Decentralization in Ethiopia I Hs

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Decentralization and Service Delivery in Ethiopia
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a. bongwa / s. kassahun / m.p. van dijk (eds.)
Following a period with a centralized government during the regressive Derg regime, a. bongwa / s. kassahun / m.p. van dijk (eds.)
the Ethiopian government has followed a decentralization policy, building the capacity
decentralization
of lower levels of government. Decentralization in Ethiopian urban centres has played
an increasingly important role in the service delivery to the urban inhabitant. Hence,
the purpose of this book is to assess the situation of decentralization and urban service
delivery in Ethiopia.
This book concentrates on decentralization and service delivery in urban Ethiopia.
The book covers three elements of decentralization: Political decentralization, where
and service
powers and responsibilities are devolved to elected local governments. Administrative
decentralization; transferring of functions performed by federal government to regional
and woreda level administrative units. Financial decentralization, entailing the transfer
of financial resources in the form of grants and tax-raising powers to regional and
woreda levels of government, have also been covered in the book. These variations in
the form and content of decentralization have an important bearing on service delivery
delivery in
outcomes, and on processes of participation, accountability and responsiveness.
decentralization and service delivery in ethiopia

The book is based on selected papers presented at the third national conference,
organized jointly by the Ethiopian Civil Service College and ihs, Erasmus University
Rotterdam, in July 2010.
ihs is an international institute of the Erasmus University Rotterdam, in the field of
ethiopia
housing and urban management. It offers post graduate education, training, advisory
services and applied research.
The Ethiopian Civil Service College is the national leader in providing education programs
ranging from short term courses to Bachelor and Masters degree’s, research and
consultancy to the country’s civil service.
Aloysius Bongwa is a senior expert in urban finance, urban policy and capacity building
at the Institute of Housing and Urban Development Studies (ihs) at Erasmus University
Rotterdam (eur).
Samson Kassahun is associate professor and academic vice president of the Ethiopian
Civil Service College.
Meine Pieter van Dijk is an economist and professor of Water Services Management at
unesco-ihe Institute for Water Education in Delft and professor of urban management
in emerging economies at the Institute of Social Studies (iss) of Erasmus University
Rotterdam (eur), msm and ihs.
This is the third book in a series on Urban Management in Ethiopian Cities.
The titles of other books in the series are:

Managing Ethiopian cities in an era of rapid urbanization
Formalization and informalization processes in urban Ethiopia: Incorporating informality
ihs is the international institute of urban management

of Erasmus University Rotterdam
Decentralization and Service
Delivery in Ethiopia
ii Decentralization and service delivery in Ethiopia
Institute for Housing and Urban Development

Studies (IHS)
Erasmus University Rotterdam

(EUR)
Ethiopian Civil Service College (ECSC)
June 2011
Decentralization and service delivery in Ethiopia iii
Decentralization and Service Delivery

in Ethiopia
A. Bongwa, S. Kassahun and M.P. van Dijk (eds.)
Shaker Publishing, Maastricht

June 2011
iv Decentralization and service delivery in Ethiopia
ISBN 978-90-423-0408-6
Shaker Publishing BV
St. Maartenslaan 26
6221 AX Maastricht
Tel.: 043-3500424
Fax: 043-3255090
http://www.shaker.nl
Cover design:
© 2011 ZEE Grafisch en Architectonisch Ontwerpen
Printed in The Netherlands.

© Copyright Shaker Publishing 2011
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or
otherwise, without the prior permission of the publishers.
© 2011 IHS. All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior permission in writing from the proprietor.
© 2011 IHS. Alle rechten voorbehouden. Niets uit deze uitgave mag worden verveelvoudigd,
opgeslagen in een geautomatiseerd gegevensbestand, of openbaar gemaakt, in enige vorm of op
enige wijze, hetzij elektronisch, mechanisch, door fotokopieën, opnamen, of op enig andere manier,
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©2011 ECSC. All rights reserved. No part of this publication may be reproduced, stored in a retrival
system, or transmitted, in any form or by any means, electronic, mechanical, photocophying,
recording, or otherwise, without the prior permission in writing from the proprietor.
Keywords: Formal economy, Shadow economy, Case studies, Ethiopia, Finance, Financial aspects
Authors: Abuye Anelye, Aloysius Bongwa, Ayele Mulugeta, Belaye File, Emaculate Ingwani, Frew
Mengistu, Jan Fransen, Kassa Teshager, Meine Pieter van Dijk, Ranauijai Bahadur Sing,
Samson Kassahun, Sudir Kuma Sing, Tesfaye Teshome, Tilahun Fekade
English Editing and type setting: S.N. Welsh
This is the third book in a series on Urban Management in Ethiopian Cities

The titles of other books in the series are:
Managing Ethiopian cities in an era of rapid urbanization
Formalization and informalization processes in urban Ethiopia: Incorporating informality
Decentralization and service delivery in Ethiopia v
Decentralization and Service Delivery

in Ethiopia
vi Decentralization and service delivery in Ethiopia
Table of Contents
List of Tables ........................................................................................ vii
List of Figures ..................................................................................... viii
Preface ................................................................................................... ix
Contributors ........................................................................................... x
Part I: Overview: Decentralization and Service Delivery in Ethiopia....... 1
Professor Meine Pieter van Dijk
Part II Political Decentralization Gives More Power in Decision Making
.................................................................................................... 12
Political Decentralization and Service Delivery in Addis Ababa
Kassa Teshager
Part III Administrative Decentralization: To Redistribute Authority ...... 28
The Challenges of Public-Private Partnerships: The Case of Merkato Millennium
Development Partnership (MMDP)
Frew Mengistu and Professor Meine Pieter van Dijk
Part IV Fiscal Decentralization: to Have Adequate Revenues ............... 57
Assessment of the Budget Balance: Challenges and Opportunities of Fiscal
Decentralization in Addis Ababa City Administration
Belay File and Ayele Mulugeta
On the Concept and Measurement of Fiscal Imbalances in Ethiopia .................. 74
Aloysius Bongwa
Part V Sectoral Case Studies ................................................................ 90
Housing
Decentralization and Cooperative Housing in the Oromia Region ...................... 90
Tilahun Fekade
Incorporating Informal Settlements in Addis Ababa: From Centralized Urban
Planning to Local Partnerships ................................................................. 104
Jan Fransen and Samson Kassahun
Environment ....................................................................................... 117
Role Pluralism and Performance of Local Governments on Solid Waste Collection
Service Delivery:
The Case of Addis Ababa City
Mesfine Tilaye
Reflections on Women Participation in Solid W aste Collection in Bole Sub City,
Addis Ababa, Ethiopia
Emaculate Ingwani
Education ............................................................................................ 145
The Effects of Administrative Decentralization on Education Provision in Addis
Ababa
Tesfaye Teshome, Ranavijai Bahadur Singh, and Sudhir Kumar Singh
Part VI Support of International Development Agencies ..................... 158
Decentralization and service delivery in Ethiopia vii
Decentralization and the Support Role of International Development Agencies in

Ethiopia’s Urban Development
Abuye Anleye
Part VII Conclusions ........................................................................... 168
Conclusions and Future Research
A. Bongwa and S. Kasahun
Bibliography ....................................................................................... 174
List of Tables
Table 1: Context Analysis ....................................................................................................... 42
Table 2: Accountability of the Task Force .............................................................................. 45
Table 3: Organizational Culture of the Task Force ................................................................ 45
Table 4: Organizational Values of Respondent’s Organization.............................................. 46
Table 5: Role of Respondent’s Organization in the Partnership ............................................ 46
Table 6: Resources Contributed by Partnering Parties to the Partnership ............................ 47
Table 7: Expectation of Partnering Parties from the Partnership ........................................... 47
Table 8: Representation Modalities of Members ................................................................... 48
Table 9: Capacity Analysis ..................................................................................................... 50
Table 10: Strength of the Partnership .................................................................................... 52
Table 11: Weaknesses of the Partnership ............................................................................. 53
Table 12: Achievement Rate (in Birr) ..................................................................................... 66
Table 13: Trends of Tax and Non-tax Revenue ..................................................................... 67
Table 14: Percentage Share of Major Revenue Sources in Total Revenue .......................... 69
Table 15: Budget Balance in Birr ............................................................................................ 72
Table 16: Vertical Fiscal Imbalances in Ethiopia .................................................................... 80
Table 17: Horizontal Imbalance Ethiopia................................................................................ 80
Table 18: Ethiopia: Regional Fiscal Operations as a Share of Consolidated Government ... 81
Table 19: Ethiopia: Regional Fiscal Operations as a Share of GDP, 1998/99-2003/04 ........ 82
Table 20: Effective Potential Revenues ................................................................................. 83
Table 21: Expenditure Needs ................................................................................................. 84
Table 22: Indicators and Distribution of Special Funds to the Emerging Regions ................. 84
Table 23: Federal to Regional Government Block Grant Transfers from Treasury ............... 87
Table 24: Shares Vertical / Vertical and Horizontal Equalization ........................................... 88
Table 25: Incentives For and Against Formalization ............................................................ 107
Table 26: Addis Ababa Solid Waste Collection and its Pluralistic Nature ............................ 122
Table 27: Features of Indicators ........................................................................................... 123
Table 28: Correlation Co-Efficient of each of the Scale Items with Summated Score ......... 128
Table 29: Correlation Co-efficient of each of the Scale Items with Summated Score ......... 129
Table 30: Correlation Co-Efficient of each of the Scale Items with Summated Score ......... 131
Table 31: Correlation Co-efficient of each of the Scale Items with Summated Score ......... 133
Table 32: Distribution of Schools in Addis Ababa by Ownerships and Levels, (2007/08) ... 150
Table 33: Distribution of Kindergardens by Ownership and Sub-city ................................... 151
Table 34: Distribution of Primary Schools by Ownership and Sub-city ................................ 151
Table 35: Distribution of Secondary Schools by Ownership and Sub-City .......................... 152
Table 36: Student Enrolment at Different Levels in Addis Ababa ........................................ 152
Table 37: Responses to the Question “How Decentralization has improved the Conditions of
Education Provision and its Service Delivery in Addis Ababa City” .............................. 154
viii Decentralization and service delivery in Ethiopia
List of Figures
Figure 1: Integrated Theoretical Framework for Analysis of Public-Private Partnerships ...... 33
Figure 2: Indictors of Decentralization - The soufflé Theory .................................................. 61
Figure 3: Growth Rate of Achieved Revenue ......................................................................... 67
Figure 4: Growth Rates of Tax and Non-tax Revenue ........................................................... 68
Figure 5: Trend of Major Revenue Sources, Compiled from BoFED. .................................... 68
Figure 6: Trends in the Percentage Share of Major Revenue Sources ................................. 70
Figure 7: Expenditure and Revenue Per Year in Birr ............................................................. 71
Figure 8: Recurrent Expenditure and Captial Expenditure in Birr .......................................... 72
Figure 9: Summary of indicators .......................................................................................... 108
Figure 10: Analytical Framework for Administrative Decentralization. ................................. 123
Figure 11: Role vs. Available Resource Compatibility for Local Governments as Expressed
by Local Governments .................................................................................................. 126
Figure 12: Clarity of Power, Role and Duty as expressed by local Governments. .............. 127
Figure 13: Evolution of WID’s Approach to Gender Issues .................................................. 141
Decentralization and service delivery in Ethiopia ix
Preface
This is a very enlightening book on decentralization and service delivery in
urban Ethiopia. Decentralization refers to the reorganization of authority so that
there is a system of co-responsibility between institutions of governance at the
Federal, regional and local levels. Decentralization also contributes to enhancing
good governance, through increasing opportunities for public participation in
planning and decision making. It also assists in enhancing the government
responsiveness, transparency and accountability.
Following a period with a centralized government during the regressive Derg
regime, the Ethiopian government has followed a decentralization policy, building
the capacity of lower levels of government. Decentralization in Ethiopian urban
centres has played an increasingly important role in the service delivery to the
urban inhabitant. Hence, the purpose of this book is to assess the situation of
decentralization and urban service delivery in Ethiopia. The book is based on
selected papers presented at the third national conference, organized jointly by the
Ethiopian Civil Service College and IHS, Erasmus University Rotterdam, in July
2010. In the conference several papers were presented covering topics of
decentralization policies and practices in Ethiopia in the past decade and a half.
From the papers presented in the conference 12 were selected to be included in
this book.
The book commences with an introduction, which contains the theories of
decentralization and outlines the structure of the book. The book covers basically
three elements of decentralization: - political decentralization, where powers and
responsibilities are devolved to elected local governments, which is a form of
decentralization that is synonymous with democratic decentralization.
Administrative decentralization, which sometimes referred to as deconcentration, is
about the transferring of functions performed by federal government to regional
and woreda level administrative units. Financial decentralization, entailing the
transfer of financial resources in the form of grants and tax-raising powers to
regional and woreda levels of government, have also been covered in the book.
These variations in the form and content of decentralization have an important
bearing on service delivery outcomes, and on processes of participation,
accountability and responsiveness.
The chapters in the book have demonstrated, aside from accountability, the
other issues pertaining to decentralization include shortcomings, clear
responsibilities at different level of government structures, capacity constraints,
financing of decentralization, among others and how these problems impact service
delivery. This book could be regarded as a contribution to the discourse on
decentralization with a focus on the extent to which decentralization enhances
service delivery for the urban population.
This book represents the contribution of many, to whom I wish to express my
thanks. I thank the contributors for their input and the organizers of the conference
for their creditable job and the participants for their contributions and participation.
Finally, my thanks go to Dr. Samson Kassahun, Mr. Aloysius Bongwa and Prof.
Meine Pieter van Dijk, for editing the book.
Dr. Hailemichael Aberra

Presidnet of Ethiopian Civil Service College
x Decentralization and service delivery in Ethiopia
Contributors
Abye Anelye is director of Urban Development Capacity Building Office at
Ethiopian Ministry of Urban Development and Construction
Aloysius Bongwa is a senior expert in urban finance, urban policy and capacity
building at the Institute of Housing and Urban Development Studies at Erasmus
University Rotterdam. He has over 20 years of international experience in lecturing,
research and advisory services. Aloysius has worked in Ethiopia on a regular basis
for the past decade.
Ayele Mulugeta has an MA in economics from University of Kansas, USA. He is a
senior lecturer in economics and he is currently the Academic Vice President of
Ethiopian Police University College
Belay File is a lecturer at Ethiopian Civil Service College. He has an MA in
development studies, specialized in Economics of Development and is currently
doing PhD research on small business success in the urban informal sector at IHS-
EUR.
Emaculate Ingwani is a lecturer at the Urban Management Masters Program, at
the Ethiopian Civil Service College.
Frew Mengistu is a lecturer at Ethiopian Civil Service College. He has a
background in architecture and town planning from Addis Ababa University and in
Urban Management from IHS, Erasmus University Rotterdam. He has extensive
experience in construction projects, urban planning studies and restructuring of
municipalities. Currently he is pursuing his PhD research at IHS-EUR.
Jan Fransen is deputy director of the Institute for Housing and Urban Development
Studies (IHS), Erasmus University Rotterdam. He has 20 years of experience in
education, research and advisory work on urban employment, capacity building and
development. Jan has worked in Ethiopia on a regular basis for the past decade.
Previously he co-edited a book on urban management in Ethiopia.
Kassa Teshager is an instructor in the Ethiopian Civil Service College. He
obtained his BA degree in Development Administration from Ethiopian Civil Service
College, Ethiopia, his MA in Development Studies specialization in Local and
Regional Development from the Institute of Social Studies (ISS), The Hague, The
Netherlands. Currently he is doing his PHD in Development Studies from the
University of South Africa (UNISA). Mr. Kassa has publications including: “Sector
Wide Approach: the Case of Health Sector in Ethiopia”, Microfinance as a Strategy
for Poverty Reduction in Ethiopia”, “Strengthening Governance for Improved
Health Services in Addis Ababa” (at the final stage of publication by OSSREA). In
addition to his experience in teaching and research, he had worked as a junior
clinical nurse in the health sector, Ethiopia
Meine Pieter van Dijk (PhD Economics Free University Amsterdam) is an
economist and professor of Water Services Management at UNESCO-IHE, Institute
for Water Education in Delft and professor of urban management in emerging
economies at the Institute of Social Studies (ISS) of Erasmus University Rotterdam
(EUR), MSM and IHS. He is a member of the research schools CERES and
SENSE. His work has been focused on developing countries since 1973, as
lecturer, consultant and researcher. His recent books are on the Chinese presence
in Africa (Amsterdam: University Press, 2009), Managing cities (Cheltenham:
Edward Elgar, 2006), with C. Sijbesma (eds., 2005): W ater and sanitation in India
(New Delhi: Manohar) and with M. Noordhoek and E. W egelin (eds, 2002):
Decentralization and service delivery in Ethiopia xi
Governing cities, New institutional forms in developing countries and transitional

economies (London: ITDG).
Ranauijai Bahadur Sing is working as Assistant Professor in Urban Management,
at Ethiopian Civil Service College, Addis Ababa, Ethiopia since 2007. He conducted
his PhD research on the topic: Environmental Problems and Management of
Lucknow City and Masters Degree in Geography (Specialization- Applied and
Regional Planning) both from Banaras Hindu University, Varanasi, UP, India. He
has an appointment as Coordinator for the Urbanization and Urban Development
Planning Course and Land and Real Estate Management Course, in Urban
Management Masters Programme, ECSC, Addis Ababa. Mr. Sing is currently
teaching the Masters Courses in Environmental Planning and Management, Land
and Real Estate Management and Urban Development Planning. His
expertise/interest areas include: Environmental Planning and Management, Climate
Change Issues, Urban Land use and Regional Planning and Urban Water and
Sanitation issues.
Samson Kassahun is associate professor and the academic vice president of
Ethiopian Civil Service College. He is an urban planner, demographer and
sociologist with extensive professional and research experience. His current
research interests include urban poverty, urban social development, housing, social
capital, neighborhood development and reproductive health.
Sudir Kumar Sing (Master Degree in Social W ork, Certificate in Disaster
Management) is currently working as a Lecturer in Urban Management Masters
Programme, Ethiopian Civil Service College Addis Ababa, Ethiopia since February
2009. Mr Singh has more than 10 years of working experience particularly in the
development sector with Indian Institute of Management (Lucknow), UNDP New
Delhi and Voluntary Services Overseas (UK). His teaching areas are Urban
Governance and Management, Local Economic and Social Development and Urban
Social Development and Poverty Alleviation. His research interests are in local
economic development, urban governance and cross cutting issues like gender,
HIV/AIDS and Youth development. Mr Singh has strong academic leadership
qualities and skills testimony as a Coordinator in Urban Governance and
Management and Local Economic and Social Development courses and he
accomplishes all tasks in a professional way.
Tesfaye Teshome (MA in Human Geography) is currently a lecturer at the
Ethiopian Civil Service College, Urban Management Masters Programme and also
th
served as Deputy Program Manager for the above mentioned programme from 12
st
November, 2007 to 1 November, 2009. In the summer of 1998 he successfully
participated as a research assistant in the research project conducted on selected
ethnic minorities of Gamo, Hamer and Wolaita in southern Ethiopia based on the
agreement signed between the Federation Council and Research and Publication
Office of Addis Ababa University. He has also many years of teaching experience
and served as part-time lecturer and research adviser to senior and post-graduate
students in Addis Ababa University, Addis Ababa University Commercial College,
Royal College and Asmara University. His areas of interests include research,
consultancy and reading.
Tilahun Fekade has an MA in Regional Development Planning (December, 1991),
from the Institute of Social Studies, The Hague, The Netherlands and a BSc in
Agricultural Economics (July, 1987) from Alemaya University of Agriculture, Dire
Dawa, Ethiopia. He has over 23 years of experience in the urban development
sector , where he has participated in multidisciplinary research conducted as part of
master plan projects for towns located in various s regions of Ethiopia. He has
xii Decentralization and service delivery in Ethiopia
strong research interest and is the author of several research papers on diverse
urban development related issues including urban planning, local economic
development, urban-rural linkages, urban housing, integrated solid waste
management and microfinance. Many of his research works are presented at
national and international conferences, while most of them are published in
journals, proceedings and books. He had also served as the head of the Economic
Research Department (2003-2005) and later as the Deputy Director General of the
Federal Urban Planning Institute (2005-2007) before he joined the Urban
Management Masters Program at the ECSC. He is currently serving as the Director
of the Institute of Urban Development Studies and continues to lecture at the Urban
Management Masters Program.
Decentralization and service delivery in Ethiopia
Part I: Overview: Decentralization and Service Delivery in

Ethiopia
Professor Meine Pieter van Dijk

Introduction
In this introductory chapter we shall first introduce the concepts and the major
theoretical reflections on decentralization. We will then give an example of
analyzing what decentralization could mean for the urban poor in the case of
Tanzania and Ethiopia. Van Dijk (2006: 4) argues that in the framework of
decentralization urban managers are not only dealing with social issues (such as
urban poverty and inequality), they are also responsible for the economic
development of their city and for the environmental impact of the development
process.
The decentralization concept

The different forms and types of decentralization according to the Cheema-
Nellis-Rondinelli-Silverman paradigm are well known (for example Rondinelli and
Ruddle, 1978). According to these authors three forms of decentralization can be
distinguished on the basis of their objectives. These three main forms can be
mentioned and will be discussed briefly:
1. Political decentralization to give more power in decision making
2. Administrative decentralization: to redistribute authority
3. Fiscal, to have adequate revenues
Ad 1 Political decentralization would give more power in decision-making to
lower levels of government, the people concerned or other stakeholders. It would
include political participation, meaning elections of some kind of a local council.
Ad 2 Administrative decentralization: transfer of planning, budgeting, staffing,
program and project implementation, information management and operation and
maintenance to a lower level of government, mean a replication of a national
government structure at the that level: a department of health, education, etc.:
Ad 3 Fiscal decentralization means:
• Mobilisation of resources, self-financing, or cost recovery through user
charges
• Co-financing or co production, users participate in providing services and
infrastructure through monetary or labor contributions
• Expansion of local revenues through property, sales or other local taxes or
indirect charges
• Intergovernmental transfers of general revenues from taxes collected by
central government to local governments for general or specific uses
• Authorisation of municipal borrowing, including loan guarantees by central
government
Often market or economic decentralization is added to this list.
Responsibilities are transferred to the private business or non-governmental (NGO)
sector. Waste collection in Addis Ababa is good example and will be discussed.
This often requires removing legal and policy constraints to allow the private sector
to take up these responsibilities.
This is the most complete forms of decentralization from a government’s
perspective and involves privatization and deregulation; the shift responsibility for
functions from
2 Decentralization and service delivery in Ethiopia
the public to the private sector. This allows functions that had been primarily or
exclusively the responsibility of government to be carried out by businesses,
community groups, cooperatives, private voluntary associations, and other
nongovernmental organizations.
Privatization and deregulation are usually accompanied by economic
liberalization and market development policies
Ethiopia has undergone remarkable transformations in both political and socio-
economic terms. The transformations were largely centred on the need to shift from
the centrally planned, command and control system of the previous regime to a
more open market economy. The package of reforms that Ethiopia has been
undertaking includes extensive decentralization, de-monopolisation and a
promotion of private sector investment. These reforms are now yielding results in
the form of economic growth and socio-economic development, the challenge that
Ethiopia faces is to ensure their sustainability.
A combination of the three main forms of decentralization results in three types
of decentralization:
1. Deconcentration, the weakest type of decentralization: redistribution of
functions to non central government levels within sector ministries or other
sector-specific national agencies that tend to stay in control.
2. Delegation is more extensive, involving the transfer of responsibility for
decision-making and administration of public functions to semi-autonomous
organizations not wholly controlled by the government, but ultimately
accountable to it
3. Devolution is even more extensive and involves the transfer of authority for
decision-making, finance and management to quasi-autonomous units of
local government with a corporate status. The essence of devolution is
giving discretionary authority to lower levels of government; certain tasks
can even be subcontracted to the private sector.
Cohen and Peterson (1999) analyze decentralization from the perspective of roles
distribution. They distinguish three states:
1. Institutional Monopoly, or centralization, where roles are concentrated at the
spatial centre in an organization or institution
2. Distributed Institutional Monopoly, or decentralization to local level
governmental institutions or private sector firms and organization through
deconcentration, devolution, and/or delegation, but where roles are
distributed spatially and concentrated in one organization or institution
3. Institutional pluralism, or decentralization through deconcentration,
devolution, and/or delegation, but where roles are shared by two or more
organizations or institutions, which can be at the spatial centre, distributed,
or a combination of both
This would lead to the following states of decentralization and distribution of roles.
The quadrants can be explained in the diagram on the following page:
i. Quadrant I represents centralization or institutional monopoly, where
roles are not shared, but instead are monopolized within one central
public institution
ii. Quadrant III represents distributed institutional monopoly, where roles
are not shared, but responsibility for roles is spatially distributed.
Included in this quadrant are the deconcentrated and devolved types of
decentralization
ii. Quadrants II and IV represent institutional pluralism, where roles related
to a specific task are shared by 2 or more governmental institutions
and/or private sector firms or community organizations. Institutional
Decentralization and service delivery in Ethiopia 3
pluralism can be spatially centralized as in Quadrant II or decentralized

as in Quadrant IV
There are high expectations concerning the results of decentralization, for example:
1. Political benefits include strengthening of the democratization process, with
and new initiatives taken & improved management at the local level
2. Decentralization will lead to a reduction in rural-urban disparities through
providing employment and basic social services at local level and thus
diminish the high rate of rural-urban migration
3. Contributes to poverty reduction
Role Based
Centralization & Decentralization

Monopoly & Pluralism
Center I II
Centralized monopoly Institutional pluralism
at centralized level
Spatial
III IV
Distributed Institutional Institutional pluralism
Local Level monopoly at decentralized level
Source: Laryea-Adjei G., 2007, Decentralization plus pluralism for basic services
provision: water and
Which theoretical framework can be used for research concerning

decentralization?
In principle there are five key questions, each with a different body of literature,
in relation to decentralization.
a. Which functions and responsibilities have been transferred to which lower
level of government?
Van Dijk (2006) shows that in India, Indonesia and Thailand a very different
choice has been made which functions and takes responsibilities to transfer to
lower levels of government, this has created a very different position for the urban
managers involved. We could call this the basic situation created by the legislation
and part of the ‘reality of decentralization’ in the countries concerned. Research
focusing on this issue would have a comparative angle and argue that a certain
choice limits or stimulates local level managers to take up their own responsibility.
It should be noted that the emphasis in India and Ethiopia is on the (region) states,
while in Ghana and Tanzania power is given to (usually smaller) districts. In other
countries responsibilities are given to local governments (India and Indonesia for
example), which may correspond with a city, or a city could be made up of several
local governments, implying even smaller spatial units and the problem of
coordination at the city or metropolitan level.
b. Is decentralization achieving its objectives in the country concerned?
To answer the question whether decentralization is achieving its objectives in
Tanzania we first have to agree on the objectives in the country concerned. It is
possible to focus on the improved service delivery in Tanzania, a before and after
comparison is necessary showing whether the performance has improved. The
World Bank financed a study on the effects of decentralization on service delivery
in Ethiopia, the results are very optimistic as is shown by the title: Achieving better
service delivery through decentralization in Ethiopia (Garcia and Rajkumar, 2008).
c. Effects of decentralization on the poor
Van Dijk (2008a) wants to assess the effects of decentralization on the poor in
Tanzania. Van Dijk used household surveys before and after decentralization
became effective and tried to argue that the improvements were the result of
decentralization. Research into economic of market decentralization, where private
parties would take over certain government functions, usually also focus on the
results for the poor (Van Dijk and Schouten, 2008)
d. Effects of decentralization on different sectors
Mollel (2010) wished to determine the effects of decentralization on different
sectors, in particular health and education. This PhD focuses on the planning
process, which should become more participatory as a manifestation of the
decentralization process and be more effective. However, is one interested in the
planning process? or is one interested in the results of planning a more
development friendly environment for local farmers and businessmen? Van Dijk
(2006: 4) argues that in the framework of decentralization urban managers are not
only dealing with social issues (such as urban poverty and inequality), but also
responsible for the economic development of their city and for the environmental
impact of the development process. If the environment is not properly managed, it
has the potential to undermine the development prospects of the country.
Ethiopia’s urban centres are facing growing environmental problems. These
environmental problems are rooted in failed markets and their resolution requires
that the government takes firm action. There is evidence that market based
instruments can achieve positive environmental outcomes at considerably less cost
relative to Ethiopia’s command and control approach.
e. What kind of decentralization do we find in a certain country?
Using the typology of Rondinelli’s three main forms of decentralization, firstly,
political decentralization: this gives more power in decision making to the lower
level, here participation is important. Secondly, administrative decentralization: to
redistribute authority, allowing the lower level of government to improve service
delivery and/or to promote economic development. Finally, the fiscal
decentralization: this should help the lower level of government to get adequate
revenues to achieve the previous forms of decentralization. In this type of research
one could ask, which types of decentralization do we find in Ethiopia? and to what
extent has decentralization been successful? Several chapters in this book deal
with these issues, in particular in Ethiopia, some of the findings are summarized
below.
The following good framework for analyzing has been developed by Rondinelli and
his associates:
8. Development of
1. Assessment of goals
decentralization
and objectives
implementation strategy
2. Assessment of concepts 7. Selection of feasible

and approaches to decentralization options
decentralization
3. Preliminary analysis
6. Assessment of financial
of political support-
options
stakeholder analysis
4. Analysis of existing 5. Assessment of

institutional structure organizational alternatives
Examples of Decentralization: Ethiopia and Tanzania
Ethiopia
Decentralization in Ethiopia has been through different phases; political
decentralization (Part II of the book), administrative decentralization (Part III of the
book) and fiscal decentralization (Part IV of the book). Garcia and Rajkumar (2008)
have separate chapters on improvements in health and education services, the
delivery of basic services and intergovernmental fiscal transfers. The book contains
a chapter evaluating decentralization at the woreda level, focusing in particular on
a number of constraints for decentralized service delivery, which are still in
existance. The study repeatedly asks whether the changes over the past 15 year
are due to decentralization, or to other development initiatives.
Garcia and Rajkumar study discusses how Ethiopia has made substantial
progress during the last 15 years in achieving the Millennium Development Goals,
in particular those concerning education and health. The study also points to some
shortcomings. For example the targets for child and maternal mortality and for
access to clean water and sanitation that will not be achieved. The woredas also
need mired funding to adequately undertake service delivery and the capacity of
local governments need to be increased. The major constraints are the lack of
clarity in assignment across tiers of government and the fact that citizens do no
hold service provincial accountable. Subsequently a lot of interesting policy
conclusions have been formulated, such as:
1. To implement an appropriate tax-collection and revenue-sharing mechanism
2. To improve local government capacity
3. To clarify the functional roles between regions and woredas
4. To strengthen transparency and accountability in service delivery
5. To use public information campaigns to improve education and health
outcomes and
6. To systematically evaluate key reforms
Tanzania
Van Dijk (2008a) provides an analysis of the decentralization process in
Tanzania. The major objectives for the promotion in this country were:
1. Promote economic developments in the regions
2. Accelerate development efforts for rural poor
3. Reduce interregional disparities, in particular concerning social service
4. Redress rural-urban imbalances and arrest rural-urban migration
Like in the case of Ethiopia, Tanzania started with a very centralized system of
government, then a decentralization strategy was introduced. The conclusions of
the research showed that the implementation of decentralization strategy after
1997 has not been totally satisfactory. A number of shortcomings were noted, one
of these shortcomings was that central government continued to maintain a strong
presence at the regional level. However, the decentralization process had also
strengthened the democratisation process by introducing mechanisms of
accountability and by forcing local governments to compete for funds.
The following evidence was produced for the positive interpretation of the
results. In the first place the government became convinced that an economic basis
is needed to justify decentralization. Secondly, they found out that it is good to
make people responsible through elections. Currently the Tanzanian authorities
take decentralization very seriously
Recently the president even suggested a code of conduct for people at the
regional level. Politicians now know that they will be held accountable for what they
have promised. In the case of the capital, the three new municipalities in Dar es
Salaam have been more active in developing economic policies, by providing space
and infrastructure for economic activities, because they had to compete with each
other for government funds and private investments. These and other local
governments organized private solid waste collection with some success. It was
also a remarkable achievement of Tanzania that it improved its accountancy
system for decentralized projects by training 400 accountants, who are now active
through out the regions.
There are also examples of improved management at the local level in
Tanzania:
1. There was a rehabilitation of physical infrastructure, particularly the trunk
and regional roads under the Integrated Road Program (IRP) after 1997
improved significantly the marketing networks
2. Recently government worked on the privatization of the railroads, hoping to

use the port of Dar es Salaam more effectively, once the railroads work
again
3. A lot of money has been spent on improving infrastructure & transport,
which can facilitate rural development
4. Improved transport contributes to poverty alleviation by assuring cost-
effective transport of goods and people
5. Improved transport also links the country to the global economy and assists
neighbouring landlocked countries to connect to the world
6. The Agriculture sample census 2002/03 shows some improvements in
assets owned in the rural areas
7. Higher levels of regional economic growth in recent years are also probably
the effect of decentralization: cumulative positive effect of the infrastructure
built by different levels of government and of the higher level of
expenditures of local governments
8. Direct central government support to regions, for example by setting up
offices in specific regions
Due to decentralization there are more initiatives at the regional level and
efforts have been made to reduce rural-urban disparities (Van Dijk, 2008b). An
effect of decentralization is for example that more regional initiatives are taking
place as has been shown by comparing two districts: the Arusha and Kilimanjaro
districts in the north. The Arusha district is better managed and more booming
because of tourism and migration into the region, but also because of agriculture
and trade links with Kenya and Uganda: wheat, coffee and flowers (with some
Dutch horticulturalists), plus mining can be mentioned, although the latter concerns
mainly some small-scale activities. In general of course the tourism takes place
outside Dar es Salaam and hence contributes to rural development. The
continuously increasing number of tourist has had a positive impact on rural
demand for goods and services, because people earned more money in these
regions. Also the regional budgets and tax revenues give an indication of how
much is spent in different regions and that these amounts have increased. A
combination of these factors have contributed to higher regional growth and
spreading of economic growth, which is fuelled by decentralization.
The Structure of the Book

In part II, political decentralization, Kassa Teshager (ECSC) has looked at
political decentralization and assesses how it has been legally designed,
implemented and how successful it has been in achieving the intended objectives
of being an instrument of facilitating service delivery and promoting participation of
grass-roots people in the decision-making processes. He gives a working definition
of political decentralization and assesses the constitutional and legal framework of
political decentralization. In this chapter he also examines the level of decision
making autonomy of local governments; the participation of citizens in different
decision making activities; and inter-governmental relations for improved
decentralized service delivery.
The chapter is based on experiences with political decentralization experiences
in Addis Ababa city. The study analyzes the constitution and the various policies
formulated for the formal transfer of powers and responsibilities from the central
government to Addis Ababa city, sub city and kebele levels of administration.
Teshager points out that in practice, there have been very little devolution of
authority and functions from city government to sub city and kebele levels. The
structure is characterized by top-down approach of control and supervision. The
representation of different segments of people and organizations of civil society in
policy-making and political processes of sub city or kebele governments is

extremely low. There is no consultation and citizen input in deriving development
plans, projects and goals. Therefore, there is a need to revise the political
decentralization policy and focus on its practical implementation which is
responsive to the needs of local community
In part III administrative decentralization: Frew Mengistu and Meine Pieter van
Dijk argue that Public Private Partnerships (PPP) are an attempt to transfer
management to a combination of government and provide parties. Taking the
Merkato Millennium Development Partnership (MMDP) as a case, this chapter
analyzes the challenges in public private partnerships for urban re/development
projects. The theoretical framework is composed of strategic and behavioural
factors embedded within the specific local context. The strategic level factors
include: vision/goal, strategies, leadership, political and societal support, and
communication. The behavioural interaction level factors include trust, power
balance and positions, mutual respect, perceptions, commitment and interaction
rules. Both groups of factors are interdependent and closely related to the
principles of good governance. These process variables were contrasted to the
goal achievements or performance outcomes of the partnerships. The chapter
shows that in order to use Public Private Partnerships effectively two conditions are
necessary: a meaningful decentralization which empowers urban local governments
with enough political space to influence policies to promote local development, and
a higher level of political support. The Merkato Millennium Development PPP was
lacking these conditions. The other challenges of the partnership had been
managing too many stakeholders with different organizational values and
expectations, and lack of clear demarcation of roles. The partnership also suffered
from generic challenges of public private partnerships which are lack of clear
accountability and identity.
In part IV, fiscal decentralization, Belay File and Ayele Mulugeta note that fiscal
decentralization is often considered the manifestation of other types of
decentralization. Fiscal decentralization involves the devolution of both revenue
generation and expenditure management power to the lower levels of government.
Devolving such a power would result in efficient and effective utilization of scarce
resources. However, implementation of such systems varies among regions due to
factors such as implementation capacity, the tax base, and level of economic
development. The purpose of this chapter is to investigate the practices of fiscal
decentralization in Addis Ababa City and to analyze the opportunities and
challenges of the city administration in raising sufficient revenue and delivering
public services to satisfy the needs of its citizens.
Aloys Bongwa looks at the formula for fiscal decentralization in Ethiopia and
suggests several alternatives. He addresses the issue of measuring fiscal
imbalances in transitional and developing economies and in particular in Ethiopia.
Fiscal imbalance indicators are of special interest in transitional and developing
economies, where peculiar developments question the validity of conventional
indicators. This chapter discusses different approaches to fiscal imbalance
measurement. Based on a review of fiscal policies in Ethiopia, and explains why
the fiscal imbalances are an important phenomena that needs to be monitored and
hence the imbalances have to be measured, which can be done in different ways.
The author suggests using the net worth of government which gives a specific
insight. W hat mechanisms do federations need to deal with fiscal imbalances
between governments? The results show that fiscal imbalances in Ethiopia were
much larger between 1998-2004 than conventional indicators suggest.
In part V an example of sectoral examples of decentralization housing has been
reviewed. Tilhun Fekade chapter is about decentralization and cooperative
housing. Housing cooperatives can play an important role in housing provision as
emphasized by enabling strategies promoted by the United Nations Centre of

Human Settlements (UNCHS). The adoption of decentralization policies in Ethiopia
that followed the change of government in 1991 led to a redefinition of the legal
and institutional framework and hence the support available to the cooperatives.
This study was therefore undertaken with the aim of exploring the impacts of
decentralization on the performance of housing cooperatives in Oromia Region.
The chapter is based on an extensive literature review and was supplemented by
interviews held with relevant resource persons. The chapter’s major finding is that,
despite changes in the legal and institutional frameworks for cooperatives that were
adopted at the national level, the role of housing cooperatives in Oromia Region
has been limited due to long years of policy neglect of the housing sector as well
as failure to create adequate capacity to promote, support and regulate housing
cooperatives. The chapter further highlights the lack of institutional alignment
between the activities of institutions responsible for housing and cooperative
sectors that have deprived housing cooperatives from obtaining support that are
responsive to their specific demands. The study also revealed that, as things stand
now, the role of cooperatives has been apparently downplayed in favour of a
basically government-driven condominium housing construction program. The study
forwards recommendations to be taken up in future efforts that aim to come up with
innovative housing provision modalities.
Jan Fransen and Samson Kasahun suggest a different way for incorporating
informal settlements in Ethiopian cities. They assess if and how informal
settlements can be incorporated into the urban fabric of Addis Ababa by answering
two questions: Does urban planning in Addis Ababa offer an enabling environment
for local governments to incorporate informal settlements? Do present experiences
offer opportunities to incorporate informal settlements? The study has practical and
theoretical relevance. Practically, it aims to offer recommendations in order to
reverse the trend towards dualism by creating incentives to invest in informal
settlements and to capture land value increases. These recommendations are
targeted at the macro (national policies and regulations), meso (revised master
plan of Addis Ababa) and micro level (kebele level upgrading projects).
Theoretically, it is relevant as hardly any definition, theory and research
methodology exist on incorporating informality.
Mesfin Tilaye looks in his chapter at pluralism and performance of local
governments in the case of solid waste collection in Addis Ababa. The chapter tries
to test hypotheses about the effects of decentralization on accountability of the
local governments, taking into account the impact of selected institutional factors
on solid waste collection service. The hypotheses tested specifically in this chapter
are: has the reform process (in particular decentralization) which took place in
Addis Ababa improved task specificity of local governments in solid waste
collection service delivery. Secondly, Mesfin wants to find out whether
administrative decentralization under institutional pluralism improved the task
environment of local government in Addis Ababa hence improving its solid waste
collection service function?
Emaculate Ingwani reflects on solid waste collection in Bole from a gender point
of view. She notes that for many years management of solid waste in African
countries, including Ethiopia, has been a burden of governments and local
authorities who were often overwhelmed by other service provision obligations.
Following decentralization initiatives by the Ethiopian Government through
PASDEP; women are now seen playing significant roles in solid waste collection.
Bole sub city of Addis Ababa Ethiopia has been implementing a variety of methods
in collection of its solid waste. Using the Gender and Development (GAD)
framework this research explores the role of women in solid waste collection;
reflecting the fundamentals of gender analysis and gender diagnosis. This
descriptive case study made use of both primary and secondary methods of data
collection which include interviews with 35 women who participate in solid waste
collection, the Delphi technique with 3 purposively selected city administrators, on
site observations of the process and practice of solid waste collection in Bole sub
city Kebele 14/15. This research established that the practice of solid waste
collection in Bole Sub city Kebele 14/15 is not mechanized, however it is very
efficient in keeping the environment clean. Both women and men participate in
solid waste collection activities; but women make up the bulk of the workforce.
Scaling up the opportunity on community participation in solid waste collection
through training and access to equipment is a necessary prerequisite for
sustainability of decentralization initiatives and effort in solid waste collection at
local level.
Tesfay, Singh and Singh look at decentralization and education. A popular form
of deconcentration in education is to give additional responsibilities to schools. This
is often called school autonomy or school-based management and may take the
form of creating elected or appointed school councils and giving those budgets and
the authority to make important educational decisions. Deconcentration may also
take the form of empowering school directors or directors and teaching faculty to
make decisions within the school. Recent studies in developing countires, which
are currently trying out new forms of decentralization, show that these countries are
ruled by their own specific political traditions. They are often faced with competition
from different political legitimacies, in particular those linked to policies of more or
less "socio-democratic" inspiration and those bound up with the resulting budgetary
adjustment and restriction policies advocated over the past many years. The last-
mentioned policies, tending towards greater decentralization, are usually
underpinned by ideas of efficiency, participatory democracy or governance.
Ethiopia turns out not to be an exception to this state of affairs.
In part V, support by International Development Agencies, Abuye Anleye gives
an overview of the support role of International Development Agencies in Ethiopia’s
Urban Development process. He notes that remarkable achievements are being
registered in the field of decentralizaiton and intends to provide an overview of the
various federal government initiatives that have been executed in collaboration with
bilateral and multilateral agencies since the ascendance of the incumbent EPRDF-
led government to power in 1991.He browses through secondary sources under the
custody of the Ministry of Works and Urban Development (MW UD). The author
aims at effectively capturing the major achievements claimed to have been attained
in the pursuit of decentralization policies in league with bilateral and multilateral
agencies.
In part VI the conclusions Aloysius Bongwa and S. Kasahun draw some
conclusions and look at their implications for future research.
Conclusions
Autonomy at lower levels of government allows a more active role for urban
managers in formulating, economic, environmental and social policies and
collecting more local revenue. The challenge for urban management is to focus on
the most important urban issues and develop a strategy concerning the future
development of the city. The question is, who determines what these issues are?
Urban management has also become more complicated because it has become
more and more a multi-actor event. Inhabitants, entrepreneurs, organizations of
inhabitants or entrepreneurs, environmental activists and project developers (or
organizations of these actors) all want to play a role. To be able to deal with this
situation the urban manager needs clear responsibilities. This leads to the theme of
decentralization, which provides new opportunities for local actors to take
initiatives. Decentralization offers urban managers more opportunities to create the

conditions for growth. The conditions for successful decentralization will be studied
in this book.
Part II Political Decentralization Gives More Power in

