claims that the post-Soviet countries are on average more decentralized from the fiscal point of view, than other developing economies.

One should be aware of the fact that the de-facto decentralization in the post-Soviet countries differs substantially from the de-jure decentralization. In the Soviet Union relations between different tiers of governance were threefold. First, the country was officially organized as a multi-level asymmetric federation. Secondly, the formal decentralization was in fact part of a strictly hierarchical political system with absolute dominance of the central government; the Soviet Union thus was a “super-unitary” state. However, thirdly, the Soviet hierarchy evolved from the 1950s on into a system of multi-level bargaining between different power centers with informal property rights over their assets and territories, often exchanging the formal loyalty for quasi-autonomy (typical for the Southern republics of the Soviet Union). This system of informal bargaining is often referred to as the “administrative market” (Kordonskiy, 1995). The collapse of the Soviet Union shifted the power balance in the administrative market. While several new independent states were too small to experience any significant decentralization, faced too strong external challenges (like Armenia) or developed a highly autocratic political system even exceeding that of the late Soviet period (like Turkmenistan), several larger republics with relatively weak central government experienced the de facto devolution: the regional governments were able to seize significant power and became influential players. The classical example is that of the Russian Federation with its asymmetric federalism of the 1990s: even after establishment of the formal rules of a highly centralized federation in 1994 regional governments continued gaining independence through the quasi-constitutional system of power sharing treaties and unilateral actions like strategic tax collection and “war of laws” (Libman and Feld, 2008). In Ukraine regional governments led by the presidents of regional councils (oblastnoi sovet) became influential players in the political system, and the Autonomous Republic of Crimea followed the Russian path of unilateral devolution (Turovskiy, 1999).

However, the informal nature of the decentralization made it vulnerable to power shifts; the evolution of the post-Soviet regimes, on the other hand, dictated the consolidation of power on the central level (Furman, 2007). Hence, most post-Soviet countries which became informally decentralized in the 1990s, switched to increasing centralization when the regional semi-autocracies managed to gain power. In Russia the centralization stage replaced informal decentralization in the 1990s after the power shift from Yeltsin to Putin; nevertheless, even the first term of Putin (2000-2004) and, according to certain claims, the first wave of gubernatorial appointments at the beginning of the second term, were characterized by relatively high informal autonomy of regional governments (Chebankova, 2005, 2006, 2007). In Ukraine the shift to centralization occurred earlier under the administration of Kuchma, which, however, also tolerated informal autonomy of the regions for a relatively long period of time (Turovskiy, 1999). Since the Ukraine, unlike Russia, is economically decentralized, the regions still continue playing an important role in the political processes in the country, and the political struggles after the Orange Revolution lead to repeated discussion of the federalization idea. Nevertheless, the general logic of predominance of informal decentralization depending upon the power balance at the central level remains valid: the informality of decentralization makes it sustainable only if the central authority is weak.

The informality of decentralization fits quite well in the model of semi-authoritarian hybrid regimes and the “hostage taking” as an instrument of control typical for many post- Soviet countries. In fact, the attempts of the central government to establish control over secessionist territories by force in the former Soviet Union failed (and resulted into

emergence of non-recognized states), while the temporary retreat and acceptance of informal decentralization allowed the re-centralization in the future (Ukraine does not fit this pattern, but its current political system is also quite different from the post-Soviet standard). The mechanism of is very similar to that of control over private business: since decentralization is informal, it may be removed by applying perfectly legal instruments; their selective application may be used as an instrument of control over regional elites. As the previous section claimed, semi-authoritarian regimes have an extremely negative impact on public administration. It will be shown that the same is true for the devolution in semi-authoritarian environment.