Decision Making
Political Decentralization and Service Delivery in Addis

Ababa
Kassa Teshager
Introduction
Background and Rationale

Decentralization has become an increasingly widespread and significant
dimension of political and administrative reform in many developing countries
including Ethiopia. This is associated with the hope that “bringing government
closer to the people” will improve the provision of public services by increasing
people’s voice in decision-making, and by making the government more
accountable to them. Decentralization is presumed to have a number of benefits,
including positive outcomes in both democratic and developmental terms. It is
assumed that democracy will be deepened by the extension of political
representation to the local level, with democratic processes strengthened through
enhanced political participation at the local civil society actors. In addition, it is
assumed that benefits in socio-economic development will accrue through local
government being more responsive and more accountable to citizens’ needs and
desires. These benefits are interlinked in that local-level representation and
participation is believed to lead to the delivery of public services that are relevant
to the local context.
The current Ethiopian government officially declared a decentralized ethnic-
federal system in its 1991 transitional charter and 1995 constitution which was
aimed at devolving political, fiscal and administrative power from the central to sub
national governments. The decentralization drive in Ethiopia has proceeded in two
phases – first from the federal to regions and chartered cities (Addis Ababa and
Dire Dawa) (1991-2001/02), and subsequently into W oredas or sub cities
(2002/03). While the first wave of decentralization has registered significant
achievements, it was not capable of bringing genuine self-rule and better service
delivery particularly at lower levels of administration (Taye and Tegegne 2007).
This circumstance prompted the central government to take an initiative to further
devolve powers and responsibilities to the woredas or sub cities and kebeles in
2002/03.
Following this initiative, the revised Addis Ababa city charter (proclamation No
361/2003) became effective in 2003 and is valid until today. Prior to the reform,
Addis Ababa was structured in 6 zones, which were divided into 28 woredas
(districts), which were again divided into 328 kebeles (sub districts) (proclamation
No 87/1997). After the reform woredas were renamed to sub cities and there is no
zonal structure. Today, the city is divided into 10 sub-cities and 99 Urban Kebeles
as per the new administrative structure (Proclamation no 361/2003). Following the
path of decentralization the sub cities and kebeles were empowered and endowed
with the duty to provide a multitude of decentralized municipal services.
However, to what extent these decentralized powers are exercised and the
anticipated benefits actually realized are so far remaining limited. Therefore, this
chapter looks at political decentralization in Addis Ababa City Administration and
attempts an assessment of legal framework, local government autonomy, and its
success in achieving the intended objective of being an instrument of promoting

participation of grass-roots people in decision-making and better service delivery.
Statement of the Problem

Political decentralization is the territorial division of state power. It is a popular
governance arrangement aimed at achieving complete devolution of decision-
making power and transferring political responsibility to sub-national governments.
In such a political structure, sub-national urban governments have an independent
legal existence guaranteed by constitutional arrangements. Often, there are legal
provisions to prevent any undue interference by central governments in matters
determined to be of local jurisdiction.
In federal systems, the independence and autonomy of the constituent units are
so important that authority and responsibility are constitutionally shared between
the central government and other subsidiary units of government, which can be
regions, woredas and chartered cities. Such a division of state functions and
responsibilities is the hallmark of genuine decentralization. Apart from legal
guarantees for autonomy, politically decentralized governmental units have
independent revenue and taxing authority, and can prepare and approve their
budgets and socio-economic development plans without having to seek central
authorization. Further, they can also have elected councils primarily accountable to
the electorate. In modern politics, the closer a political system gets to such direct
participation and the more people it offers an opportunity to influence policy
making, the more decentralized and democratic it is (Barkan et al. 1998). According
to the W orld Bank, Political decentralization aims to give citizens or their elected
representatives more power in public decision-making. Advocates assume that
decisions made with greater participation will be better informed and more relevant
to diverse interests in society. The concept implies that the selection of
representatives from local electoral jurisdictions allows citizens to know better their
political representatives and allows elected officials to know better the needs and
desires of their constituents. From this explanation, political decentralization often
requires a constitutional/legal framework, democratic elections and pluralistic
political parties, local government, and the encouragement of effective public
participation.
The decentralization program of any government must be guided by the
principles of political decentralization and the measure of success must be its
contribution to democratic self rule and facilitated service delivery at local level. By
the same token, the current decentralization policy of the Ethiopian urban
governments must be evaluated from this perspective. However, there is a gap in
this arrangement because the role and responsibilities of Cities, Sub cities and
Municipalities as well as their place in the broader realm of administration are not
clearly and adequately stated and implemented in Ethiopian state structure. This
has resulted in the apparent neglect of Cities and Municipalities as separate
decision making units. In particular this implies that urban centres are not
recognized as distinct units of governance and their authority and functional
relationships with the federal, regional, zones and woredas governments have not
been clearly defined. This has handicapped sub cities and municipalities from
delivering services and infrastructure to urban residents. Though Addis Ababa city
administration is different from other cities in the country, there is no evidence that
shows how political decentralization is exercised at sub city/ kebele level.
Objectives of the Study

The main objective of the study is to examine how political decentralization
affects public-service delivery in Addis Ababa. Specifically, the study aims to
achieve the following objectives: (1) to assess the constitutional and legal
framework of political decentralization; (2) to examine the level of decision making
autonomy of local governments; (3) to examine the participation of citizens in
different decision making activities; (4) to examine inter-governmental relations for
improved decentralized service delivery.
Significance of the Study

Political decentralization is now recognized as a key pre-requisite for facilitating
public service delivery and promoting good governance. It is therefore crucial that
policy-makers, scholars, practitioners and other stakeholders in Ethiopia should
advance their understanding of issues related to local government and political
decentralization. Though there are different reform measures taking place in the
country related to decentralization, there is little empirical evidence on the
improvement of service delivery at the sub city level as a result of political
decentralization. Therefore, it is important to study how political decentralization
facilitates service delivery at the decentralized level. The study wishes to give an
indication for policy makers on how to make the service delivery effective and
efficient through different decentralization reform measures. It is hoped that the
study will contribute to the existing body of knowledge relating to decentralization
in general and political decentralization in particular in Ethiopia.
Scope and Limitation

This study mainly focuses on Addis Ababa city administration. However, to
illustrate cases, the researcher has chosen Bole Sub City because of the
constraints of time, costs and availability of information. Since this chapter depends
on both secondary and primary data, inconsistency and unavailability of relevant up
to date information have affected the quality of the chapter. In addition, the
researcher used semi structured interviews and applied qualitative approaches.
This has also had an affect on the quality of the research. Since the research is a
case study on political decentralization, it does not give the real picture of all types
of decentralization in the city.
Approaches and Methodology

This study looks at political decentralization in Addis Ababa and aims to assess
the extent to which local governments exercise democratic self-rule,
representativeness of elected councils, popular participation and independent
decision-making power on matters pertaining to service delivery. Although the
study is in Addis Ababa, the sub city level of administration is taken as the focal
point for case presentations due to its strategic place in the present city
government structure. In this research, qualitative data from mainly secondary and
primary sources were used. The primary data obtained from 15 key informants
(kebele officials, sub city officers, elected councilors, heads of NGOs and
community representatives) through semi-structured interview in Bole sub city.
Secondary data was obtained from books, journals, articles, city and sub city
documents and research works. The federal constitution, city charter and other
laws were reviewed for the purpose of examining the formal powers and duties of
the city, sub city and kebele level administrations. In addition, the same sources
were used to sketch the formal institutional framework and inter-governmental
relations between sub city and the other tiers of government. Official reports and
publications were used to prepare the socio-economic and demographic profile of
Addis Ababa.
Organization of the Study

With the above introduction as the first part of the study, the remaining parts of
the study have been organized as follows: The second part of this paper deals with
the theoretical discussion about political decentralization. The third part of this
paper is about data presentation and analysis. The fourth part of this paper
describe the findings and observations made by the researcher and the final part of
this paper is the conclusion.
Theoretical Discussion
When studying political decentralization for improved service delivery in Addis
Ababa, it is important to reflect on decentralization issues, because the institutional
setting and functioning of the city determines to what extent certain laws and
policies can be implemented at different levels. To be able to understand how
political decentralization functions, first of all a definition will be given of the
concept. Next, the concept will be framed into service delivery, referring to how
political decentralization can improve service delivery. This theoretical framework
aims to highlight and bring together the most important components of political
decentralization with respect to service delivery. Though political decentralization
can be seen from different perspectives, this analysis will be made based on the
perspectives of UNDP/WB.
Decentralization
The term decentralization has different meanings for different people. However,
most authors on the subject agree that decentralization means transfer of authority
and responsibility from higher to lower level government bodies and functionaries.
According to Falleti (2005), ‘decentralization is a process of state reform composed
by a set of public policies that transfer responsibilities, resources, or authority from
higher to lower levels of government in the context of a specific type of state’.
Decentralization by Rondinelli and Nellis (1989) is described as transfer of
responsibilities for planning, management, and the rising and allocation of
resources from the central government and its agencies to field units of the central
government, semi-autonomous public authorities, regional authorities, or non-
governmental, private or voluntary organization. According to UNDP, there are
different types of decentralization- namely political, administrative, fiscal, and
market decentralization, which are distinguishable by their different characteristics,
policy implications and conditions for success. However, this chapter focuses on
Political decentralization in line with the perspective of UNDP and is discussed in
the following section.
Political Decentralization
Political decentralization refers to the decentralization of political power and
authority to sub-national or local levels where elected and empowered sub-national
government units exist (Martinussen, 1997). It is a popular governance
arrangement aimed at achieving complete devolution of decision-making power and
transferring political responsibility to regions, woredas and chartered municipalities.
In such a political structure, sub-national governments have an independent legal
existence guaranteed by constitutional arrangements. Often, there are legal
provisions to prevent any undue interference by central governments in matters
determined to be of local jurisdiction. The primary objective of political
decentralization is to push decision making down to lower levels of governments
and empower communities to exercise self-rule at the local level.
According to the World Bank 1, political decentralization often requires

constitutional or statutory reforms, the development of pluralistic political parties,
the strengthening of legislatures, creation of local political units, and the
encouragement of effective public interest groups. Further, advocates of political
decentralization often always assume that decisions made with greater community
participation will be better informed and more relevant to diverse interests in
society than those made only by national political authorities. The concept implies
that the selection of representatives from local electoral jurisdictions allows citizens
to become better aquainted with their political representatives and allows elected
officials to better understand the needs and desires of their constituents. According
to Mehret (2006), political decentralization is usually assumed to have the following
benefits:
• Transferring power and authority from the central government to legally
established units of local governments so that decision-making power
will be in the hand of local-authorities who are more aware of the local
situation and hence are in a better position to take judicious decision;
• Promoting democracy at the local level through periodic elections and
elected councils; (3) encouraging citizen participation in government
and development;
• Guaranteeing the independent decision making authority of local
governments;
• Helping in the development of a robust civil society;
• Promoting equity at the local level by ensuring the fair representation of
all societal groups in the community.
According to John-Mary Kauzya (2007), Political decentralization can also be

understood to refer to either or both of the following: (1) transferring the power of
selecting political leadership and representatives from central governments to local
governments, and (2) transferring the power and authority for making socio-
economic decisions from central governments to local governments and
communities. The first sense of political decentralization refers to the vote (in the
choice of their local leadership and representatives) while the second one refers to
the voice (to have strong influence in the making, implementation, monitoring, and
evaluation of decisions that concern their socio-economic wellbeing). A
combination of both enhances the influence of local people on the decisions that
concern them.
John-Mary Kauzya (2003) argues that political decentralization requires a
process that combines both vertical and horizontal decentralization. While vertical
decentralization transfers power and authority from central government to local
government, horizontal decentralization empowers the local communities and
enables them to receive and utilize the powers that are transferred to them
especially in problem analysis, priority setting, planning, and constantly demanding
accountability from their local and national leadership or any governance actor at
the local level. Horizontal decentralization would require growth of civil society as
well as structuring local governments in such a way that they are legally obliged to
seek and promote the participation of the local communities in setting priorities,
planning and making decisions that the local governments will implement in a
whole range of socio- economic activities. This study used the perspective of
UNDP, and the benefits of political decentralization identified by Mehret are used
as a parameter to assess the success of political decentralization policies in
promoting self rule and service delivery at local level.
1
http://www1.worldbank.org/publicsector/decentralization/political.htm
Decentralization in Ethiopia
Ethiopia’s decentralization policy, elaborated in the 1991 transitional charter
and the 1995 constitution, was created by the current ruling party (EPRDF) to
devolve fiscal, political and administrative power to the ethnically organized
regional governments and chartered cities to bring political stability and contribute
to democratic governance, and improve service delivery. Unlike previous, heavily
centralized Ethiopian regimes, the EPRDF introduced a decentralized federal
system, and officially allowed different political parties to compete and participate
at both central and regional government levels. The first phase of decentralization
created a federal state structure, consisting of 9 ethnic regional states and 2 city
administrations responsible for a broad range of the country’s political, economic
and social objectives (Mehret 1998, FDRE 1995).
While the first wave of decentralization registered significant achievements, it
was not capable of bringing genuine self-rule particularly at the lower levels of
administration. Though the constitution allows for the creation of woredas with their
elected councils, the lack of power, resources and authorities has limited them to
effectively engage in democratic self-rule. It is within this back-drop that in 2002/03
the government launched a second phase of decentralization, designed to shift the
decision-making process closer to the community level and to improve the
responsiveness of service delivery. This was achieved through the District Level
Decentralization Program (DLDP) and Urban Management Program (UMP) (Taye,
2008). The process entailed enabling legislation for local governments, fiscal
reform, institutional restructuring, capacity development, etc.
Along this line, it is not difficult to see that there is a room for improvement in
order to maximize the benefits of decentralization. However, while decentralization
has changed the political climate of the country, it has certainly led to questions
regarding its various procedures, ramifications and impact. According to Paulos
Chanie (2007), on the political front, the EPRDF controls all the regional state
governments in the Ethiopian federation, either directly through its member parties
or indirectly through affiliate parties. The relationship between the central and
regional parties is between patron and clients. Therefore, a lot remains to be done
to get deeper into the decentralization process in Ethiopia, particularly in light of
recent developments. Further research and investigation will help to fill knowledge
gaps and provide policy makers with adequate, sufficient and reliable data to
improve the decentralization drive in Ethiopia and this research is part of this
process.
Decentralization in Addis Ababa

Before the revolution and dethroning of Emperor Haile Selassie by the military,
Addis Ababa had been one of a few self-governed cities of Ethiopia. The mayor
nominated by the Emperor, was able to reign autonomously. He was independent
from the strong hand of the Ministry of Internal Affairs and was hence able to
command internal and external resources for the implementation and acquisition of
programmes as he pleased. The city government had a city council consisting of 30
members, with legislative powers. The council was formed by eight appointed
department heads and 22 elected citizens of the city. The right to stand for election
was a privilege to those classified as great land owners (Mehret 1999).
After the political change in 1974 and the power shifted towards the provisional
military council called the “Derg“, the city government lost all its influences and
Addis Ababa eventually lost its autonomy. The appointment of the mayor and other
civil servants required the membership in the single political party the “W orkers
Party of Ethiopia”. The growing politicization and hierarchy of the administrative
structure created a culture of “Command and Control”. The increasing relevance of

party membership led to the recruitment of “cadre” instead of professionals and
thus to the bureaucratization of the administrative machinery and as a result
hindering the adequate provision of municipal services to the citizens of Addis
Ababa (Kokebe 2007). In 1991 the communist government was replaced by the
government that is ruling Ethiopia up until today. In 1994 the provisional
government was declared as the “Federal Republic of Ethiopia”, thus introducing a
democratization process. Addis Ababa became the capital of the federal state and
a chartered city with a decentralized structure.
Data Presentation and Analysis
Background of Addis Ababa

Addis Ababa, the capital city of Ethiopia and the diplomatic centre of Africa,
founded in 1886 at the time when emperor Menelilk II and his wife Empress Taitu
made their principal town at Entoto. Established in 1887 with a few tents and
scattered huts, Addis Ababa has shown a great geographical expansion to the area
of about 540 Km² to date. Prior to 1974, Addis Ababa was one of the few chartered
cities of the Empire of Ethiopia administered by a lord mayor (kantiba) appointed by
the Emperor. It had considerable local autonomy because the lord mayor was
largely free from the political control of the then powerful Minister of interior. In
addition, it was the only local government authority empowered to finance projects
by issuing its own bonds and borrowing from internal and external sources on its
own right (Kokebe 2007).
After the political change in 1974 and the power shift towards the provisional
military council, the city government lost all of its influence and Addis Ababa
eventually lost its autonomy. In 1991 the communist government was replaced by
the current government that is currently ruling Ethiopia and Addis Ababa is a
chartered city having its own administration led by a mayor. According to UN-
HABITAT (2008), hosting 30 percent of the urban population of Ethiopia, Addis
Ababa, is one of the fastest growing cities on the continent. Its population has
nearly doubled every decade. In 1984 the population was about 1.4 million, in 1994
it was 2.1 million, and it is currently thought to be 4 million. UN-HABITAT estimates
that this number will continue to rise, reaching 12 million in 2024. Its geographic
location, combined with its political and socio-economic status have made it a
melting pot to hundreds of thousands of people coming from all corners of the
country in search of employment opportunities and services. A high rate of
unemployment, concentration of slum dwellings, and poor housing, infrastructure
and sanitary development, characterize Addis Ababa more than the few good
features it posses. Until recently an inefficient centralized service delivery system
was among the big manifestations of the previous city administration system. The
City Governance Needs Assessment demonstrated a lack of vision and appropriate
strategies, lack of commitment and attitudinal change, absence of participation of
all development actors; weak public institutions, unsupportive policy environment
and centralized service delivery systems were among the manifestations of the
administrative system (AACG 2006). However, currently the city is decentralized
into 10 sub-cities, which are sub-divided into 99 localities called ‘kebeles’. Kebeles
are the lowest levels of city administration with negligible decision making power in
urban development activities. However, together with sub-cities kebeles play a key
role in executing municipal activities.
Socio-Economic Problems
The economy of the City mostly depends on industry, trade, large and small-
scale factories run by the government and private investors. Handicrafts and
cottage industries are numerous and play an important role in the development of
the city. Commerce and tourism are growing and some agriculture is undertaken in
the surrounding kebeles. However, growing urbanization, industrialization and
population influx put continuous pressure on the cities administration. The
economic condition is low and social services are minimal. The magnitude and
intensity of the problems are beyond the financial means of the City to alleviate
them. The most visible manifestation of the urban crisis in Addis Ababa is the lack
of the essential basic amenities such as piped water, sanitary facilities, electricity,
telecommunications and road networks. Where they are provided, these facilities
are insufficient and therefore do not meet the requirements of the users.
According to UN HABITAT (2008), basic indicators clearly show the extent of
the problem in Addis Ababa. For instance, 26 percent of the houses have no toilet
facilities (not counting the informal houses), 33 percent of households share a toilet
with more than six families, 29 percent has no separate room for cooking, and 34
percent of the residents depend on water from frequently interrupted public taps.
This implies that over half of the households in Addis Ababa including informal
settlements, have neither private nor shared toilet facilities, resulting in an
indiscriminate use of drains, open spaces and waterways. Solid waste disposal is
also a major problem in the city. Drainage facilities are absent in most areas and
this makes the most part of the city liable to flooding during heavy rainfall. A city’s
economic activity and its competitiveness depend heavily on the reliability of its
power supply. Deficiencies in power supply in Addis Ababa are so high that power
rationing has become a norm. As a result virtually all manufacturing firms, big
enterprises and institutions are forced to have their own electric power generator to
cope with the unreliable public power supply. It is clear that Information and
Communication Technology (ICT) has been playing an important role in tackling a
wide range of health, social and economic problems. The ICT services in Addis
Ababa provided by the publicly owned Ethiopian Telecommunication Corporation
(ETC), has not been able to meet the growing demand of the population. Poor
transportation service, traffic accidents, congestion and pollution are among the
serious problems of the city.
The housing problems in the city are overwhelming and the total housing
production has been inadequate in relation to need. The housing problems in Addis
Ababa manifest themselves not only in terms of quantity but also in quality. The
majority of the population live in areas where the housing conditions have
deteriorated significantly with the associated degree of lack of necessary facilities.
Therefore, the full force and commitment of the federal as well as competent,
responsive and autonomous city government is required if the city is to overcome
the pressing problems most residents face on a daily basis.
Legal Framework
Constitutional Provision
Addis Ababa, the capital city, has a constitutional right to self-government. Art.
49 (2) of the federal constitution provides that “the residents of Addis Ababa shall
have a full measure of self-government”. However, as argued by Mehret (1999),
following the coming to power of the EPRDF in 1991, the city of Addis Ababa
assumed multiple identities. First, it was declared the capital city of the Federal
Government of Ethiopia in 1995. Second, it serves as the seat of government of the
Oromia Regional State. Third, it is also an autonomous local government authority

in the Ethiopian federal system of government with an elected council and city
governor answerable to the residents. This multiple status has made it difficult to
clearly determine the formal lines of responsibility. With this complication the city
has not been responsive to the needs and problems of the residents mainly
because it has to balance between its accountability to the federal government, the
Oromia regional government and the electorate. These are pertinent issues that
need to be addressed in order to make Addis Ababa a self-governing and
independent urban entity.
Although Addis Ababa residents are guaranteed a full measure of self
governance by the federal constitution to exercise higher level autonomy, both the
old and revised city charters empower the prime minister in consultation with the
parliament to dismiss the mayor and dissolve the city council where he deems it
necessary and to order the election of a new council. This shows that Addis
Ababa’s city government in practice works under the supervision of the federal
government and is not fully autonomous.
City Charter
The City Municipality was recognized as a local government for the first time in
1954 when Notice No. 172/1954 gave the Charter status to the city. This notice was
the first tentative attempt ever taken by the Ethiopian government towards the
recognition of the self governing right of the city dwellers. Then, the administration
of the city was entrusted to the city council consisting of elected councillors and a
Kentiba who was nominated by the Emperor. The fact that the city was given full
freedom to administer its internal affairs, issue its own structure, and generate fund
from internal and external sources had given the municipality significant political
and financial autonomy (Shimelis 2003).
The progress towards self-administration of the city faced set-backs following
the overthrow of Emperor in 1974. During the Derg regime (1974-1991), the three
proclamations that were made, drastically affected Addis Ababa’s Municipality.
First, the proclamation No. 47/1975 issued to nationalize the land and all extra
houses of private owners significantly reduced the municipality’s revenue based
property tax. Then, proclamations, No. 4/1976 and No. 206/1981 which were
prepared to confirm the plan-led and highly centralized economic policy of the
government changed the organizational structure of the city. Crippled by the
sudden decline of revenue, lack of power and the new organizational structure that
changed the city government to urban dwellers’ associations with a role of
ideological promotion, the municipality neglected its service delivery and
infrastructure development tasks for more than a decade (ORAAMP 2000). Even
after the radical government decentralization of the country in 1991 and later on,
during the adoption of the FDRE Constitution, municipalities in Ethiopia seemed to
remain overlooked.
In 1997 Addis Ababa became a chartered city with significant self-government
rights. Its City Charter proclamation number 87/1997 was revised and replaced by
proclamation number 361/2003 that gave full autonomy to the City Administration.
This proclamation was meant to empower the Addis Ababa City Administration
(AACA) to make the city a suitable urban space for work and residence fulfilling
modern standards, maximizing the achievements of its development objectives and
coping with time through self-renewal. At present Addis Ababa City Government is
structured along three layers: The City Government, 10 Sub-cities and 99 Urban
Kebeles and 20 Rural Kebeles, which consists of peasant associations as per the
new administrative structure (Proclamation no 361/2003).
Power and Functions of City Government

Under the present structure the units of the City Government includes a City
Council, a Mayor, City Cabinet, the Office of the Chief Auditor and City Judicial
Department. The City Council is the supreme authority elected every five years and
appoints the mayor. As the chief executive officer of the city, the mayor is
accountable to the city council and the federal government. The new executive
wing of the administration is led by the city manager who is accountable to the
mayor. The City Government undertakes its functions through 8 bureaus which are
accountable to the Mayor and 11 agencies, institutes and offices organized under
City Manager Office (Proclamation No. 361/2003).
According to Article 11 in Proclamation No. 361/2003, Addis Ababa City
Government has legislative, executive and judiciary power to function over issues
specified in the city charter and that have not been included in the powers and
functions of the executive units of the Federal Government of Ethiopia.
Proclamations No. 261/2003 indicates that the city has a right to generate its own
revenue from designated sources, obtain loans from local resources, and establish
its own executive bodies, institutions and enterprises. Moreover, the City
Government is responsible to define the power and duties of each unit within it. It
also issues and enforces regulations and directives on matters connected with its
jurisdiction. This legal framework shows that power is decentralized from federal to
city level but in reality inter governmental relationships among the federal
government and city government and their lines of authority and structure is
characterized by a top-down approach of control and supervision. City government
works under the direct supervision of the federal government which is against the
purpose of political decentralization that empowers and gives autonomous power to
sub national governments.
Power and Functions of Sub City Council

Sub-cities are the second layer of the Addis Ababa City Government and each
sub city is structured comprising of three departments: a Sub-city Council, a Sub-
city Administration and an Executive body. The functions and power of each Sub-
city Council in general are related to governing the Kebele Administrations within
its boundary and ensuring how laws and orders are being exercised. According to
Addis Ababa city charter (Proclamation no 361/ 2003), a Sub-city Council, being
accountable to residents of the respective sub-city and the City Council, shall:
approve economic, social development and municipal service plans of the
respective Sub-city; elect the Chief Executive and the Deputy Chief Executive of
the Sub-city from among its members recommended by the political party with the
majority of seats in the council; approve the appointment of members of the
Standing Committee of the respective Sub-city upon nomination by the chief
executive thereof; allocate the budget set aside to it by the City Council; constitute
the committees of the council of Sub-city; receive, examine and decide upon the
annual and periodic reports from the chief executive of the respective sub-city;
issue internal regulations that govern the operations of the Sub-city council.
However, the sub city council role focuses more on the implementation of policies
rather than formulating and planning their own issues. According to key informants,
sub city administrations are not fully empowered in the approval of their plans and
use of the collected revenue to finance their expenditure. They are supposed to
submit it to the city government, they collect local taxes - but not use it and prepare
budgets, but not approve it. They are unable to recruit their staff when necessary
without the approval of the city government. According to the key informants, this
has affected the service delivery in the sub cities. For them sub cities are expected
to provide adequate service. However, due to lack of financial, human, material and
information networking problems there are complaints from service users. This is
due to their inability to recruit and use what they have collected for their own
purposes.
Power and Functions of Kebeles

Kebeles are the lowest level of government in Addis Ababa City Administration.
The Charter also stipulates that Kebeles have the following organs of power: a)
Kebele council, b) Kebele chief executive, c) Kebele standing committee, d) Kebele
social courts. According to proclamation no. 361/2003, a Kebele, being a centre for
development and direct popular participation as well as a location for the delivery
of basic services, shall: with its council accountable to the resident there of and to
the respective Sub-city Council, have such powers and functions as to be specified
by the city council, facilitate conditions in order for services to be available within
reach of the respective residents. However, kebeles are still detached from full
decentralization of power. Almost all key informants agreed that kebele
administration is given more responsibility than the resource and power given to it.
Like that of sub cities, kebeles suffer from serious lack of human resources and
they do not have the autonomy to recruit their own employees. It was reported that
many of the kebeles in Bole Sub City were under-staffed and under-financed, and
thus unable to deliver services to the community. Some of the officials at kebele
level complained that city and sub city governments routinely assigned functions to
kebeles without adequate resources (skilled personnel, money, equipment,
vehicles, IT services, etc) and this kind of mandate without the needed resources
will create public mistrust about the ability of local government to deliver efficient
services. For them, kebeles most often operated as recipients and implementers of
decisions and orders from city /sub city governments rather than semi independent
institutions of self-government at the grassroots level. For example, kebeles are not
involved directly in development planning and the plan is usually prepared by the
city and sub city experts mainly by the office of finance and economic development
in cooperation with sector offices. Due to such reasons, kebele officials confirmed
that they are not providing adequate service to the citizens though there is a
change as compared to the previous situation. This clearly shows that political
decentralization is the key for better service delivery but must be fully practiced
and supported by other types of decentralization (mainly fiscal and administrative).
Local Government Autonomy

The new City Charter adapts the federal government’s policy directives on
decentralization, governance restructuring and civil service reform to Addis Ababa
and clearly defines the extent and methods of self-government of the city. Formally,
the city government has been given full powers to exercise complete decision-
making authority. In practice, however, commands and instructions flow from top to
bottom in an unbroken bureaucratic line from the central government to the city,
sub cities and kebeles. As confirmed by key informants, this bureaucratic chain of
command has limited the local discretionary power and decision-making authority
of the city, sub city and kebele tiers of government.
According to Mehret (1999), Addis Ababa does not have legal authority over the
utility corporations operating in the city. MWUD (2000) clearly stated that services
that involve major inter-regional externalities or those that have important
distributional implications such as electricity, telecommunications, postal services
etc remain in the hands of the federal government. This was the challenge for
Addis Ababa city government not only to meet the demands of the electorate but it
has also been incurring tremendous costs to repair the damage to houses and
streets caused by the uncoordinated activities of the utility companies. This

constitutes a serious gap in the city’s autonomous power because it has
handicapped the municipality’s capacity to match the demand for utility services
with the growth of the urban population.
Avilability of both financial and human resources, and other institutional
amenities play a significant role in efficient public service delivery. For this local
government autonomy in decision making is a necessary condition. That means
decision-making power has to be devolved in an adequate way. However, as
confirmed by interviewed officials, sub city and kebele council discretion in
employment policies and budget resources is limited. In order to have the
necessary flexibility to respond to local needs, local governments need to have
political decision making autonomy.
Democratic Election
Political decentralization deals with the number of elected sub national tiers,
the existence of direct elections for local governments, and the fairness of such
th
elections. National elections in Ethiopia began in the 20 Century. However, it was
not democratic in its very nature because political parties were not allowed to
function or to take part in elections. After coming into power, the current
government established a democratic system in the country. Based on this, the
Ethiopian 1995 constitution Article 38 (1) clearly states that:
“Every Ethiopian national, without any discrimination based on color,
race, nation, nationality, sex, language, religion, political or other opinion
or other status, has the following rights: (a) To take part in the conduct of
public affairs, directly and through freely chosen representatives; (b) On
the attainment of 18 years of age, to vote in accordance with law; (c) To
vote and to be elected at periodic elections to any office at any level of
government; elections shall be by universal and equal suffrage and shall
be held by secret ballot, guaranteeing the free expression of the will of the
electors”
Following this legal provision, Article 8 of Addis Ababa City Charter
Proclamation no. 361/2003 stated that elections for the councils at all levels of
the City Government shall be conducted in accordance with the electoral law of
the country. There were three national periodic elections (1995, 2000 and
2005) and one local election (2008) in Ethiopia in general and in Addis Ababa
in particular. In those elections, there were three levels of direct local
government elections in Addis Ababa (city, sub city and kebele level). Unlike
other election campaigns, the 2005 national election brought a landslide
victory to the opposition party Coalition for Unity and Democracy (CUD) in
Addis Ababa’s city council. None of the mandates were won by the ruling party
EPRDF. However, the opposition parties did not join the parliament saying that
the election was rigged and they did not take over administrative duties of the
city government.
Following this action, Addis Ababa was governed by a care-taker
administration. According to the National Election Board, elections were held
in 2008 for kebeles and to replace sub city councils and the result were totally
the reverse that of in 2005. All the parliament seats, city council seats and all
of the seats in all 99 kebeles of the 10 sub cities were won by EPRDF. The
reason for this total shift, according to interviewed EPRDF officials was that
the dissatisfaction of Addis Ababa residents on the alternatives of opposition
parties. However, according to many writers and international observers, the
2008 local election in Addis Ababa was seriously flawed and affected the
participation of the opposition parties. Despite the non-participation of the main
opposition parties in the 2008 local election, the government claims that the
elections reflected a popular, democratic legitimacy due to the 93 percent
turnout of registered voters. However, this part needs further investigation to
critically identify the causes for the complete shift.
Citizen Participation
A perceived benefit of political decentralization is the enhancement of political
participation in processes of political decision-making and socio-economic
development at local levels. The assumption is that citizen and civil society
participation in the decision-making processes of the state can improve good
governance and public service delivery. Moreover, participation is clearly a key
element of effective popular control over government. Indeed popular local
participation in local decision-making is explicitly stated in the constitution as an
objective of decentralization in Ethiopia but to what extent such aspirations are
realized in practice is a difficult question.
In Addis Ababa, to enhance the participation of the community in decision
making, People’s Advisory Councils 2 were established at all three levels (city, sub-
city and kebele) with members drawn from all sections of society (women, youth,
elderly, private sector, non-governmental organizations, academia, influential
personalities, etc.). Any policies, programs and budget proposals initiated by the
City Government have to be deliberated by these councils before they are
proclaimed for implementation. However, according to key informants, though its
purpose is very important in practice this people advisory council is not functional.
Key informants appreciated the purpose of the council but they have confirmed that
this council is not doing what it intends to do because on the one hand members
are not interested in participating; and on the other hand some members feel that
their voices will not be considered by the concerned bodies. Governemt officials
informed the researcher that there is still a push from the city government to
involve the community through this council. Leagues, Forums and Federations
have been established to involve youth and women at different levels. This means
that public forums and leagues exist where different groups can express dissenting
opinions and personal interests, and where these viewpoints are treated as serious
input in the decision‐making process. However, there is still a problem related to
the participation of both youth and women in the political process without the
influence of the ruling party. According to the key informants, some associations
like youth leagues are politically affiliated. In all of the kebeles of Bole sub city,
plans were prepared by experts at sub city or kebele levels without the direct
consultation with the people, later the councils and leagues were asked to
comment on the already prepared plan. This shows that the participation of the
community in decision-making process was negligible. The programs are planned
and prepared at higher levels of the city or sub city administration. Thus the
community has a symbolic representation in decision-making process and even in
the process of implementation.
Some officials stated that citizen participation is significant in labour and
financial contribution. For example in bole sub city, kebele 14/15 bridge
construction, Goro police station building, Bole high school maintenance, kebele
04/06/07 386 meter asphalt road construction were made through the direct
2
People’s Advisory Councils are established at all three levels (City, Sub-City and Kebele) with members drawn
from all sections of society (women, youth, elderly, private sector, non-governmental organizations, academia,
influential personalities, etc.) for the purpose of evaluating the policies, programs and budget proposals initiated by
the City Government. Moreover, the council can also evaluate the involvement of NGO’s to minimize duplication of
efforts in the city. The council serves as a link between the government and citizens. It can give information from the
higher governments to citizens and provide feedback (concerns of citizens) to the government.
contribution from the community. Though kebele structures are organized as a

means to reach people at grassroots level, there is no clearly institutionalized
structure for coordination and participation of local communities in decisions
concerning public service delivery.
Civil Society Organizations (CSOs)

Political decentralization measures are expected to increase the level of citizen
participation in local decision making and public service delivery through their
organizations. According to Article 31 of the Constitution of Ethiopia, every person
has the right to freedom of association for any cause or purpose. Since then there
were many local and international CSOs established in Ethiopia for both lobbying
and operational purposes. However, the current charities and society’s legislation
restrict a substantial section of civil society to a limited set of activities. According
to Article 14(5) of the proclamation no. 621/2009, only Ethiopian Charities or
Societies i.e. those groups that receive less than 10% of their income from foreign
sources - are allowed to work on: (a) advancement of the practical implementation
of human and democratic rights, (b) promotion of equality of nations, nationalities,
peoples, gender and religion, (c) promotion and protection of the rights of children
and the disabled, (d) advancement of conflict resolution or reconciliation and, (e)
promotion of the efficiency of justice and law enforcement agencies. Other types of
charities and societies are relegated to undertaking only service delivery activities.
Given the lack of fundraising opportunities inside Ethiopia, most organizations rely
on foreign sources of funding. Therefore, by cutting off the sources of funding for
local Ethiopian CSOs, the proclamation would result in the closing down of many
vocal and prominent organizations, particularly those who continue to work in
area’s of human rights, good governance and policy advocacy.
Some of the interviewed CSO leaders stated that, unless the government
revised the policy they will not be able to continue their interventions in mobilizing
and empowering different sections of society to engage in governance and human
rights issues. This will result in reduced participation of citizens. Some of them will
be prohibited from participating in the formulation of policies, laws and programs
related to governance and human rights and this will minimize policy dialogue
among the public, which will, in turn, affect the formulation of appropriate and
responsive polices as well as better service delivery.
Findings and Observations

The first essential step to improve public service delivery in Addis Ababa is to
give the city genuine autonomy and make its city councils responsive to the
citizenry. At present, the city government is subject to the pressure that can come
from the federal government, the Oromia regional government and the electorate. It
is very likely that this political pressure will erode the city’s autonomy and
compromise the mayor and city council’s commitment to serve the public. It is
absolutely necessary that Addis Ababa becomes an independent urban authority
with sufficient legal powers in order to alleviate many of the problems its residents
face on a day-to-day basis.
The constitution and the various policies provide for the formal transfer of
powers and responsibilities from the central government to city, sub city and kebele
levels of administration. According to the city charter, sub cities and kebeles are
formally declared to be independent local government authorities but in reality inter
governmental relationships among the city, sub city and kebele administration and
their lines of authority are not clearly defined. The structure is characterized by a
top-down approach of control and supervision. Kebele administration works under
the direct supervision of the sub city administration. Sub city administration works
under the direct supervision of city administration. Kebeles most often operate as
recipients and implementers of decisions and orders from sub city governments
rather than semi independent institutions of self-government at the grassroots
level. It is however necessary to equip sub cities and kebeles with adequately
trained staff and office facilities in order to enable them to shoulder the delegated
responsibilities. If given adequate budgets and authority to work as autonomous
local institutions, they can indeed prove to be popular outlets for service delivery
because they are near to the community and can thus be responsive to the needs
of the public. They can also be easily accessible to ordinary citizens and less
bureaucratic than the central municipality administration.
Key informants indicated that the overall performances of the delivery of basic
services were noted to have shown improvements after political decentralization.
The improvements, however, were found to be low which makes it difficult to
conclude that there is a significant change contrary to the expectations hoped to be
realized after decentralization. Formally, the sub city/kebele government has been
given full powers to exercise complete decision-making authority. In practice,
however, commands and instructions flow from top to bottom. The bureaucratic
chain of command has limited the local discretionary power and decision-making
authority of the sub city/kebele tiers of government. Moreover, respondents
confirmed that the availability of both financial and human resources, and other
institutional amenities play significant role in efficient public service delivery. This
confirms that sustainable and effective decentralized service delivery need not only
institutional, organizational and human resources capacity building at local level,
but also a functional financial mechanism, and a clear and appropriate allocation of
roles and responsibilities. That means decision-making power, institutional
capacity; fiscal and technical resources for services delivery and their management
have to be devolved in an adequate way. In other words, political, administrative
and fiscal decentralization should go hand in hand. In addition, roles and
responsibilities in the respective social sectors should be devolved to the lowest
appropriate and competent level.
The potential of community’s initiatives and participation can go a long way in
making local decisions and improving the administration of the city of Addis Ababa.
However, there is a relatively low consultation and citizen input in deriving
development plans, projects and goals. This resulted, on the one hand, in
insufficient knowledge about the plans by the people, on the other hand, the plans,
projects and regulations are often perceived as; “the government’s” ideas.
Additionally, in recent years, while social movements, regime-critical civic
organizations and NGOs are stigmatized and limited by legislative means,
government-sponsored NGOs have often been encouraged. As part of this
initiative, regime-sponsored youth organizations have been created to increase
control, disseminate the ideology of the political organization in power and
suppress political dissent. Exclusion of community organizations, mainly working in
advocacy, from the urban development process and general decision-making on
their daily lives has impeded the development of feelings of belonging to the city.
This has an implication on better service delivery in response to local community
needs. Therefore, the government should reverse its policies regarding CSOs and
needs to consider their substantive role in good governance efforts of the country.
Conclusion
The professed goal of decentralization in Ethiopia is to progressively transfer
the delivery and management of public services from the central government
bureaucracy to democratic sub-national governments. However, one needs to
differentiate between rhetoric and reality in the ongoing process of political
decentralization in Addis Ababa. The constitution, city charter and the various
policies provide for the formal transfer of powers and responsibilities from the
central government to city, sub city and kebele levels of administration. In reality,
however, there has been very little devolution of authority and functions from city
government to sub city and kebele levels of administration because the
bureaucratic chain of command has limited the local discretionary power and
decision-making authority of the sub cities, and kebele level of government. Sub
cities and kebeles do not have sufficient decision-making authority to serve as
autonomous institutions of decentralized governance, nor do they manage public
and community services on their own without strict guidance and supervision by
city administrations. The problems of Addis Ababa city, in particular, its multiple
identities are crucial in this respect. What is needed is a government body that is
primarily accountable to the electorate. The participation of the people in decision-
making at all levels of city government is a concrete manifestation of political
empowerment. However, the representation of different segments of people and
organizations of civil society in decision making processes at city, sub city or
kebele level is becoming minimal nowadays. Therefore, the government should
reverse its policies regarding CSOs and needs to consider their substantive role in
good governance efforts of the country.
Effective decentralized service delivery needs not only the devolution of
political power, but also institutional, organizational and human resources capacity
building at local level and a clear and appropriate allocation of roles and
responsibilities. That means decision-making power, institutional capacity; fiscal
and technical resources for services delivery and their management have to be
devolved in an adequate way. Thus, political, administrative and fiscal
decentralization should go hand in hand. In addition, roles and responsibilities
should be devolved to the lowest appropriate and competent level.
Part III Administrative Decentralization: To Redistribute