4.2. Decentralization in Central Asia

From the point of view of formal decentralization, all countries of the region are unitary and have a multi-level administrative system, inherited from the Soviet past: the provinces (oblast, viloyat) include smaller districts, which, in turn, consist of rural and urban settlements; the largest cities have the status of oblast or district. The heads of local administration are appointed by the central government; the governors (akims, khokims, hyakims) act as representatives of the president and heads of regional executive, as well as often act as presidents of local legislatures (or propose the presidents, like in Uzbekistan). There are local elected councils at provincial and sub-provincial level (maslikhat in Kazakhstan, local councils in Uzbekistan, madzhilis in Tajikistan, gengesh in Turkmenistan and kenesh in Kyrgyz Republic), which are, however, virtually powerless and often dominated by the executive (e.g. Mahmutova, 2004). The structure of subordination is hierarchical, but the lower-level jurisdictions often have a dual subordination to the governors and the central agencies (Uzbekistan). Uzbekistan includes the autonomous republic of Karakalpakstan with its council of ministers and parliament; however, “weak on paper, Karakalpak autonomy is even less evident in reality” (Epstein and Winter, 2004: 42). The territorial division of Tajikistan is slightly different, including the Gorno-Badakhshan Autonomous Province and Region of Republican Subordination under direct rule of the center (i.e. not belonging to any province). There are certain elements of self-governance on the lowest municipal level (see the collection of papers in Tishkov, 2001, Part 2), e.g. in Tajikistan, where local councils (jamoat) have a relatively large de-jure authorities (which are, however, extremely limited in practice). Kyrgyz Republic, besides the common local legislatures, in 2001 started the pilot elections of the heads of rural municipalities and larger cities (Omuraliev, 2002). Uzbekistan added an additional tier to the system in form of selfgovernance of local mahalla councils.

The legal framework for the decentralized governance is relatively well-developed in Kyrgyz Republic, which, however, lacks implementation of the existing legislature, which still bears several contradictions. In Tajikistan the regulation is still largely based on the law established in the early 1990s, though there has been a lot of effort to improve the legislature recently. Uzbekistan as of 2007 had virtually no legislature supporting decentralization and local self-governance, with the important exception of the mahalla program. From the point of view of assignment of competences Kyrgyz Republic and to a lower extend Tajikistan made certain effort to clarify the distribution of responsibilities between the central and the regional level, which is, however, still lacking. In Kazakhstan and especially Uzbekistan the power at the local level is controlled by the centrally-appointed governors. From the point of view of the fiscal structure, some countries of the region assign numerous local taxes and shared taxes as financial resources to the local governments, but the administration, as well as decision rights over tax rates and tax bases are completely controlled by central government and the tax revenue is not sufficient for fiscal autonomy of local governments, which still heavily depend on interbudgetary transfers. The latter have been, however, to a great extend subject to bargaining and hence depend on power distribution. Several countries of the region still practice the asymmetric distribution of tax revenue between regional and central governments, set for each territory separately and inherited from the Soviet fiscal practices (Leschenko and Troschke, 2006; Wright, 2006). Many public services are de jure decentralized, but the accountability mechanism is absent and the decisions of local and regional governments heavily depend upon central influence (Nikolov, 2006). Localgovernments in Kazakhstan and especially in Kyrgyz Republic own significant property (in particular, land ownership in Kyrgyz Republic), which, however, fails to generate significant revenue.

As mentioned, however, formal decentralization reflects only one side of the coin in the region. From the point of view of informal power structure, there are some differences between the Central Asian countries. Kazakhstan, as the largest country of the region, resembles to a certain extend the pattern of the informal decentralization – recentralization dynamics of Russia and Ukraine. In the first half of the 1990s the country experienced a severe economic crisis, leading the regional governors to develop their own policies partly deviating from the central ones. Moreover, the concentration of FDI inflow in the oil-rich Western part of the country also increased the bargaining power of local elites, able to influence the appointment of akims. The economically successful regions received a higher portion of tax revenue generated from their territory. The results and the mechanisms of informal decentralization in Kazakhstan were very similar to those observed in Russia: capture of local tax authorities, tax exemptions for companies for donations and inconsistent application of central regulations. Hence, the informal decentralization thrived in Kazakhstan as well as in other large countries of the CIS. The main difference was probably the higher concern of the central government for secession threats of the Northern territories with a significant share of the ethnically Russian population and traditional economic ties to Siberia. In fact, the potential of internal separatism belongs to the factors making Kazakhstan supportive of the post-Soviet integration.

Since 1999 economic boom and completion of the power concentration at the central level made the policy of recentralization possible. As in Ukraine, the formal appointment of akims by the central government made the personnel selection schemes the main instrument of recentralization: former members of the central government were appointed as akims. Furthermore, the central government re-established control over oil and gas resources of the regions through the newly established KazMunaiGas. Territorial shifts of regional borders and removal of the capital from the Southern Almaty to Astana in the center of the country also contributed to the reduction of political de-facto autonomy of governors (Cummings, 2000; Jones Luong, 2004; Paarmann, 2007). Increasing transfers from the center increase the dependence of regions from the center (Ufer and Troschke, 2006). Interestingly enough, success of de-facto re-centralization seems to support the desire of the central government to experiment with different forms of self-governance at the regional level. In 2001 president Nazarbaev allowed the pilot elections of heads of rural administrations (a practice resembling the rural elections in China, see Thurston, 1998); however, the experiment was ceased in 2003 and was heavily criticized for non-democratic practices and limited authorities of newly elected officials. As mentioned, local governments still own about 80% of public enterprises, but the authorities are not clearly separated and the degree of autonomy is in fact very limited (Gutovnik, 2006). Thus modern Kazakhstan turned into a de-facto and de-jure highly centralized political entity.

There is virtually no empirical evidence on the development of the informal power structure in other countries of the region. One could probably expect that the civil war in Tajikistan in the early 1990s or the current political turbulences in Kyrgyz Republic in the second half of the 2000s give rise to development of informal devolution; the evolution of center-periphery power distribution depends upon the degree of consolidation of political regime in the center. In Tajikistan the power of local authorities differed substantially during the civil war, though there has been a strong convergence trend after 1997 (Olimov and Olimova, 2001). On the other hand, Uzbekistan seems remain highly centralized throughout the period of independence from de-facto point of view as well; local governors have always been strictly controlled by the center. Turkmenistan is probably the most centralized country in the region; governors are dismissed in short intervals and without any reasonable explanation (Leschenko and Troschke, 2006) – once again, due to the very high power concentration at the central level.

There is, however, yet another perspective on Kazakhstan, Kyrgyz Republic and Uzbekistan, discussed by Jones Luong (2000). Regardless of the degree of de-facto decentralization she documents the strong development of regional interests and political identities in the political and economic elites, which manifest themselves in the decisionmaking at the central level. A similar concept in the theory of decentralization is the “constitutional decentralization”, i.e. the ability of regions to influence national decisions; in the case of the Central Asian countries it is obviously necessary to refer to an “informal constitution” as system of rules governing relations within the elite as the basic concept. The rise of regional political identities seems to be stronger than the development of tribal and local interests as an unexpected result of the Soviet heritage. Regional political interests are very important for the modern Kyrgyzstan. The civil war in Tajikistan can be perceived as war between regions (Olcott, 2005: 146). It is questionable whether the “public manifestations” of regional political identities survived the consolidation of power in Uzbekistan and Tajikistan in the mid-2000s. However, from this point of view one could actually claim, that the very nature of any central-level politics in Central Asia is to a certain extend related to the competition of regional clans (Starr, 2006); therefore even the recentralization can be viewed as a success of a particular regional interest.

4.3. Decentralization and quality of public administration

The central question for this paper is, however, to understand whether the decentralization practices and intends in the Central Asian region could be beneficial for the quality of governance. Unfortunately, the experience so far has been dismal: there is no evidence that even limited decentralization and devolution of power to local municipal selfgoverning institutions improved the functioning of the public administration. It is possible to distinguish among four main factors making the experience of decentralization problematic: the informal nature of political property rights, interventions into economic autonomy of individuals and businesses, expansion of public authority through decentralization and decentralization with lacking intraregional infrastructure. In what follows I discuss these factors in greater detail. Of course, it does not mean that decentralization is unable to have a positive effect on the quality of public administration: it rather suggests that decentralization per se in the existing institutional environment is unable to generate new incentives for public officials.

As mentioned above, the predominance of informal practices and institutions constitutes an important problem for the public administration. The informal decentralization, by its nature implies the continuing use of informal instruments. It does not imply that the informal decentralization is unable to have positive economic effects on economic development: inefficient public service can be effectively substituted by informal practices of public officials. This is exactly the logic of the contested “grease the wheel” corruption theory: under certain circumstances, if the administration and legal system are highly inefficient, informal channels like corruption can help avoiding publicly created barriers and thus become growth-enhancing (Dreher, Gassebner, 2007). Competition between corrupt local governments in a decentralized environment can either establish a “race to the bottom” from the point of view of corruption like it is reported in India or increase the interest of governments in executing the “helping hand” policies for regional industry, as it may have happened with the TVE experience in China. Finally, the impact of inefficient administration on growth differs in different political regimes; Aidt et al. (2008) claim that corruption has a negative effect on growth in high accountability regime and no effect in low accountrability regime. There is certain evidence of growth-enhancing policies of local governors in Kazakhstan: in particular the example of the former governor of Semei Galymzhan Zhakiyanov is worth mentioning. Nevertheless, it has nothing to do with better public administration; on the contrary, these practices just conserve the inefficiencies in the bureaucracy. Finally, one should not forget, that the informal decentralization was caused by the weakness of the central state: the re-centralization phase is therefore likely to include policy measures directed against more successful regional leaders (once again, Galymzhan Zhakiyanov is a good example: the provincial governor and wealthy businessman was sentenced to prison). In fact, the very practices of informal decentralization, which per definition are semi-legal, give the central government the pressure instrument against local governments.