Authority
The Challenges of Public-Private Partnerships: The Case

of Merkato Millennium Development Partnership (MMDP)
Frew Mengistu and Professor Meine Pieter van Dijk
Introduction
Ethiopia is among the several African countries which have made notable
progress in meeting the Millennium Development Goals (MDGs). In 2005 the
percentage of the children enrolled in primary school reached 75 percent which is
the result of an impressive 9 percent annual growth in enrollment since 1993.
Immunization coverage for measles rose 57 percent in the same year from 40
percent in 1995. These improvements in service delivery are attributed to the
massive decentralization first from federal to regions and subsequently to woredas
(World Bank, 2008) and later on to urban administrations.
Decentralization can be defined as the transfer of authority and responsibility
for public functions from a higher level of central government to subordinate or
quasi-independent government organization, or from government to non
government organization or the private sector (Rondinelli, 1983). The institutional
approach to decentralization theory states that decentralization places decision
making authority closer to the people; creates an incentive structure and minimizes
information and transaction costs. Decentralization is one of the guiding principles
of good governance, public private partnerships (PPP) are part and parcel of good
governance. Various definitions of PPP abound, however a general definition of
public private partnership can be adapted in the Ethiopian context as a spectrum of
possible relationships between public and private parties with possible involvement
of community/civil society groups for the cooperative execution of development
projects and provision of infrastructure and services.
Regarding the methodology of the research, the main research strategy
adopted was a case study research. The main data collection instruments used
included interviews with key informants, questionnaires distributed to 10 members
out of 15 members of the Task Force who served at different times, an archival
documention search and a desk review of previous studies. This research has also
benefited by making use of the discussions and findings of the assessment
workshop that was carried out by members of the Task Force for Merkato
Millennium Development Partnership and stakeholders which was moderated by a
consultant in the field of organizational development in February 2005. Response
to the questions in the questionnaire schedule were predominantly in a Likert scale
of 1-5 ranging from (1) strongly agree to value (5) strongly disagree or in a quality
range of (1) excellent to (5) worse and dichotomous choices of yes or no. The cut
off point for the Likert scale is taken to be the median value 3. W here frequency
counts are put in percentile, the cut off point is considered to be 50%.
Background
The concept of public private partnership is not new. Different authors agree
that many examples in history show that some cooperation between the private and
th
the public sectors existed in the 18th and 19 centuries (Hodge & Greve, 2007;
Nisar, 2007 cited in Taseska 2008). They were widely used on the international
scene in the seventies. In the US they were used for urban renewal projects and
spread to other countries at various rates. They are sought after by governments
especially in Europe in the effort to look for new institutional arrangements to
provide services for their citizens (Klijn et al., 2000). PPPs have also played a
special role in the transition to market economy as instruments to restructure the
provision of public services to meet social needs and develop a civil society. The
case of Hungary after the 1990s can be mentioned as an example. Public private
partnerships are also widely utilized in urban development projects in China (Han
and W ang, 2003). However not everywhere are PPP’s welcomed. In some East
Asian Confucian societies where they exist they are treated in the form of vertical,
hierarchical arrangements rather than voluntary collaborations (Common 2000).
The two most important public private partnership initiatives at city/local level in
Ethiopia include: the Clean and Green Addis Ababa Society and the Merkato
Millennium Development Partnership. The Merkato Millenium Development
Partnership (MMDP) is the first of its kind in Ethiopia in terms of its composition of
partnering parties. This study focuses on the challenges of the Merkato Millennium
Development Partnership. The Merkato Millennium Task force was established in
November 2003 with the aim of implementing the Merkato Local Development Plan.
The partnership has been successful in bringing together different parties and
launched the redevelopment project of Merakto. However, it has also faced
challenges which resulted ultimately to its suspension. This study focuses on the
challenges that the partnership faced.
Literature Review
Khanom (2009) summarized four approaches in defining PPPs. Three of them
are discussed here. As a tool of governance or management, PPPs are either inter-
organizational or financial arrangement between the public and private sectors. The
most important aspects here are cooperation between organizations, sharing risks,
resulting in some new and better products or services and finally the involvement of
a longer term commitment (Van Ham and Koppenjam 2001). Van Dijk defines a
partnership as a form of cooperation between parties with similar objectives but
different (complementary) qualities, whereby each contribute resources and share
in the investment risks. Definitions stressing the financial relationships are
prominent in the literatures on infrastructure building. These mostly include BOT
(Build-Operate-Transfer), BOOT (Build-Own-Operate-Transfer) and BOO (Build-
Own-Operate). In the context of urban development in areas of multiple
deprivation, the UK government has defined a partnership approach as involving;
“voluntary commitment by the wide range of bodies with a contribution to make to
urban development or regeneration (including the local communities, the local
authorities, government departments and agencies and private sector) to an agreed
long-regeneration strategy for their areas” (The Scottish Office, 1993). Peters
discusses Public Private Partnerships both as institutions and policy instruments
for the implementation of urban policy.
Categorization of PPPs by different authors (Stephenson, 1991; Dunn, 1999)
includes policy based-partnerships and project-based partnership. Policy-based
partnerships aim to lay down a set of general rules for private investment and
operation through co-operative ventures and without a definable end point while
project-based partnerships focus on a specific site or circumstances to deliver a
certain product and having a clear end. Another categorization includes contract-
based partnerships (formal) and trust- based partnerships (informal) such as
gentlemen agreements.
Public private partnerships though with many challenges help to facilitate
transparency and bridge understanding between the private sector, community and
public, thereby building up social capital which is a necessary ingredient in
maintaining political stability and economic growth. Though the substantive

meaning of social capital is contentious among scholars, the definition by Putnam
(2000) is adopted here as; “the connections between individuals – social networks
and the norms of reciprocity and trustworthiness that arise from them”. He further
goes to make a distinction between bonding (exclusive) and bridging (inclusive)
social capital. Bonding social capital occurs among homogenous population, is
often parochial and benefits those with internal access. Because of its essential
elements such as tight bonds of trust and solidarity it may ultimately prevent its
entrepreneurial members from reaching their full potential. Rather entrepreneurial
members will only become successful if they are able to forge ties with others in
1
the wider society .
Traditionally, the market and hierarchy have been seen as distinct and
opposing mechanisms. Recent debates on the pros and cons of market based
models in the public sector led to the argument that if market criteria and public
service providers are allowed to play a role in the design, production and delivery
of public services, both the state as well as private sector would be better off (Jon
1997). This has led to a congruent discourse from one based on the traditional
state – market dichotomy to one looking for hybrid governance arrangements.
Public Private Partnerships are among one of such arrangements. Other hybrid
arrangements include: strategic networks, alliances, coalitions, consortia, societies
established with specific objectives, and other partnership forms between public
(state) and private (market) actors. However there also exists a different view by
Klijn and Geert 2002 in which referring to Jacob (1995) and Simon (1990), they
argue that since the public domain is characterized by the guardian syndrome i.e.
avoiding trade and commerce, striving for discipline and loyalty, fatalism linked to
strong devotion to the tasks at hand etc. and the private domain marked by the
commercial syndrome characterized by avoiding violence, agreement on voluntary
basis, honesty and competitiveness etc.; they reasoned that the two syndromes
can not be merged without problems.
According to McQuaid, success with PPPs depends upon how partnerships are
led, legitimized, resourced, managed, and evaluated. This varies according to local
circumstances, the issue to be dealt with, the institutional framework and on the
partners themselves. From a similar perspective Murray (1998) identifies four sets
of factors which influence the successfulness of negotiation. These include: the
type of collaboration sought, the type of organizations entering into collaboration,
the process of developing and implementing the collaborative process, and
environmental and contextual factors. Brinkerhoff (2002a) attests that most of the
benefits of a partnership arise from the relationship itself. Helina (2005), in her
research on Merkato Millennium Development Partnership focused on the partner’s
relationship aspect. Referring to Brinkerhoff 2002(b) the variables she used
constitute the salient factors in defining relationships in a partnership which include
mutuality and organization identity. The specific variables she used include:
power, mutual respect, trust, partner’s perception of partnership, communication,
participation and representation, and ethnic differences. Klijn and Geert noted that
the number and variety of actors, different objectives, variety of perceptions,
contrasting backgrounds and value conflicts are some of the factors which inhibit
cooperation. Whatever the variation in the factors, a partnership should be
ultimately judged in terms of achieving its objectives or satisfying the expectations
of the partners.
When discussing how partnerships are led and managed, the theory of
organizing capacity comes to the forefront. The theory of organizing capacity
emphasizes a broadly shared and accepted vision that can be translated into
strategies, implemented by strategic networks of either public-public or public-
private, supported and championed by strong leadership and enjoy sufficient levels
of political and societal support and an enhanced two way communication (van den
Berg et al, 1997).
Capacity includes the abilities, skills, understandings, attitudes, values,
relationships, behaviors, motivations, resources and conditions that enable
individuals, organizations, networks, sectors and broader social systems to
carryout functions and achieve their development objectives over time (Bolger
2000). From the perspective of governance, capacity building goes beyond
government organizations and includes the private and civil society groups as well
empowering communities. In most African societies both their central and local
governments as well as their private and civil society suffer from capacity
constraints. These constraints include not only human, material and financial but
also in terms of institutions, systems, information, knowledge and skills.
Capacity building is a continuous process at individual, organizational and
societal level. Actors as leaders and members work through their respective
organizations and organizations operate within the broader context of society.
People work in organizations and organizations operate in society. However, it is
people not organizations and sectors that create and sustain partnerships. Society
must offer basic policies, practices and attitudes that encourage collaboration and
the accumulation of social capital (The Synergos Institute 2002, web based).
Organizations need to develop their institutional capacity which involves
institutional change, organizational restructuring and human resource development.
Individuals within the organization and sector need to be prepared with the
knowledge and skills to engage in collaborative efforts with people from other
organizations and sectors.
Theoretical Framework
From the institutional perspective the challenge to develop a theoretical
framework for a specific type of Public-Private Partnership at a certain level is to
link the process approach to the result oriented evaluation in a specific political,
economic, socio-cultural, and institutional context and try to measure the specific
explanatory variables (van Dijk and Pfistere, forth coming). In view of the above
review of literature, the theoretical framework for this case study is composed of
strategic and behavioral interaction level factors within a specific local context. The
strategic level factors include: vision/goal, strategies, leadership, political and
societal support, and communication. The behavioral interaction level (mutuality)
factors include, perceptions, trust, power balance, mutual respect, commitment,
partnering bodies i.e. their role, motives/expectations and underlying values;
partnership identity expressed in mandate, norms and values, organizational
culture; and the interaction rules (Ostrom, 1994). Both group of factors are
interdependent and are closely related to principles of good governance and the
institutional framework. These process variables are contrasted to the goal
achievement or performance outcome of the partnership.
Context
The aspects of the city and the local context identified are political and
administrative, spatio- demo-economic, socio- cultural and the relevant institutional
framework. The political/ administrative context and the relevant institutional
framework influence the pre-conditions under which actors can cooperate (van den
Berg, et al. 2003). Antecedents are specific environmental conditions or stimulus
changes that exist before the behaviour of interest which constitute opportunities or
problems/constraints for the partnership activities.
Strategic Level Factors

The strategic level factors correspond to the organizing tools in the analytical
framework for organizing capacity as developed by van den Berg et al., 1997.
Shared vision helps to formulate objectives and strategies. It helps also to guide
the relevant actors in their behavior (van den Berg, et al. 2003). Congruency of
strategies needs to be maintained to realize the mental journey in materializing the
vision or in dealing with the strategic issues. Leadership of key actors contributes
substantially to the successful design, development and implementation of the
partnership project. For success at least one competent individual who champions
and nurtures the partnership is important. Political support as a recognition and
support by national or local level political bodies i.e. “having their blessing” is
prerequisite for success of Public – Private Partnerships. Societal support, the
need to consult societal actors regarding on such issues like decision on quality
and quantity of services and level of satisfaction is crucial in the success of
partnership projects (van den Berg et al. 1997). Communication refers to the two-
way flow of information. Communication strategies can help to mobilize political
and societal support.
Behavioral Interaction Level Factors

Behavioral interaction level (mutuality) factors are interpersonal and inter
organizational relationship factors as well as the interaction rules developed by the
partnership. Relationship factors mainly include: trust, power balance, mutual
respect, perception and commitment. Trust is to act as expected. A more
comprehensive definition of can be; “…the willingness of a party to be vulnerable to
the actions of another party based on the expectations that the other party will
perform a particular action important to the truster, irrespective of the ability to
monitor or control the other party” (Mayer et al., 1995). Trust and confidence are
the foundations of partnership (Drewry 2000). Greater level of trust results in a
greater likelihood of cooperation. This will help save time and money spent to
monitor the actions of others. Power balance is the level of influence one has over
others in a relationship. It might depend on either size of partners, or resources
brought to or expertise in the partnership, and on the power base of the partners
for e.g. whether elected or non-elected. Mutual respect can refer to recognition of
indispensability of each partner and its contribution (Brinkerhoff 2002 a).
Perception (of each other among partnering bodies) defined as the extent the
partner perceives whether partners are committed to the alliance (partnership) and
find it to be productive and worthwhile (Bucklin & Sengupta, 1993 in Ramaseshan
and Loo, 1998). Commitment is another factor which affects relationship and
consequently success of the partnership. When commitment to each other fails
separation of responsibilities follows, each actor concentrating on his own task and
gradually disintegrating. Interaction rules are rules that regulate interactions such
as establishing positions, assigning positions to participant, entry and exit
conditions, providing information, conflict management, access etc. (Ostrom et al.,
1994, 2005). This research will only focus on the type of rules the partnership had
developed.
Figure 1: Integrated Theoretical Framework for Analysis of Public-Private Partnerships
Context: political/adm., spatio-economic, socio-cultural, institutional
Governance
Partnership
identity
Strategic level Factors
Antecedent Partnering Goal

actors Capacity Process Achievement
Behavioral Interaction
level Factors Monitoring & Evaluation
Formal institutions
Partnering actors & role demarcation: Partnerships are cooperation among

organizations. The four major indicators used for describing the characteristics of
the partnering actors (parties) include: organizational values, role, expectations
and resource capacity of the organization. Organizational values are collectively
shared principles or beliefs that guide the organization’s purpose or the deepest
convictions through which members view reality. Expectations are concerned with
expected rewards. Resource capacity is manifested through the major resource the
organization contributes to the partnership. It includes manpower, financial capacity
and intangibles i.e. knowledge, skills, management and leadership qualities.
Partnership identity: is the aggregate quality of a partnership as the result of
this relationship built up and development process through the interaction of
strategic and behavioral factors. The indicators for partnership’s identity include:
number and type of members, organizational culture, identity recognition, and clear
mandate/purpose.
Capacity: Public private partnerships in order to be successful require
individuals and leaders to be trained and educated to develop certain core
competencies; and also need to build skills and attitudes towards collaborative
partnership with individuals from other organizations. The stronger each individual
partner is, the more effective the partnership will be. As such, the main
competencies analyzed in this research include: resources contributed by members
(technical, managerial and administrative skills etc.), negotiation skills, contribution
of innovative and constructive suggestions.
Governance: is the process through which local political institutions implement
their programs with civil society and private actors and interests. As such the
indicators used include whether the partnership had been instrumental for
collective actions across the public-private demarcation, and other attributes such
as the modality members are represented in the Task force (election vs. delegation
by the executive), accountability, and working culture.
Goal Achievement
A partnership should be judged in terms of achieving its objectives or satisfying
the expectations of the partners. Towards this end the indicators include: whether
greater synergy is achieved expressed in terms of whether the achievement of the
partnership could have been achieved without it, the specific objectives of the
partnership achieved, whether outcomes are a win-win, win-lose or lose-lose
situation expressed in terms of whether the achievements are to the satisfaction of
all of the members or not, and mission fulfillment.
Interconnectedness of Factors
All the factors discussed above are interrelated within and across categories.
The political and administrative as well as the spatio-economic and socio-cultural
context determines the problems and opportunities. Political ideas or ideologies
shape the mental constructs that individuals use to interpret the real world around
them and make choices. A common cultural heritage provides a means of reducing
the divergence in the mental models. Social evolution, economic base and the
environment crystallize in distinct social values. Existing institutions limit the socio-
economic space and the rule boundedness in which actors make their choices and
take action. Expectations of partnering actors are intimately related to shared
vision. Leadership helps to stimulate commitment and enthusiasm of actors.
Strategies are manifestations of consistency in behavior. Communication helps to
convey the message of the vision to the partnering actors, the networks are
connected to politicians and society. Political support stimulates local commitment
and strengthens
societal support (van den Berg et al. 1997, 2003). Trust and respect are related to
communication. Perceptions about power differences influence trust in relationship.
Differences in trust levels result in different levels of commitment. Respect follows
a trusting relationship.
The tendency towards strategic thinking and planning in communities comes
after the community or group of actors reaches a certain level of maturity. The
move from behavioral interaction to strategic level interactions i.e. dealing with long
term issues is often gradual in the development of groups for collective action.
There are no marked phases but a gradual transition within the process of
development.
Context
National & City Level Context

Ethiopia, in its political and administrative structure is a country established
based on a Federal system since the take over of power by the EPRDF led
government in May 1991. According to the constitution of the Federal Democratic
Republic of Ethiopia, the form of government is parliamentarian. Nine regional
states and two city governments constitute the Federal Democratic Republic of
Ethiopia. Addis Ababa being the federal capital, its administration was made
responsible to the Federal Government. Further decentralization measures taken
by regional states have granted urban administrations with a considerable share of
administrative and fiscal power. Regarding Addis Ababa a tremendous change has
taken place following the finalization of the Revised Addis Ababa Master Plan. A
transitional government (2003-05) was established. The city was granted a charter
by the Federal Government and a Citizens Council was established. The
governance and administrative structure of the City Government was obliged to
undergo a sever reform (City Government of Addis Ababa, 2005).
With respect to state ideology, the political and socio-economic development
principles of the incumbent government are based on tenets of the developmental
state. Currently some symptoms indicate a move towards recentralization.
Examples can be cited like; administration of street parking and garbage collection,
which had been outsourced to the private sector are now being reorganized under
kebele administrations. The reasons given include the improved service delivery on
the part of the public sector due to the ongoing civil service reforms and Business
Process Reengineering (BPR).
Regarding laws which provide for the establishment of public private
partnership the only provision at the constitutional level is the Revised City Charter
Proclamation no. 361/2003, which in its Article 11 on powers and functions of the
City Government stipulates: “Constitute the executive bodies of the City
Government and to establish public enterprises, as legal entities, on its own or in
partnership, per applicable laws, with the private sector or other third parties.”
Though one of the outputs of the Office for the Revision of the Addis Ababa
Master Plan (ORAAMP) is a “Public Private Partnership Model Scheme,” it has not
yet been further developed or utilized. The second attempt was in 2004 by the
Addis Ababa City Government - Policy Study and Plan Commission under the title
‘Public Private Partnership Policy Framework,’ however this study too has not been
endorsed.
Merkato in Context
Historically Merkato traces its origin to the Italian occupation (1936-41). The
colonial master plan based on racial segregation divided the capital into different
zones. Consequently with the launching of the 1937 resettlement program, 100,000
natives i.e. 90% of the then total city population were forced to resettle in an empty
area called Addis Ketema (New Township) in the Northwest of Addis Ababa. This
led to a distinct settlement camp for the local people: the Merkato Indigeno; ‘market
for the local people’ and the Ethiopian settlement Qurteri Indigeno surrounding it.
The new market and the Ethiopian settlement surrounding it later became know
known as ‘Addisu ketema’ (“the new township”) which was the predecessor of the
current Merkato.
Spatially Merkato largely encompasses the current Addis Ketema Sub City or
the former Zone One and some kebeles in the former Woreda 7 of Zone Two, like
the areas surrounding the main regional bus terminal and Gojam Berenda. Merkato
in its spatial layout is characterized by its morphology of specialized quarters
2
(terras) for retailing of similar items and related services. An updated map of
Merkato central shows 44 such specialized quarters or terras (Tibeb Consultancy,
2005). According to the latest census (CSA, 2007), Merkato is also a residential
area inhabited by 255,000 residents. By its tenure structure 90 percent of the built
up properties in central Merkato are nationalized houses administered by kebele
3
administration or the Agency for the Administration of Rental Houses (AARH) . The
businessmen in Merkato were basically tenants.
In its economic activity Merkato is a major trading center catering for the
wholesale and retail demand of the country and the city. It is often referred as the
biggest open Market in Africa. Merkato is also a tourist attraction. All tourists that
arrive to Addis Ababa go to Merkato at least twice during their stay. According to
some estimates Merkato generates 20-25 percent of the annual revenue of the City
Government (Getachew D., 2000). It is not without reason such phrases are used
praising Merkato: “the Wall Street of Addis,” “the Taiwan of Africa,” “hope for the
rural migrant,” and many others. Merkato is also a major transport hub of the city
with about 200000 people arriving daily by bus and taxi.
Merkato’s social and cultural aspectsinclude, mutual tolerance, peace,
industriousness, and unity. There is a friendly and peaceful interaction between
various ethnic groups and followers of different faiths. Traditional organizations
generally known as maheber (associations) provide arrangements for cooperative
efforts. Ikup (saving arrangements which enable members to benefit from the joint
savings in rounds) and Meredaja Idir (a communal society to coordinate and
organize funeral ceremonies and consolations of the bereaved families) are
abundant as traditional forms of associations. The ´culture of credit transactions´ is
a unique arrangement in Merkato based on trust and reciprocity. Lending in kind
without collateral is a common practice. However, it is not easy for new entrants to
assimilate in to the Merkato business community, the social capital is limited to a
bonding type of social capital.
Merkato is also not without its problems. Its residential environment is
characterized by slum habitation and very poor health conditions. Merkato Central
as a market place in contrast to its high land value gradient is also an area
characterized by low service standards, poor physical conditions with small scale
and informal economic activities some of them classified as illicit trade activities.
Its infrastructure, buildings, and open spaces are becoming obsolete. Waste
management is well nigh non-existent. There is no sewerage system in Merkato.
Storm water drainage is inadequately minimal. The only places available for
parking are the sidelines of the already overcrowded narrow streets. Congestion,
inappropriate road infrastructure and unsafe electrical line installations combined
with cramped and contiguous old buildings without internal fire safety systems
frequently exposes the area to fire hazards.
Antecedent
From the institutional perspective two aspects of the institutional framework: the
Lease proclamation and the Master Plans studied for Addis Ababa specifically the
Merkato Local Development Plan provided the socio-economic space and the rule –
boundedness in which the businessmen in Merkato and other stakeholders made
choices and took action.
The Lease Proclamation

The Ethio-Italian Master Plan (1986), studied under the ideological principles of
socialist command economy was approved in 1994 after a change of government. It
proposed a development plan with the aim of replacing Merkato’s traditional
activities with higher order uses and multi-storey (5-9 stories) building
development. The accompanying land use and building regulations (with 5-9
stories) become sources of dissension. On the other hand the Lease Proclamation
No. 80/1993 (promulgated on 23 December 1993) Article 5 stipulated that a town
administration shall only grant lease holding permits for those uses which conform
to the land use provision of the Master Plan of the town. The lease rate is
determined by conducting competitive public tendering. Pursuant to this national
proclamation, Region 14 Administration (the current City Administration of Addis
Ababa) issued Proc. No. 3, 1994 stated that two modalities of lease payment: the
total amount of the lease price at the signing of the contract (Article 14.2a) or
periodically with bank compound interest on the unpaid portion (Article 14.2b).
Consequently those business associations in Merakto who already had acquired
land through lease (a total of 52 plots were leased between 1996 and 1999)
declined to continue with the construction work. Other businessmen complained
too, for they were requested to make a down payment of 25 percent of the lease
price and to pay the balance in 5-15 years. The proposed benchmark price for
2
Merkato on average was about Birr 3,541/m . This was higher than the rate of other
2 2
city centres such as Legehar (Birr 2,274/m ) and Piazza (Birr 1,996/m ). The
situation reinforced the bias against the lease policy.
The City Administration started to issue notifications to the defaulters to fulfil
their obligations. The tense situation invited other actors to become involved. Some
of the higher level businessmen who were also members of the Addis Ababa
Chamber of Commerce approached the Chamber to stand beside them. The
Chamber positively responded and a meeting between the Chamber and the
th
business community was held on 9 June 1998 and this led to the establishment of
the committee by the name of “Merkato and Surrounding Special Committee”
(MSSC).
The other concern of the businessmen was the possibility that the area might
be leased to others for development. Their fear was not unfounded. There was
news on public media that a Malaysian company named the Adorna- Shebele
Investment Group is intending to undertake a massive investment activity by which
one billion USD will be invested in transforming Merkato into “the largest and
neatest market place in Africa”. Investment agreement had been signed between
Adorna-Shebele and the Addis Ababa City Administration in 1999 (Addis Tribune
Sept. 24/1999). Then a top official of the City Administration announced the
withdrawal of the Malaysian company on grounds that the negotiations had failed.
The Merkato and Surrounding Special Committee in its letter addressed to the
Chairman of the Addis Ababa City Administration forwarded the identified problems
th
together with its proposal in July 2001 (18 Hamle 1993 E.C.). Among the
proposals that were forwarded by the Committee they included reduced percentage
of advance payment, payment holidays to be given until construction completed,
the lease payment to be distributed through out the whole lease period, and
number of stories be reduced to G+ 2 stories. Finally the City Administration

decided that the development requirements be addressed in the master plan
revision process for which the Office for the Revision of the Addis Ababa Master
Plan (ORAAMP) had been made operational from January 1999 (Heyaw T., 2005).
A national conference on implementation of land lease policy and its problems
was held in December 2001 in which representatives of the Merkato and
Surrounding Special Committee played a significant role. Finally the lease
proclamation was amended by proclamation No. 272/2002. The advance payment
has been reduced to a minimum level of 5 percent of the total lease price
(Art.10.1b). The rate of interest over the remaining payment is to be determined by
the rate of interest on loan offered by the bank (Art.10.1d). The modalities through
which land lease hold would be acquired were also extended to include
negotiations or by the decision of the City Government (Art. 4.1b). Compounded
interest on the unpaid amount has been replaced by a bank penalty (Art. 10.1e).
The lease regulation of the City Government was also amended accordingly. The
cost approach method of determining reserve price (determination of reserve price
based on infrastructure and compensation cost) resulted in much reduction ranging
from 70-27 percent. Down payment reduced to 10-20 percent while repayment
period was extended to 20-30 years for businesses (Addis Ababa City Government
Regulation No. 29/2002).
The Addis Ababa Master Plan Revision & the Local Development
Plan for Merkato
The Office for the Revision of the Addis Ababa Master Plan (ORAAMP) was
established in 1999 with a mandate to update and revise the 1986 master plan in
order to make it a more effective tool to guide the development of the city. From the
outset ORAAMP has adapted a participatory and strategic approach. In line with its
approach the project had organized more than 100 workshops, public events, panel
discussions and meetings. The International conference held in December 2000
“Addis 21: planning the future of our city” was a forum in which the issue of
Merkato was particularly discussed. Representatives of the business associations
who participated took the opportunity and insisted on a lower building height (2-3
stories) in which they finally succeeded.
4
According to the Merkato Local Development Plan which was completed in
2002, Merkato was envisaged to develop as a primary market center in a typology
characterized by low-to-medium rise (3-5 storey) buildings. Among the
implementation principles recommended by ORAAMP include implementation
through privately managed and financed projects. The block associations,
individual businessmen and local residents become the main actors. The other
important mechanisms for the implementation of the LDP were public private
partnership (ORAAMP, 2002) and the Urban Development Company (UDECOM)
which itself would be established as a public private partnership.
The Case of Merkato Millennium Development Partnership

5
The Merkato Millennium Task Force was established in November 2003
initiated by the German Technical Cooperation (GTZ) with the idea of creating a
result oriented dialogue to bring the businessmen and the City Administration into
consensual understanding. GTZ was attracted to the issue after being influenced
by the exhibition “Merkato in Millennium” which was organized by Merkato and
6
Surrounding Special Committee . One of the objectives of launching the Exhibition
was to lobby city authorities and garner support for its proposal submitted to the
city authorities.
Members of the Task Force include: three members from the Addis Ketema Sub
City (one of them from the City Government), four members from the business
community (one of them from the Addis Ababa Chamber of Commerce Merkato
5
Satellite Office ), two representatives of local non-governmental organizations
active in Merkato area - one from Pro Pride and another from Christian Children
Fund (CCF), one member representing the 13 Idirs in Merkato neighborhoods, and
one member from GTZ. Though representatives of CCF and Idirs in Merkato
abandoned the partnership from the beginning, the rest, nine members of the Task
Force continued as functionary members. Based on the interviews the two
members abandoned the partnership on the ground that their objectives and
anticipation were different from the issues of demolishing existing business
buildings and replacing them with modern multi storey buildings. The organizational
structure of the task force was composed of one chairman (the CEO of the sub
city), vice chairman (from representatives of the businessmen) and secretary (from
Pro Pride) supported by one project coordinator and an assistant. The office for the
Task Force was apparently located in the Sub City premises. The Task Force had
also opened a bank account to be operated by joint signatories. GTZ contributed
the initial year budget of Birr 200,000.
The Partnership was established basically to implement the Merkato Local
Development Plan (MMTF, 2005). The vision of the Task Force was “Merkato: a
modern, clean and safe Africa’s biggest market”. Its objectives include:
1. To accelerate the implementation of the Merkato Local Development
Plan
2. To improve service delivery in Merkato
3. To strengthen Merkato as a center for employment generation
4. To strengthen public private partnerships in Merkato
5. To develop a sound and sustainable development strategy for Merkato.
The mandate of the task force was basically coordinating all implementation
activities in Merkato which include:
1. Contribute to the implementation of the Merkato LDP development projects
and programs through sensitization of all actors and stakeholders
2. Mobilize funds, materials and technical know-how from members to run
Merkato LDP
3. Establishing a sustainable strategy on how to align all development
activities in Merkato
4. Promote the establishment of Merkato Business Improvement District
5. Safeguard the interests and benefits of members and stakeholders in the
design, execution and management of development projects and programs
in Merkato area.
The Task Force hiring a consultant on Organizational Development (OD)
7
organized a review workshop in February 2005 to assess the performance of the
partnership and identify measures to strengthen and reorganize it.
Analyis and Findings
Context
The context provides the historical, politico- administrative, spatio-economic,
socio-cultural and institutional environment in which development plans are
conceived and implemented. The context determines opportunities and constraints.
History influences the path dependence on the accumulated experience and skills
for example on cooperative action and concerted efforts of existing communities
symbolized in the existence of historical buildings and stories. Political ideas shape
the mental constructs that individuals use to interpret the real world around them
and make choices. A common cultural heritage provides a means of reducing the
divergence in mental models. Social evolution, economic base and the
environment crystallize in distinct social values. Existing and proposed institutions
(as rules and regulations) limit the socio-economic space and the rule –
boundedness in which actors make their choices and take action. Analysis on the
contextual elements is presented in table 1.
The analysis on the context elements shows that there are many contextual
aspects which constitute opportunities for collaborative development by the
different actors. Nevertheless the unfavorable institutional environment, the high
solidarity and trust among the business community in Merkato which is limited to
bonding social capital, the focus on the construction of new business buildings
(lack of attention for social aspects), the ignorance to the traditional and historical
values of Merkato, and the high cost (actual and induced) of its development pose
challenges for Merkato Millennium Development Partnership by eroding its political
and social support, being abandoned by its members, eroding its ground for
legitimacy and jeopardizing its performance.
Strategic Level Factors

Strategic level factors are factors which transform the interaction and
relationship among partnering bodies to the goal achievement of the partnership
through formulation of shared vision and execution through policies/strategies,
programs and projects.
Leadership: was basically fairly distributed among the partnering bodies and
there was an intention to circulate the chairmanship in rounds. The CEO of the Sub
City had been elected as the first chairman. Members believed that since he was
more familiar with the workings of government offices as well as the concerns of
the businessmen he would help in cutting short the bureaucratic red tape.
Respondents agree on the vision and mission of the partnership being mutually
agreed upon and all activities of the partnership being coordinated by the
leadership. However responses on a Likert scale of 1-5 ranging from 1 strongly
agree to value 5 strongly disagree, on whether the leadership had acted
responsibly to maintain continuity of the partnership’s development activities, a
mean value of 3.8 is obtained showing the leadership didn’t commit itself to keep
the momentum going.
Societal support: responses on a Likert scale of 1-5 ranging from 1 strongly
agree to value 5 strongly disagree, on whether neighborhood residents living in
Merkato had been involved in the redevelopment project from the very beginning, a
mean value of 3.3 shows that efforts to involve neighborhood residents of Merkato
had been low. This compounded by the early withdrawal of representatives of the
Idirs and one of the NGOs shows that societal support had been given less
attention and this resulted with lack of incentives for their representatives to
participate. Two out of the three businessmen respondents agreed strongly.
Communication: The Addis Ababa Chamber of Commerce committed its
monthly Amharic newspaper ‘Merkato’ to introduce the establishment and
propagate the activities of the Partnership. The first issue of a quarterly magazine
by the name ‘Merkato Today’ was published by the Merkato Millennium Task Force
in July 2005 to serve as a medium of communication between the public and the
business community of Merkato. However the magazine was never published after
its first issue. 70 percent of the respondents agree on the instrumental role of the
magazine ‘Merkato Today’ as a medium for communicating information. A new
Merkato Tourist Guide Book was also published by the Task Force.
Strategies: responses varied to the set of actions/strategies followed in the

medium to long term by the partnership. However 100 percent of respondents have
a broader view of what they are trying to achieve in the medium to long term i.e.
beyond the mere construction of commercial buildings by associations.
Political Support: respondents agree on the fairness of the Sub City
Administration in handling conflicts between public and private interests as well as
the role played by the Sub City Administration in facilitating the collaborative
activities of the partnership with mean values of 2.9 and 2.5 respectively on the
Likert scale of 1-5 ranging from 1 strongly agree to value 5 strongly disagree.
Regarding higher level political support interviews with some key informants and
members of the task force remarked that the lack of enthusiasm in the part of
higher city and federal public officials might be due to the CEO of the Sub City not
selling the very idea of “public private partnership.”
Behavioral Interaction Level Factors

Power balance: regarding on who controls the financial resources of the
partnership 70 percent responded by saying ‘all members.’ To the question who
does often speak on meetings and influence the rest of the Task Force and to
which group do these belong to, 70 percent of respondents answered that majority
members belonging to all groups participate.
Mutual respect: respondents have remarked that members who come to
meetings in time do check whether all members are able to attend before
proceeding with the meeting. Respondents agree to the remark that meetings are
scheduled with consideration of all partners and the opinions and ideas of all
partners are openly discussed before decision is made, with mean values of 2.4
and 2.0 respectively on a Likert scale of 1-5 ranging from 1 strongly agree to value
5 strongly disagree.
Trust: In general there seems an established and widely observed mistrust
between the main partnering actors (value of 4.0 in the Likert scale). The public
sector view the businessmen as “thieves and cheats” and unwilling to pay tax and
the businessmen view the Sub City tax collectors as “thieves and people used to
bribes.” Further more in the later days of the partnership the businessmen
suspected the Sub City Administration turning to be secretive. Respondents were
asked about their perception on the honesty, integrity, reliability and dependability
of the other partners in a Likert scale ranging from (1) ‘Excellent’ to (5) ‘worse’, the
least mean value (3.1) is assigned to the representatives of Idir who withdraw early
followed by the Sub City Administration (2.9). The highest mean value (1.7) goes to
GTZ. Being asked to evaluate the performance of the other partners in achieving
the partnership’s objectives in the same scale, respondents assigned a fair positive
value ranging from ‘good’ to ‘very good’ with the minimum mean value 2.9 to Idirs
followed by the City Administration and a maximum mean value (1.6) again to GTZ.
Commitment: attendance of members in meetings held by the Task Force in a
Likert scale ranging from (1) ‘regularly’ attending to (5) ‘never’ attending shows a
mean value of 3.6 for Idirs who attended the few meetings at the beginning of the
establishment of the Task Force, followed by NGOs with a mean value of 3.0. The
best attendant is GTZ with mean value of 1.3 followed by the Sub City
Administration and City Government. Another indicator used for commitment is
contributions of members in innovative ideas or constructive suggestions. Analysis
of respondents’ response on a Likert scale ranging from (1) ‘Excellent’ to (5)
Table 1: Context Analysis

Aspect of Element Opportunities Constraints Remark
context
Historical Historical establishment: Strong and passionate Makes difficult for late Family business and right to
evicted from the existing historical attachment, joiners /new entrants, business spaces are considered
main market on grounds of as inheritance from ancestors;
segregation, Conflict between Resulted in demolition of
Existence of historical Duality: modern and historical preservation & historical buildings e.g. Mars
buildings promotes inclusion, tourist creation of more Hotel
attraction commercial space
Institutional Policy/Legal provision for Proc. No. 361 /2003, City No policy /regulatory ORAAMP’s model scheme on
PPP charter, Article 11, framework on PPP at PPP and attempt by Policy
Lease Proclamation Lease was instrumental for national or city level; Study and Plan Commission of
tenure change Lease price and AACG relegated,
Revised Addis Ababa Revised plan modalities were Those unable to afford were
Master plan & Merkato LDP recommends PPP as restrictive forced to pull out
implementation instrument
Political Decentralization Stimulate people to take Most issues raised by Constrained decentralization
initiative, an opportunity for businessmen were limits space for managerial
management of urban considered policy discretion and local
development at local level issues beyond the sub development policy initiatives
city mandate
Social Social capital High trust and solidarity Social capital limited Makes difficult for late joiners
creates high potential for to bonding type (e.g. the resistance to the lease
collaborative actions restrains new entrants sale of road side plots in
Minalesh Terra)
Economic Major trading center, illicit Merkato epicenter of national Conflict b/n enforcing Preference to high quality shops
trading, tourism economic and financial growth ethical business and and improper handling might
& center of employment prevalence of illicit lead to exclusion of micro and
trade small enterprises
Spatial Slum habitation, obsolete Necessitate concerted efforts Requires high financial Excludes unable members of the
infrastructure, poor of all concerned actors investment , conflict of business community,
physical condition interest b/n Turned to be a series challenge
construction of new for MMDP, led to be abandoned
Redevelopment as opportunity buildings and social by two of its members,
Tenure: 90% government to tenure change rehabilitation, Aggravated by irresponsible
owned Duality: modern and Land grabbing architecture & urban design
traditional, high tourist tendency, might lead to exclusion of
Existence of specialized attraction Loss of traditional traditional traders
quarters- Terras market
INCENTIVES: DISINCENTIVES:
(1) Help win political and social support for the PPP (1) Erode the political and social support of the PPP
(2) Improve the performance of the PPP (2) Reduce the performance of the PPP
(3) Help to expand membership and networks (3) Members might withdraw
(4) Build the legitimacy of the partnership (4) Erode the legitimacy of the partnership
Source: own analysis

‘worse’, shows a mean value of 3.29 for Idirs followed by NGOs whereas the best
contributors goes to GTZ (mean value of 1.5) followed by business association
representatives (mean value of 2.0). Interview results show that though initially
meetings were held every two weeks, later the intervals between meetings became
longer (2-3 months) and the business men developed the impression that the
partnership had started losing its momentum.
Perception: responses to the belief respondents have on effectiveness of the
partnership in achieving its goals in a Likert scale ranging from (1) very strong
(optimistic) to (5) very weak (pessimistic) is remarkably high with a mean value of
1.7. This is reinforced by the regretful expression of respondents considering the
partnership as missed opportunity.
Interaction Rules: the question in reference to this issue enquires what rules,
norms of practice etc. the Task Force had established. The questionnaire states
that rules need not be in written form but have to be commonly agreed upon. 40
percent of respondents do not recognize the existence of such rules. Among
respondents who recognize the existence of such rules or norms of practice the
most frequently mentioned types of rules are: rules specifying roles and
responsibilities of each position (Position can vary from ordinary membership to
leadership) (83%), rules for rotational leadership i.e. chairmanship of the
partnership (83%), rules specifying what action to take or not take at some decision
point or which decisions can be taken by members in a position and which
decisions need collective consensual decisions (67%). Considering the fact that
most of the respondents in this later group are from the leadership including the
Sub City Administration, the business associations and other representatives from
the Chamber, and GTZ; it is possible to deduce that there were some perceived
norms in directing the behavior of actors. However archival document search
revealed that a TOR had been prepared to hire consultants to draft such norms of
practice and codes of conduct at later days of the partnership.
Partnership Identity: W hen the partnership was established it had been
assumed that it possessed a mandate i.e. decision giving power pertaining to all
the implementation activities of Merkato redevelopment. However later it was
observed that there were issues which need decisions beyond the Task Force and
they started feeling that the partnership had not been really empowered.
Representatives of the business community become frustrated by the fact that the
Task Force served only to voice their suggestion, where as no action was being
taken.
The other problematic aspect of the partnership was the number and
composition of members of the Task Force. 60 percent of respondents have the
opinion that the Task Force had failed to address the anticipation of all partnering
bodies. Regarding other indicators for the identity of the partnership such as
organizational identity, 70 percent of respondents ‘disagree slightly more’ in the
organizational identity of the partnership being clearly recognized, resulting in total
mean value of 3.3 in the Likert scale. This is reinforced by the various responses
given to the question to which public body was the Task Force accountable in
addition to accountability of its members to their respective constituencies. Table 2
summarizes the results.
Table 2: Accountability of the Task Force