Decentralization, however, as already mentioned, does not necessarily mean growth- enhancing policies. Given a particular framework of formal and informal institutions, it just creates additional possibilities for rent-seeking. In this case public administration remains bad. One of the factors determining the quality of public administration in semi-autocracies, as mentioned above, is the desire to use “hostage-taking” to control potential opposition. McMann (2006) studies this problem from the point of view of the “economic autonomy” reasoning. In order to actively participate in the political processes and to oppose the incumbent, citizens and businesses have to achieve certain degree of economic autonomy; the semi-democratic incumbent therefore tries to restrict the economic independence of its subjects. Regional governments are often quite successful in managing economic autonomy of individuals and small enterprises, which actually form the basis for the democracy: thus political systems in different regions become different. McMann (2006) documents the use of these instruments in less democratic regions of Kyrgyz Republic (as well as Russia). Hence, the negative effects of the political system on the quality of public administration may exist not only at the national, but also at the local level.

Moreover, decentralization may have a greater effect on the borders between state and society rather than on the internal organization of bureaucracy per se. Therefore it broadens the sphere of inefficiencies created by bad public administration. Noori (2006) provides evidence in favor of this statement studying the Mahalla Initiative in Uzbekistan. So far I have described Uzbekistan as probably the least decentralized country in the region due to its political regime. However, shortly after independence Uzbekistan started a program aiming to delegate administration of critical public services to local communities (mahalla) (see details in Epstein and Winter, 2004, as well as in Noori, 2006). Although the initiative was actively supported by the international NGOs due to both the secular status and the grassroots democracy organization of the mahalla, in the early 2000s, Noori (2006) claims, that mahalla just turned into an additional coercive instrument of the state. On the one hand, the Mahalla Initiative merged the community-based institutions with the state, thus decreasing the ability of the society for self-organization – a practice similar to that of the Soviet government. On the other hand, there is evidence that mahalla did not improve the quality of the public services for the population.

Finally, many positive effects expected from decentralization are related to the opportunity of active factor flows across regional borders (for example, it is the necessary precondition of any interjurisdictional competition). This condition, which is straightforward in the developed world or even in Ukraine or European part of Russia, is very uncertain in Central Asia. It is particularly problematic for Kazakhstan: large dimensions of the country and poor quality of transportation (in particular, railroads) have been a severe problem for the economic development of the country (Ekspert Kazakhstan, 2007). Moreover, the countries of Central Asia – in particular Kazakhstan as the largest country, but also in Uzbekistan and Kyrgyz Republic – are characterized by severe territorial disparities, which seem to increase over time (UNDP, 2005; Ufer and Troschke, 2006). In this environment interjurisdictional competition is likely to suffer from agglomeration effects, providing additional benefits to selected regions and reducing the pressure on their policies, thus creating a market failure in the market for institutions and economic policies.

5. Conclusion

The quality of public administration in Central Asia is low and seems to have a negative impact on economic development. Omnipresent corruption and high administrative barriers belong to important obstacles for growth. Deficits of public administration arise from a number of factors: informal institutions, deficits of resources and weak state capacity seem to play an important role in all or several countries of the region. A particular factor of bad quality of bureaucracy seems to be the political system. The semi-democratic regime of Central Asian countries makes inefficient bureaucracy even more likely than both “pure” democracies and autocracies, and therefore prevents the “roundabout” way to growth through development of good administrative governance without democratic political transition. Moreover, this political environment makes the success of administrative reforms, implemented in several countries of the region (in the 1990s in Kyrgyz Republic, currently in Kazakhstan and Tajikistan) unlikely.

Although all Central Asian countries are formally highly centralized, some of them experienced a period of significant de-facto decentralization in the 1990s, followed by the recentralization in the 2000s. Kazakhstan seems to be the most prominent example of this trend. Moreover, regional political identities play an important role in both politics and bureaucracy. Nevertheless, the attempt to improve the quality of public administration by decentralization and devolution in the region seems to be unsuccessful. The very informal nature of decentralization makes its effects questionable. Moreover, a typical feature of semiauthoritarian regimes is institutional pesudomorphism: institutions are likely to have a completely different function than officially declared. In this case governments are able to guarantee their power even without resolving to coercion. The example of the Mahalla

Initiative in Uzbekistan demonstrates that it may be true for institutions of decentralization, which in fact can become a “hidden channel” of expansion of state influence.

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