No. Category- to which public body was the task Respondents Percentage
force accountable Organization
1 The Addis Ababa Chamber of Commerce and Business 20
Sectoral Associations association,
GTZ
2 The Addis Ababa City Government GTZ, NGO, 30
Business Assoc.
3 The Addis Ketema Sub City Administration Business 20
Assoc., NGO
4 Not clear City Adm., GTZ 20
5 (Non respondents) 10
100
Source: own computation on questionnaire results
Regarding the mandate of the partnership in the development of Merkato being
recognized by higher level bodies of the City Government and other stake holders,
80 percent of respondents do agree with a mean value of 2.6 on the Likert scale.
70 percent of the respondents had the opinion that the norms and values of the
partnership support the work that it intended to do. There are mixed responses
regarding to the organizational culture of the Task Force in its operation. The
following Table 3 summarizes the results.
Table 3: Organizational Culture of the Task Force

No. Category Percentage
1 Hierarchical and bureaucratic 20
2 Democratic and decentralized 20
3 Not bureaucratic but centralized 10
4 Mixed and confusing 10
5 Yet not developed its own organizational culture 10
6 Not yet developed its own however centralized and a bit 10
bureaucratic
7 Non-respondents 20
100
Though the Task Force was in its early stage, results in Table 3 indicate a
higher tendency to centralized and bureaucratic culture in its operation. This can be
shown by taking out the 20 percent for democratic and decentralized category.
This is expected in a hierarchically structured administrative culture trying to fit with
a new arrangement based on negotiation and equal status. To the question whether
partners have had prior knowledge of other partners’ track records, competence
and operations; respondents from GTZ, NGO and Sub City Administration do have
such prior knowledge about the other partners.
Partnering Bodies and Role Demarcation: Responding to the question what
the values of member’s organization are, respondents have the following answers
as shown in Table 4.
Table 4: Organizational Values of Respondent’s Organization

No. Organizational Values Respondents Organization Percentage
1 Respecting traditions and GTZ 10
hierarchy
2 Profitability & competitiveness Business association 10
3 Populism Business association 10
4 Humanitarianism NGO 10
5 Technical cooperation GTZ 10
6 Promotion of socially Chamber-Business community 10
responsible trade and
investment
7 Development advocacy NGO 10
8 Public service AA City Government 10
9 Populism and humanitarianism Sub City Administration 10
10 (Non-respondent) 10
100
The results show an interesting variety of organizational values. However
responding to the dichotomous question (yes/no) whether the respondent’s
organizational value aligns with the values of the Merkato Millennium Development
Partnership, 80 percent of the respondents agreed. Moreover respondents
responding to the question whether the partnership’s objectives complement to
those of their respective organizations, 90 percent agreed. Therefore such values
can be taken as complementary values in collaborative actions for development.
The responses to the role of the respondent’s organization in the partnership are
summarized in Table 5.
Table 5: Role of Respondent’s Organization in the Partnership
No. Role in the partnership Respondent’s Organization Percentage
1 Advocacy NGO 10
2 Administrative/financial and GTZ 20
technical support
3 Facilitator Business associations, Sub City 40
Adm., AA City Government
4 Advocacy, major stakeholder & Chamber of Commerce/business 10
beneficiary, facilitator community
5 Resource mobilization and NGO 10
public support
6 (Non-respondents) 10
100
Still one can observe the various but complementary roles of the partnering
bodies which might be essential in partnership for development. The resources
contributed by partnering parties for the partnership are summarized in Table 6.
Table 6: Resources Contributed by Partnering Parties to the Partnership

No. Resources contributed Respondent’s organization Percentage
1 Technical know-how and NGO, AA City Government 20
experience
2 Management Business association 10
skills/administrative clout
8
3 Finance, technical know-how GTZ, Business associations 30
and experience
4 Technical know-how and NGO, Sub City Administration 20
experience, Management
skills/administrative clout
5 Coordination skills Chamber/ business community 10
6 (non-respondent) 10
100
Regarding the expectation of partnering bodies from the partnership, Table 7

summarizes the results.
Table 7: Expectation of Partnering Parties from the Partnership
No. Expectation Respondent’s Percentage
organization
1 The lives and livelihood of Merkato poor NGO 10
and low income residents improved
2 Developed, safer and cleaner Merkato Sub City Adm., GTZ, AA 30
City Government
3 Developed, safer and cleaner Merkato Chamber/business 10
attractive to tourists, and affordable community
construction
4 Developed, safer and cleaner Merkato with NGO 10
Pro-poor development
5 Developed, safer and cleaner Merkato with Business association 10
affordable construction
6 Pro – poor and small businesses devt.; Business association 10
developed, safer, and cleaner Merkato;
with affordable construction
7 Pro – poor and small businesses devt.; GTZ 10
developed, safer, and cleaner Merkato;
affordable construction and a cooperative
culture flourished
8 (non-respondent) 10
100
The expectation of 80 percent of the respondents which is a ‘developed, safer
and cleaner Merkato,’ aligns with the vision of the Merakto Millennium Task Force:
“Merkato: a modern, clean and safe Africa’s biggest market.” It is obvious from the
table that even though the representatives of the business associations have also
expectations for a ‘developed, safer and cleaner Merkato,’ affordability of building
construction is also an important concern for them.
Interviews indicate that the relationship among the partnering bodies in
deliberating the partnership tasks was based on willingness to cooperate and trust
rather than contract based. However, there was no as such clear demarcation of
roles among the partners even though responsibilities for the different positions in
the Task Force (some by de facto) existed. One thing which might be taken by
default is financing of the construction of commercial buildings which has been

carried through private investment.
Governance
it is clear from the composition of the urban actors involved that the partnership
was instrumental to involve governmental, civil society groups and private
businesses in the decision making process of Merkato development. One of the
indicators used for governance has been the modality through which members were
represented in the Task Force. Table 8 summarizes the result.
Table 8: Representation Modalities of Members
No. Category: Representation modality Respondents Organization Percentag
e
1 Through election (voting) by the Business community, GTZ 30
general assembly
2 Delegated by the GTZ, Chamber- business 60
leadership/executive community, NGO, AA City
Government
3 Hired GTZ (project coordinator) 10
100
Table 8 shows that the representatives of the business associations (with the
exception of a respondent represented by the Chamber of Commerce Merkato
Branch Office) were represented through election carried by their respective
general assembly while most other respondents are delegated by the executive of
their respective organization. Regarding transparency, responding to a question
whether the working culture of the Task Force can be expressed in terms of
openness and integrity 80 percent of respondents agree resulting to a mean value
of 2.7 on the Likert scale. Interviews show that the businessmen were expressing
openly their view with out beating around the bush. Capacity analysis
The analysis of capacity involves identification of the key players and their
major stakeholders, who they are (public sector, private sector, civil society groups,
donors, development co operations at local community, regional, national and
international level etc.), understand what capacity they possess and what capacity
they lack vis-à-vis their roles.
There was no formal assignment of roles and responsibility of each partnering
actor. It was at its later period that the Task Force drafted a TOR to a hire a
consultant for drafting of its internal rules. The list of roles in the preceding table is
reconstructed from what each partner had been performing.
Apart from the capacity limitation of its members, Merkato Millennium
Development Partnership (MMDP) as an organization has been plagued by many
capacity related problems. The Task Force did not have its own structure. It lacked
formally written interaction rules. The task Force also lacked its own office space.
To whom the project coordinator was accountable was not clear. There was no
common understanding on how development should continue among its members.
Rather opportunities were utilized to promote own interest and agenda. Financially
apart from the amount contributed by GTZ, no member had contributed what it
pledged.
Goal Achievement
In responding to a set of dichotomous questions used as indicators for goal
achievement, 90 percent of the respondents have confirmed that what had been
accomplished by the partnership could not have been attained by the business
community alone. This signifies synergy being attained. 70 percent of them (+20%
responded ‘partially’) do not believe that the partnership had fulfilled its mission
and 80 percent of them have the opinion that the development and management
problems which the partnership tried to solve still persist. 60 percent don’t believe
that the accomplishments so far are to the satisfaction of all members. 80 percent
of them answered ‘no’ in response to whether they still owe allegiance to Merkato
Millennium Development Partnership. Nevertheless 70 percent of them are hoping
that political and ideological trends of the City Government will support such
collaborative arrangements between the public, private and civil society groups.
Respondents from representatives of the business community agree on the
enthusiasm of the Sub City Administration expressed in facilitating the construction
activities by organizing design competitions, tendering and bidding on construction
work and settling disputes. Among the main practical problems solved by the Task
Force was the provision of space on public alleys for construction of temporary
shops so that the livelihood of the businessmen and their families would not be
affected while construction was progressing on sites where their former shops were
demolished and cleared to give way for the new constructions. The Task Force was
also serving as an arbitration body. Sometimes an individual investor claimed land
that was occupied by one of the associations. This is often met with reactions of
members ranging from covert negotiation to intimidation against life. This required
a third party to pacify the situation with local mediation skills.
Regarding the construction of commercial buildings by associations, in 2006
there were only 6 projects under construction in central Merkato. By 2010 six
buildings have gone operational while only five additional projects were under
construction. These achievements need to be measured against a total of 52 plots
which were leased since 1996. Infrastructure development save the installation of
street lighting by the Sub City Administration with an investment worth of 6 million
Birr seems to be relegated.
After the turbulence following the May 2005 election, the former CEO of the Sub
City Administration was transferred to another public responsibility and the
chairmanship shifted to the representative of the business community. The
meeting venue also changed from the Sub City office to Merkato Chamber of
Commerce and Sectoral Association Office. However in November 2006 a general
meeting was called for improving the operation of the MMDP. A document search
shows the last minutes of the partnership recorded in the month of June 2007.
Currently members’ allegiance to the partnership is being replaced by commitment
to their respective block associations.
Monitoring and Evaluation

Based on the questionnaire the Task Force had carried evaluations 1-3 times
and tried to make use of the evaluation for further improvement. When asked
whether inputs of monitoring and evaluation reports were utilized 30 percent
answered “yes, most often”, 20 percent “seldom” and “20 percent “never” with the
remaining not responding to the question.
Table 9: Capacity Analysis
No Key players & Category Role Unique capacity Capacity limitations Remarks
major
stakeholders
1 Merkato Private Construction of business Flexibility, Low collaborative Progress of
businessmen’s businesses buildings and infrastructure, Quick practical effort: Allegiance to construction of
block associations Resource mobilization, decisions, the partnership gave business
facilitation, Management & way to commitment to buildings has
Advocacy coordination ones block been retarded
skills association
2 Addis Ababa Private Organizing and coordination, Experience and Limited advocacy Not able to
Chamber of business Capacity building (information skill in negotiation capability, less sustain the
Commerce associations system, good business Coordination organizing and magazine
practice etc), skills coordinating skill ‘Merkato Today’
Resource mobilization & after GTZ
facilitation, withdrew,
Awareness raising, Unable to sustain
Networking and advocacy the momentum
and reorganize
the partnership
3 Addis Ketema Sub Governmental Facilitation of construction Know how on Shortage of skilled It failed to resolve
City routines (arranging temporary government professional staff, issues related to
shops, access to supplies, working Itself at early stage of lease (modality of
dumping site for excavated procedures, establishment, payment and
soil etc), Maintain overall management Less selling skill in the selling price)
quality of Redevelopment, skills, promotion of the ideas
Regulate financial flow of the Political capital of PPP, Less
PPP, and networking, communication
Provision of infrastructure, Conflict handling
Communicate (policy related skills
issues to the City Government
e.g. lease, tax etc.)
Addis Ababa City Governmental Administrative backing and Technical and Lack of Limited to passive
4 Government facilitation, professional experience in observance and choose
Policy direction knowledge on planning PPP, not to take action to
& design, legitimate Absence of provide policy framework
authority and eminent legal on PPP
domain to acquire framework
property for PPP
5 Pro Pride Non- Advocacy (whether Long years of (-) Served as secretary of
Governmental redevelopment adversely experience in poverty the Task Force
Organization affects the livelihood of the alleviation projects in
people), Merkato
Resource mobilization
6 Christian Children Non- Advocacy (NA) (NA) Unable to find its niche
Fund Governmental and withdrew earlier
Organization
7 Iddirs in Merkato Community Advocacy for resident Local knowledge on Low Unable to find its niche
Based communities of Merkato the needs of resident negotiation and withdrew earlier
Organizations communities skills, limited thereby abandoning its
innovative & advocacy role
constructive
suggestions
8 GTZ International Financial and technical Experience in PPP (-) GTZ seems satisfied by
Development support, Expertise knowledge the length it traveled to
Cooperation Networking and assist in Networking skills create the partnership as
resource mobilization, a joint forum between the
Facilitation of participatory main parties
fora
Source: Reconstructed from own survey questionnaires and interview results (specifically Table 6), reports of the Task Force,
Report on assessment workshop by the OD consultant, and other studies.
Table 10: Strength of the Partnership

Strategic level Results Behavioral Values Remarks
factors on Likert interaction on Likert
Scale or Level factors Scale or
percentages percentag
es
Shared vision 80% Perception 1.7 High belief on the
(Table 7) effectiveness of
Orgn. Value 80% MMDP,
alignment Conviction that orgn.
Complement 90% value and objectives
ary align with that of the
objectives partnership
Strategy 100% Expectation 80% All have broader view
of development than
Commitment (clear mere construction of
direction) shop buildings
Political support Commitment Growing The sub city
Facilitative role of 2.5 & 2.9 cooperati administration showed
sub city adm. & ve activity great enthusiasm in
handling at early the redevelopment
conflicting stage
interests
Governance Mutual 2.2 There is mutual
-openness and 2.7 Respect respect and all
integrity All (70%) (fair) members actively
-participation Power participate in meetings
balance
Source: own computation and summary
Synthesis
From the synthesis using Table 10 and Table 11 the major strengths of the
partnership are in respect with vision and strategy. Here ‘strategy’ is limited to
having a broader view of development objectives and clarity on how to reach there
i.e. through collaborative efforts. All members have broader views of development
than mere construction of shop buildings. Members were optimistic on
effectiveness of the partnership in achieving their development goals. Members
were convinced that what had been accomplished through the partnership could not
have been done by the business community alone i.e. synergy is attained. The
major weaknesses of the partnership included inability of the leadership to keep the
partnership going, the passive observance or lack of enthusiasm about the
partnership at higher political level of the City Government, lack of societal support,
mistrust among the main partnering bodies (between the businessmen and City
Government), lack of clear demarcation of roles, the interruption of the
communication medium of the partnership for which most members were
enthusiastic, unclear accountability and organizational identity.
Table 11: Weaknesses of the Partnership

Strategic Results Behavioral Values Remark
level on Likert interaction on Likert
factors Scale or Level factors Scale or
percentage percentage
s s
Leadership 3.8 Commitment (interval Failed to maintain the
b/n continuity of devt.
meetings activities of the
2-3 partnership
months)
Societal 3.3 Commitment (representa Lack of Involvement of

support tives of the residents in
societal implementing
groups with Merkato LDP
drew
earlier)
Political (Passive Commitment (businessm Passive observance of
support observance en felt a higher level City
) forum for Government
voicing but
no action)
Communica 70% agree Trust Mistrust b/n “Merkato today” stopped
tion on the the main publishing after its first
magazine partnering issue
Merkato bodies
today (4.0)
Governanc Partnership 4.0 (70%) Accountability and
e (not clear) identity / 3.3 organl. identity of the
- -bureaucratic & (100%) partnership is not clear;
`Accountab centralized it adopted the
ility 80% bureaucratic culture
Source: own computation and summary
Conclusion & Recommendations

This case study on Merkato Millennium Development Partnership (MMDP)
exemplifies a case in point where a collaborative effort in the form of partnership
between government and private businesses is necessary when private investment
is required to build commercial buildings and the city government in addition to its
interest in redevelopment of the city will be benefited from tax revenue increase
due to expanded commercial activities as the result of creation of additional
commercial space.
The main strategic level weaknesses include lack of leadership which was able
to maintain the momentum and continuity of the partnership, lack of societal
support, lack of political support, and failure to maintain the communication organ
of the partnership which was the magazine “Merkato Today” after GTZ transferred
to the City Administration. The major weaknesses at the behavioral interaction level
factors include the lack of trust between the key partners i.e. the businessmen and
the Sub City Administration, and lack of formal interaction rules. However the
Merkato Millennium Development Partnership also suffered from many capacity
related challenges both on an individual and organizational level. The Task Force
for the partnership as an organization had no structure of its own, lacks its own
office space, no power of its own to give decisions on the development issues
raised by the businessmen, and was not able to maintain a common understanding
on how an integrated development (beyond the physical construction of modern
buildings) should come in Merkato. Individual members of the partnership also

suffered capacity problems which can be expressed as lack of experience in PPP
and consequently lack of main competencies such as collaborative skills,
negotiation, advocacy and communicative/lobbying skills. Shortage of skilled and
professional staff in the part of the Sub City Administration has also limited its
supervisory role in maintaining over all quality of the redevelopment. Several
identity aspects of the partnership such as organizational identity, mandate,
accountability, demarcation of roles and responsibilities, number and composition
of members, organizational culture, its being trust-based are not in favor of
promoting its identity and legitimacy. Contextual factors such as redevelopment
which needs high investment cost, the lack of conducive institutional framework for
PPP, constrained decentralization (issues like lease price, repayment period, grace
period, height regulations, phasing and modalities of payment couldn’t be decided
at the sub city level), bonding social capital working against the advantage of the
partnership, the conflict between traditional and modern and between prevalence of
illicit trade and the need to enforce ethical business practice - all obliged the
partnership to operate in unfavorable environment.
Regarding goal achievement of the partnership, members (90 percent of
respondents) in particular the private businesses have realized that the
accomplishments so far achieved couldn’t have been achieved without the
concerted effort through the partnership. 70 percent of them (+20% responded
‘partially’) do not believe that the partnership had fulfilled its mission and 80
percent of them have the opinion that the development and management problems
which the partnership tried to solve still persist. 60 percent don’t believe that the
accomplishments so far are to the satisfaction of all members. 80 percent of them
answered ‘no’ in response to whether they still owe allegiance to Merkato
Millennium Development Partnership. This is evidenced by the fact that no
significant progress has been made since 2005. Finally the cumulative result was
the abandonment of partnership which was disbanded after 2007.
In order to make the best use of such collaborative efforts in the form of public
private partnerships for urban redevelopment projects, the first measure to be
taken need to be the provision of facilitative policy/legislative framework. Such a
framework shall address the typology of PPPs for different development
collaborative efforts. Meaningful decentralization which empowers urban local
governments with enough power to manipulate local level development polices is
essential. One of the basic characteristics of partnership arrangement is that each
participant is a principal. It has to be capable to bargain on its own behalf rather
than having to refer back to other sources of authority. This however doesn’t
overrule the need for consultation and reconciliation before reaching decisions.
This is necessary on the basis that decisions on development issues are taken by
different arenas and networks. Nevertheless when a decision is completely beyond
the mandate of the partnership and the stance of the upper authority doesn’t go
along with the objectives and pace of the partnership, this will constitute a serious
challenge to the success and even survival of the partnership. All aspects related
to the partnership identity and organizational capacity need to be rectified including
a shift from trust based (informal) to contract based (formal) partnership, clear
demarcation of roles, assignment of responsibilities and drafting of interaction
rules. Capacity building efforts in governance framework need to involve all parities
including the private sector. Priority in capacity building at individual member level
shall focus on building basic competencies for collaborative action: negotiation
skills, communication and lobbying skills, contribution of innovative and
constructive suggestions, and positive attitudes and interaction rules.
Partnerships exist in different networks (physical development, social
development, environment etc.) and in different arenas. The MMDP can be
rearranged as a network including different partnerships in the social development

field which involves the Idirs, the NGOs, government and in fact part of the private
businesses, international development co-operations; and another one on physical
construction sphere which mainly involves the private businesses and the City
Government. Higher level political support is necessary to introduce and maintain
such kind of collaborative action between public and private businesses. A practical
first step in this regard could have been assigning members representing the
Federal Ministry (Ministry of Works and Urban Development) to listen and follow up
at arms length the policy related issues of the partnership. This is justifiable on the
accountability of the City Administration to the Federal Government.
Finally, as forthcoming institutional/governance arrangements and taking the
experimental nature of its current practice, establishing a knowledge center or
research center on Public-Private Partnership might be necessary. Examples can
be given like; the Dutch Knowledge Center on PPP and the Commission on UK
Public Private Partnership.
Note:
1
This categorization of Putnam was criticized on the ground that bridging social
capital has also exclusionary aspects and for its analysis being simplistic.
2
. Terra is a distinct block specialized on similar items of merchandise items
defined by streets and internally served by alleys
3
Kebele is the smallest administrative unit in the administration unit closest to
the community. Though they were established after the two proclamations
which put under public ownership of rural land and nationalization of urban
land and extra houses they are still maintained up to now and even given
constitutional ground. According to the proclamation urban Kebele
administrations do administer houses with rental amount below Birr 100 at the
time of the promulgation of the proclamations. Where as those rented Birr 100
and above are under the Agency for the Administration of Rental Houses.
4
A local Development Plan is an instrument that facilitates the implementation
of the city’s master plan by focusing on strategic investment areas located
both in the inner city and expansion area.
5
The Merkato Millennium Development Task Force was envisaged to replace its
predecessor the Merkato Coordination Office (MCO) which was established in
January 2000 by the Chamber to coordinate the activities of the four Sub
Committees established by Merakto and Surrounding Special Committee (MSSC).
The sub-committees include: Master plan and Lease, Business Improvement
District (BID), External Relations and Business Ethics.
6
The Addis Ababa Chamber of Commerce established a Satellite office in Merkato
in 2001 with the aim of serving the Merkato business community. However after
serving up to November 2004 its services discontinued due to lack of budget and
reopened in July 2006 following the financial assistance from the German
Technical Cooperation (GTZ). It was later upgraded to a branch office level in
November 2007 by the project support of the Royal Netherlands Embassy in
Addis Ababa which extended from November 2007 to June 2010. The vision of the
branch office was “to make Merkato a vibrant business hub as well as historical
and tourist attraction through the concerted efforts of the business community and
other stakeholders.” One of its objectives is networking with the Addis Ababa City
Government, Sub City Administrations and other development partners for the
growth of Merkato. The adopted strategies among others include: promoting
public private partnership (PPP) forum in Merkato, organizing annual festivals
inside Merkato that exhibit handicraft products of MSEs, publishing annual
magazine on Merkato’s historical, social, trade and economic perspectives.
Among recent major activities which the branch accomplished include the
launching of a Local Area Network (LAN) and Wide Area Network (WAN)
Information Technology Capacity Building Program to establish computer and
internet training center in Merkato. The project is intended to facilitate information
sharing from the head office and enhance awareness of the business community
on the significance of Information Technology to advance their businesses
(Activity highlights, Merkato Past and Present, May 2009).
7
Participants of the review workshop were asked to jot down their concerns about
the development of Merakto. A highlight on some of their concerns include: lack of
political support and lack of public awareness, the lack of faith in cooperative
development between the business community and government i.e. the prevailing
view that only government is developmental, the mistrust between the business
community and government, preservation of the tourist attractiveness of Merkato,
the lack of adequate infrastructure, and shortage and exorbitant price of building
materials. Participants were also asked about what they expect from the
workshop. Some of their expectations include: clear demarcation of the
responsibility and mandate of the Task Force, demarcation between government
role and that of the Task Force, establishing the norm of practices/rules of
conduct for the Task Force, enhancement of accountability and interaction
between members of the Task Force and their constituencies, and how to turn the
poor and low-income groups as partners in the redevelopment of Merkato.
8
Financial contributions made by the business associations were concerned with
the financial investment they made on the construction of the new commercial
buildings. Only GTZ contributed an initial budget to make the Task Force
operational.
Part IV Fiscal Decentralization: to Have Adequate

Revenues
Assessment of the Budget Balance: Challenges and

Opportunities of Fiscal Decentralization in Addis Ababa
City Administration
Belay File and Ayele Mulugeta
I Introduction
Decentralization has been defined as the transfer of responsibility for planning,
management, and resource raising and allocation from the central government to
field units of central government ministries or agencies, subordinate units or levels
of government, semi-autonomous public authorities or corporations, area-wide
regional or functional authorities, or organizations of the private and voluntary
sector. There are four types of decentralization: political, administrative, fiscal and
market decentralization. Many studies argue that fiscal decentralization is the
manifestation of all other types of decentralization. Fiscal decentralization involves
the devolution of both revenue generation and expenditure management power to
the lower levels/tiers of a government. It has been advocated that devolving such a
power would result in efficient and effective utilization of scarce resources.
However, implementation of the system varies among regions due to several
factors such as implementation capacity, the tax base, and level of economic
development among others.
Hence, the purpose of this study is to investigate the practices of fiscal
decentralization in Addis Ababa City Administration and to analyze the
opportunities and challenges of the city administration in raising sufficient revenue
and delivering public services to satisfy the needs of its citizens.
The city administration is striving to increase its revenue raising capacity
through various mechanisms such as by decreasing the tax rate and thereby
broadening the tax base by calling in evaders such as micro and small enterprise
operators in the informal sector. Secondly, there are efforts to increase
accountability and trust between the tax payers and the collectors. Awareness
creation among the pubic, improving the service delivery system of the city through
BPR and capacity building of the relevant institution are among the major efforts.
Despite such efforts, there is evidence that revenue is not being generated to its
full capacity and that there are also service delivery problems. Moreover the rapidly
increasing urbanization rate has posed sever challenges to the capacity of the city
administration to meet demands. To this end the study investigates three main
questions: to what extent has efforts in boosting revenue achieved the targets?
What are the opportunities and challenges of raising revenue by the city
administration? Is the city administration covering all its expenditure by its own
means?
To meet its objectives, the study relies mainly on secondary data. However,
some primary data has also been used to support the arguments in the study. To
analyze the data the study employs trend analysis and computation of percentages,
averages and ratios etc. The study is expected to yield important insights that could
help the city administration in meeting such an increased demand and provoke
extended research in the area.
II. Theoretical Framework
2.1. Decentralization
Decentralization is a very broad, complex and multifaceted term which is
defined as the transfer of authority and responsibility for public functions from the
central government to the different tiers of lower level governments, intermediate
and local governments, or quasi-independent government organizations and/or the
private sector (World Bank, 2008). Broadly speaking decentralization in the system
of government is nothing but “transfer of power from a central government to
subordinate authorities”. In other words, “A decentralized government is the
opposite of a centralized government, in which power is legally vested in the
central government and local governments act merely as agents, having no
decision-making power of their own.” (ibid)
In practice, decentralization entails the spread of power from higher level to
lower level units, within a central government, from central to regional and local
governments or from regional to local governments (Tegegne and Van Dijk, 2005;
Jha and Mathure, 1999). Similarly, Kibre (1994) argues that decentralization is the
division of political, economic and administrative powers among government levels.
Types of Decentralization
Broadly speaking for the purpose of this chapter there are three types of
decentralization. These are political, administrative and fiscal decentralization. For
the purpose of clear understanding on the difference between them we have
defined each as follows.
Political decentralization: is a type of decentralization that transfers policy
and legislative powers from central governments to autonomous, lower level
assemblies and local councils that have been democratically elected by their
constituencies. There are several prerequisites for Political decentralization to be
effective and to meet its objectives as desired, among which the major ones are
regular elections, clearly defined jurisdictions and powers, and the existence of
appropriate legal, political and functional space to exercise the devolved powers
and duties thereof. In addition, political decentralization often requires
constitutional or statutory reforms, the development of pluralistic political parties,
the strengthening of legislature’s creation of local political units and the
encouragement of effective public interest groups (W B, 2009; Kumera, 2007).
Administrative decentralization: is another type of decentralization that
transfers responsibility for the planning, financing and management of certain
public functions from the central government and its agencies to field units of
government agencies, subordinate units or levels of government, semi-autonomous
public authorities or corporations, or area-wide, regional or functional authorities. In
general Administrative decentralization seeks to redistribute authority,
responsibility for providing public services among different levels of government. It
is also argued that there are several prerequisites for Administrative
decentralization to become effective including the ability to make independent
staffing decisions and ability to negotiate conditions of service are the major ones
(Wikipedia.org; W B, 2009).
Administrative decentralization is further divided in to three categories mainly
depending on the extent of the decision making authority that is transferred from
the central to the lower tiers. These are:
Deconcentration: is the first and the weakest form of Administrative
decentralization which is used most frequently in unitary states. This form of
decentralization often redistributes decision making authority and financial and
management responsibilities among different levels or organs of the central

government mainly under the supervision of central government ministries as the
extent of the authority and responsibility increases (W ikipedia.org; W B, 2009).
Delegation: is a more extensive form of decentralization as compared to the
former in that through delegation central governments transfer responsibility for
decision-making and administration of public functions to semi-autonomous
organizations not wholly controlled by the central government, but ultimately
accountable to it. For example, Governments delegate responsibilities when they
create public enterprises or corporations, housing agency, transportation, power,
telecom authorities, regional development agencies, or special project
implementation units. Usually they may be exempt from constraints on regular civil
service personnel and may be able to charge users directly for their services (Ibid).
Devolution: is the strongest type of decentralization in that it transfers
authority for decision-making, finance, and management to the local governments
that elect their own mayors and councils, raise their own revenues, and have
independent authority to make investment decisions. In a devolved system, local
governments have clear and legally recognized geographical boundaries over
which they exercise authority and within which they perform public functions. It is
this type of administrative decentralization that underlies most political
decentralization (Ibid).
Fiscal decentralization: is the third type of decentralization that transfers the
autonomy and responsibility of revenue raising and expenditure management,
including the power to levy taxes and user charges, to local governments. It can be
argued that fiscal decentralization/financial responsibility is a core component of
decentralization without which decentralized local governments can not carry out
decentralized functions effectively. In other words, political and administrative
decentralization without fiscal decentralizing/financial responsibility can not be
effective as these functions would be jeopardized by waiting for someone else to
decide on revenues as well as about expenditures (W ikipedia.org; WB, 2009).
Oates (1991:133-156) argues that if local governments and private
organizations are to carry out decentralized functions effectively, they must have
an adequate level of revenues either raised locally or transferred from the central
government as well as the authority to make decisions about expenditures. Hence,
for fiscal decentralization to be effective and meet its desired objectives it strongly
requires linking pleasure of spending with pain of revenue generation. Fiscal
decentralization is now seen as part of a reform agenda to strengthen regional and
local governments. This is because central government alone cannot satisfy all of
the competing needs of its constituent units. Besides, local and regional
governments help in the implementation of national economic development
strategies and this can be more reliable with adequate taxation powers to meet
their expenditure responsibility (Oates, 1991). However, Smoke (2004) suggests in
many developing countries local governments or administrative units possess the
legal authority to impose taxes but the tax base is so weak and the dependence on
central government subsidies so ingrained that no attempt is made to exercise their
authority.
In general it is argued that effective decentralization requires a balance
between administrative, fiscal, and political decentralization. Ignoring this fact and
following the common tendency to implement political aspects of decentralization
and undermining the remaining two will not make the decentralization process
complete and effective. In short its effectiveness depends on the existence of
genuine local autonomy, appropriate legal frameworks for Local Governments, and
the level of responsibilities and accountability devolved thereof. In conclusion,
literatures suggest that three conditions must be met to effectively improve
governance:
• Significant responsibilities and powers for local service delivery should be

devolved to democratically elected local authorities (local governments) in
line with their capacities and potential, based on a principle of subsidiarity
(political decentralization)
• Proper channels to encourage strong accountability between elected
representatives and local bureaucrats and between elected representatives
and their electorates (institutional decentralization)
• Resources, through own revenues (especially local taxes) and grants from
higher-level governments, sufficient to meet these responsibilities should be
devolved to local governments (fiscal decentralization) (Bahl and Linn,
1992).
In line with the third condition, many federations including the FDRE employ
fiscal grants to correct fiscal imbalances and to offset spill over effects. Besides,
central government applies it as an instrument to influence the spending pattern of
sub national government. This mechanism serves as a political tool to pursue both
national goals and regional plans through coordinated conditional transfers (Oates,
1999). According to Shah (1994), national fiscal transfers include the following six
broad objectives: bridging vertical fiscal gaps, bridging the fiscal disparities through
fiscal equalization transfers, setting national minimum standards, compensating for
benefit spillovers, influencing local priorities and dealing with infrastructure
deficiencies and creating macro economic stability in depressed regions.
Transfers/grants are broadly classified in to two categories, namely General
Purpose Transfers: transfers that are provided to sub- national governments to
ensure horizontal and vertical equity that are not tied to or specified for any specific
purpose (Rao, 1998). The second type is a specific purpose transfers: as the name
indicates, these transfers are employed for specific purposes to be implemented at
sub national or local levels. They are assumed to compensate spillover effects or
are given for merit good reasons to ensure optimal provision of public services by
federal and regional states (Shah, 1994).
2.2. The Soufflé Theory of Decentralization

We have adapted the Soufflé Theory of decentralization to clearly show and
create a common understanding on the impact of decentralization on economic
development of developing countries. The figure below depicts clearly the impact
of a well managed and balanced, in terms political, administrative and fiscal,
decentralization on economic development of LDCs. The model show that
decentralization entails three distinct choices each of these choices (political, fiscal
and administrative) has their own outcomes in the system where political
decentralization brings about political accountability, transparency and
representation. Fiscal decentralization enhances effective and efficient resource
mobilization, allocation and fiscal capacity as well as discipline which otherwise
may increase sub-national indebtedness.
The system outcomes in turn may translate into system results in the form of
budget constraint (soft/hard), moral hazard, and macroeconomic instability, or
responsive, effective, efficient and sustainable services. Finally, if the positive
system results dominate it leads to development in the form of increased incomes,
productivity literacy, etc.
Figure 2: Indictors of Decentralization - The soufflé Theory
2.3 Economic Rationale for Fiscal Decentralization

Even though much of the decentralization which has taken place in the past
decade has been motivated by political concerns there is also a strong rationale for
decentralization in terms of economic efficiency, public accountability and
empowerment. Hence, the economic discussion of fiscal federalism has
concentrated mainly on federalism as real decentralization where the lower level
jurisdictions have competence over their own expenditures and revenues. The
following benefits of decentralization are regularly mentioned: a. Decision making
at the local levels gives more responsibility, sense of ownership and increased
participation to local agents, and local information can often identify cheaper and
way of providing public goods b. Regional differences can be better taken into
account (i.e., local governments are better positioned than the distant national
government to deliver public services as a result of information advantage); c.
Lower planning and administrative costs due to the abundance of overlapping
functions(i.e., decentralization reduces overload and congestion in administration
and communication from the mainly higher level government); d. Competition
among local governments favors organizational and political innovations (i.e.,
mobility of resources between localities rewards governments who better serve
residents and businesses); e. Population mobility narrows the gap between local
government policy and local communities’; f. More efficient politics as citizens
have more influence (i.e., since voters pay for local public services in the form of
taxes and user chargers, they hold local officials accountable for delivery of
services at some acceptable quantity and quality by promoting good governance,
enhances organizational effectiveness, and improve human power capacity)
(Fritzen and Patrick, 2006; Oates, 1972; Brennan and Buchan, 1980; Mohammed,
2005; Conyers,1990; Maro, 1990; Tegegne and van Dijk, 2005; Jha and Malthure
,1999; Loop, 2002; Davey, 1983; Mwangi and Patrick, 2004)
However, recently there have been several papers articulating challenges to
fiscal decentralization. For example, Prud’homme (1995) and Tanzi (1996) pointed
out a number of conditions necessary for the benefits of fiscal federalism to
materialize: some of these concerns are related to the issues of the degree of
accountability of sub national governments to constituents; the availability of

qualified and integral staff at the local level; availability of clear rules of financial
accounting and budgeting at all levels of government, freedom of people and
resource mobility.
Evidences and literatures show that both in the industrialized and in the
developing world, nations are turning to devolution/decentralization of power to
improve the performance of their public sectors (Oates, 1999).
Article 47 of the constitution of the FDRE mandates a federal structure that
divided country into nine national self-government or regions and two special city
administrations of Addis Ababa and Dire Dawa (FDRE constitution1995,)
Similarly, Article 51 of the constitution, gives the mandate of formulation and
implementation of policies related to over all economic and social development
which include defense, foreign policy, money, banking and currency and provision
of basic infrastructures like; air, rail, waterways, shipping, major roads, postal, and
telecommunication services to federal government.
On the other hand, article 52 of the constitution grants the regions the power to
establish a state administration that best advances self-government, enact and
execute the state constitution and other laws, formulate and execute the region’s
economic & social development plans, administer land and other natural resources
according to the Federal Laws, levy taxes and collect revenue on sources
demarcated to states; prepare and execute the regional budget; establish and
administer a state police force.
2.4 Addis Ababa City Administration

Addis Ababa, the capital city of Ethiopia, has an estimated population of about
3 million. Migration constitutes an important component of the population dynamics.
Most of the migrants come to Addis Ababa for various reasons, the most important
being search for better livelihood. Nonetheless, with limited capacity of the formal
sector to absorb the immigrants, many of them particularly the women are
involved/employed in the informal sector. According to the recent statistical
surveys conducted by CSA (2003), the total number of people involved in the
informal sector in the city reached 128,598, out of which, 65,719 (51%) are women
(Central Statistical Authority.2003). According to the urban informal sector survey
of 2003, most of the people engaged in informal sector are found in the
manufacturing (42.78%), trade, hotels and restaurants (42.53%). These people are
mostly crafts and related trade workers (44.72%) and services, shops and market
sale workers (36.32%).
Hence, urbanization is becoming a pressing challenge of Addis Ababa, as it is
not accompanied by a well-built economy and a wide resource base that could
adequately fulfill basic requirements for its ever-increasing residents. The informal
sector contribution or share to the economic growth of the city is paramount. Unlike
the formal sector, the informal sector is operating spontaneously and in an
insecured manner; without fixed location, little technology and with no formal
training. Nevertheless, the contribution of this sector to generate income for the
many unemployed working age group and its role for the city’s development is
significant.
According to the Bureau of Finance and Economic Development (2010), there
are challenges and opportunities that arise from the dominance of informal sector
enterprises in the city. The challenges are that by nature informal sector operators
are ‘hard to tax’ as they can easily under report or escape tax authorities. Due to
small size and owner managed nature of their businesses, they are mobile and
pose a big challenge to the taxing authority. However, the bureau also indicates on
the opportunities if they exert efforts on taxing the “hard to tax”. Lowering the tax
base, provision of trainings on business skill development, accountability and

transparency are among the major efforts the bureau is working to tax the “hard to
tax”.
Recently there are reports that the city administration is running a budget deficit
owing mainly to a rise in capital expenditure. However there are also unmet
demands in the areas of drinking water, sanitation, housing and public safety and
security. The question that remains is even if such expenditure might be justified,
who would finance the debt if the deficit keeps on widening? The city administration
seems to look into building its own capacity to tap its revenue potential, besides
seeking support from the federal government. In other words there are efforts by
the city administration to close the deficit in many fronts. This will be assessed in
the discussion part of this chapter.
The tax reforms that took place in the country have also been implemented in
Addis Ababa and seem to have contributed positively. The reform was designed to
correct the crucial policy failures focusing on the following key measures through
the tax policy.
• Reducing the very high rates: for payroll employees, business and
agriculture income tax.
• Removing undesired taxes: in order to promote export diversification and
avoid reliance on mono-commodity, export taxes were removed, except for
coffee.
• Broadening the tax base: in this regard, new income, wealth and
consumption taxes were introduced. The rental, capital gains and interest
income tax as well as services sales taxes can be cited as additional levies
embarked through the tax policy reform.
• Enhancing revenue collection: through improving and modernizing the
revenue collection institutions efforts are underway to provide stability in the
revenue systems.
These tax reforms were undertaken with an aim to meet several objectives. The
first objective was to yield a sustainable source of government funding for a rapidly
rising expenditure both in the country and in the city. The reform also aims at
stimulating businesses by lifting unnecessary burdens. Creating an enabling
business environment thus calls in many non-compliant businesses as is evidenced
by the deputy head of Addis Ababa revenue bureau. According to him new tax
payers are coming into the system voluntarily. A progressive tax system which the
country is in principle applying was deemed to narrow income inequality. In general
the reforms seem to have impacted a fiscal balance both in Addis Ababa and in the
city in a positive direction.
2.4.1 Tax Paying Outlets

In the city of Addis Ababa there are three tax paying outlets with an aim to
enhance tax collection system and create a conducive environment for tax payers.
These are:
• Kebele: Category C tax payers pay taxes at kebele level.
• Sub city: category A and B tax payers conduct their tax payments at sub
city level.
• Third party: All tax categories are allowed to pay taxes through the third
party. The third parties are: selected banks in each sub city, Addis Credit
and Saving Institution, and commercial nominees. The service charge will
be paid by the tax payer and the bank transfers the money to the central
treasury of the city administration. The revenue authority receives copy of
the bank slip to balance (update) their account. There are also efforts to
introduce an online declaration although this is not commonly used by tax

payers.
III. The Data and Empirical Results
3.1 The data

The study largely relies on secondary sources for the analysis of data.
However, some interviews were also conducted with deputy heads of the revenue
bureau. The bureau of finance and economic development has a six years
consecutive data on revenue and expenditure, both planned and achieved. This
allowed us to see some trends for both revenue and expenditure components.
Trends such as budget balance can thus be examined from the data. The
expenditure components are broadly categorized as recurrent and capital
expenditures. The trend of each is described in the six year consecutive period.
The details of each of the components are included in the secondary data set.
Revenue is broadly classified into two sub-units as tax revenue and non-tax
revenue. The tax revenue is further divided in to direct and indirect tax
components. The interview essentially provided us with qualitative insights about
the subject. Information on efforts made by the bureau to boost the revenue raising
capacity and the challenges faced was obtained using this method.
3.2 Revenue Base and Trends in Addis Ababa

Although the city is strategically positioned as a political site of government and
many NGOs, embassies and other international organizations, critics argue that a
small amount of revenue is raised compared to its potential. There are also efforts
exercised by the municipal authorities and other concerned government bodies to
raise revenue through various means. Accordingly this study has investigated both
qualitatively and quantitatively about efforts made by the city administration to raise
revenue and also the extent to which these efforts have achieved targets.
3.2.1 Efforts exercised by the Revenue bureau

According to the interview conducted with Deputy Head of the Revenue Bureau,
six major efforts are underway to boost the revenue raising capacity of the city
administration.
Automation of the revenue system: the bureau has developed a system
called Integrated Revenue Management System with the view of modernizing the
revenue system. This effort has received recognition even at the continent level
enabling the bureau to receive an award called Technology in Government in Africa
( TIGA, 07)
Strengthening the Tax information system: with the view of raising tax
compliance the bureau has implemented the Integrated Revenue Management
System, has made a pilot test in the SIGTAS deployment of the country, introduced
cash register machines and started issuing finger print based TIN and Tax payers
Identity Card.
Institutional Capacity building: W ith the view of boosting the implementation
capacity of the bureau it has invested in capacity building by creating strong
relationship with the ITC of the ECSC and by hiring foreign trainers.
Raising the ethical standard of the staff: In this regard, trainings have been
carried out in collaboration with the ECSC and the Anti-Corruption Commission on
service delivery and corruption respectively. Beyond the training, they have
developed draft ethical regulation of their own.
Awareness creation programs to the tax payers: in this regard the bureau
has established a separate body, the Education and customer service sub-business
process, at all levels down to the Kebele level to take care of the awareness
creation task. Accordingly, the awareness creation program uses several means:
face-to-face, media, brochures, and the website of the authority.
Developing enforcement mechanism: in this regard the bureau has started
different ways to enforce the tax laws. These include negotiations with companies
not to sell their products to those who have no TIN. There is also a strong
cooperation with the chamber of commerce. There are field visits using some 30
intelligence workers of its own. The problem here is the number of intelligence
workers has been very small compared to the 220,000 tax payers in the city. There
is a close cooperation with federal police and intelligence institutions to assure
enforcement. The authority mentions recurrent crimes related to Value Added Tax
(VAT) as business men feel reluctant to pay VAT to the government.
The authority also mentions that there are efforts to embrace the informal
sector who would pay tax if it were explained well. In this regard the deputy head
mentions the possibility of extending proper service delivery to the formal sector
operators so that informal sector businesses will demand formality. Also raising
transparency and accountability among tax collectors and informal sector
businesses was explained to have increased the number of informal sector
operators paying taxes.
As a result of the above efforts, everyday ten to fifteen new tax payers are
entering into the system in each sub city showing a good move towards modern
fiscal discipline. Moreover, the revenue authority has negotiated with various
companies not to sell their products to those who have no TIN (Tax Identification
Number).
3.2.1.1 Business Process Re-engineering (BPR) and its Impact

According to the interview with deputy head of revenue bureau, both the
revenue authority and the bureau of finance and economic development have
implemented a BPR. The BPR proved to have brought some positive impacts on
revenue raising efforts. Some of these are:
Attitudinal changes: Due to effective communications between tax payers and
collectors on the “why” and “for whom” of tax collection, there are attitudinal
changes in the public. According to the interview, due to the BPR people are now
more aware that the tax collected will be for the benefit of the people themselves.
As a result the number of voluntary tax payers has increased.
BPR has increased confidence for tax payers. According to the interview, not
only can tax payers participate in biddings, they feel they have contributed to their
citizenship obligations. Tax payers are less exposed to harassment and
confiscation and thus run their businesses with confidence.
BPR has induced a performance based evaluation. The revenue authority
conducts a performance based evaluation periodically. Moreover sudden
observation is done by the capacity building bureau to monitor the performance and
customer handling system of both the revenue bureau and the bureau of finance
and economic development.
3.2.2 Achievement rate

The table below shows the rate of achievement of revenue generated compared
to what is planned. Achievement here is indicated by the performance rates in each
fiscal year compared to the previous year.
Table 12: Achievement Rate (in Birr)

Year Planed Achieved Performance (%) Growth rate of
achieved revenue
2004 2,517,566,600.00 1,565,742,663.06 62.1927008
2005 4,102,716,872.00 1,976,437,918.60 48.17388039 0.26230061
2006 3,476,440,000.00 2,677,590,305.74 77.02104181 0.354755584
2007 5,160,959,191.00 2,425,217,518.58 46.99160425 -0.094253698
2008 6,371,020,000.00 3,008,488,465.53 47.22145693 0.240502529
2009 8,838,020,000.00 4,313,064,776.61 48.80125613 0.433631814
Source: own computation from BoFED data
Performance growth trend over the past six years is shown as in the diagram
below. As shown in the fourth column in the previous table, it is only in the year
2006 that the percentage growth of revenue performance, computed as ratio of the
difference between planned and achieved to the planned revenue, exceeded a
seventy percent performance rate. Even so, the main reason for such a high
performance in this year is largely due to the low value of the planned revenue. In
2006, planned revenue was much lower than in the year 2005. In almost all other
years the performance is below a 50% point indicating that much more effort has to
be exerted by the revenue authority to meet its planned/targeted levels.
Column 3 shows the actual revenue collected by the authority over the past six
years and the growth rate of this actual revenue is indicated in column 5. There are
positive growth trends in the first three years consecutive years before attaining a
negative growth in the year 2007. A thorough observation into the data reveals that
a negative growth in actual revenue is due to a fall in government investment
income and specifically a dramatic fall in urban land lease in 2007. Urban land
lease has achieved its peak in 2006 with a value of about half a billion birr. This
could be largely due to the reform following 2005. The growth rate of achieved
revenue is shown in the figure below. In the first three years there is a positive
growth trend before it reaches its lowest level in 2007.This was largely due to a
sharp fall in non-tax revenue. From there on, there is a positive growth trend in
actual revenue collected although it is on the average about half of what is
planned. Growth rate in actual revenue exceeded 40 percent only in the year 2009
and that was largely due to a sharp growth in tax revenue. This could signal an
improvement in the trend of growth of revenue from a non-tax dominated source
such as urban land lease to a tax dominated source. Tax revenue may yield a more
sustained component than non-tax sources. This is explained in the next section
under revenue structure.
Figure 3: Growth Rate of Achieved Revenue
0.5
0.4
0.3
0.2
Growth rate of R
0.1
0
2004 2005 2006 2007 2008 2009
-0.1
-0.2
3.2.3 Revenue Structure

This study has broadly classified the revenue structure into two as tax and non-
tax revenues; however efforts have also been made to include trends of for
example, Value Added Taxes (VAT) over the past six years. The table below shows
trends of tax and non-tax revenue.
Table 13: Trends of Tax and Non-tax Revenue
Year 2004 2005 2006 2007 2008 2009
Tax 629,733,978.47 985,224,865.61 1,029,711,365.16 1,137,679,852.11 1,582,786,244.28 2,234,346,453.98
revenue
Growth 56 4.5 10.5 39 41

rate of
tax
revenue
No tax 292,192,626.85 285,777,776.44 724,993,284.80 487,857,343.83 587,436,126.98 497,984,673.12
revenue
Growth -2.2 154 -32.7 20.4 -15.2

rate of
non-tax
revenue

The trend in growth rate is described in the diagram below. From the trend it
can be noted that the tax revenue component has surpassed the non-tax revenue
from 2007 and onwards. The non-tax revenue component has shown an irregular
growth rate over the six year period indicating that it is the unsustainable source
which could fluctuate over years.
Looking at the average growth rate over the past six years, tax revenue has
grown by about 25 percentage points while that of the non-tax revenue grew by 17
percent. An exclusion of the outlier in growth rate of non-tax revenue in 2006 would
yield a negative average growth rate. Hence although the non-tax revenue has
shown a positive average growth rate for the past six years, this is largely due to a
sharp increase in its value in the year 2006.
Figure 4: Growth Rates of Tax and Non-tax Revenue
200
150
100 Growth rate of TR

Growth rate of NTR
Year
50
0
2004 2005 2006 2007 2008 2009
-50
Source: computed by authors
The data also allows analysis of trend of VAT over the past six years. The
figure below shows trends of VAT, total revenue, tax revenue and non-tax revenue
in millions of birr. The volume of VAT is in general increasing. In the year 2009, the
volume of VAT is almost in par with non-tax revenue. This is promising, although
an interview with revenue official reveals that VAT is exposed to corruption as
collectors feel reluctant to pay the government the amount collected from
consumers. The official mentions of strengthening law-enforcement mechanisms
and other regulations such as increasing the number of intelligent workers to
maximize revenue from VAT.
Figure 5: Trend of Major Revenue Sources, Compiled from BoFED.
Another way of looking into the revenue structure is to look into the percentage
share of each revenue source in total revenue of the city administration to identify
which of the sources are dominant and whether these dominant sources are
sustainable or not. Accordingly, we have calculated the percentage share of all

revenue sources of the city administration over the six years under consideration
and presented the result for 20 items only in the following table.
Table 14: Percentage Share of Major Revenue Sources in Total Revenue
Year
Description
2004 2005 2006 2007 2008 2009
Ser.
No. Total 100.00 100.00 100.00 100.00 100.00 100.00
Items of Domestic
1 Revenue 97.31 97.13 99.76 97.98 97.79 99.51
2 Tax Revenue 40.22 49.85 38.46 46.91 52.61 51.80
Tax on Income, Profit

3 and Capital Gain 38.11 37.02 28.36 35.41 37.78 36.70
4 Wages and Salaries 18.04 15.81 15.89 21.65 23.98 23.54
5 Rental Income 1.66 2.01 0.49 0.90 1.48 1.48
6 Profits to Individuals 17.75 18.56 11.34 12.12 11.37 10.95
Value Added Tax
7 (VAT) 0.000 3.86 4.34 6.45 10.69 10.61
Excise Taxes on
Locally Manufactured
8 Goods 2.11 8.97 0.09 0.24 0.14 0.10
Sales Turnover Tax
On Locally
9 Manufactured Goods 0.87 0.61 2.04 0.88 1.99 2.31
10 Service Turnover Tax 0.000 3.73 1.42 3.93 1.41 1.50
Stamp Sales and
11 Duty 0.92 4.45 2.20 0.73 0.61 0.58
12 Non-Tax Revenue 18.66 14.46 27.08 20.12 19.53 11.55
Administrative Fees
13 and Charges 1.19 0.29 0.56 1.40 0.89 0.66
Sales of Public Goods

14 and Services 1.72 1.92 4.41 8.09 5.68 0.67
Government
15 Investment Income 11.41 9.50 19.89 7.12 7.71 7.67
Miscellaneous
16 Revenue 4.34 2.75 2.14 3.52 5.25 2.55
17 Capital Revenue 5.17 0.49 7.66 4.94 13.60 21.61
18 Subsidy Revenue 1.31 1.26 2.32 1.13 1.44 0.63
19 Municipality Revenue 31.95 31.07 24.25 24.88 10.61 13.92
20 External Assistance 2.69 2.87 0.24 2.02 2.21 0.49
Accordingly, domestic revenue source account for 97.13 - 99.76% of the total
revenue of the city administration leaving the share of external assistance to be
less than 3% of the total revenue. This implies that the city administration almost
entirely depends on domestic revenue sources. This can be interpreted positively in

terms of sustainability and at the same time negatively for failure to harness more
assistance given the opportunity that it is the seat of all embassies and many other
international organizations.
Figure 6: Trends in the Percentage Share of Major Revenue Sources
Percentage share of major revenue sources

Tax Revenue
60.0 Non-Tax Revenue
50.0
Capital Revenue
40.0
30.0 Subsidy Revenue
20.0
Municipality
10.0
0.00 External Assistance

2004 2005 2006 2007 2008 2009
Value Added Tax (VAT)
Year
Within the domestic revenue sources, as depicted in the figure above, tax
revenue is the dominant source that accounts between 38.48% (2006) and 52.61%
(2008). After a fall to 40% in 2007 it recovered and reached 52.61% in 2008 and
then showed a slight fall in 2009 to 51.8%. In 2004 and 2005 Municipality Revenue
was the second largest contributor by accounting about 31% of the total revenue of
the City Administration followed by Non tax revenue in the same year which
accounted about 18 and 14 per cent respectively. But after 2005, the trend in both
sources was so erratic in which successive fall was registered that ended up
bringing down their share to 13.92% and 11.55% respectively in 2009. The
contribution of capital revenue is becoming so promising after 2005 showing a
steady growth after 2007 and has become the second largest contributor in 2008 by
accounting 21.61% of the total revenue. Subsidy and external assistance are the
least contributors in the list by accounting less than 3%. This trend calls for deeper
study into the sub components of Municipality Revenue and Non tax revenue to
investigate the reason behind their severe fluctuation and successive fall in the
entire study period and the indication of the slight fall of the dominant tax revenue
in 2009. Here we gave due attention to the trend in the value added tax (VAT) as
one of the tax revenue sources. As can be seen from the previous table and figure
VAT has shown a steady growth until 2008. Its share has increased from zero to
three decimal points in 2004 and reached to 10.69% in 2008 with again slight fall in
2009 by 0.08 percentage point contributing that much to the fall in the tax revenue.
Hence, the trend in VAT is encouraging but given the potential of the city
administration a lot has to be done to further boost its contribution.
3.3 Expenditure and Budget Balance Analysis

Budget balance reveals the difference between expenditures and revenues at
any level of a government. In public finance literature governments incur budget
deficits largely because the revenues raised are so small to cover expenditures or
that governments are involved in ambitious expenditures. The following graph
shows the actual gap between revenue and expenditures as well as the six years
trends in the gap.
Figure 7: Expenditure and Revenue Per Year in Birr

The data reveals that prior to 2007, the city administration was running surplus.
However, from 2007 on wards the gap between revenue and expenditure has
widened and that the administration is in deficit. Although there is an increase in
total revenue over the six years, the deficit occurred from 2007, mainly because
expenditure is increasing more than the increase in total revenue. This may
provoke questions such as which expenditure type and why. An analysis of
recurrent and capital expenditures may yield an answer to these questions. The
following figure reveals trends in actual values of both recurrent and capital
expenditures. Maybe the city government has embarked on several development
projects such as road construction and this might have contributed to an expanding
gap between revenues and expenditures.
The next question that deserves attention is how this deficit is financed. An
interview with the deputy head of finance and economic development revealed
sources such as loans from the Commercial Bank of Ethiopia, Ethiopian
Telecommunication Corporation and Ethiopian insurance company. According to
the deputy head, currently there are efforts to finance deficits through issuing
bonds to the Commercial Bank of Ethiopia. It should be noted here that such a size
in deficit occurred by also including external assistances as parts of total revenue
generated. An exclusion of the external assistance widens the gap between
revenues and expenditures. The following table reveals budget balance with and
without an external assistance. The table shows that the city administration is
sinking down into debt especially from 2007 onwards and this reveals that many of
development projects are implemented through loans.
Figure 8: Recurrent Expenditure and Captial Expenditure in Birr
Table 15: Budget Balance in Birr

Budget balance (R-E) including Budget balance excluding
Year external assistance (Birr) external assistance (Birr)
2004 3,335,686,13.9 2,914,829,51.6
2005 4,692,806,86.1 4,124,821,43.6
2006 4,420,611,30.5 4,356,736,75.3
2007 -2,762,496,06.3 -3,252,185,47.8
2008 -8,313,831,20.5 -8,978,049,92.7
2009 -12,932,807,05 -13,146,042,07

Such a deficit could be justified as long as the city administration invests in
development projects. However, without due attention to these deficit problems, the
administration may run a stage where it totally fails to deliver important social and
economic services as a result of debt servicing that could arise from such a
mounting loan. Moreover such a mounting loan has an implication that the future
generation should bear our current expenses. Therefore the city administration
should still strive to narrow the gap and work on raising revenues that will cover
more of its expenditures.
IV. Opportunities and Challenges

Addis Ababa being the capital city of the country enjoys a number of
opportunities in increasing its revenue base. As an economic footprint it extends to
all corners of the country. All goods and services marketed to all regions directly or
indirectly touch Addis Ababa in their value-chains. According to an interview with
the deputy head of the revenue authority the following opportunities are identified.
First as a political capital the city gets a number of tourists and visitors who create
a demand for goods and services thereby raising the volume of transaction in the
city. A higher volume of transaction means that the revenue potential is also higher.
Secondly, there are diverse economic activities in the city which would serve as a
potential source of revenue. Owing to the initial advantage of infrastructure, capital
goods industries prefer to set up a business in or around Addis Ababa. This forms
a potential base to tax unincorporated businesses. Moreover there are a large
number of potential informal sector operators that the city administration is
planning to embrace by improving service delivery to these operators, raising
transparency and accountability these operators may comply with tax regulations.
Finally the rapidly growing population of Addis Ababa, as a result of demographic
and rural-urban migration serves as a potential revenue source by raising demands
for goods and services and also by raising the income tax base of the city.
There are also challenges that the city administration is facing to date to raise
revenue. Tax evasion is the most commonly mentioned challenge according to the
officials from both Revenue Authority and Bureau of Finance and Economic
Development. Due to the inherent backward systems, size and complexity of the
city of Addis Ababa business’s are able to evade taxes. Implementation capacity of
the Revenue Authority is also another major challenge. Lack of clarity of the tax law
and subjective estimation might have posed challenges on fairness and equitability.
Lack of accountability and poor transparency between tax payers and collectors as
well as poor institutional capacity have also been cited as major challenges in
raising revenue according to the deputy head of the revenue bureau.
V. Conclusion
This study has investigated trends in both revenue and expenditure in the city
and tried to analyze the budget balance by assessing the difference between the
two. Challenges and opportunities towards raising revenues or narrowing the deficit
have also been discussed qualitatively. Currently the city is exerting efforts towards
raising revenues through automation of the revenue system, tax information
system, institutional capacity building and awareness creation. Business process
re-engineering has also been implemented and started yielding positive results
within a shorter amount of time, especially in the areas of attitudinal changes to
both collectors and tax payers.
The overall performance of revenue generation measured in terms of the ratio
of achieved to the planned revolves around 40 percent indicating that much more
effort needs to be exerted in this case. The city administration almost entirely relies
on a domestic revenue source implying that its sources are sustainable. However,
this can be interpreted as a failure to harness more assistance given the
opportunity that it is the capital city of the nation, and the seat of all embassies and
many NGOs.
From the trend analysis major fluctuations in revenue trends emanates largely
from non-tax revenue indicating that these sources are not sustainable although
significant. Generally speaking growth rate in actual revenue is showing an
increasing trend. Tax revenue is increasing at an average growth rate of about 25
percent over the last six years, while non-tax revenue is growing by about 17
percent over the same period. However, such a growth in non-tax revenue is mainly
due to a more than hundred percent growth rate in the year 2006, again implying
that non-tax revenue is a non-reliable source and the city government should work
hard in strengthening its tax revenue bases. Value added tax has been
increasingly becoming significant especially in recent years and this is an
encouraging sign towards closing the deficit. Finally taxing the “hard to tax” can be
realized if transparency, accountability, awareness and institutional capacity
building is further strengthened in the city administration and these should be the
major tasks ahead to combat the rapidly widening budget deficit that the city
administration is encountering.
On the Concept and Measurement of Fiscal Imbalances

in Ethiopia
Aloysius Bongwa
Introduction
The structure and institutional arrangements of federal countries - especially
how the regions of a federation deal with one another and with the central
government - vary widely around the world. Fiscal imbalances emerge from the
interactions of the distribution of the tax base, a fiscal policy stance and the
economic development in the different regional states of Ethiopia. There are three
types of fiscal imbalance: vertical fiscal imbalances between the tiers of
government, horizontal imbalances across a single tier of government, and
structural imbalances in the tax and expenditure mix. They have figured
prominently in recent public policy debates in many federations. The most widely
used definition of vertical fiscal imbalance — the gap between government’s
spending responsibilities and its own revenues — is inadequate as a guide for
public policy. Many governments have put in place mechanisms to subsidize the
fiscal deficits of regional governments. The magnitude and distribution of such
federal subsidies poses three political economic issues: how to measure fiscal
imbalance, deciding on the aggregate amount of federal subsidies from the total
purse of the federal government and distributing this amount across regional
governments.
The chapter addresses the issue of measuring fiscal imbalances in transitional
and developing economies and in particular in Ethiopia. Fiscal imbalance indicators
are of special interest in transitional and developing economies, where peculiar
developments question the validity of conventional indicators. This chapter
discusses different approaches to fiscal imbalance measurement. Based on a
review of fiscal policies in Ethiopia, this chapter will explain why the fiscal
imbalances are important phenomena that need to be monitored and hence have to
be measured which can be done in different ways. The author suggests using the
net worth of government which gives a specific insight. W hat mechanisms do
federations need to deal with fiscal imbalances between governments? The results
show that fiscal imbalances in Ethiopia were much larger between 1998-2004 than
conventional indicators suggest.
The rest of the chapter is organized in the following manner. First the concepts
and definitions of fiscal imbalance (the fiscal gap), horizontal imbalance
(equalization) and structural imbalance (imbalances in the tax and expenditure mix)
are discussed. Second, the measurement of fiscal imbalances in general is focused
upon. Third the issues are contextualized by looking at the Federal Republic of
Ethiopia. This is followed by a discussion section where arguments have been put
forward for a different way of measuring fiscal imbalances. Fifth in a brief
concluding section a few lessons on dealing with imbalances have been sketched.
Fiscal Imbalances: an Observation

In most federations, spending and revenue responsibilities are not perfectly
matched. In other words, one order of government collects more revenue than is
needed to finance its own programs and the other order does not collect enough.
Virtually any decentralization of fiscal responsibilities will give rise to horizontal
imbalances. Moreover, since in most federations, expenditures are decentralized
more than revenues, there will be vertical fiscal imbalances as well. While, for the
accountability reasons discussed above, it is desirable to minimize such
imbalances, there are legitimate reasons for them to exist.
Before launching the analysis, we need to examine the underlying concept of
fiscal imbalance because much of the confusion and debate, especially with regard
to vertical fiscal imbalance, has arisen from a faulty conception of what constitutes
a fiscal balance.
Here it is important to distinguish between accounting definitions and economic
definitions. Measuring a gap between spending and revenues is the accountants’
role. Determining whether taxes and spending are too high or too low is the
economists’ role. In any economic model of resource allocation, whether something
is too high or too low depends on the gap between marginal costs and marginal
3
benefits, and not on the gap between revenue and expenditure .
Similar principles apply in evaluating fiscal policy in the public sector. From an
economist’s perspective, balance does not mean that revenues equal expenditures
for a particular government at a particular point in time or across levels of
government. It is not known whether taxes or expenditures are too high or too low
unless we have some measures of the additional benefit from increased spending
and the additional burden from tax rate increases. As discussed in the following
sections, the distinction between accounting measures of balance and economic
concepts of balance is crucial for evaluating the claims that there are horizontal,
vertical, and structural imbalances in any public finance system.
The Concept of Fiscal Imbalance

The notion of fiscal imbalance appears early in the theory of fiscal policy in a
federal regime. The issue is: which level of government would be economically
more suited to take charge of certain expenditures and additionally to collect the
4
revenues for financing an optimal level of those expenditures? . Thus, the
constituent regions, provinces or states should have entrusted to them all the
expenditures producing little in the way of leakage of benefits to other regions,
provinces or states.. In regard to revenues, economies of scale and scope can be
secured if tax collection is entrusted to the central government, which would then
see to making transfers to the federated regions, provinces or states. Moreover, the
federated regions, provinces or states are not in the best position to levy taxes
when the economic objects or agents one wishes to tax can move from one region
to another. The federal government should therefore, theoretically, take charge of
all taxation, and afterwards transfer part of the amounts collected to the member
regions, provinces or states.
Fiscal imbalance seems inherent in federal countries. As a rule, federal
governments tend to collect most taxes while state and local governments are
responsible for more expenditures than can be financed from sources of revenue
directly under their control. The resulting difference between expenditures and
own-source revenues at different levels of government is called Vertical Fiscal
Imbalance (VFI). At the same time, within each sub national level of government
there are invariably some jurisdictions that are richer than others. The resulting
difference in the resources available to governments at the same level is called
Horizontal Fiscal Imbalance (HFI). There is also the issue of distortions in the tax
mix because the marginal Cost of Public Funds (MCFs) for the different tax sources
3
For example, the fact that a firm’s revenue exceeds its expenditure by $1 million does not tell us
whether the firm’s output is too high or too low, given its goal of maximizing profit. To determine
whether the firm should produce more output or less, we need to know its marginal revenue and its
marginal cost of production.
4
J.M. Buchanan, “Federalism and Fiscal Equity.”
are not equalized, and there are spending misallocations because the marginal
benefits from spending on different types of public services are not equalized. This
results into another source of fiscal imbalance, Structural Imbalances (SIs) in the
tax and expenditure mix.
Defining Fiscal Imbalances

There are three aspects to fiscal imbalance: vertical, horizontal and structural.
A horizontal fiscal imbalance is said to exist when “regions / provinces / territories
differ in their fiscal capacity to provide similar levels of public services to their
citizens at similar rates of taxation” (Standing Committee on Finance 2005: 19).
A vertical fiscal imbalance exists when “the fiscal capacity of one order of
government is insufficient to sustain its spending responsibilities while the fiscal
capacity of another order of government is greater than is needed to sustain its
spending obligations, while both orders of government provide public services to
the same taxpayer” (Standing Committee on Finance 2005: 19).
Although these issues come up in all countries, they are most obvious and most
often the focus of political discussion in federal countries.
Vertical Imbalances
First, consider the conventional definition of vertical fiscal imbalance. The three
definitions given below are drawn from American, Australian, Canadian and
Ethiopian sources:
• “The inability of one level of government…to fund its own responsibilities
from its own revenue streams without monies from elsewhere, in this case
by borrowing” (W alter 2004)
• “The difference between the relative revenue and spending responsibilities
of the Commonwealth and States…” (Webb 2002)
• “The mismatch of own revenues and expenditures of governments located
at various jurisdictional tiers — and the consequent flow of funds among
governments….” (Breton 1996, 197)
Although these definitions might be considered neutral, having no inherent
policy implications, the word imbalance, as Breton (1997, 197–198) has noted, is
like the words “distortion, irresponsibility, illusion, and manipulation, [which] if they
do not speak of intrinsic evil, do not signal much that should be encouraged and
nurtured, either.… Those who focus on the effects of vertical fiscal imbalance and
on the money flows among governments…almost invariably decry vertical
imbalance and the consequent flows of intergovernmental funds.”
Horizontal Imbalances
Horizontal fiscal imbalances refer to differences in the capacity of state
governments to provide ‘reasonably comparable levels of public services at
reasonably comparable levels of taxation.’ Horizontal imbalance arises when there
is no broad correspondence between expenditure responsibilities and fiscal
capacity across LG to meet the responsibilities. Unreliable fiscal capacity is the
result of existing fiscal disparities across jurisdiction (Shrestha, 2004). Commonly,
lower levels of governments have different tax capacity because they have different
economic base. Horizontal fiscal imbalance can also be attributed to difference in
regional and local expenditure needs and variations in the ability of regional and
LG to raise their own revenues (Vazquez, 2004).
The principle behind this means that the public sector should provide the same
net fiscal benefit to all who have the same standard of living. This is basically the
equal-treatment-of-equals concept applied to the total impact of the public sector.
This strong ethical position, if accepted, would justify equalization grants to
regional / provincial governments with low fiscal capacity to permit them to provide
the same net fiscal benefit to their residents as are provided in provinces with high
fiscal capacity.
Structural Imbalances: An Idealistic View

Another source of fiscal imbalance is the structural imbalances in the tax and
expenditure mix. By this what is meant is that there are distortions in the tax mix
because the MCFs for the different tax sources are not equalized, and there are
spending misallocations due to the marginal benefits from spending on different
types of public services are not equalized. In Canada, these structural imbalances
also have a federal-provincial dimension because of the overlaps in federal and
provincial taxation and blurred lines of responsibility in spending. In this section,
focuses on the excessive reliance on certain forms of taxation: the retail sales
taxes levied by five provinces, the capital and CIT rates levied by the federal and
regional governments, and the heavy taxation of the financial institutions. On the
expenditure side, the continuing pressure for more spending on health care is
threatening to crowd out other forms of spending. The blurred lines of expenditure
responsibility between the federal and provincial governments need to be
addressed, but majority voting, the federal spending power, and the
interdependence of federal and provincial governments’ budgets means that it very
difficult to achieve narrowly defined expenditure assignments.
The Measurement of Fiscal Imbalances

On the Measurement of Fiscal Imbalances
Measurement: An essential pre-requisite to dealing with fiscal imbalances is

being able to measure them. At minimum, it is necessary to measure government
revenue and expenditure and population in a timely way. More complex
mechanisms may require measurement of additional variables such as tax bases.
Essentially, however, for each level of government (central, regional, state,
local, and consolidated sub national) three progressively narrowing measures of
vertical imbalances can be calculated as follows (see: Boadway and Watts, 2000,
"Fiscal Federalism," 2000, and W atts and Hobson, 2000; Hunter (1977, IMF
Government Finance Statistics Yearbook).
Type 1: Unrestricted budget balances for the central, local, regional, and sub-
national governments (sum of regional and local governments):
I
Revenues + Grants) j – (Expenditure +Lending) j
SVI j = (Expenditure +Lending) j 100% 1
Where j = consolidated central government, regional government, local

government, or subnational government.
Type 2: Budget balances, excluding net intergovernmental transfers between

the government of interest and other levels of government:
II Revenues + Grants) j – NIG j - (Expenditure +Lending) j

SVI j = NT 100% 2
(Expenditure +Lending) j
Where the superscript abbreviation NT indicates that figures are net of

intergovernmental transfers and NIG denotes net intergovernmental grants
Type 3: Budget balances, excluding intergovernmental transfers and

intergovernmental net borrowing (the latter term, denoted in the formula as IGNB,
is a negative of the Net Lending to Other Levels of Government account as it is
used in the IMF Government Finance Statistics Yearbook):
III Revenues + Grants)j – NIGj - IGNBj -(Expenditure +Lending) j

SVIj = (Expenditure +Lending) j NT + IGNBj 100% 3
In addition, it is possible to calculated three country specific alternative

coefficients of vertical imbalance reflecting the shares of sub-national
expenditures that are covered with intergovernmental transfers (CVI 1 ) or
intergovernmental transfers and intergovernmental borrowing (CVI 2 ), and not
covered with own revenues (CVI 3 ) 5.
CVI 1 : Intergovernmental transfer share in sub-national government

expenditure:
Net Intergovernmental grants) SNG

CVI 1 = NT 4
(Expenditure +Lending) SNG
In addition, two subcategory coefficients are calculated separately to reflect

individual shares of net current and capital intergovernmental transfers that
partially cover the total sub national government (SNG) expenditure:
CVI 2 : Intergovernmental transfer and intergovernmental net borrowing share

in the sub national government expenditure:
Net Intergovernmental grants) SNG + IGNB SNG
CVI 2 = NT 5
CVI 3 : Share of sub national government expenditure that is not covered by

the sub national government's own revenues:
Revenues + Grants) SNG – NIG SNG - IGNB SNG

CVI 3 = 1 NT 6
Higher values of these CVI correspond to a higher degree of vertical fiscal

imbalance and thus reflect a higher level of dependence by sub-national
government (regional and local governments) on transfers and lending from the
5
These statistics are a variation of a methodology introduced by Hunter (1977)
central government 6. The third coefficient differs from the first two in that it
incorporates sub-national government budget deficits or surpluses. Although all
three formulas should allow one to make similar conclusions regarding a time trend
in vertical fiscal imbalances, the third CVI is thus somewhat more volatile. (It
should perhaps be noted that the results would be almost the same if we used
simply "expenditure" rather than the IMF GFS concept of “expenditure + lending."
"Expenditure" in the GFS covers all non recoverable payments by government. Net
lending (lending minus repayments) consists of government lending for public
policy purposes minus repayments to government and government acquisition of
equity participation for public policy purposes minus any sales of such equities by
government. Use of the broader concept slightly increases the comparability of
data from different countries that structure their public sector finances in different
ways in order to achieve the same purposes.)
The interpretation of the calculated HFI measures is as follows:

Minimum (maximum) as percent of national average is the ratio of the per
capita value in the lowest (highest) region to the national per capita average:
Ymin .100% And Ymax .100%

7
y y
Maximum to minimum ratio is the per capita value for the richest region divided
by the per capita value for the poorest region:
Y ma x
MMR = 8
Y max
A value of one for MMR would represent perfect equality. Larger values show
regional inequalities. In many countries, of course, there are "exceptional" cases
such as city-states (Germany), sparsely populated poor territories - Canada,
Ethiopia – the lagging regions, the four smaller regions 8 Afar, Benishangul-
Gumuz, Gambella and Somali , or sparsely populated rich territories; Alaska, in
the United States, that may affect the results. Nonetheless, this ratio provides a
simple and easy to comprehend measure of regional disparity.
Fiscal Imbalances Ethiopia
Decentralization Widened THE Fiscal Asymmetry Between Pending

Mandates and Revenue-Raising Potential
The typical characteristic of all federations is the disparity between revenue
sources and expenditure needs. The aggregate revenue raising capacity of the
regions fails in much of their expenditure responsibilities, while the Central
Government is able to raise more revenue than is needed to finance its own
expenditures. This disparity between revenue sources and expenditure needs at
various levels of government is referred to as vertical fiscal imbalance (World Bank,
2000:23). The reasons for the emergence of vertical imbalance are first,
centralization of revenue sources by Federal Government due to capacity
limitations of regions with respect to tax administration. Secondly, when inter
regional equity is an important consideration, the Federal Government needs to
hold some resources over and above those required for its own expenditures to
6
See Bird; Tarsasov, 2003. Closing the gap: Fiscal Imbalances and intergovernmental transfers in
developed federations.
distribute them among the sub national governments in a way that promotes equity
leading to vertical fiscal imbalance (World Bank, 2001:80). When we see vertical
fiscal imbalance in Ethiopia (the following table), as measured by the difference
between regions’ own revenue and their expenditure needs, the decentralized
expenditure ratio exceeded the revenue share of sub national governments by 16
percent. That means, their revenue raising capacity failed to match their
expenditure needs. In addition, the other measure of vertical imbalance is the
coefficient of vertical fiscal imbalance. The implication is that, a coefficient of zero,
i.e., low vertical imbalance, indicates that the regions are pretty much autonomous
in their fiscal decision- making. This happens when the revenue and expenditure
share of the regions becomes the same. On the other hand, a coefficient close to
one indicates absolute federal control over the regions. This happens when the
regions’ revenue share in the aggregate is extremely small in comparison to their
expenditure share.
Table 16: Vertical Fiscal Imbalances in Ethiopia
Indicator 1993 1994 1995/9 1996/9 1997/9 1998/9 1999/20 2000/0 Mean
/94 /95 6 7 8 9 00 1
R4 .18 .15 .19 .17 .19 .18 .18 .17 .18
E5 .34 .38 .42 .43 .29 .26 .25 .33 .34

F6 =R/E .51 .39 .46 .40 .65 .68 .70 .51 .52
V7 = 1 – 0.49 0.61 0.54 0.60 0.35 0.32 0.30 0.49 0.48
F
V = Coefficient of vertical imbalance computed using a formula [1 – {(Rs/R) / (

Es/E)}]
Where Rs = State (Regional) revenues; R = aggregate revenues (federal plus states);
Es = State (Regional) Expenditures; and E = Total expenditures (federal plus states).
Table 17: Horizontal Imbalance Ethiopia
Indicator 1993/ 1994/ 1995/ 1996/ 1997/ 1998/ 1999/ 2000/ Mean
94 95 96 97 98 99 2000 01
Tigrai 18.6 19.1 26.7 26.6 24.9 25.4 28.8 32.4 29.05
Afar 9.1 13.7 11.34 22.0 7.7 4.4 4.7 7.9 8.1
Amhara 20.6 19.4 18.34 16.9 22.0 21.7 22.36 29.1 22.45
Oromya 27.9 26.8 31.4 23.4 31.4 30.9 45.8 32.0 31.21
Somali 60.1 58.1 30.6 21.6 12.3 11.7 17.0 9.9 25.8
Benishang 6.6 7.4 9.4 5.6 6.6 6.3 9.3 8.1 7.12
ul Gumuz
SNNP 19.5 18.9 23.8 23.3 27.4 22.5 33.5 27.1 24.5
Gambella 8.7 9.9 8.6 5.9 8.2 6.8 8.6 8.4 8.12
Harar 33.7 13.4 19 15.5 10.4 22.7 12.0 16.5 17.9
Dire 94.1 69.5 52.43 51.9 45 41.8 15.5 52.1 52.8
Dawa
Addis 64.9 68 105.6 77.2 96 100.5 121.3 121.2 94.34
Ababa
Source: MoFED Dtat cited in Melkamu Bessie fiscal decentralization in Benishangul

Gumuz Region:A review of Problems of Fiscal Imbalance *(p.50)
It is usual that, regions in Federal Countries differ in their development level

and resource endowment. Some may be industrial areas that could collect
adequate revenues while others may be dominantly rural areas with high backlogs
in the provision of physical and social infrastructures. Thus, these backlogs call for
higher fiscal needs. The component states of a federal country also differ in their
ability to raise revenue and expenditure needs. The same is true in Ethiopia.
Regions in Ethiopia are vastly different in terms of population, area and level of
economic and infrastructure development. As a result, those which have sufficient
administrative and institutional capacity, including adequate trained manpower,
relatively developed infrastructure and a sufficient local resource base, enjoy a
relatively better degree of autonomy and independence than those with serious
shortages of trained manpower and finance. For example, Amhara, Oromya, and
Tigray are not subject to the same degree of interference by the Central
Government as the manpower deficit regions such as Gambella, Afar, Benishangul-
Gumuz and Somale (Ayenew, 2000:139). The inconsistency between the ability to
raise revenue and the fiscal needs at the same levels of a government is what we
call horizontal fiscal imbalance. In another way, the horizontal fiscal imbalance is
the ratio of own revenue to their expenditures across the same levels of a
government.
The following table shows the extent of horizontal fiscal imbalance in Ethiopia.
There is wide discrepancy among the regions ranging on average from 7.12
percent for Benishangul-Gumuzregion to 94.34 percent for Addis Ababa City
Administration. In-between are Dire Dawa,Oromya, Tigrai, and Amhara and SNNP
regions covering on average 52.8, 31.2, 29, 24.5 and24.5 percent t respectively.
The four smaller regions 8 (Afar, Benishangul-Gumuz, Gambella and Somali) have
covered on average 8.1, 7.12, 8.12 and 25.8 percent of their expenditure from their
own revenues
For instance, the federal government continues to collect over 80 percent of
general government tax revenue, while the share of regional government fiscal
operations has increased from about a quarter to a third of consolidated
expenditure since1999/2000 (see the following table).
Table 18: Ethiopia: Regional Fiscal Operations as a Share of Consolidated Government
1998/ 1999/ 2000/ 2001/ 2002/ 2003/
1999 2000 2001 2002 2003 2004
In %of GDP
Total revenue 2 14.8 15.8 14.2 15.3 13.4 12.6
Tax revenues 19.5 19.3 18.7 18.3 19.0 18.0
Nontax revenue 14.2 17.2 15.9 20.6 18.6 17.7
Total expenditure 29.2 24.7 32.6 30.8 30.4 32.0
Current expenditure (of 28.8 22.1 33.7 37.0 35.2 28.6
which)
Social services 78.1 71.3 77.5 71.2 75.3 81.6
Education 85.2 83.3 83.8 80.9 81.2 --
Health 78.7 82.6 80.9 88.2 86.8 --
Capital expenditure (of 31.2 29.6 20.3 25.0 23.3 24.6
which)
Social development 36.0 43.2 53.1 43.3 36.3 35.8

Education 16.3 44.5 37.8 31.4 27.1 --
Health 24.7 19.8 67.1 57.9 51.3 --
Roads 43.7 21.9 26.1 40.3 38.8 --
Source: Ministry of Finance and Economic Development; and Fund staff estimates.
1/ Beginning in 1997/98, data pertain to the period July 8-July 7; prior to that,
data pertain to the period July 1-June 30.
Data by disaggregated social sector represent preliminary estimates.
2/ Revenue from taxes, rents, and fees levied and collected by the regional
governments
Regional governments also deliver an increasing proportion of consolidated
pro-poor spending. For instance, the regions provide over 80 percent of total
recurrent spending in health and education. Further, the regions provide over a
third of consolidated capital spending in the social development sectors. In line with
the decentralization of expenditure commitments, the total regional government
budget deficit has increased by about 2 percent of GDP since 1999/2000, largely
as a result of weak own source revenue growth and higher expenditure
commitments (see the following table).
Table 19: Ethiopia: Regional Fiscal Operations as a Share of GDP, 1998/99-2003/04
1998/ 1999/ 2000/ 2001/ 2002/ 2003/
1999 2000 2001 2002 2003 2004
In %of GDP
Total revenue 2 3.2 3.3 3.4. 3.8 3.7 3.3
Tax revenues 2.2 2.3 2.6 2.8 2.7 2.7
Nontax revenue 0.9 1.0 0.8 1.0 0.9 0.7
Total expenditure 9.3 8.0 9.5 10.5 10.9 10.0
Current expenditure (of
which)
Social services 3.1 2.8 3.2 3.8 4.2 3.8
Capital expenditure (of 3.1 2.3 3.0 2.9 2.6 3.0
which)
Social development 0.8 0.5 1.0 0.8 0.8 1.3

Overall Balance /3 -6.1 -4.7 -6.1 -6.7 -7.2 -6.7
Sources: Ministry of Finance and Economic Development; and Fund staff

estimates.
1/ Beginning in 1997/98, data pertain to the period July 8-July 7; prior to that,
data pertain to the period July 1-June 30.
2/ Revenue from taxes, rents, and fees levied and collected by the regional
governments.
3/ Deficit (-) covered by direct transfer from federal government of joint tax
receipts and foreign assistance.
Revenue Raising Capacities

For the estimation of the revenue capacities (revenue potentials), the sources
(taxes) building the main regional revenue have been included. These taxes/fees
are:
• Personal income tax
• Business profit tax
• VAT
• Agricultural income tax
• Rural and land use fee
• Sales tax (TOT)
• Fees for medical supply and treatment
The accumulation of these taxes accounts for 80 percent or more of the

regional revenues on average. In order to calculate the potentials for these taxes,
different approaches depending on the nature of the tax and data availability have
been used. While data on Personal Income Tax is easily accessible, other data
proved more difficult to be computed (for details see House of Federation 2009: 13-
22). After the potential revenues from the individual taxes were computed for each
region, the revenues have been aggregated. As a next step, the aggregated
potential revenue was compared to the actual revenue collected by the regions. For
this calculation the average revenue of three years has been used. The comparison
leads to a ratio between actual and potential revenue for each regional state. This
ratio has been averaged across all regional states. The ratio is 48.53 percent and
has been used as deflator to calculate the effective aggregate potential revenue
used for the formula. The result of this operation is shown in the following table:
Table 20: Effective Potential Revenues
Region Effective potential % of effective potential
revenue in Mio Birr revenue of the national
potential revenue
Tigray 110.64 9.95
Afar 14.29 1.29
Amhara 245.29 22.07
Oromiya 455.33 40.96
Somali RS 27.84 2.50
Benishangul-Gumuz 17.24 1.55
SNNPR 201.62 18.14

Gambella 9.99 0.90
Harari 12.71 1.14
Dire Dawa 16.58 1.49
National Total 1,111.53 100.00
Source: (House of Federation 2009: 23)
Expenditure Needs
Similar to the calculation of the revenue potential, the expenditure needs have
been calculated based on indicators accumulating to more than 90 percent of
regional expenditures based on constitutional mandates and implementation of
national policies. These indicators are:
• General administration costs
• Education
• Public health
• Agriculture and natural resources
• Clean water supply
• Rural road construction and maintenance
• Micro and small scale enterprise development
• Work and urban development
The results of the calculations are shown in Table 21.

Table 21: Expenditure Needs
Region Total expenditure need, partially adjusted for

spatial price variations in Mio Birr
Tigray 2,313.82
Afar 999.70
Amhara 7,546.74
Oromiya 10,635.70
Somali RS 2,535.10
Benishangul-Gumuz 538.85
SNNPR 6,428.82
Gambella 464.86
Harari 291.46
Dire Dawa 332.98
National Total 32,088.04
The Emerging Regions. In the Ethiopian case special attention has been given
to the Emerging Regions. Four out of the nine Ethiopian regional states, Afar,
Benishangul-Gumuz, Gambella and Somali Regional State, have significantly lower
revenue raising capacities and higher expenditure needs than the rest of the
regions and are thus considered emerging regions. This is a function of policies of
former Ethiopian regimes. Similar to equalization mechanisms in other solidarity-
based federations or systems, like Germany or the European Union (Jacoby 2008;
Jochimsen 2008), it is also assumed here, that the four emerging regions would not
be able to catch up with the rest of the regions. In order to address this inequality,
one percent out of the total grant is reserved for the four emerging regions. The
share out of this reserved part of the total budget grant is again computed on the
basis of weighted indicators relating to the particular situation of these four regional
states. The indicators used are shown in the following table.
Table 22: Indicators and Distribution of Special Funds to the Emerging Regions
Indicator Weight Afar Somali B.-G. Gambela
Area of cultivated land (in hectares) 0.2
Population 0.1
Tropical livestock unit 0.15
Urban unemployment 0.1
Spatial price index 0.15
Tax raising effort 0.2
Number of poor people 0.1
Share among regions 1 18.61 42.48 28.87 10.3
The above table also shows the distribution of the one percent share across the
four emerging regions based on their distinct development situations.
Vertical imbalances are defined as the gap between the revenue raising
capacity of a government and the expenditures this government has to make in
order to fulfill its constitutional mandates and duties and / or to implement policies
of the federal level of government. These imbalances result from a usually lower
capacity to raise revenue of the sub-national level. In order to reduce these
imbalances, equalization mechanisms, i.e., fiscal transfers from the federal to
regional level are applied. W hether this is done by addressing either expenditure
needs or revenue needs only or by a combination of both factors, depends on the
political choice and the socio-economic context of a given country.
Discussion
Measuring fisical imbalances has always been in the policy debate given the
diversity of measurements see formulas in the earlier section of the chapter, and
the simplification of the measurements used in Ethiopia, one would think that the
issue of measurement could be resolved easily.
However, consider an alternative definition for vertical fiscal imbalance: There
is a vertical fiscal imbalance in a federation if the marginal cost of raising tax
revenue varies between the levels of government. Central to this definition is the
concept of the Marginal Cost of public Funds (MCF), which measures the loss that
occurs when a government raises an additional dollar of revenue. Taxes usually
distort consumption, savings, labor supply, and investment decisions, resulting in a
less-efficient allocation of resources. This efficiency loss can be considered as a
decline in the size of the economic pie — the value of goods and services produced
and consumed in the economy, including the value of leisure time and the quality of
the environment.
It usually costs a society more than a dollar to raise an additional dollar of
revenue because of the additional distortions in resource allocation that are caused
by a tax rate increase, and therefore the MCF usually exceeds one. Generally
speaking, the MCF will be higher the greater the tax sensitivity of a government’s
tax bases.
This definition provides a basis for determining whether taxes and expenditures
are too high or too low across the various levels of government. Just as a
multiplant firm minimizes the total cost of producing its output by allocating
production across its plants until the marginal cost of production is the same in all
plants, so a federation will minimize the total cost of raising any given amount of
revenue by equalizing the MCF across the two levels of government. For example,
if the MCF is Birr 1.20 for the federal government and Birr 1.40 for the provincial
governments, then an increase in taxation at the federal level that finances a
transfer to the provincial governments, allowing them to reduce their taxes by the
same amount, would result in a net social gain of Birr 0.20 for every dollar
transferred. Consequently, there is a vertical fiscal balance when the MCF is the
same at both the federal and the provincial levels because this will minimize the
cost of raising a given amount of tax revenues.
This way of defining vertical fiscal balance has the attractive feature, at least
for public finance theorists, of integrating the concept of vertical fiscal balance with
the theory of optimal taxation, which is the backbone of normative public finance.
An optimal tax system is one that minimizes the total deadweight cost of raising a
given amount of tax revenue. This can be achieved if a government sets its tax
rates so as to equalize the MCFs across its various taxes and this brings into play
a new angle to the debate on measuring fiscal imbalances.
Dealing with Imbalances in Ethiopia

If “Imbalance” is the problem, then “ balance” would seem to be the solution
(Bird, 2004). In the Ethiopian case, given the existence of mismatch in aggregate
revenue raising capacity and expenditure responsibility between levels of
government, (similar to many other countries with decentralized government
systems), the Ethiopian government has been addressing the problem by

introducing a formula based grant system. A key underlying principle of these block
grants is that they have to be allocated across regions or woredas in a manner that
is fully objective and formula-based.
A number of revisions have been made in terms of the content and methodology
of the formula since its first inception in the year 1995. The Federal block grant
transfer to the regions was initially based on a simple formula that took into
account the population size (65 percent), poverty and development level (25
percent), and an index of revenue effort and sectoral performance (10 percent) of
7
each region. There were a number of problems with this formula, including :
• It did not take into account the per capita expenditure requirement
differences
• It gave more emphasis on infrastructure gap among Regions and ignored
the recurrent budget needs for the existing infrastructure
• It did not fully consider the potential differences in revenue capacity
• It did not objectively answer questions raised from Regional governments in
relation to changes on selection of variables to estimate the expenditure
need and assigning of weight to each variable. Particularly important is the
first of these or a).
With this initial block grant formula, to take the education sector as an example,
two regions with similar populations would receive the same total block grant
allocations even if one region had much higher student enrolments than the other
(all else being equal). Regions thus had little incentive to encourage increased
enrolments; higher enrolments would imply less funding available per student (all
else being equal), and so if anything regions had an incentive to constrain
increases in enrolment.
As a result, a new formula is being gradually phased in, based on the “fiscal
equalization” approach. Among other things, this new approach has the advantage
of being much more results-oriented since recurrent funding—which accounts for
the bulk of total funding—is allocated in higher quantities to regions with higher
expected demand and provision levels of public services. Taking the education
sector again as an example, all else being equal, the new formula provides larger
per-capita block grant recurrent allocations to regions that have higher primary and
secondary enrolment rates than others. The capital allocations of the block grants
are based on equity, so regions with less school per capita receive larger per-
capita capital allocations, enabling them to “catch up” with other regions by building
more schools. But the recurrent allocations dominate, and this is in keeping with
the increased emphasis on a system of decentralized service delivery that is
focused on results
Aside from taking into account expenditure needs as outlined above, the new
formula also makes adjustments in the allocations to each region to take into
account differences in revenue raising capacity. All else being equal, regions with
lower potential revenue raising capacity receive larger per-capita block grant
allocations than other regions. Note that what matters here is the regions’ potential
revenue raising capacity (which takes into account exogenous factors that affect
the tax base, such as the amount of agricultural land) and not regions’ actual
revenues raised. Regions are not penalized (by reductions in Federal block grant
allocations) if they raise their actual own revenues, so there is no disincentive
against regional own-revenue raising. Additional adjustments are made to the block
grant allocations to regions to take into account some other factors as well. One of
7
See World Bank (2009): Project Appraisal Document federal democratic republic of
Ethiopia
For a Protection of basic services program Phase II Project. Report No. 45186
these is economies of scale; all else being equal, smaller regions receive higher
per-capita allocations under the new formula than larger regions.
The new formula is being gradually introduced as it has an impact on the less
populous Regions’ share from what they used to get under the old formula. Hence,
the new formula was applied to 25% of the grant pool in 2007/08 (EFY 2000) and
on 50% in 2008/09 (EFY 2001). Although more objective, transparent and results-
oriented, the new formula requires a lot of data and can be considered as an
evolving system. The new formula will be fully phased in by 2010/11.
1
Table 23: Federal to Regional Government Block Grant Transfers from Treasury
2004/2005 2007/2008 2008/2009 Change %

Regions Bud- Act- Sha-- Bud- Act- Sha- Bud- Sh- 2008/ 2008/
1 1 1
get ual re get ual re get are 09 09
% % (%) over over
2004/ 2007/
05 08
Afar 25.1 23.6 1.1 48.7 48.7 1.2 47.7 1.1 89.7 -2.1
Amhara 143.6 141.5 6.7 360.0 359.9 9.1 395.1 9.4 175.1 9.8
Benshang 19.2 17.7 0.8 26.6 26.1 0.7 25.6 0.6 33.6 -3.7
ul/
Gumuz
Dire Dawa 10.4 10.2 0.5 19.2 19.2 0.5 19.2 0.5 84.3 0.0
Gambella 14.0 12.5 0.6 18.9 18.9 0.5 16.9 0.4 20.8 -10.5
Harari 8.9 8.9 0.4 13.6 13.6 0.3 12.9 0.3 44.9 -5.1
Oromiya 206.0 205.9 9.8 497.9 497.9 12.6 531.9 12.6 158.2 6.8
Somali 40.6 40.6 1.9 102.6 100.7 2.5 110.2 2.6 171.1 7.4
SNNP 127.5 127.5 6.0 284.9 285.0 7.2 315.2 7.5 147.3 10.6
Tigray 47.2 47.2 2.2 94.6 94.6 2.4 105.9 2.5 124.5 12.0
Total 642.5 635.6 30.0 1,467 1,464 37.0 1,580 37.5 146.0 7.7
.0 .6 .5
Sources (including PBS), 2004/05 to 2008/09 (in millions of USD) 2004/05 2007/08
2
2008/09 Change (%)
Notes: (1) Share of total Federal expenditure. (2) The disparity in percentage
change figures in the two right hand columns among regions is largely due to the
phasing in of the new block grant formula since 2007/08. Source: MoFED data.
Having come up with an acceptable measure of fiscal imbalance, it is easier

from the policy point of view to move forward. From a broader standpoint, the key
objective in a Federation like Ethiopia is to answer the three questions:
• What are the underlying causes of fiscal imbalance between the federal
government and the regions?
• What are the practical consequences of this imbalance?
• What concrete solutions can be put forward to redress the imbalance?
Conclusions
This chapter has addressed the issue of measuring fiscal imbalances in
transitional and developing economies and in particular in Ethiopia. Fiscal
imbalance indicators are of special interest in transitional and developing
economies, where peculiar developments question the validity of conventional
indicators.
As has been shown above, the new Federal Budget Grant Distribution Formula
enables the regional states to carry out their constitutional mandates. The vertical
imbalance emanating from the lower capacity of raising revenue of regional states
in comparison to the federal government is addressed through the first two pillars
of the formula: the equalization of the revenue raising capacities and the
expenditure needs. In order to equalize these two elements, 99 percent of the
overall Budget Distribution Grant is used. The horizontal imbalance between the
four emerging regions, Benishangul-Gumuz, Afar, Gambela and Somali regional
states and the rest of the regional states is equalized through a share of one
percent of the overall Budget Grant which is divided among those four regions in
addition to their share out of the 99 percent allocation.
The combination of the two equalization steps, vertical and horizontal
equalization addresses both, the equality and the solidarity principles. The equality
principle is met because all regional states are enabled to provide the
constitutionally granted services and access to resources on an equal base: the
regions in higher need for more investments gain a higher share of the funds
because they have higher expenditure needs.
Table 24: Shares Vertical / Vertical and Horizontal Equalization
Region Share of regions vertical Share of regions after

equalization only in vertical and horizontal
percent equalization in percent
Tigray 7.11 7.04
Afar 3.18 3.34
Amhara 23.57 23.33
Oromiya 32.86 32.53
Somali RS 8.09 8.43
Benishangul-Gumuz 1.68 1.96
SNNPR 20.1 19.9

Gambella 1.47 1.57
Harari 0.9 0.89
Dire Dawa 1.02 1.01
National Total 100 100
The above table highlights the differences in the shares of the regional states
with and without the application of the horizontal equalization. Reserving a one
percent share for the emerging regions leads to a reduced share of all other
regions and a higher share of the emerging regions in comparison to a purely
vertical equalization. In federations, where the federal transfers are decided by
federal institutions without involvement of the beneficiaries, the application of this
formula would have come with only little surprise although it is common knowledge
that any equalization formula is usually contested within the country it is applied.
The situation in Ethiopian bears an additional feature. The formula has been
prepared and decided upon by representatives of the beneficiaries. The decision to
apply a model including both, horizontal and vertical equalization was taken
unanimously after a series of consultation processes with representatives of all
regions. This unanimous decision is quite remarkable and not self-evident,

especially not in a situation, where even the relatively better-off regional states
have nothing to spare. And still, these relatively stronger regions did agree to
reduce the amount of funds distributed among them by one percent.
Therefore it can be concluded that the New Budget Grant Distribution Formula
not only addresses issues of vertical and horizontal imbalances in order to reduce
the vertical balance, the new Ethiopian Budget Grant Distribution Formula
considers both sides: the expenditure needs and the revenue raising capacities
because of the heterogeneous composition of the regional states and their
development needs. This approach enables the regional states to discharge their
constitutional mandates and to meet the constitutional requirement of access to
equal services across the country.
These two steps, however, do not touch the relatively worse situation of the
four emerging regions. Using the general distribution through the first two pillars of
the formula would make it extremely difficult for these regions to provide the
necessary services and to undertake the prescribed investments. Therefore, the
formula applies a third step. Dividing the overall amount of the Budget Distribution
Grant into a 99 percent share, which is divided according to the principles of
vertical fiscal equalization, and a one percent share, which is reserved for the four
emerging regional states, includes an element of horizontal equalization into the
formula.
Part V Sectoral Case Studies
Housing
Decentralization and Cooperative Housing in the Oromia
Region
Tilahun Fekade
It has been long since most countries in the world adopted decentralization as a
strategy aimed at ensuring sustainable development. As decentralization is a
pervasive process that affects almost all sectors of an economy, it invariably
affects the dynamics within the housing sector in general and the housing
cooperative (HC) sub-sector in particular. Hence it will have a bearing on the
sustainability of shelter provision that depends very much on the quality of support
they obtain from government and other actors they interact with. This has a special
meaning in view of “enabling shelter strategies” that are promoted by the UNCHS
and embracing a multi-actor scenario that also underlines the importance of
community-based initiatives. As a matter of fact, the link between decentralization
and cooperatives is evident as the adoption of decentralization policies brings
about changes in the way the various levels of government (both federal, regional
and local) provide support to housing cooperatives as well as in the range of
support available to them. This is in the major motivation for conducting the present
study on “Decentralization and Cooperative Housing in Oromia Region” of Ethiopia.
Modern HCs in Ethiopia have a short history, although they had a special place
during the late 1970s and throughout the 1980s associated with the socialist
ideology that gave unprecedented attention to cooperatives as non-corporate
entities. The promotion of HC was concentrated in Addis Ababa and a few bigger
urban centers in the country and hence that included those located in what later
become the Oromia Region. The Region is the largest of the nine national regional
states in Ethiopia, and it is divided into 17 Zones and 180 Woredas. According to
the 2007 census (PCC, 2008), it is also the most populous region accounting for
36.7% of the country’s total. The level of urbanization in the Region (12.2 %) is
apparently lower than the country’s average (16.1%) as the former excludes Addis
Ababa City Administration that is located within and does have a pivotal role in the
regional urbanization process.
The spatial landscape of the Region is dominated by small urban centres and
there were only nine towns with population above the 50,000 mark during the
census year: Adama (222,035), Jimma (120,600), Shashemene (102,062), Bishoftu
(100,114), Nekemt (76,817), Assela (67,250), Sebeta (56,131), Ambo (50,267) and
Haromaya (50,986), of which only five surpassed the 100,000 threshold. Housing
problem is reckoned to vary across urban centres, but there are no studies that
precisely tell the magnitude of the deficit: this was missing in the housing strategy
developed for Oromia Region (GTZ-IS, 2006), the Region’s Integrated Housing
Development Program (IHDP) was launched with little attempt customize the
federal program to the specific regional housing needs and demand, while the
results of the recent housing census are not officially released.
The dynamics of the cooperative sector exhibited a dramatic shift after 1991, as
the new government adopted free-market economic policies as well as
decentralization policies that had a combined bearing on the way HCs were to be
established and promoted. As noted by W anyama et al (2008), the cooperative-
related literature on this era which is characterized by intense decentralization
interventions is rather scanty and this is more so in the case of HCs. In the case of
Ethiopia, there were very few studies on HCs like those of Dolicho (1993), which
entirely focused on the experiences of the pre-1991 period. The few studies
undertaken on the topic after 1991 like those of Melesse (2003), Dengushe (2008),
Mulissa (2008) and Jijo (2009), are unpublished academic studies in which
decentralization is only one of several factors considered. The present study on
“Decentralization and HCs in Oromia Region” is aimed at reckoning how the HC
sector performed in the context of the post-1991 decentralization related reforms.
This study had basically relied on extensive, desk-based review of available
theoretical and empirical literature (see reference list) on decentralization, housing
cooperatives, housing and housing cooperatives with a focus on the study area.
Additional information was also collected through interviews held with relevant
resource persons.
The findings, conclusions and recommendations of the study are organized in
the following four additional sections: Section one provides the conceptual
framework for the study based on the relevant literature on decentralization, its
impact on the cooperative sector and the importance of HCs in the multi-actor
shelter delivery strategies that are promoted by UNCHS and other international
organization. Section two outlines the pre-1991 situation pertaining the
cooperative sector in general the HC sector in particular as this was the starting
point for the decentralization processes that commenced in 1991. Section Three
focuses on the decentralization-related developments that have occurred after
1991 in both the housing and cooperative sectors that have a bearing on the
dynamics of HCs. Section four, offers some conclusions that focus on interventions
that will be relevant to come up with a more responsive HC-related policy and
organizational support and highlights issues that should be taken up for further
research if HCs are to play key roles in housing provision.
Conceptual Framework on Decentralization and Capacity
The Concept of Decentralization

Decentralization refers to the transfer of authority and responsibility for public
functions from the central government to subordinate or quasi-independent
government organizations and/ or the private sector (Sundaram, 1994 quoted in
Kundishora, 2009). As it is also highlighted in the call of papers for this conference,
decentralization takes four main forms; political, administrative, fiscal and market
that should not be seen as mutually exclusive. Accordingly, (a) Political
decentralization is about giving citizens or their elected representatives more power
in public decision-making and hence attempts to devolve law making powers to
democratically elected local governments; (b) Administrative decentralization refers
to the redistribution of authority, responsibility and financial resources for providing
public services among different levels of government and thus involves the transfer
of policy making, planning, management as well as financial responsibilities for
providing public services; (c) Fiscal decentralization broadly refers to efforts aimed
at re-distributing the revenue raising powers of different tiers of government and
inter-governmental fiscal transfers along with the redefinition of their service
delivery mandates; and (d) Market/economic decentralization is aimed at creating
space for the involvement of private businesses, community-based organizations
(CBOs), cooperatives, private voluntary associations, and other non-governmental
organizations (NGOs) as it involves measures that are aimed at removing policy
and legal constraints for the participation of the private sector and other actors in
the economy.
Decentralization is a dynamic concept that may have different manifestations in
different contexts. According to Cheema and Rondinelli (2007), its evolution over
the past half a century can be discussed under three distinct waves. Essentially,
the first wave of decentralization refers to the period after the World W ar-II up until
the 1980s, which gave emphasis on de-concentrating government functions, the
second one that started in the mid-1980s included devolution, democratization and
market liberalization, while the third that started in the 1990s focuses on opening
governance to wider public participation through civil society. It is interesting to
note that the first was focusing on government, whereas the second and third are
aimed at bringing on board the other actors (e.g., private and community sectors) in
the decentralization arena.
Driving Forces and Rationales for Decentralization

Decentralization received unprecedented attention by both national
governments as well as international and bilateral organizations during the last few
decades owing to several external and internal drivers of change (Ahmad et al,
2005; Caulfield, 2006; and Devas, 2005). These include: (a) the dissatisfaction of
citizens with highly centralized systems that failed to effectively respond to local
demands, (b) the potential role of decentralization to provide political solution to
regional conflicts with invariably ethnic overtones; (c) the need to promote state re-
construction in situations where the local economy and public services were
devastated by internal strife; and (d) the pressure from international institutions like
the World Bank (WB). The unique combination of these factors in different contexts
determine the scope and pace of decentralization subject to the diversity in the
historical, political, economic and social milieu of individual countries (Devas,
2005). Yet, improving service delivery- whether explicit or implicit – is the major
motivation behind most of these decentralization efforts (Ahmed et al, 2005).
There are many justifications for promoting decentralization as it: (a) facilitates
the participation of stakeholders including the public in local development efforts as
decentralization helps “bring the government closer to the people;” (b) enhances
the transparency and accountability of civil servants, elected representatives and
political institutions to the public; (c) facilitates better division of labour among the
different levels of government in the management of public affairs and hence
checks and balances; (d) promotes the self-reliance and sense of ownership of
stakeholders about local programs and projects and hence their relevance to local
contexts and hence their feasibility; (e) facilitates the mobilization of local
resources in support of decentralized development processes; and (f) promotes
monitoring, evaluation and planning at the local level (Furtado, 2001 and
Kundishora, 2009).
Capacity as a Missing Link for the Success of Decentralization

Despite the perceived advantages, the performance of decentralization policies
depends on contextual factors, including the presence of adequate institutional
capacity at the sub-national level to discharge the newly assigned functions
(Furtado, 2001; and Ahmed, 2005). The centre also needs to have sufficient
capacity to manage the decentralization process as well as sufficient information
that would allow it to properly monitor and evaluate the process and outcomes of
decentralization (Devas, 2005, Caulfield, 2006 and Kundishora, 2009). This is very
critical as decentralization – as a continuum – brings significant changes in the
centre-local relationships and does not avoid it altogether.
Decentralization and capacity development are complementary as both seek to
improve participatory decision-making, reduce the need for external resources, and
achieve long-term sustainability (Furtado, 2001). The United Nations Development
Program (UNDP, 2006) defines capacity as “the ability of individuals, institutions,
and societies to perform functions, solve problems, and set and achieve objectives
in a sustainable manner, while capacity development is the process through which

the abilities to do so are obtained, strengthened, adapted and maintained over
time.” Polidano (1999) defines public sector capacity: “as the ability of the
permanent administrative machinery of the state to implement policies, deliver
services to the public, and provide policy advice to decision-makers” and identifies
its two important elements, namely policy capacity (the ability to structure the
decision-making process, coordinate it throughout government, feed informed
analysis into it, and ensure that the analysis is taken seriously) and implementation
capacity (the ability to carry out decisions and enforce rules, within the public
sector itself and the wider society).
Rationale of Cooperatives and the Cooperative Movement in Africa
Concept and Rationale of Cooperatives

The word “cooperative” is a generic term and different types of cooperatives
could be organized for economic, social and societal purposes (ILO/ICA, 2003 and
OCDC, 2007). As a matter of fact, “the diversity of cooperatives is kaleidoscopic
and their variability is literally infinite” (Emelianoff quoted in Zeuli and Cropp,
2004). Definitions of cooperatives abound, but the most widely used definition is
the one adopted by the International Cooperative Alliance (ICA), namely: “an
autonomous association of persons united voluntarily to meet their common
economic, social, and cultural needs and aspirations through a jointly owned and
democratically controlled enterprise” (Ibid).
Cooperatives are distinguished from other forms of organizations (such as
government, private and other incorporated businesses) because of seven basic
principles, known as Universal Cooperative Principles: voluntary and open
membership, democratic member control, members' economic participation,
autonomy and independence, education, training and information, cooperation
among cooperatives and concern for community (OCDC, 2007; and Zeulli and
Cropp, 2004). Three of the seven principles adopted by ICA in 1995 – user-
ownership, user- control and proportional ownership of benefits and costs – are
applicable to all types of cooperatives and hence seen as defining principles.
Cooperative is an association to be established by like-minded people of limited
means to achieve a common goal in a collective way. Likewise, the establishment
of HCs is justified in a situation where individuals find it difficult to achieve their
shelter needs on their own, but when joining forces with other individuals facing
similar challenges provide comparative advantage to solve such problems (UNCHS,
1989). Thus, HCs can be used as instruments to increase the affordability of
housing for low- and moderate- income families. They are a flexible form of housing
that provides access to both rental accommodation and home ownership (OCDC,
2007). HCs in many developing countries are “construction cooperatives” (i.e.,
cooperatives which are established to facilitate the construction of housing units),
whereas in most W estern nations they are of the “permanent kind” that primarily
focus on continued ownership and operation of a group of housing units (Davis and
Rabenhorst, 2005). As a matter of fact, one would miss many of the defining
characteristics of cooperatives (Cf. ICA’s definition) in most of the housing
cooperatives established in Oromia Region.
Evolution of the Cooperative Movement in Africa

In most of the developing world, and notably in Africa, the cooperative
movement has passed two main phases: the period up to the early 1990s and the
post cold-war era which was characterized by liberalization and SAP (Birchall,
2004; OCDC, 2007; Vanhuynegem, 2008; and Wanyama et al, 2008). During the
first phase that lasted up to the early 1990s, cooperatives established in these
countries were regarded as mere extensions of the state sector as their operations
were invariably dependent on the generous services of quasi-public agencies.
The first few years following the end of the cold war were characterized by
indifference to cooperatives sector and in some cases a tendency to privatize their
properties. In many cases cooperatives disintegrated, as their assets were
vandalized or they could not sustain the sever competition with enterprises from the
cooperative sector (OCDC, 2007; Vanhuynegem, 2008; and W anyama et al, 2008).
During the second phase cooperatives were to be established on voluntary and
bottom up fashion and the state withdrew from its traditional supportive roles also
facilitated by the WB-sponsored SAPs (Birchall, 2004; OCDC, 2007 and Wanayama
et al, 2008). Thus, the work units and staff dedicated to cooperative issues were
downsized and eventually the government sector retreated from providing
organizational, supervisory, audit and management training to cooperatives.
The Inclusive Enabling Housing Strategy

SAPs promoted by W B during the 1980’s and 1990’s emphasized on enabling
markets and they invariably excluded alternative modalities of housing provision
from policy debates. As a matter of fact, there is a need to promote an inclusive
enabling strategy that should not be confined to enabling the private housing
market as it would be:
“...a mistake to equate UNCHS and World Bank policies and ideology on the
subject. While their policies overlap to a large degree with respect to enabling the
formal private markets the UNCHS … has paid much greater attention to making
the strategy more inclusive by including particularly the community and co-
operative sectors. The Bank pays scant attention in this regard” (Keivani and
Werna, 2001: 200).
In view of resource limitations particularly in developing countries like Ethiopia,
self-help schemes in which the poor can be encouraged to contribute at least a
certain share of the total cost of housing provision are plausible options worth
promoting. These would immensely ease the burden on the government and allow
to better target subsidies as well as to capitalize on the agency of such
beneficiaries. In this regard, the promotion of HCs is expected to result in better
outreach and synergetic impact (UNCHS, 2006).
Discussions about the potential role of cooperatives in the housing sector
should not be limited to their contributions in the construction of new housing units,
as HCs can also play strategic roles in the provision of neighbourhood level
housing related facilities and services. As the establishment of HCs on voluntary
basis would involve self-organization, it would provide members greater autonomy
and leverage in determining their fates (Birchall, 2004). As a matter of fact, the
lofty goals of decentralization are effectively realized provided cooperative-type of
organizations are promoted to freely grow and flourish on their own.
Evolution of Housing Cooperatives in Ethiopia

Modern HCs have a more recent history in most of the developing world
(UNCHS, 2006). In the case of Ethiopia, it was the Cooperative Societies
Proclamation No. 241/1966 that laid ground for the formation of a wide range of
cooperatives including HCs. The first 150 cooperative houses - Bole Homes - were
constructed in Addis Ababa during the 1960s (Tefera and Tilahun, 2004) within the
context of the then state-centred capitalist development strategy. During the 1960s
and up until 1978, the mandate of organizing HCs was within the then Ministry of
Agriculture (Tefera and Tilahun, 2004 and Veerakumaran, 2007).
The period between the late 1970s and the early 1990s saw cooperatives
flourishing under state-sponsorship, which followed a similar pattern like most of
the then socialist countries (OCDC, 2007). The Ethiopian government issued the
“Cooperative Societies Proclamation No. 138/1978” that envisaged the
establishment of producer and services cooperatives as instruments in the
socialization of the economy, as part of the state-centred socialist development
strategy. The establishment of cooperatives was top-down and their operation was
dependent on highly centralized and government managed import and export
operations.
Following the nationalization of urban land and all extra houses in 1975,
earning rental income from private housing was banned and stringent regulations
were instituted for housing transactions (Dolicho, 1993 and Fekade, 1997). HCs,
which were regarded as one form of socialist ownership, were promoted especially
after the failure of the government to keep its promise of directly delivering housing
for urban residents (Assefa, 2004). After 1978, the mandate of promoting,
supporting and regulating HCs was transferred to the Ministry of Urban
Development and Housing (MUDH). HCs enjoyed preferential treatment in terms of
access to land, construction finance and construction materials as well as provision
of various types of technical and institutional supports that underwent two phases
(Assefa, 2004, Dolicho, 1997, Fekade, 1997, and UNCHS, 1989).
The first one (1975-1986) was directly managed by MUDH and its main focus
was on Addis Ababa. The next phase (1986-1991) was characterized by a more
systematic support to cooperatives channelled through its de-concentrated regional
office. A revised policy on HCs was issued in 1986 that precipitated, among others,
in the establishment of a specialized department for HCs under MUDH that had
four divisions for technical-, training-, organizational- and financial- support that
allowed it to provide comprehensive support free of charge, whereas in many other
countries cooperatives are expected to pay fees for getting similar services
(UNCHS, 1989).
The new policy also provided for targeted support to be given to the three types
of cooperatives, namely “normal”, “aided self-help” and “pure self-help” HCs
(Dolicho, 1997; UNCHS, 1989; and Tefera and Tilahun, 2004). Accordingly, the
normal cooperatives were to obtain all kinds of technical support except
construction finance which they would get from banks at the ongoing fixed market
rate; the aided self-help cooperatives were to be provided subsidized credit (at
4.5%); while the pure self-aided cooperatives were expected to mobilize their own
finance and hence allowed to get support from NGOs or other organizations. The
self-help housing cooperatives were the focus of the WB-financed housing
programs implemented in Addis Ababa as part of Urban-I and later the Lafto Low
Cost Housing Projects that were implemented during the late 1980s and the 1990s.
This differentiated approach and the all rounded support provided to HCs gave
impetus to their contribution to housing provision. It was estimated that about one-
third of all houses newly constructed in urban areas of Ethiopia between 1986 and
1992 belonged to HCs (Dolicho, 1993). This was hailed as success as it was seen
as demonstrating what could be achieved if governments supported cooperatives
(UNCHS, 1989), whereas the policies adopted by the then government were also
condemned for disrupting the housing market (UNCHS, 2007). Decentralization and
Housing Cooperatives
Policy and Legal Framework for HCs

The New Economic Policy of the Transitional Period (NEP) stipulated that the
role of the state in the overall economy will be retracted to give way for the private
sector (TGE, 1991). Although explicit about the desire to promote private sector
participation in housing development, the policy was muted about the role of HCs.
Following the adoption of decentralized policies, many of the supports provided to
HCs were suspended. Trade liberalization outlined in the New Economic Policy
(NEP) for the transitional period (TGE, 1991), opened up the production and selling
of construction materials by the private sector, withdrew subsidies on housing
finance and construction materials and introduced the urban land lease holding
policy as a market-based land management system.
The ensuing Structural Adjustment Program (SAP) – and hence decentralization
– resulted in the re-organization of cooperative related institutions. Although
referring to the former socialist countries in Eastern Europe, the following excerpt
depicts the situation in the (housing) cooperative sector in Ethiopia that was
subjected to decentralization interventions:
“…cooperatives in the form of collectives or consumer or housing cooperatives

were part of a highly politicized, state-controlled system within a centrally planned
economy, in which the State had the monopoly in trading and banking. Support
services for the communist collectives were part of this centrally planned system,
and cooperatives were used to implement centrally made plans. With the
introduction of elements of a market economy in the form of liberalization and
privatization of economic activities, the main task has been to depoliticize and
decentralize the cooperative system and to reorganize the entire structure …” (ILO,
2001: 90)
Decentralization also brought about decentralized urban land management and
building regulation systems as well as cooperative support structures. Accordingly,
the Cooperative Societies Proclamation No. 147/1998 was issued, which was later
amended in 2004 (FDRE, 1998; and FDRE, 2004). The Proclamation embraces the
seven basic cooperative principles adopted by ICA and provides for the
establishment of cooperatives on a voluntary basis, whereby the government is
expected to create an enabling environment for their operation through
decentralized support structures.
City administrations started allocating land under a lease holding arrangement,
while the public ownership of land was promulgated in the FDRE Constitution. This
move was believed to better respond to local demands for residential land as well
as to streamline building and building standards to local contexts. Yet, building and
construction standards continued to be prescribed by federal or regional levels
justifying it in terms of lack of capacity at the local level. Likewise, with the
liberalization of land markets, certain built-in mechanisms aimed at pre-empting
speculation were introduced at the regional level (e.g., cooperative members were
expected to put 10-20% of the total estimated construction cost of standardized
housing typologies in a blocked bank account to be released after members
partially complete the construction of their housing). Although it sounds
paradoxical, such requirements were put in place at a time when the then Housing
and Savings Bank (HSB) was commercialized and renamed Construction and
Business Bank (CBB). Members of HCs had thus nowhere to go to securing
favourable loans to construct housing units.
Institutionalization of Housing Development

Until recently, urban housing issues were not adequately institutionalized at the
national level as evidenced by its relegation to a department level within the
Ministry of Federal Affairs (MoFA) that was in charge of urban affairs until 2005
(GTZ-IS, 2006). A somewhat heightened attention is now given to the housing
sector as illustrated by the issuance of the National Urban Development Policy
(NUDP) and the establishment of Land and Housing Development Coordinating

Bureau under the newly established MWUD. However, despite the heightened
emphasis accorded to the promotion of the housing sector, the Ministry at the
moment does not give any attention to HCs as it is currently working “towards the
implementation of the Integrated Housing Development Program and the Micro and
Small Enterprise development programs” (MWUD, 2010). NUDP gives attention to
housing-related issues, while a comprehensive housing development policy is still
at the draft stage. A (draft) concept note prepared by the Ministry discusses the
contribution of different actors in housing provision, while it appears to underline
government-sponsored low cost housing program as central (MWUD, 2007).
The current consensus seems for regions to come up with strategies that can
allow them to implement the national urban development policy issued in the year
2005 in their respective regions. In this connection, the GTZ-IS has come up with a
regional urban development strategy for Oromia and, even though reference is
made to this document in several studies, it has not been officially adopted to be
considered as the region’s urban development strategy. Moreover, the region is
yet to come up with its own policy and strategy for the housing sector.
Due to the lack of well articulated regional level policies and strategies for the
urban development sector in general and the housing sector in particular, the
picture at the federal level replicates itself at the Regional level in the Oromia
Region. Although the institutional mandates of the relevant work units include the
management of public housing; conducting housing-related research; developing
housing standards and typologies; providing support to cooperatives; and
facilitating the supply of land for housing development (GTZ-IS, 2006), their actual
focus is on the administration of public housing and allocation of residential land
and coordinating the implementation of IHDP (which refer to bigger towns).
Institutionalization of HC Related Mandates

The Federal Cooperatives Commission (FCC) and Regional Cooperatives
Promotion Bureaus were established following Proclamation 147/1998 that
provided for the transfer of all cooperative related mandates to the newly
established agency and its decentralized institutional counterparts at regional level.
These new offices took over the responsibility of providing legal personality and
registering all types of cooperatives including HCs. Yet, the urban wings of these
offices were ill staffed to undertake any meaningful HC-related tasks.
The Oromia Region has established offices for promoting, supporting and
regulating cooperatives at all levels of the administrative hierarchy, but their HC-
related activities were not well coordinated with that of the FCC that is now under
the purview of Ministry of Agriculture and Rural Development (Tefera and Tilahun,
2004). Likewise, a recent study undertaken by the Ministry of Works and Urban
Development (MW UD) underlined the absence of institutional preparedness and
capacity to provide institutional support for HCs (MW UD, 2007).
The legislation is of significant importance to the institutionalization of the
support to be provided to HCs is Proc. No. 87/2004 issued by the Oromia National
Regional State (ONRS). As per Article 31 of this proclamation, the mandates of the
Oromia Cooperatives Promotion Commission (OCPC) focuses on the promotion of
cooperatives to be established in the rural areas such as multi-purpose-,
marketing-, saving and credit- and irrigation-cooperatives. Article 18 of the
proclamation states that the OWUDB shall have the powers and duties to confer
legal personality and register HCs, undertake studies concerning low cost houses;
undertake comprehensive studies on housing problems and forward
recommendations.
The registration and licensing of HCs, however, is not currently being

undertaken by the OWUDB as there is no dedicated work unit for HCs. The Bureau
has decentralized the functions related to cooperatives to city administrations
which the same Bureau reckons is incapacitated to perform the delegated tasks.
Yet, there are two regional level institutions dedicated to some aspects of housing,
namely the Oromia Housing Development and Administration Enterprise (managing
nationalized and government constructed rental houses) and the Oromia IHDP
office (coordinating city-level IHDP offices). Moreover, in the context of IHDP, the
relevant offices for transport, trade and industry were promoting construction
material and service providing micro and small enterprise (MSEs). This again
shows how political priorities determine the modalities to be adopted in
institutionalizing cooperative-related assistance. In fact, one of the stark features of
the current housing development related efforts is the absence of systematic
initiatives to promote HCs.
These are vivid examples for the situation in which the centre pushes mandates
to lower levels without giving heed to the presence of adequate capacity to perform
the tasks. In this connection, Jijo (2009) noted that the responsibility of organizing
all types of cooperatives in Burayu town -one of the Grade-1 urban centres in
ONRS- was given to the city’s Public Relations and Information Department,
registration HCs is the responsibility of the Trade, Transport and Industry
Department (which is currently active in organizing MSEs), the delivery of land for
cooperatives continued with the Land Administration and Building Permit
Department, while the City’s Code Enforcement Office is entrusted with the task of
regulating cooperatives. In fact, a notable feature of the institutional arrangement
for supporting HCs is the lack of institutional alignment that exists between
sectoraly organized institutions responsible for housing and those entrusted with
cooperative-related mandates.
Support Provided for HCs

The provision of residential land for housing cooperatives remained the single
most important support the government was providing to HCs as land remained
public property despite the adoption of free market policies that resulted in the
withdrawal of various housing-related subsidies. The set of criteria to be fulfilled by
applicants for getting access to residential land from a city administration included:
the applicant has to be at least 18 years old, resident of the city where the
application for residential land was to be submitted and should not own or hold an
urban house or residential land elsewhere in the Region. The formalities that are
required to be registered as a HC include: minutes of the cooperative founding
meeting, the internal regulation (bylaw) of the cooperative, name list of founding
members along with supporting letter from Kebeles, names of cooperative
executive committee members and the amount of capital raised by members. Those
who fulfil these criteria are temporary registered until they receive residential land
and permanently after they acquire land. The support to be provided to newly
established HCs ends here, as there is no follow-up to be made on their activities,
achievements and the constraints they face due to the lack of required expertise.
The provision of residential land to HCs had to be banned in the major towns in
Oromia Region including those that are found near Addis Ababa associated with
the incidence of land-related corruption (Tefera and Tilahun, 2004). A major factor
is found to be the way in which members of a given HC were recruited as the
kebele administration has no adequate means of checking the authenticity of
background information regarding potential applicants. There are reported cases in
which fake names have replaced others in older lists, which would open doors for
corrupt practices in land management departments (Mulissa, 2008; and Zibagwe et
al, 2009). In particular, the lack of a chain of command between cooperative

departments and Kebele administrations made it difficult to avoid multiple
allocations of residential plots. This was further complicated by a directive recently
issued by the Council of ONRS which provides the right of the residents of Oromia
Region to get residential land in any urban centre of their choice (Mullisa, 2008).
Moreover, the absence of clarity on the transfer of rights to the cooperative and
individual members is another factor that created loopholes for such corruptive
practices. During the socialist era, both the land and the housing structures,
including infrastructure and services linked to the housing units, were collective
properties of the cooperatives until the entire group of members completed the
repayment of the housing loans they had taken from the HSB.
The Importance of Cooperative-Related Training

One basic feature of the assistance given to cooperatives after 1991 is the near
absence of orientation and training about cooperative principles and the special
nature of HCs, which should normally be given during the pre-establishment stage
as cooperative members are expected to undergo a self-selection process. This
self-selection process is believed to result in the establishment of cooperatives with
members who posses more or less the same potentials and face similar
constraints. As noted by Davis and Rabenhorst, cooperatives:
“....can only thrive if members have freely chosen to join, are interested in
engaging and investing their time and money in a democratically-run housing
organization. If cooperatives are formed from unwilling or unenthusiastic members,
they will not have benefit of the strong internal leadership, mutual support, and
financial responsibility to survive.” (Davis and Rabenhorst 2005: 43)
The lack of concerted support provided to HCs can be seen as one of the
reasons for the more or less similar internal and external constraints being faced by
HCs that got the chance to be established in recent years in Amhara, Oromia,
SNNP and Tigrai regions (Melesse, 2003; Dengushe, 2008; Mulissa, 2008; and
Woldegeworges, 2009). The major internal problems include the absence of regular
meetings as per cooperative bylaws; serious difficulties to mobilize joint savings
associated with significant differences in the income level of members; and
spontaneous withdrawal and replacement of members. Some of the major external
constraints that are specific to cooperatives, on the other hand, refer to the
sluggish cooperatives registration process and absence of follow-up support.
Difficulties to get access to developed land, rigid building regulations, shortage and
high price of building materials and unavailability of mortgage finance are
additional external factors that also affect the non-cooperative actors.
As some of these constraints are linked to the quality of support cooperatives
could actually obtain from the institutions they are interfacing with, the support
organizations are expected to streamline their efforts to assist HCs during
establishment and beyond. One glaring gap in this connection is the sever shortage
of trained manpower that can deal with the demanding tasks of promoting,
supporting and regulating as well as self-management of HCs. Since the last few
years, apart from the training programs that had been managed for quite a long
time at the Ardaita Cooperative Training College under FCC, the universities of
Alemaya, Debub, Jimma and Mekele have opened undergraduate and post-
graduate programs in cooperatives (Veerakumaran, 2007). Although the combined
output of these universities a few years ago was estimated at 500 per year, the
graduate profile is biased toward rural-based cooperatives highlighting the
importance of re-orienting existing cooperative related training and education
programs.
Suspension of Support to HCs

Priority in receiving land-related support is among the privileges cooperatives
are entitled to as per the Cooperative Societies Proclamation, but the allocation of
residential land for HCs has been suspended since 2006. As a result, those
cooperatives that are still waiting have their money tied for several years in blocked
bank accounts (Tefera and Tilahun, 2004). Of the total of 478 cooperatives
temporarily registered in Adama and Burayu towns during the period between 2001
and 2006, only 84 cooperatives (18%) were able to obtain land. The only exception
in this regard was the establishment of HCs by Ethiopians living abroad as it was
promoted as the preferred arrangement for residential land delivery for this group.
This arrangement had received utmost attention during the celebration of the
Ethiopian Millennium and a total of 263 cooperatives with 4,429 members were
provided with residential land in 35 urban centres of the Region (OW UDB, 2008
quoted in Jijo, 2009). The modus operandi of these “Diaspora HCs” is similar to
other cooperatives established by local residents as their main interest was to
obtain residential land.
The main reason for suspending the allocation of land to HCs appears to be the
widespread incidence of scarcity-driven, speculative transactions in residential land
allocated for cooperatives. This can be discussed under three points, firstly, the
absence of municipal level strategic planning for land management and effective
control systems invariably led to the squandering of scarce urban land. This again
underlines the failure of decentralization programs to put in place the necessary
capacity as well as monitoring and evaluation systems. Secondly, rigid building
regulations motivate land holders to sell their right to use the land allocated to
them. Construction has to start within six months and finish the within a maximum
of two years; otherwise the allotee will forfeit the plot (Davis and Rabenhorst,
2005). Thirdly, most cooperative members self-finance their home construction
from informal sources and hence prefer to operate on an individual basis (Davis
and Rabenhorst, 2005; Mulissa, 2008; Jijo, 2009 and Zibagwe, 2009).
Once parceled plots are allotted to cooperatives, members distribute it using a
lottery system. Although this tends to reduce the interest of members toward the
cooperatives, it becomes active whenever members individually or in groups put
certain requests like support letters for extension of utility lines or for the release of
the money kept in a blocked account after members partially complete their
houses. Likewise, HCs need to notify the municipality about changes in
membership when semi-constructed or completed houses change hands. In
performing these tasks, however, HCs operate in a rather informal way (i.e.,
outside their bylaws) without getting support from institutions with the relevant
mandates.
Current Attention to HCs

Another argument forwarded by the policy makers against the provision of
residential land to HCs is that cooperative approaches does not ensure efficient
use of urban land. Such a requirement, however, contradicts the very social
objective that is built into the cooperative movement of providing shelter to citizens.
Moreover, such a problem can be raised in connection with the single plot, single
housing unit development by members of cooperatives, whereas HCs can also be
promoted and assisted to adopt land-saving construction technologies including
vertical development in those contexts where land is scarce.
Housing cooperatives refer to associations to be formed by individual members
for the purpose of jointly carrying out activities that would enable their members to
meet their housing related needs. Condominiums refer to buildings that constitute
multiple residential units that could either be arranged vertically or attached
horizontally. Thus, the term condominium is neutral in terms of ownership as they

can be built either by individuals forming cooperatives to meet their own shelter
demands or private real estate developers (either individually or in groups) for rent
and/or sale. The construction of multi-storey buildings by HCs is in fact covered in
the condominium proclamation (FDRE, 2003). Part nine of this proclamation states,
among others, the Cooperatives Societies Proclamation shall be applicable for the
construction of cooperative condominiums, whereas the condominium proclamation
shall be applicable when such a building is to be registered.
A more recent regional level study on the housing sector conducted in Oromia
Region (GIS-IS, 2006), identified a list of thirteen strategies that were in line with
the multi-actor scenario. One of these strategies refers to the promotion of pro-poor
cooperative housing schemes, although the current situation on the ground does
not reflect this concern. As Davis and Rabenhorst (2005) note, the attention given
to HCs seem to have exhibited some decline with the introduction of the concept of
“condominiums” as an alternative means of group ownership of housing. The
Integrated Housing Development Programme (IHDP) envisaged significant direct
government involvement (50%) in housing provision, while the balance was to be
covered by owner builders, HCs, real estate companies and other actors (MWUD,
2008).
In the case of Oromia Region the share of government was put at 40% (Jijo,
2009), whereas the government sponsored condominium project was the entire
focus of ONRS. The implementation of condominium projects in the Oromia Region
started in 2006 in 11 larger urban centres and it was scaled-up later into a total of
16 urban centres (OHDPO, 2010). The original plan was to construct 66,748 units
in a total of 29 urban centres during the four years period between 2006 and 2010,
whereas only 22,850 units (34.2%) in 16 towns have actually be completed so far.
There is also a serious challenge to transfer the completed condominium units to
residents, which is in the main linked with the absence of rigorous demand analysis
before the launching of the program and the non-participatory approach in which it
was designed and implemented (Ayenew and Martin, 2009). This, together with a
recent directive issued by MWUD to regional governments and that underlines the
need to make a rigorous housing demand analysis before embarking on new
condominium projects, may be considered suggestive of the need to make a
reappraisal of the relevance of the cooperative modality.
Conclusion and Recommendations
Developing Policy Guidelines on HCs

To date there is no detailed policy guidelines on HCs (Tefera and Tilahun,
2004). There is a need to come up with a clearly articulated policy direction on the
provision of all rounded support to housing cooperatives that should in fact go
beyond the allocation of residential land. Developing such a policy is believed to
clarify, among others, the institutional arrangement for the promotion, support and
regulation of HCs, the preferred tenure arrangements for residential land to be
allocated to cooperatives, the types of cooperatives that can be established and
the type of supports they are entitled, the resource mobilization modalities they can
utilize, the roles NGOs can potentially play in the promotion and provision of
support to cooperatives and basic data to be collected on cooperatives.
Building Capacity for HC Development

Even though the basic principles of cooperatives are the same, there is a need
to create relevant capacity at all levels in order to be able to effectively respond to
the specific nature and hence requirements of HCs in a decentralized governance

regime. There is therefore a need to adopt a holistic approach to capacity building
that would allow: (a) to clarify and/or redefine the HC-related mandates of
government organizations; (b) design and institute organizational structures for
such institutions that are appropriate/commensurate to their respective mandates;
(c) hire an adequate number of staff with relevant training and experience, and
regularly update their competence through relevant training and educational
interventions; and (d) develop appropriate, transparent and accountable working
systems and procedures for the various promotional, support and regulatory
activities.
Embracing Inclusive Housing Strategies

The preparation and allocation of residential land in most of the larger towns in
the Oromia Region during the last three to four years was in the main confined to
condominium housing programs, whereas individuals including those organized in
HCs have been relegated. It is therefore a high time to revisit the cooperative
model as one of the housing provision modalities, particularly its relevance for low
income groups and smaller towns that have somewhat special linkages with their
hinterlands and where the private, profit oriented sector may not be a major player
in housing provision.
Creating Sufficient Awareness about Cooperative Principles

It appears that most cooperative members do not have sufficient awareness
about cooperative principles as well as their rights and obligations. As the HC pre-
establishment process usually takes some time, the interim period should therefore
be grabbed as an opportunity to provide awareness training to cooperative
members about cooperative principles as well as basic cooperative management
related training in topics such as cooperative leadership, construction project
management, financial management, record keeping and conflict resolution.
Streamline Land Allocation Systems to Help HCs

Land allocation systems for cooperatives should be systematized that could
include among others stating explicitly the mix of government support that would be
available for individuals who want and/or would be encouraged to be members of
housing cooperatives so that such supports (e.g., pertaining land allocation) could
be properly targeted. Clear and transparent eligibility criteria for getting access to
land should be developed and clearly communicated. Moreover, local governments
within the region should develop and maintain a systematic database on land
allocation to members or cooperatives which they can exchange with a view to
avoiding multiple allocation to individuals or even allocation to non-eligible persons.
Developing Tailored Training Programs for HCs

Training is an important component of the support to be provided to
cooperatives during their establishment and beyond so that they would be able to
properly manage their activities. Yet, the training programs organized by the
Regional cooperative promotion bureau and their decentralized offices focus on
rural-based cooperatives. Likewise, trainings provided by the bureau of transport,
trade and industry and their decentralized offices focus on Micro and Small
Enterprise (MSEs). The institutions with the mandate to promote, support and
regulate HCs should, therefore, deploy an adequate number of extension workers
to provide the requisite support to these cooperatives during their establishment as

well as monitor and evaluate their activities in cooperation with NGOs.
Developing a Cooperative Database

There is no comprehensive and systematically organized data, at either
national, regional or municipal levels, on activities undertaken, results achieved
and constraints faced by the HC sector (Tefera and Tilahun, 2004). This has made
it difficult to monitor and evaluate the actual performance of HCs and the relevant
support providing institutions as well as to introduce appropriate improvements
within the HC sector. There was very little city level data documented in the
literature reviewed as part of the present study and there was no systematically
collected data and information on the performance of the urban housing
cooperative sector especially after the adoption of decentralization policies. In fact,
the evolving organizational structures for housing cooperatives did not allow the
systematic collection of data that can allow comparisons across cities and zones
within the region and hence systematic monitoring and evaluation of the
performance of cooperatives both at the national and regional levels. There is
therefore a need to develop key performance indicators and institute an integrated
information system that allows the gathering and exchange of information among
the different stakeholders as well as to collect, collate and share relevant
cooperative related information that can serve as a basis for decision making.
Promoting Secondary HCs

The establishment of secondary cooperatives is believed to contribute to the
empowerment of cooperatives and their members to develop neighbourhood level
services as well as advocate and lobby for better housing and operative related
policies (UNCHS, 1989). In the present circumstances, for example, HCs could not
properly manage green/open spaces that have been provided as part of their site
plans and there are cases in which such plots are put for lease auction by
municipalities as vacant lands (Tefera and Tilahun, 2004). It is therefore important
to promote the establishment of secondary HCs as this would give them leverage in
their lobbying or advocacy efforts.
Conducting Further Studies

If a wider definition of housing is adopted as one that encompasses land,
shelter and residential services (McCallum and Benjamin, 1985), home owners can
retain their cooperatives or establish new ones for the purpose of tackling common
issues such as construction and/or maintenance of access roads, ensuring
neighbourhood security and sanitation, provision of utilities such as water,
electricity and telephone the management of open spaces and green areas or
establishing basic social service facilities such as day care and sporting centres.
Further research would thus be necessary to identify:
• The potential roles that can be played by HCs in facilitating the legalization
and regularization of informal settlements;
• The scope for involvement of cooperatives in inner city slum areas to
improve the overall infrastructure and service situation; and
• The potential roles that could be played by the NGO sector in the promotion
and capacity building support for HCs.
Incorporating Informal Settlements in Addis Ababa: From

Centralized Urban Planning to Local Partnerships
Jan Fransen and Samson Kassahun

Introduction
This chapter builds on previous research conducted by the authors: Kassahun
(2010) offers an overview of housing problems in Addis Ababa; Fransen and van
Dijk (2008) describe informality in Ethiopia; and Kassahun and Fransen (2010)
offer a theory and first assessment on the state of incorporating informality in
Ethiopia. Informal settlements have grown exponentially in Addis Ababa due to a
combination of rapid urbanization and institutions failing to enable the provision of
formal land and housing. Formalization processes are not keeping pace and are
primarily focusing on the provision of title deeds, with limited attention to other
aspects of formalization (infrastructure and service provision; housing
improvements; community building; informal employment; Kassahun, 2010). This
leads to two kinds of informal settlements: settlements of the middle class that
adhere to building standards in the urban fringe and depilated informal squatters
where the urban poor live. The present trend has two risks.
First of all, investments in squatter settlements are likely to lag behind due to
unsecure tenure, land use conflicts, limited support and rampant poverty, whereas
outside these settlements skyscrapers and shopping malls emerge as mushrooms,
and secondly if present trends continue, Addis Ababa may transform into a dual
city, as so many other cities in Sub Saharan Africa have done. This creates a huge
financial constraint for local governments, paying the bill for public infrastructure
and services without capturing increases in land value. This chapter aims to assess
if present practices in Addis Ababa offers an alternative development path.
Incorporating informal settlements is the act of combining informality as an
existing and valuable phenomenon into the urban fabric, accepting its positive and
negative contributions to urban life. It differs from formalization, which according to
Kappel and Ishengoma (2006) requires total compliance with regulations laid down
by the government. Incorporation instead involves trade-offs based on equity and
governance approaches (Chabalengula, 2009).
This chapter assesses if informal settlements are or can be incorporated into
the urban fabric of Addis Ababa by answering two questions: Does urban planning
in Addis Ababa offer an enabling environment for local governments to incorporate
informal settlements? Do present experiences offer opportunities to incorporate
informal settlements? The study has practical and theoretical relevance.
Practically, it aims to offer recommendations in order to reverse the trend towards
dualism by creating incentives to invest in informal settlements and to capture land
value increases. These recommendations are targeted at the macro (national
policies and regulations), meso (revised master plan of Addis Ababa) and micro
level (kebele level upgrading projects). Theoretically, it is relevant as hardly any
definition, theory and research methodology exist on incorporating informality.
Theoretical Framework
Incorporating informality
Incorporating informal settlements is the act of combining informality as an
existing and valuable phenomenon into the urban fabric and accepting its positive
and negative contributions to urban life. It differs from formalization, which
according to Kappel and Ishengoma (2006) requires total compliance with

regulations laid down by the government. Incorporation instead involves trade-offs
between governments and those in informality based on equity and governance
approaches (Chabalengula, 2009). For instance: allowing lower standards of
infrastructure in exchange for formalization of a settlement. In relation to urban
planning, Kusakabe (2006) refers to incorporation as the accommodation of the
informal activities in urban space and issues of right to buy and sell.
Incorporating informality hinges on four notions. The first notion is that full
formalization involves high entry and operating costs, which are unaffordable for
most. For example: building standards increase the construction costs of housing
to a level unaffordable to the urban poor. These costs are reduced by deregulation,
as advocated by Hernando de Soto. The second notion builds on Morrison’s
assertion (2005) that it is preferable if those in informality meet part of their social
obligations instead of not complying with all. This requires the government to
accept partial formalization, while informal settlers still do not comply with other
rules and regulations. While governments often ignore informality, accepting the
violation of rules is another ballgame altogether. Third, incorporation combines
informal land development processes (occupy, build, plan and own) and the
opposite formal processes. As many cities in developing countries develop
informally, it aims to develop an optimal solution. Fourth, and most controversial,
incorporation hinges on the notion of governance, as local governments should
meaningfully negotiate where and how informal settlements can be incorporated
into the urban fabric. This requires decentralization to local governments and
including other aspects of good governance which also need to be in place
(transparency, accountability, etc). The outcome of such a negotiation process is a
concrete action plan to incorporate an informal settlement. This is controversial as
local governments have to enter into dialogue with informal and sometimes illegal
institutions to discuss partial (non)compliance with laws and regulations in the field
of taxation, building standards, zoning, title deeds and/or service and infrastructure
provision. Crucially, the agreed plan to incorporate the informal settlement should
stimulate all actors to invest in upgrading the settlement, thus capturing increases
in land value.
Heterogeneous informal sector
Chen et al. (2002) asserts that informal sector policies demand understanding
of the heterogeneity of the informal sector. Much has been written about
heterogeneity of the informal sector and many ‘subsectors’ have been identified.
We will apply a basic subdivision into two, as proposed by van Dijk and Fransen
(2008):
“Exclusionary informality: the urban poor, driven to informality by poverty and
social; exclusion. They lack capital to build houses up to standards and acquire
fully developed land. In many countries, informal land and housing is their only
affordable option.”
According to Kassahun (2010) these houses are easily recognizable, as they
are below building standards. Competitive informality: the middle class and
speculators are driven to informality as it offers more benefits than costs. They end
up buying and developing informal land with the expectation of increased land
values. These houses tend to adhere to building standards and new housing
development also to land zoning requirement.
Dilemmas
Both government officials and informal settlers have incentives for and against
the incorporation of informality. Chabalengula (2009) reports vividly how these
dilemmas stalled the development of an informal market right in the city centre of
Kitwe, Zambia. The government had reserved the plot of land for a Central
Business District and had attracted a potential developer. Yet, they could not evict
the traders, as this would cause social upheaval. The result: the process stalled.
Formalization of the informal market would legitimize its existence, which was
considered unwelcome at least, but demolition was politically impossible. For the
past decade nothing has happened and everybody lost.
This case hints to possibly the biggest obstacle of incorporating informality, one
that is often ignored in literature: the notion of a modern city, which is competitive
in the global economy. New York, Shanghai and Tokyo are seen as best practices.
A modern competitive city is seen to be equivalent to skyscrapers and shopping
malls. An informal market is the city centre or an informal settlement will
downgrade this image.
A second serious obstacle is the opportunity of corrupt deals for government
officials, speculators, land developers and settlers in fluid informal land and
housing markets. It is well known that profits in real estate benefit many. This
creates a cycle of informality, where informality itself initiates corruption and visa-
versa.
A third major obstacle is the administrative and management cost involved in
incorporating informality. Taxing informal settlers adheres to the famous 20-80 rule:
collecting 20% of the tax takes 80% of the administration costs. In a similar vein,
negotiating how to incorporate informal settlements is very time consuming; a
luxury for many understaffed local governments.
Roever (2005: 8) tables incentives for and against formalization of the
government and vendors for markets. The following table translates these to
informal settlements and adds the obstacles mentioned above. A look at the table
clarifies why formalization and incorporating informal settlements is easier said
than done.
Research Design
The research methodology that was employed for the study was qualitative in
nature. A desktop research of contemporary literature on informal settlements with
a key focus on Addis Ababa was the first phase of the research process. The
desktop research was followed by interviews with key informants from Addis Ababa
administration officials and professionals to crystallise the findings of the desktop
research and source additional information. Representatives from City Planning
Institute, Department of Land Development and Department of Land Administration,
Sub-City Officials and other stakeholders in informal settlements formed part of the
interviewees. The interviews with the key informants were mainly geared at
understanding whether the regulation and laws at national and city level (master
plan) are enabling local dialogue to incorporate informal settlements. The
interviews were conducted on a face-to-face basis.
Key informant interviews were followed by site scans of the two informal
settlements that were selected as focal areas for the research. Research team
members physically visited the selected sites on several occasions where the
practices of incorporation issues were observed. In addition, interviews were
conducted with key informants from members of the selected community in the
informal settlements during the site scan phase. The interviews with members of
the community were also conducted on a face-to-face basis. The selection of
interviewees during this phase was random in nature and a total of 30 interviews
were conducted. Moreover, a third additional case was included in the analysis
from the work published by Frew (2010).
Table 25: Incentives For and Against Formalization

Government Settlers
Dimensions
Incentives Disincentives Incentives Disincentives
Relevant for all 1 Legitimises settlers claim 1 Legitimises claims of 1 Imposes monetary costs
dimensions of rights rights
2 Opposed to modern city
image
3 Generates administrative
costs
Taxation 1 Creates revenues 4 Constraints ability to 2 Constraints to expel 2 Does not guarantee
2 Legitimises expulsions of expel those who pay those who pay rights
those who fail to pay.
Licensing, 3 Facilitates clientalism, vote 5 Constraints to expel those 3 Constraints to expel 3 Can impose bureaucratic
authorization buying recognized those recognition costs
4 Facilitates enforcement of 4 Implies requirement to
regulations comply with regulations
Inducements and 5 Facilitates cooperation, 6 Constraints policy 4 Potential for better policy 5 Limits autonomy for
concessions enforcement of agreements See 2 and 4 5 Channel for voicing association
6 Fosters stability demands
Source: adapted from Roever (2005:8)

Figure 9: Summary of indicators
National, • Low level of regulation &

regional Level laws
City Level • Master Plan

• Formalization policies
• Dimension of informality
Case study
Level • Governance practices
• Process of formalization
A case study approach was applied to assess how actors incorporate informal
settlements into the urban fabric and how informal settlements have been
incorporated in Addis Ababa and what have been the lessons learned. Two case
studies were analyzed: one with exclusionary informality and one with competitive
informality. It was assessed how, when and where each dimension of informality is
taken on board in the process towards incorporation. More particularly an
assessment of how actors negotiated this process based on governance theory has
been conducted. The reliability of the data was tested through triangulation: open
interviews with all stakeholders based on checklists were combined with
observation of the settlements and key informant interviews.
Decentralization and Urban Planning in Ethiopia

According to Beard et al (2008, 3-4), decentralization in planning traces its
heritage to participatory and advocacy models of the 1960s that sought deeper,
democratic community involvement in development. A later wave of
decentralization arrived with neoliberal reforms in the 1980s and 1990s, under
which governments encouraged cost recovery, efficiency of service delivery, and
an ethos of entrepreneurship (Beard et al, 2008). This type of decentralization
could bring about empowerment through encouraging participation in local social
and political institutions. Decentralization also signals a departure from state-
centric models of planning to more alternative involvement of actors, such as civil
society groups, NGOs, and the private sector.
Ethiopia like many developing countries, since 1991, has been engaged in the
process of decentralization by transferring responsibilities of the state to lower tiers
of government to bring not only political stability and contribute to democratic
governance, but also improve service delivery and attain equity. According to
Tegegne (1998), the first wave of decentralization (1991-2001) which was centred
on creating and empowering National/Regional Governments, has changed the
local and central government system. The National/Regional Governments were
entrusted with legislative, executive and judicial powers in respect of all matters
within their areas. The second wave involved charters for cities and
decentralization to city level. In this era, the capacity of cities and space for
participation increased. The third wave followed the 2005 elections, in which
opposition parties won the elections in major cities and towns. In this period,
decentralization stalled, government control increased and as a result, the space
for participation decreased once again.
Addis Ababa is a chartered city having its own administration led by a mayor
and which is accounted to the prime minister has a decentralized system to
administer the city. Currently, the city has 10 sub-cities, which are sub-divided into
110 Woredas (which used to be called “Kebeles”), which are the lowest levels of
city administration. Land and housing supply are executed at city and sub-city level
depending on its category. The decentralization approach was motivated by the
reform of the administrative structure in 2003, which also emphasizes public
participation. Addis Ababa being chartered and because of its location has
assumed a multiple identity. First, it was declared the capital city of the Federal
Government of Ethiopia in 1995. Second, it serves as the seat of government of the
Oromia Regional State. Third, it is also an autonomous local government authority
in the Ethiopian federal system of government with an elected councils and the
Mayor are accountable to the city inhabitants.
When reviewing the countries urban planning and development policies and
regulations, it shows a decentralized system that, at national level, the Federal
Ministry of Works and Urban Development (MWUD) has the responsibility to define
strategies, policies, and guidelines concerning the urban development and
construction sector 8. The ministry also gives professional support and plays a
capacity building role to regional bureaus of works and urban development as well
as to municipal administrations. In Addis Ababa, the city administration and the
sub-cities are responsible for handling the urban planning and development
process. Nevertheless, except a relationship at the working level, there is no
functional link with the Federal Ministry.
According to the city proclamation No. 17/2004, the city government is
responsible to develop the city development framework, structural plans, the long
and medium term city development plans and the local development plans. The city
planning department and agencies within in the city administration are responsible
to undertake supervision of performances and to provide various technical supports
to sub-cities. However, the lower tiers of administrations such as sub-cities and
Kebeles were not mandated to prepare the plans, as per the proclamation (No.
41/1991).
The Master Plan of Addis Ababa

The most recent exercise to revise the master plan of the city displayed
numerous platforms for stakeholder participation that were organized during the
planning process, including discussions held with various groups. The master plan
envisioned more intensive stakeholder participation in the preparation and
implementation of local development plans (LDPs). Local Development Plans in the
city are designed to be prepared and elaborated within the perspective of the city’s
structural plan and in consideration of local socio-economic conditions as well as
feedback from the stakeholders via participatory approaches. Nevertheless, these
planning exercises remained expert driven and subsequent measures lacked the
flexibility required in actual operation. Moreover, the urban planning efforts in Addis
Ababa as well as the settlement patterns both formal and informal have been
expansion orientated, with limited attention given to redevelopment of inner-city
informal areas. In fact, policies that favour inward development that have come of
late are prompted by the ever increasing challenge faced in transforming rural land
to urban use and the need to adhere to the rule of law in a democratizing society.
8
Proclamation 41/1991
The Master Plan identifies three kinds of informal settlements: settlements

earmarked for urban renewal based on Local development Plans; settlements
earmarked for upgrading; and rapidly emerging settlements in the outskirts of town
on which no decision has been made yet. Detail on these settlements and on the
urban renewal (condominium) and upgrading programme is needed here. The
decision to demolish and construct condominiums (i.e. to renew), or to upgrade a
settlement are made by Addis Ababa city administration. As mentioned, these
decisions were expert-driven and primarily reflect whether the settlements is
consolidated (resulting in upgrading) or not (renewal). The revised master plan of
Addis Ababa envisioned the need for partnerships between the government, the
private sector and civil societies to address the challenge of infrastructure. With the
exception of the newly developed expansion areas the master plan has earmarked
the rest of the city for upgrading and renewal. The majority of the city’s built up
areas were assigned for upgrading while only the precarious areas at the centre of
the city were earmarked for renewal.
Areas for Urban Renewal

The renewing mechanism was through redevelopment of the inner-city informal
settlements and privatization of kebele houses. The scheme also incorporates
better infrastructure and habitable environments through the provision of improved
water, electricity, drainage and sanitation facilities and access roads. However,
most of the dwellers, especially very poor could not afford the cost of the
condominium houses built through the redevelopment. In the case of urban
renewal, informal settlements are not incorporated but a full formalization process
takes place. Though residents are informed and are able to complain, these
participatory processes are not encouraged. For those who are resettled, the
question is whether they move to informal settlements that will be incorporated or
not. This has been investigated in the following section.
Areas for Upgrading

With regard to the inner-city informal settlements there are currently several
types of initiatives being undertaken. Woreda upgrading programmes are being
actively pursued by both government and non-government actors. Actors like NGOs
and CBOs in collaboration with the city administration have been increasingly
involved in the maintenance and rehabilitation of public housing in the inner-city
informal settlements. In addition to the partnership approach with different
participants, the Addis Ababa City Administration has focused on regularization of
informal settlements and redevelopment of strategic areas in the inner city.
Extension Areas
Moreover, with regards to the informal settlement at the periphery areas the city
government is following full formalization. From the late 1980s onward, when large
numbers of squatter units began to appear, the main government response was
none other than bulldozing them. Nonetheless, due to the utter disruption of the
formal land and housing markets, squatter units continued to spread on a rather
large scale all around the city, especially in the expansion areas. During the
1995/1996 fiscal year, municipal authorities issued what they referred to as
Directive No. 1, confirming that it had recognized all the squatter units built prior to
that specific year. In fact, the municipal authorities decided to give title deeds to
the squatters based on GIS data compiled from air photographs taken that same
year. This considerate gesture apparently gave the wrong signal to potential
squatters as it led to an even stronger invasion of land by such people during the
subsequent years. Although the expansion of squatter units is still continuing,
apparently none of the households that had built such units baeteween the fiscal
years 1995/1998 have received a title deed to date. Even a large proportion of
those who had built their own units prior to 1996 seem to be without title deeds. All
those without legal evidence of rightful use of the land that they occupy are
understandably living in perpetual fear of eviction.
However, according to the senior expert from the city planning office, currently
the city administration is preparing a regularization plan for the peripheral informal
settlements to formalize them as per the land use prescription of the master plan.
This regularization approach give the settlers legal acceptance, strengthen their
tenure security and ownership rights of their occupation and is then free from threat
of eviction
Redevelopment and formalization will be effective only if there is good
governance: transparency and participation. People should aquire access to all
kinds of information which has an impact on their lives. The existing institutional
arrangements have not been responsive enough to deal with land allocation. A
weak monitoring and evaluation system at the city administration and sub-cities
level is another significant institutional constraint. Local governments lack
adequate capacity to suggest timely corrective actions to ensure access to land by
all. Bureaucratic tendencies, shortage of manpower, corruption by some officials,
alleged nepotism and the absence of an adequate information system are other
factors that have rendered efforts by local governments in the process of
incorporating the informality both through redevelopment and regularization.
Case 1: Urban Renewal in Lideta
Background
Lideta is located in the central part of Addis Ababa. It is one of ten sub cities in
Addis Ababa, the capital of Ethiopia with more than three million inhabitants. In
Lideta Sub-City most of the housing units belong to the Kebele Administration.
Lideta is also home to the city's largest open market, Merkato, and many of the
local population live from day to day on the meagre income of petty trading and
small business activities. Unemployment is high, especially amongst the young.
Living conditions, in terms of the quality in the area is very poor due to the
inadequate services and dilapidated housing conditions. The most stringent
problem is housing, both of quantity and quality. Environmental hazards represent
another dimension of the risk faced by inhabitants. Like other areas the social
diversity of the Lideta area is characterized by a mixture of both better offs and
poor living together without segregation. Despite the variations among inhabitants,
having lived in the area for many years, inhabitants have developed a strong
network in terms of membership in the same local associations. Moreover, there is
a mixture of tenure status of the inhabitants within the Lideta area, owners and
renters. Though, according sub-city documents about 80% the inhabitants are living
in public housing which are normally precarious. A broad assortment of people are
members of the neighbourhood exhibiting a huge variation in terms of gender,
length of residence, income and activities .
In this locality, most urban upgrading and renewal schemes are still state-driven
and orchestrated by municipal planners. Hence, to improve this underdeveloped
informal settlement, the Addis Ababa City Administration is currently working on a
redevelopment project. The project as per the description of a senior administration
official is "building a city within a city." The redevelopment plan has a participatory
approach where by community and private developers both participate. According
to the key informant from the project office, the city administration is prepared to
put a total of 236 million Birr towards the redevelopment project. The project is
designed to have close to 2,044 units of condos designed to accommodate middle
class families. According to an official of the project office, the City Administration
has planned to raise 20 million Birr from leasing shops to businesses; however, the
huge proportion of the finance, which is about 800 million Birr, is expected to be
raised from the lease of 85,000 Sqm of plots for private developers. However, the
city administration has planned to make the project more accommodative to the
existing inhabitants.
Process and Prospects of Participation

After the decision that the settlement would be renewed, city officials claim that
they have offered the following options to the residents who will be relocated from
the area: they could be moved into kebelle owned houses in other neighbourhoods;
they can receive housing in one of the low cost condominium houses built by the
city; or they could stay in temporary shelters up until the middle income group
condos are built sif they arer able to afford to buy flats in them. This message has
been conveyed to residents through a series of public meetings with the city
administration officials, after the local development plan was officially launched.
However, key informants in the redevelopment site have a different perception.
One key informant claimed that he attended a few of the meetings held inside his
kebelle and he was not clear of the options that the city claims to have offered
these residents. He was concerned with the rumours that they will be relocated to
another place where they will be disconnected with their social fabric. On the other
hand, the data obtained from the project office at the city administration indicated
that more than 47 percent of the residents in the kebelle have made a choice to be
sheltered elsewhere in other kebele houses, and to come back to the two bedrooms
condominium flats to be built in the redevelopment site by paying 25 percent of the
down payment. W hat remains unnoticed, however, is that thousands of low-income
households have been displaced and adversely affected by the process of urban
development. The process of relocating people from the inner city to new
resettlement sites in the outskirts have engendered some disruption in their social
fabric and business connection.
Case 2: Kolfe-Keranio’s Peripheral Informal Settlements
Background
Kolfe-Keranio is located at the peripheral side of Addis Ababa. Illegal
settlements are typically found at the periphery of the city, in expansion areas,
where large tracts of vacant farm land are available. The ‘illegal’ or squatter
settlement in the inner-city constitutes a small proportion of the squatter
settlements. However, the informal settlements at the periphery are primarily a
result of land invasions. Many of the residents in the peripheries claim to have
“purchased” land from farmers who subdivided and sold the residential plots and
farmland allocated to them by the government.
In the study area most households can be classified as poor and they
additionally rely on irregular incomes from informal sector employment due to their
low educational background. As a coping strategy some of the inhabitants have
opened up small shops on their own compound in order to diversify their household
Income. Some of them also run small businesses (Especially the women who sell
domestic products such as Injera and/or Tella). Other means of income
diversification include urban agricultural activities, which are carried out by many
informal settlers.
As the city authorities are the sole suppliers of land and the government retains
a high degree of control over land use and design, all the informal settlers are
considers and illegal by the city administration. However, regarding the tenure
status, despite the fact that all of them are considered by the city administration as
‘illegal’ settlers, there are different statuses as per the inhabitants’ perception.
Those who own the land, construct the house and renting and those renters.
Renting out small rooms in attached or detached houses of the informal settlement
also serve as another major source of income, especially for the owner-occupier of
the households is without any income from occupation. According to the survey
result conducted in 2007, out of 250 sample 61% of the households owned the
house they were living in, while 35% were regular tenants. The remaining 4% lived
for free in a house that belonged to their relatives.
Thus, there are three types of tenure: exclusively owner-occupied compounds,
owner-occupied compounds with additional tenants and compounds belonging to
absentee landlords, solely inhabited by renters. Most of the inhabitants claim that
they are predominantly an accumulated product of structural constraints a the city
level, because policy failure has resulted in land scarcity, exorbitant prices for
private rented dwellings and a lack of legal, affordable alternatives for the majority.
In Ethiopia it is perceived that land ownership is a high status symbol.
Process of Participation
In the case of incorporating informal settlements in the peripheral areas, some
key informants revealed that citizens’ participation in key development issues and
decision making was very low or even absent. The city administration is currently
working on a regularization project to address the issue of the informal settlements
at the periphery. The first stage of the regularization of the informal settlements is
that of giving land tenure to the occupants in the periphery area. The city
administration undertake the survey and identification of the potential beneficiaries.
They prepared a site plan using the land records for the purpose of issuing a land
clearance/alienation order, and issue tenure certificates of land holding/possession
to the identified beneficiaries.
Case 3: Worku Sefer: An Urban Settlement that Peasants Helped

to Establish
Worku Sefer is an informal settlement established in the early 1980s. Currently
it is a secured settlement with approximately 1,000 households. The first settlers
were mostly from the lower income groups of society, which through time has
transformed into a settlement with a large group of middle income groups. The
houses are well constructed using standard and modern construction materials and
2.
some of the plot sizes are more than 500m The settlement has encounted much to
arrive at its current state.
The settlement had a strong social cohesion which has been used for
development. The settlers had established development committees which played
a significant role in mobilizing human and financial resources to build roads and to
get access to water and electric power. The fundraising endeavour covered
different actors ranging from private businesses, government, para-statal and
NGOs. As a result, electricity and piped water services were provided for the
settlement in the period 1987 to 1989. The community paid for all of these services
through contribution and loans obtained from the better off residents within the
settlement.
Following the government change in 1991, the settlement has been integrated
into the city administration system with a Kebele status. This phenomenon has
engendered two trajectories. First, the pervious practice of plot allocation by the
Peasant Association was stopped and the modality of land transaction has been
changed to selling land by sub-dividing own plots. Since selling land is not allowed
by the law of the country, the transactions were carried out under the pretext of
selling an existing housing unit. As a result of such a transaction, the value of land
augmented from four Eth. Birr per square metre to about ten Eth. Birr by the year
2000 and over a thousand Birr per square metre by 2007. Second, new squatters
came to grabbed land on marginalized sites around the settlement.
Regarding titling there was a frequent demand from the settlers to get land
holding certificates since the settlement was incorporated as urban kebele in 1991.
Hence, residents who were able to produce supporting documents, including a
receipt for payments made in respect of land tax and services (water and electric
power consumption bills) and a kebele identification card were given a title. An
estimated number of 250 households had received their title certificates in 2006.
Issuing a title has now stopped and for those who have not received a title, it is a
huge concern.
Process of Participation
An active citizenship implies not only a citizen with rights and duties, but a
creator of rights in the process of construction of new spaces for political
participation. According to Anthony Giddens (1995), this notion is related to the
concept of reflexive citizenry, referring to a self-conscious civil society actively
engaged in the democratization of political and economic realities. Within this
conception, the first settlers in W orku Sefere acquired a new meaning, affirming as
a compulsory condition citizens' participation and a radical transformation of the
existing relationship between the state and civil society.
The settlers were well organized and demonstrated a collective action. Their
cooperative endeavours were demonstrated in the provision of infrastructure and
facilities; they contributed their labour, finance, organizational skills and knowledge
and established a neighbourhood policing to maintain security. They collectively
addressed their demand for the establishment of a kebele administration and later
silently protested against he relocation of the kebele office. Their bonding and
bridging social capital at the locality helped them in pulling skills and resources
from different governmental, civil society groups and individuals. W ith small size
the community had benefited from social cohesion and the settlers were able to
address problems rising from members.
Dilemmas in Incorporating Informality

Considering the magnitude and scale of the housing deficit and the lack of
concerted action or inadequate response of government agencies, there is no
doubt of the positive role that squatter housing plays in housing the millions of poor
families. However, the three cases have illustrated that the government opts for a
policy direction of formalization and does not value informality, since all informal
settlements (settlements allocated for urban renewal and upgrading based on local
development plans and squatter settlements in the outskirts of the city) will be
either demolished or regularized as per the city regulations.
The city government has two approaches to the dilemma of informality. These
are settlement upgrading and regularization. Both cases have been an object of
criticism. First, the approaches support standards that do not reflect the realities of
the majority of the population (the urban poor) thus becoming an instrument of
exclusion. Second, it inadequately fulfils the needs of the city and the society as a
whole, thereby being bypassed by the poor who invade the land or the middle
income group who purchase informal subdivisions and occupy land against the
recommendations of the master plan.
The other important challenge, in implementing formalization through renewal
and regularization, is to put regulatory mechanisms into place to make land
available through, for example, forced land extractions from destitute inner-city
areas and from illegal settlers, and land readjustment procedures. This requires a
strong political commitment and institutional capacity, as it directly impacts the
interests of all citizens since land is a public property.
In this regard, public participation in all steps of development planning and
implementation is vital. Consultation is a form of participation, which means very
different things to different people. Some may insist that consultation is a form of
co-determination in decision-making and a special way of negotiating and
compromising. Those who share this argument find themselves opposed by those
who insist that final decision-making is a legitimate business only for governments.
Therefore, the right to consultation is only a right to speak and to be heard and, for
that reason, it does not come along with any obligations for governments to
consider proposals. In this regards, it is not possible to discuses community
participation without acknowledging the role played by inhabitants’ their symbolic
and physical place where everyday life takes place. The existence of different
social relationship and perspectives on the territory makes participation particularly
relevant in urban planning and development.
From another angle, it could be argued that consultation can only be a
legitimate process, if participation is open in the widest possible sense, while
others would see no harm in limiting consultation to a narrow group. This can be
achieved as a result of the growing convergence of actors involved in the
management of public affairs and the increased awareness among citizens of their
rights, duties, and capacity to make decisions that can affect the citizen situation
(Rojas, 2010). Of course, one could argue here that ‘community participation’, in all
kinds of development and planning endeavour, is a complex activity. It is not
politically neutral and it demands the consideration of perception and interests of
the different actors involved.
If all the stakeholders are thoroughly informed at an early stage of the
proceedings this may give additional space for preparing their debate and in
accessing expertise or in consulting their constituencies. Releasing information too
late or keeping “the other side” unaware up to the last moment are tempting
strategies for governments, if they want to head towards low-impact consultation.
For most cases, it may be correct to state that the quality of consultation correlates
positively with the amount of time made available before a final decision is taken. It
is not only the amount of time, but also the phasing of decision-making which
matters.
Conclusion
Decentralization signals a departure from state-centric models of planning and
implementation to a more citizen participation based model. Through the
decentralization process of Ethiopia and given the crucial position of the W oredas
in the service delivery chain, the functional relationships between the W oredas and
the regional and Federal governments have to be strengthened and more clearly
defined. For decentralization to materialize and achieve the expected outcomes,
woredas need to obtain greater assistance from the regional and Federal
governments in terms of funding and capacity building. But the benefits of
decentralization will not be maximized unless other crucial groups namely;citizens,
the community and the users of the services, are pulled into the accountability
mechanisms. Ethiopia’s development framework PASDEP and the planning policies

have emphasized discourse regarding the spirit of citizen participation. Citizens are
acknowledged as playing a crucial role in mobilizing their communities, holding
local governments accountable, and accelerating the process of democratization.
One of the rationales for decentralization was to strengthen the role of citizens.
Within the decentralized system, the kebele council is the forum where citizens are
able to play a role in enforcing accountability of service delivery. However, the
research for this chapter revealed that the system is still evolving and initiatives to
further strengthen this formal channel of citizens’ participation should be welcomed.
When considering the informal settlements in Addis Ababa and the ways that
the city administration is following to address the problem, decentralization in urban
planning hasn’t brought any significant change. Addis Ababa’s land management
process has not been immune to the growing phenomenon of urban informality.
Empirical data has shown that urban informality in both inner-city and peripheral
areas of the city is characterized by their significance. As discussed previously, the
Addis Ababa City Administration has focused on upgrading and regularization in
addressing the issue of informality. When the two modalities are working together,
they are complementary. Informal settlers have been granted access to a serviced
lot that is reasonably connected to the city, environment for the dwellers to have an
opportunity to supplement their income, improve skills, and develop cooperatives.
Such collaborative endeavour can be considered as exemplary with respect to the
managing urban regularization and land tenure processes, as it bond the
inhabitants with opportunities available in their locality.
Hence, the best way of responding to informality has been identified as a
negotiation or co-optation process as this would result in forging cooperation and
partnerships that are ideal for dealing with associated challenges. The city
administration is undertaking redevelopment projects with the objective of
developing the inner-city which has also an objective of incorporating the dwellers
in the project. Thus regularization has been taken as a good option by the city
administration to incorporate the informal settlements at periphery.
Environment
Role Pluralism and Performance of Local Governments

on Solid Waste Collection Service Delivery:
The Case of Addis Ababa City

Mesfine Tilaye
Introduction
The scale and severity of environmental problems which are currently observed
in developing country’s cities mainly reflect the failure of governance. As every
urban centre has its particular mix of environmental problems, cities need to
develop strategies and local action plans for urban environmental management.
Different programs and methodologies 9 have been and are being developed to
assist cities to identify their worst problems and develop local means to address
them (WRI, 1996, UN-Habitat, 2002). In the search for efficient and effective ways
of running the state, and in response to demands from civil society and changes in
the international arena, governments and international aid agencies have
experimented over the past few decades with a number of administrative and
political arrangements. One which has been given much importance since the
1960s is decentralization. Although the term has unfortunately been given different
meanings in different contexts, over the past decade or so the most widely
accepted and frequently used interpretation of decentralization has come from a
public administration angle (University College London, 2002).
Decentralization is defined as the transfer of authority (power by law), transfer
of responsibility (roles and tasks), for specified public functions, and transfer of
resources from higher level of (central) government to a lower level or from higher
level of government to a subordinate or quasi-independent government
organizations or private sector (Rondinelli, 1999, Rondinelli et al., 1989). The
theory behind decentralization is that people will solve problems better at the local
level, if they are allowed to do so. Indeed decentralization may help to improve the
level of environmental services; however, it is also possible that it may deteriorate
the level if the proper institutional reforms are not implemented and the direct link
between improvements in the service delivery and decentralization is not
established (Klugman, 1994).
Among many urban challenges, the poor solid waste management system in
Addis Ababa is the main problem. According to a study by Mesfin (1996), solid
waste is ranked top of environmental problems in Addis Ababa. This had initiated
various transformations to overcome the service delivery problem. The reasons for
reform are both administrative and economic: they range from accommodation of
local demands for greater autonomy, to the desire to increase private sector
participation, in the improvement process of urban service delivery.
This study evaluates whether the existing reform (institutional pluralism
strategy) created conducive environment for local governments and improved
accountability per se within the public sector domain (from the supply side). Studies
underwent so far concerning accountability of urban service delivery focused: from
9
The Urban Management Program (W orld Bank/UNDP/Habitat), The Sustainable City Program
(Habitat/UNEP), The Metropolitan Environmental Improvement Program (UNDP/W orld Bank), Healthy
City Project (W HO), Manual for Urban Environmental Management (GTZ), Numerous NGOs are also
forming information exchange networks.
participatory perspective, Goetz and Gaventa (2001), Boaden (1982), Plummer and
Slater (2001); attention is paid to the relationship between service providers and
users by Cavill and Sohail (2004); accountability for urban services that focuses on
users’ decision-making by Paul (1992), W orld Bank (2004a).
The objective of this study is to assess the performance accountability level of
local government, driven by decentralization reform in the Addis Ababa city solid
waste collection system. Given the above objectives to SWC function, various
stakeholders have prevailed in the sector; roles are also becoming many in type
and functions have been distributed among the emerging stakeholders accordingly.
This redistribution of roles and functions to the various stakeholders was
necessarily urged the reorientation of institutional set up to effectively achieve the
desired objectives.
Institutional pluralism as a decentralization strategy was taken as a framework
of analysis. The research was intended to shed light on the accountability level of
local governments as it is theoretically argued that institutional pluralism enhances
accountability levels, using the various underlining indicators within the realm of
central-local relations: task specificity and the task environment. Thus, this
research presents findings from such a test, based on the results of surveys
conducted at local government level. These findings are supplemented by a review
of relevant legal and policy documents, key informant interviews in the field, and
review of other studies and data.
The study tried to test theoretical hypotheses; the effects of decentralization on
accountability of the local governments, taking the impact of selected institutional
factors on solid waste collection service. The hypotheses tested in this research
are: 1. Reform process (decentralization) took place in Addis Ababa improved task
specificity of local governments in solid waste collection service delivery; 2.
Administrative decentralization under institutional pluralism improved the task
environment of local government in Addis Ababa solid waste collection service
function.
Literature Review
Decentralization is defined as the transfer of authority (power by law), transfer
of responsibility (roles and tasks), for specified public functions, and transfer of
resources from higher level of (central) government to a lower level or from higher
level of government to a subordinate or quasi-independent government
organizations or private sector (Rondinelli, 1999, Rondinelli et al., 1989). The
theory behind decentralization is that people will solve problems better at the local
level, if they are allowed to do so.
Decentralization can also be defined from a public choice perspective. The
general basic definition is that decentralization can be regarded as a situation in
which public goods and services are provided primarily through the revealed
preferences of individuals by market mechanisms (Rondinelli, 1989).
Decentralization can be either horizontal or vertical. Horizontal decentralization
disperses power among institutions at the same level while vertical
decentralization, which is more useful, allows some of the powers of a government
to be delegated downwards to lower tiers of authority (UNDP, 1993). According to
Wettenhall (2003) there is a sense of a serious split between two types of
decentralization arrangements. In the first, the relationships between the
participating parties are essentially horizontal (non-hierarchical), with consensual
decision-making, all parties are directly involved in the action, and there is no
single superior capable of invoking closure rules. In the second, the relationships
are essentially vertical (hierarchical), with one party superior to all others in a
controlling sense, acting through the others rather than as a direct participant in the
action, and able to close unilaterally. The implication is that the true
decentralization will involve horizontal relationships (W ettenhall, 2003).
Basta (1999) briefly categorized decentralization, in to two separable but
closely linked themes: (i) intergovernmental process, i.e. decentralization of
governance between levels of government from central to local (ii) deregulation, i.e.
decentralization from government to market, quasi-market, and non-governmental
organizations.
Memon et al. (2006) note that, reforms to improve urban environmental
management can be identified in two categories. The first category covers broad-
based reforms to bring improvements in governance at the local level. Reforms on
decentralization are targeted to improve accountability and effectiveness of local
governments in all sectors. The second category includes sector specific reforms
for water, solid waste, and air. Decentralization at this level is specifically targeted
to improve the quality and coverage of the services and level of environmental
protection. Therefore, decentralization clarifies the role of service provider,
regulator, and consumer.
Since the 1950s, a large body of academic, professional, and conference
generated literature has emerged that seeks to address the various forms, types,
and strategies of developmental decentralization. Unfortunately, many of those
contributions have shown outright indifference to building agreed-upon,
comparative frameworks and concepts. As a result, both written publications and
conference discussions on decentralization are marred by conflicting conceptual
definitions, careless application of principles, and unsystematic presentations
(Cohen and Peterson, 1997).
Because it has several dimensions, appropriate extent and the forms vary
across countries and its implementation takes considerable time, decentralization is
a difficult phenomenon both to design and to study. This problem is compounded
by the tendency of disciplinary specialists to compartmentalize decentralization.
Economists focus on fiscal and economic development, political scientists focus on
intergovernmental relations, local elections and accountability mechanisms, and
public administration experts work on institutional structures, processes and
procedures (Ibid). Despite the great attention paid to decentralization in the past
two decades, we still know too little about the impact various decentralizing reforms
have had on the service outcomes in the social and urban sectors (Gershberg,
1998).
Decentralization is therefore commonly regarded as providing an opportunity for
improved coordination between closely related areas of administrative
responsibility to ensure consistency among the policies of different agencies, to
prevent wastage and duplication of effort and to ensure integration when a
programme requires inputs from a number of agencies as is often the case in urban
development activities (Smith, 1993).
One of the strategies of decentralization as noted by Smoke (2003), it is not
necessary to turn over all constitutionally or legally mandated responsibilities to all
local governments immediately. Reforms with the greatest possibility of working
effectively in a relatively short time frame could be undertaken first. This requires
prioritisation of simple sectors, tasks and revenues that don’t immediately threaten
in a significant way the tolerance of the central power base or overwhelm local
capacity. Andrews and Schroeder (2003) state that a service sector is more prone
to be decentralization if:
• Local demands for a service differ across localities;
• There are no substantial economies of scale associated with the service;
• There are no substantial spill over of costs or benefits from the service;
• The service is amenable to at least partial local financing through taxes or
charges;
• Local governments have the capacity to deliver the service;

• The service is not meant to provide substantial redistribution of income or
wealth.
Van Dijk (2006) notes in order to establish to what extent functions and
responsibilities have been decentralized within the organization, it is imperative to
examine the decisions that are likely to be taken within the local governments. The
same author argues that, “The formulation and implementation of policies with
respect to the urban environment” is one of the issues to be placed at the level of
urban manager. Decentralization in different countries could have different levels of
execution.
Van Dijk (2006) also described that for decentralization in the case of Indonesia
the results were not yet clear. In India, decentralization provides a lot of
opportunities for urban managers, while urban management in Thailand has to work
with very limited responsibilities. The successes of decentralization for urban
management depends on a number of factors these include:
• The historical background and the history of decentralization processes;
• The type of functions and responsibilities that have been transferred;
• The extent and to what level of government these responsibilities have
been transferred;
• The fact whether implementing legislations are provided;
• Whether financial means are available to make decentralization a success.
Local governments play a significant role in environmental management through
their activities such as waste collection, disposal and recycling, development
control, sewage treatment, drainage management and community education. This
means that since they are closer to the problem, to use them as institutional
decision unit serves as a well focused strategy without running the risk of a
heterogeneous policy structure with many horizontally organised planning agencies
(and related competence questions), may enhance the institutional effectiveness of
environmental governance (Finco and Nijkamp, 2001). Decentralizing services do
not have to be uniform across all local governments in a country. There may be
different service requirements in different locations. Likewise, perceived differences
in the technical and administrative capacities of local governments can result in
differential assignments of service responsibilities (Andrews and Schroeder, 2003).
Intra-municipal decentralization of big cities aims to meet the problem of the
decline in involvement and efficiency. Public services and facilities are tailored to
local needs by bringing them within easy reach of people and by competently
taking local situations and conditions into account. The involvement of citizens
means a more legitimate administration, since this involvement in the policy-making
process can turn in to participation and result in integration (Basta, 1999).
The design administration and governance of solid waste service delivery have
crucial implications for efficiency, effectiveness and sustainability. This suggests
the real goal of reform efforts called ‘decentralization’ leading to improved
outcomes in service provision (Gershberg, 1998). Cohen and Peterson (1997),
describe the key to breaking the monopoly of central design lies in the sharing of
roles related to the execution of specific public sector tasks, such as the provision
of refuse collection and disposal in urban areas. It is the sharing of roles at central
and non-central levels that is the hallmark of a transition toward the more
devolutionary forms of Distributed Institutional Monopoly and Institutional Pluralism.
Theoretical Perspectives
Analytical framework for decentralization reform is crucial in analyzing various
decentralization strategies. In the past and even now the approach used by
Cheema, Nellis, and Rondinelli (1983), has been asserted and the most widely
accepted analytical framework is generally known as the Type-Function

Framework. This Framework is particularly important because it contains basic
definitions of the forms of decentralization (political, administrative and economic)
and the three types of administrative decentralization: deconcentration, delegation
and devolution.
However, during the 1990s it became increasingly clear that the Type-Function
Framework failed to fully address important reform design issues. Among several of
its shortcomings are Cohen and Peterson (1997): the Framework considers the
administrative decentralization as end-states and to give inadequate attention to
process, institutional and organizational linkages and collaboration is largely
neglected, failure to stimulate a focus on roles, linkages, coordination, and
resources .
“The new Framework”, which is advocated by Cohen and Peterson (1997)
labelled as the “Administrative Design Framework”. This Framework is based on:
• The growing trend to find ways to reinvent or re-engineer the public sector;
• Principles drawn from the background of various theoretical literatures;
and
• Promoting economic growth, addressing financial incapacity of the state,
reducing the spatial concentration of development, and promoting
bureaucratic reform.
Further “Administrative Design Framework,” seeks to assist decision-makers to
(Ibid):
• Strengthen local-level governance, increase transparency and
accountability, and improve governmental performance; and
• Break the “monopoly of central control” and find innovative ways to allow
local level associations and firms to produce and deliver public goods
and services.
The Framework examines administrative design in terms of the concentration of
organizational and institutional roles that implement public sector tasks. At the
heart of this new approach identifies three administrative design strategies, which
are defined by how concentrated roles are: Institutional Monopoly, Distributed
Institutional Monopoly, and Institutional Pluralism. Of these three types the most
innovative is Institutional Pluralism(Cohen and Peterson, 1997).
• Institutional Monopoly, or centralization, is where roles are concentrated at
the spatial centre in an organization or institution;
• Distributed Institutional Monopoly, or administrative decentralization to
local-level governmental institutions or private sector firms and
organization through deconcentration, devolution, and/or delegation, but
where roles are distributed spatially and concentrated in one organization
or institution; and
• Institutional Pluralism, or administrative decentralization through
deconcentration, devolution, and/or delegation, but where roles are shared
by two or more organizations or institutions, which can be at the spatial
centre, distributed, or a combination of both.
Institutional pluralism strategy allows for a mix of central, non-central, and private
sector relationships for implementing a given public sector task. As such, it
addresses major failings of past decentralization efforts and meets the new
economic and political problems of the 1990s and beyond (Cohen and Peterson,
1997). It does this by:
• Identifying and focusing on the roles required to effectively and efficiently
carry out a particular public sector task;
• Allocating those roles among an appropriate and changing mix of central,

non-central, and private sector institutions and organizations so as to
maximize the complementarities among these levels, in most cases
increasing the amount of delegation and strengthening trends toward
devolution;
• Recognizing that devolution, deconcentration, and delegation can occur at
the centre as well as in the periphery; and
• Raising the level of accountability through increasing the means and the
number of actors operating at similar and different levels and carrying out
roles relative to the task.
It is difficult to promote “improved SWM” in Addis Ababa city marked by more
than 30% of the population is in absolute poverty, inadequate recurrent budget
resources for equipment supplies, and passive, frequently poor and un-empowered
urban populations. Based on the 2000 W elfare Monitoring Survey (WMS), 36.2%
households in Addis Ababa were found to be living under the poverty line. Under
such adverse conditions, government decision-makers should consider the
administrative strategy of Institutional Pluralism, largely because it provides
innovative ways to maximize the actors and means required to generate
accountability. Taking this reality in to account, therefore, institutional pluralism
adopted as analytical framework for this research.
Table 26: Addis Ababa Solid Waste Collection and its Pluralistic Nature
Function Major roles/responsibilities
Financed by Regulated by Operated/Implemented by
Primary solid User; local government ; Micro-enterprises;
waste collection Public city government; Community;
service delivery sector; CBOs ; Community. Individuals;
NGOs. Small enterprises;
Local government.
Institutional pluralism and Performance Accountability

As noted by Cohen and Peterson (1997) accountability is promoted by task
specificity and the task environment /resources in terms of means. The key means
for promoting accountability are: political and legal oversight, institutional
competition, and administrative mechanisms. Significantly, these means vary in
robustness. The most robust and important sources of accountability are external,
particularly political oversight and laws. Administrative mechanisms and
institutional collaboration are the least robust means of promoting accountability.
This is because they are relatively complex and managerial intensive.
The level of accountability required is a major factor in determining whether the
administrative strategy selected will be based on monopoly, pluralism, or a
combination of the two. The higher the accountability the more institutional
pluralism strategy is expected to be implemented (Ibid). We highlighted the
situation of decentralization that took place in the study area with the suggested
criteria of the framework from service provider (supply side) perspective. In this
case maximum accountability is the desired objective of good governance. So,
assessing the accountability level of local governments from the supply side is the
concern of this study.
Conceptual Framework
Institutional Laws
Cooperation
Level of
The Task Accountability
Level of Environment
Resource
Administrative
Political System Mechanisms
Task Specificity
Figure 10: Analytical Framework for Administrative Decentralization.
The indicators build on Cohen and Peterson and VanSant 10 and other literatures
are used. Thus the indicators addressing the task specificity and the task
environment and the corresponding detail factors considered for this research to
evaluate the accountability level of local government are put as follow:
Table 27: Features of Indicators

Features/Criteria Indicators Factor
Task specificity Role distribution Role vs. available resource

Role clarity Clarity of role, power and right
Task Existence of effective Coordination of Local Parties
environment institutional collaboration Distribution of Functions and Authority
(Means) Institutional Capacity of Local
Government
Availability of proper Degree of Transparency

administrative mechanism Incentive
Compliance with Rules
Stakeholder Participation
Monitoring System
Availability of the required Regulatory Law
laws and regulations Enabling Legislations
Enforcement Mechanisms
Availability of supportive Commitment of Leaders
political system Effective Local Political System
Strategies on the Reform process of Solid Waste Management

Decentralization as emerging view of public sector reform either delegating all
aspects of specific tasks or playing a reduced range of roles in regard to their
execution has been especially endorsed by neo-classical economists in such aid
agencies as the W orld Bank and the International Monetary Fund. The thrust of
10
According to the Stewardship Principles advocated by VanSant (1996) within the system of
traditional approach local leaderships are tuned for competition where as under stewardship approach
they are supposed to function with the essence of strategic alliance/ cooperation. Performance
measure principles treated under traditional approach with the concept of professionalism and
standards under stewardship approach treated as Stakeholder participation.
their position is that the objectives of the public sector should be transformed from
producing and providing all aspects of collective goods and services to more limited
objectives such as: (1) carrying out only the most essential public sector tasks; (2)
leveraging private sector firms and organizations to carry out role components of
non essential tasks; and (3) protecting the public by monitoring the performance by
private sector firms and organizations charged with carrying out all aspects of a
particular public sector task or particular roles related to a given task. In poorer
developing countries this prescription is increasingly being given teeth through
conditions in structural adjustment programs.
Recognizing the importance of decentralization African states through Africa
Local Government Action Forum (ALGAF) in which Ethiopia is a member declared
st
on “Challenges Facing Local Government in Africa in the 21 Century”, resulting
from the international conference held in Victoria Falls, Zimbabwe, during
September 20-24, 1999. 11 Key parts of this Declaration are Decentralization should
be to local government structures; which are representative of and accountable to
all sectors of the local population, which enable effective community participation,
provide services for the local population efficiently and effectively, develop and
manage local resources in a sustainable manner, and enhance provision of access
to the resources needed to execute the allocated powers and functions efficiently
and effectively with the ultimate objective of improving the quality of life of the
people
In line with the above notions, the city Administration of Addis Ababa, which
was mandated to administer the city from January 2003 until September 2005, as
an interim arrangement until the 2005 election, had launched an administrative
decentralization immediately after embarked on power. This in turn led to the
formation of 10 new sub-cities or locally identified as kifle-ketema and the sub-
cities further divided into 99 Kebeles aiming at effecting and empowering the urban
management system at grassroots. Consequently, the reforms encompassed the
reorganization of the existed administration structures of public institutions, taken
for grant in order to lubricate the institutional fabrics on the way to sectoral
decentralization. The outcomes of the reform included reorganizing of the existing
institutions and the creation of new ones.
The structural reorganization process, like in the other service sectors, entailed
the decentralization of waste management services. This, in turn, paved a way for
a move from centralized to a relatively participatory waste management activity.
This situation, therefore, allowed an increased participation of the local
governments, private formal sector, informal sectors, community based
organizations (CBOs) and non-governmental organizations (NGOs) than they used
to be.
There are three ways decentralization of Addis Ababa solid waste collection
function underway: Vertical decentralization 2) Horizontal decentralization and 3)
Quasi-deregulation
• Vertical decentralization took place devolution of powers and authorities
from the city level government to the sub-city and kebele level of local
government bodies.
• Horizontal decentralization is the delegation of various responsibilities to
the public servant offices to advance participatory approach.
• Quasi-deregulation is the transfer of some tasks to be governed based on
market like principles.
11
Endorsed by the Ministers and Heads of delegations from Botswana, Ethiopia,
Gambia, Ghana, Lesotho, Malawi, Mozambique, Namibia, Nigeria, South Africa, Swaziland,
Tanzania, Uganda, Zambia and Zimbabwe.
Research Strategy
Testing the Hypotheses

The study on decentralization set out to test two hypotheses. The first is that
decentralization reform process took place in Addis Ababa improved task specificity
of local governments in solid waste collection service delivery. The second
hypothesis is: Decentralization under institutional pluralism improved the task
environment of local government in Addis Ababa solid waste collection service
function. These hypotheses are tested, taken the background and process of the
decentralization process in the city and the urban governance strategy set by the
city government. Currently solid waste collection system in the city has the
orientation of institutional pluralism.
Definition of Indicators
We propose several indicators related to the research issues and variables to
test the hypotheses. The indicators build on Cohen and Peterson (1999) and
VanSant (1996) works. Indicators are proposed in two sets. The first set relates to
the role distribution and task specificity in central-local relation. The second set of
indicators relate to criteria to evaluate the task environment of local governments,
given the available means (political system, administrative mechanism, institutional
cooperation and regulatory issues).
Research Methods
We obtained data for the study both from secondary and primary sources.
Primary data collection involved both quantitative and qualitative techniques. The
combination of different approaches and techniques enable clear insights into the
delivery of basic services (Van Dijk, 2004) stated in Adjei (2007).
Secondary Data Collection

Data were collected between October 2008 and July 2009. Secondary methods
of data collection consisted of review of research reports, government official
records, project documents, operational manuals, reports of different kinds.
Monthly, bi-annual, and annual publications of the aligned institutions are taken as
sources. Secondary data provided us with a basis to review and re-consider the
whole research process.
Primary Data Collection

Key informant interviews using open ended questionnaires were the source of
data. Focus group discussion with household group, NGOs, and the private sector
was held. The interviews and focus group discussion were preceded by a
reconnaissance visit. We used survey questionnaire to obtain primary data from
local government bodies.
Quantitative Data Analysis

Before, starting the research, decision was made on the measurement scale to
be used in quantifying the responses. Responses were gathered and given a score,
which varied from 1 to 6. A statistical analysis was performed on the complete set
of 36 items. The appropriate statistical methods for analyzing the data depend on
the measurements scale were chosen. An ordinal scale of measurements was
used. An ordinal scale is one in which the values used are interpretable only in
terms of their arrangement in a given order. Descriptive analysis was made for
some variables. For categorical variables the frequency distribution together with
the study of correlation in each category was made.
Result and Discussion

The level of accountability required is a major normative criterion in determining
the type of administrative strategy in function. In the case of Addis Ababa urban
development policy pluralism is explicitly the alleged package of the government
strategy with the theoretical assumption of high accountability. So, assessing the
accountability level of local governments to prove as said whether institutional
pluralism improved the accountability level at the local government level is the
concern of this study. The research evaluates accountability of solid waste
collection function at local government level from service provider perspective
(from supply side). The level of accountability as per the essence of the framework
is determined by: (1) the degree of specificity of the task; and (2) the level of
resources, in terms of means, that characterize the task environment.
Task Specificity
Empirically to assess the task specificity at local government level in this part
the following issues were considered:
• Roles vs. allocated resources;
• Clarity of role, power and right of the local government.
During the interview with Solid waste management business process owners at
local government level, whether the roles and responsibilities allocated to them in
line with adequate resource; partially they believe that there is a tendency for local
government to make self decision on resource, however resource inadequacy and
inability of local government to act in mobilizing resources constrained them.
Significant amount of the local government units in the city are reluctant to accept
the presence of adequate resources.
Figure 11: Role vs. Available Resource Compatibility for Local Governments as Expressed by
Local Governments
Role and resource of local government
20
15
Frequency
10
0
Disagree Neutral Agree Strongly agree
Role and resource of local government
Indeed tasks are decentralized and much of the works have come down and
people are assigned according to their educational capacity which was not there
earlier. Eight professionals and twenty one street cleaners were assigned, to each
local government/Kebele unit which used to be carried out by one person earlier.
The survey revealed (see above figure) that though there are some
improvements in role distribution there still remains a lot in allocating and
mobilizing of the required resources to have independent decision at local
government level. Regarding Clarity of role, Power, and right of the local
government there is a real shift in Power, right and duties from the city government
to the local government level as can be seen from (the following figure). Interview
result from local governments indicates that role sharing has improved although
respecting of roles to one another shows less effect under practical conditions.
Figure 12: Clarity of Power, Role and Duty as expressed by local Governments.
Clarity of power, role and duty
25
20
Frequency
15
10
0
Disagree Neutral Agree Strongly agree
Clarity of power, role and duty
The Task Environment

Institutional pluralism as a strategy to improve the task environment is an
imperative situation to overcome the inadequacy of financial resources and the
limited capacity in terms of means and actors especially at local government level.
The key means taken for promoting accountability are: political and legal
oversight, institutional collaborations, and administrative mechanisms. As
described in the theoretical framework section, to get more insight about the means
influencing accountability level of local government detailed indicators and factors
are considered under each means of resource.
Institutional collaboration and Coordination of Local Parties

The underlying factors considered to explore the issue of Institutional
collaboration for this research are: coordination of local parties, distribution of
functions and authorities to local parties and the institutional capacities of local
governments.
The solid waste collection service delivery was facilitated through collaboration
of government offices found at different levels. According to the solid waste
management policy, the city integrated solid waste collection is performed with
various responsible institutions both horizontally and vertically assigned to work in
a collaborative manner. The city government delegates various agencies to work
on the technical aspect of solid waste management. The agencies further
deconcentrate technical issues down to sub-cities and kebele levels based on the
assumption and expectation that those deconcentrated activities could be well
managed by their line teams and coordinators in collaboration with their respective
local government. Moreover the city government administratively devolved its
authority vertically to local governments; the sub-city and kebele level. The Kebele
administration is the lowest administrative unit of government structure. Local

governments are mandated to collect waste from households and small business
institutions through organized waste collectors (micro-enterprises) in the locality.
Table 28: Correlation Co-Efficient of each of the Scale Items with Summated Score
Factor Item Correlation
coefficient
Coordination of Link of formal local government with other key local 0.62
Local Parties actors
Collaboration among different levels of government 0.48
offices
Involvement of informal and private sectors 0.71
Distribution of Autonomy of local government to define and execute 0.56
Functions and its program
Authority Autonomy to set priorities, operational practices and 0.71
procedures
Flexibility to local adaptation 0.60
Institutional Enabling structures to local government staffs 0.47
Capacity of Local Working relationship within local government offices 0.61
Government Capacity of local governments to manage SWC 0.55
As can be seen from the above table, the vertical relationship between the
agency and local government is weak although there are some ties. It was
indicated that there is a loose relationship between the agency and the sub-city,
the agency designs format for sub-cities to be used but never monitors the way it is
applied, and also there is no permanent reported relationship between them. The
local government (Kebeles) relate with the Sub-city and the Agency indirectly
through the local government administration.
Distribution of Functions and Authorities

There are number of cases that have agency based decisions. The Kebeles
have the authority to buy things that requires few budget lines. Indeed, there is
variation among local governments. Although local governments are in a better
position in setting their priority and operational practices they cannot act as
required. They are not in a position to plan and prioritize their operation as per their
wishes as they do not have determinant resources. Local governments lack
flexibility and confidence in implementing their powers based on local situations.
Their expectation is still from top down.
Institutional Capacity of Local Government in Managing Solid Waste

Collection
With interviews from local officials, they revealed that they do not have enough
waste bins, trucks to transport the bins, office facilities. Some local governments to
minimize these problems correspond with NGOs who provide material support so
as to build the capacity of small and micro enterprises. Local government staff are
less empowered and inspired by organizational structures and procedures set at
local government level as can be seen from the above table. Moreover, there is not
sufficient manpower assigned to take the rules and the guidelines forward that are
in place.
There are inherent problems related with solid waste management, problems
like the stigma surrounding the job and the people who are working on it. This
situation still exists within the percept of the local government officials to provide
sufficient attention for the sector.
Administrative Mechanisms
Administrative mechanism is one of the four means taken as vital by the
framework in bringing the required accountability level of local governments.
Various factors are seen under this resource such as: incentive systems;
compliance with rules and regulations; stakeholder participation; and monitoring
system.
Incentive
Availability of the right skills mix as an incentive encourage doing things in the
right way and to do them correctly, as can be seen from the following table, this
has made less contribution in Addis Ababa solid waste collection system at local
level. There has been an argument that in some local governments there were not
enough skill mix as required but there is good initiation and capacity among the
workers. In some cases it was observed that, although the workers assigned have
high initiation and enthusiasm local integration and enabling environment that is in
place are poor.
Table 29: Correlation Co-efficient of each of the Scale Items with Summated Score

coefficient
Incentive Integration of local government institutions to create 0.59
enabling environment
Availability of the right skill, mix, as incentive 0.47
Compliance Motivation level of local government 0.67
with Rules To exercise and act in the spirit of policies 0.69
Stakeholder Participation of the community 0.64
Participation User assessment 0.66
Incorporation of user perspectives in planning 0.58
Monitoring Existence of check and balance mechanisms 0.73
System Application of performance measurement to local 0.64
governments
Utilization of output indicators 0.65
Availability of binding contract for managers performance 0.52
Compliance with Rules and Regulations

Local governments are mandated to implement various policies and strategies
that are coming from the centre. These include health policy, environmental policy,
urban policy, land and housing policy, poverty reduction strategy etc. But they do
lack in-depth knowledge and directions of different policies, strategies and
guidelines stipulated by various agencies in discharging their responsibilities
according to the policy spirit/framework of respective body.
Line bureaus neither consult local government during the development of their
respective policies and strategies nor request their views before the approval/
finalization of the rules and regulation. They focus on meeting their mainstream
objectives irrespective of problems encountered during the implementation of the
process at local government level, under such circumstance local government
workers loss their focus in due course of time.
All interested parties attempt to influence the process of decentralization
according to their own mainstream target which in turn could have significant
impact on maintaining the equilibrium of the system (Bennett et al. 1999).
Stakeholder Participation
There are cases at local administrations level that made the community
participate towards commercially oriented service provision systems. Like the
participation of private micro-enterprises in the solid waste collection system. This
happened in different forms; i.e., the community or neighbourhood operates its own
primary collection scheme by using unemployed and/or street people from within or
outside of the community, and/or the population will have to partly carry out the
work itself. This means that those who cannot afford to pay in cash for micro-
enterprises can be provided with municipal skips within their reach in order to
facilitate free access to dump their household wastes by themselves.
Based on interviews there is a minimum participation among the poor in priority
setting. People who live with a low standard of living in the community are
approached through the representatives of community based organizations
(housing association, Idir,) and NGOs. During the focus group discussion there
were signals of civil society participation in alleviating local constraints with regard
to Solid W aste Collection service delivery. There are many formally organized
institutions that facilitate and support civil society participation. A resident council
committee is represented in the kebele. This committee has permanent members
representing the communities to reflect the interests of the community (users)
indeed this made problem of direct community participation. Moreover Local
Governments use various methods to consider the opinion of the service users.
Though the application as feedback is questionable, in every public service offices
customers are invited to give their suggestions and drop them in the suggestion
box.
Monitoring System
Monitoring has been undertaken both from supply and demand side. Service
users’ deviant behaviours are monitored by local governments. There are
structures such as the code enforcement office that takes measures against
violators/abusers; Different levels of punishments for various target groups are set
i.e. households, commercial centres, industries and service centres etc.
Regarding the supply side local governments measure the performance based
on plans versus accomplishment through check and balance mechanism. Appraisal
charter format is developed for each work process at the local level based on each
process to be appraised on daily, weekly, and monthly basis. The outcomes are
measured depending on the preset plans, indicators, goals and objectives.
Although the public managers’ specific task is not explicitly stated in relation to
accountability, they are evaluated by resident council of the kebele who are elected
by the community to represent the community in the kebele.
Legislative Mechanisms
To address legislative mechanism different factors are considered, such as:
availability of sufficient regulatory laws at local government level, enabling
legislation, and the existence of enforcement mechanisms.
Table 30: Correlation Co-Efficient of each of the Scale Items with Summated Score

coefficient
Regulatory Law Guideline availability 0.59
Application of rules and regulations 0.66
Enabling Legislative domain and institutional interaction of LGs 0.62
Legislations Level of independency in terms of legislation and 0.65
regulation
Non conflict environment between objectives of LG 0.67
and regulations
Enforcement Enforcement capacity of LG on laws and regulations 0.62
Mechanisms Penalizing capacity of violators 0.60
Authority to develop enacting complementary 0.48
regulation
Regulatory Law
Legislation in Addis Ababa typically decentralizes some components of solid
waste management service provision while centralizing others. Addis Ababa’s 2004
solid waste management regulation makes sub-cities and Kebeles responsible for
planning, implementation and management of primary solid waste collection. Other
components relevant to solid waste management tend to be centralised because
they are considered critical to attaining central goals. These components include
secondary collection; final disposal and land fill management.
The AASBPD Agency was assigned at the city level to ‘oversee’ local
government until local capacity was developed. However in some cases
discrepancy between formal and actual decentralizations is observed in Addis
Ababa solid waste collection. W hile legislation reserves significant service
provision components for local governments, the city government at the central
level still enjoys an influential role overseeing sub-cities and Kebeles. Thus, while
legislation specifies a high level of decentralization in planning, operating and
maintaining solid waste collection service facilities, the activities are often actually
quite centralized.
To what extent is a function devolved? A purely de jure answer to these
queries, based on applicable legal and policy documents, will not suffice. Formal
arrangements only partly determine practice; hence other factors must be
examined in order to judge the extent of de facto devolution.
Differences between normative, institutional and de facto models emerge
because of a variety of influences related to decentralization structure and public
sector reform. It is these other factors that have great influence over the nature of
de facto service assignment within key sectors. The bulk of these factors are
‘institutional’ in character, reflecting decentralization tensions in established
governance structures. These include bureaucratic politics and capacity constraints
(Andrews and Schroeder, 2003).
Technical manuals for solid waste management in Addis Ababa city were
developed by the agency and these technical manuals are supported by BPR
principles to be converted in to working manuals. These synchronized technical
documents are not well supported by updated guidelines that facilitate the working
process to be effective, this means that although the business process
reengineering is underway the guidelines are not in line with the new BPR
approach.
The guidelines are not flexibile and simple. The guidelines give emphasis for
main stream activities while coordination and collaborations left as de-facto as their
implementation at local government level is hard as the system needs coordination.
Enabling Legislation
Legislative domain of Local Governments and the extent to which they interact
institutionally with the other stakeholders is less stated and lacks clarity. The
developed manuals by the agency say nothing about the relations that could exist
between the integrated solid waste management work process and the kebele
executives. The Kebele executives are the decision making body of local
government. Although the developed manuals overlooked the relationship that
should exist with the kebele executives, the reformed work process by BPR has
now created a conducive working environment in such a way that the solid waste
management work process works in collaboration with the health office, code
enforcement service, and liquid waste department of local offices.
There are structural stressors to implement a legislative domain of LGs as
structures are not supportive to ease implementation of stipulated rules and
regulations. Harmonizing these different regulations for local government is a
difficult task, because they do not have enough resource to compromise and
handle all these issues that are within their capacity.
Given the mandate the trade and industry bureau is responsible to organize and
provide licenses to the micro enterprises, it does not communicate on the formation
of the MEs and makes the control mechanism difficult. Furthermore there are no
plans in relation to secondary waste disposal sites, dumping site (it is only Repi
site for the whole city), transport routes, transfer stations, and bin sites in the city,
which negatively impacted institutions to fulfil their roles and responsibilities
according to the stipulated laws and regulations.
In addition there is a problem with the working process of local government.
Although efforts are made to avoid potential conflict between the objectives of the
local government and legislation that regulates its activities, it is difficult for local
governments to create a conflict free environment, due to on one hand legislations
are coming from different sources and on the other there is a charter developed by
the agency to serve as a framework for local government to develop
complementary local legislations. The problem here is that the principles of local
government and upper stream government do not reconcile.
Enforcement Mechanism
Enactment and even application of Solid W aste Management (SWM)
regulations are not in a position to ensure that all appropriate steps are taken to
minimize the impact of SWM on the environment and public health in Addis Ababa
city. Good practices and standards are yet to be promoted to play supportive roles
for the enforcement of rules in the guidelines. In essence, they are less
incorporated in the action and interplay of the basic system components.
The Kebeles are still in line with the spirit of all written laws and regulations
despite their low implementation level as local contexts are not properly addressed.
Further more local leaders are reluctant to implement the regulation effectively,
especially at punishment level. Local governments have the authority to enforce
laws and regulations but they have capacity problems. Local officials want to by-
pass things by giving temporary solutions or pretexts and they actually do this by
discussing with the violators. The thoughts behind this are: 1). The fine if realized
will be beyond the capacity of the violator, 2). If they take the right measures, they
fear loss of social ground in the community; this has encouraged the violation to be
repeated at times. Moreover the fine collectors are not available in place when the
violation is committed to instantly fine the violator and execute the process. The
violator may not necessarily be a dweller in the local area, which provides him with
an opportunity to escape. More over the procedure of taking the violator to a code
enforcement body is lengthy. The delay discourages the workers as others did not
learn from their actions in the shortest time possible.
Though responsibility of enforcing the regulation is imposed on the sanitarian
and sanitary guards within the solid waste management main work process, the
punishment is undertake by the code enforcement bureau which has a different
work process. The enforcing mechanism is likely to be stronger with the new
reforms application of neighbourhood guards and establishment of courts for urban
affairs. People who have violated rules and regulations are punished by the social
court at the local government level, however, the social court doesn’t give good
sentences as per the law, this in turn makes people who are in charge and
presented with the case uncomfortable. Some local governments argue that given
the conditions and realities on the ground, it is unfair to use legal measures where
they are not in a position to fulfil the necessary and required conditions for the
people like availability of waste bins within a certain distance to users.
In developing enacting complementary laws at local level, dependency on upper
government body was high for such matters in earlier times. There is a new
structure formed in the local government offices to deal with such matters. The
speaker of the house of the local government and Federation Council are recently
established systems to facilitate such things at local government level. This is
currently considered and highly promoted in the manual that local governments are
responsible to handle such cases. However, as seen from athe pevious table, there
is not enough potential at local government level to do so.
Political System
Effective political system is one of the resources used to enhance better
accountability of local government units. The factors used to assess the
accountability level are: availability of committed leaders and the existence of
effective local political system.
Committed and Capable Leaders and Effective Local Political

System
There are committed and capable leaders whose capacity is enriched through
experience sharing among local governments although there are some that lack
awareness and readiness to be consulted on the issue of solid waste management
in Addis Ababa city. The local governments try to respond according to the needs
and preferences of the local community. Although the readiness is there the
responsiveness is not as expected.
Table 31: Correlation Co-efficient of each of the Scale Items with Summated Score

coefficient
Committed Leader Availability of committed and capable leader 0.80
Effective Local Understand and act on the need of local people 0.78
Political System Inclusiveness in local processes 0.82
Local constraints on central power 0.52
The inclusiveness of the poor is relatively good on solid waste as there is a

beginning but it is not dealt in depth. However, there is potential as new civil
society organizational entities taking place in the city of Addis Ababa expected to
create opportunities to validate the interests of this segment of the society (W omen
and Youth Federations, Forums, Leagues are emerging).
As resources are managed and allocated from the centre, local governments
are not in a position to put pressure on authorities at the centre (see above table).
They would rather opt to compromise and negotiate to get the necessary
resources.
The experience in place was that the flow of the work from top to bottom, and
also the human capacity is not yet sufficiently addressed at the local level, thus it is
less likely to influence upward. Moreover internalization of previous work
procedures and lack of capacity prohibit local governments to fix the participatory
approach.
Discussion
Decentralization is seen as representing the critical means through which the
changing role of the public sector, within the context of power devolution to local
governments, can be most effectively realized. Decentralizing state power and
resources is therefore a logical continuation of the many recent efforts to bring
government closer to the people. It offers the chance to match public services more
closely with local demands and preferences and to build more responsive and
accountable governments from below (W orld Bank 1997).
This chapter has analyzed the accountability level of local governments in
terms of task specificity and the task environment. The chapter has addressed two
research questions: Does decentralization reform process improved task specificity
at local government level? Is decentralization reform improved the task
environment at local governments’ level?
Task Specificity
Empirically to assess the task specificity at local government level the following
issues were considered:
• Role vs. allocated resource;
• Clarity of role, power and right.
The analytical results show that, local governments’ roles distributed to them
and the required resources allocated are less compatible. As seen in the second
figure of this chapter, half of the local governments are not comfortable with
allocated resource to accomplish their tasks accordingly.
Institutional Pluralism resonates with many of the current proposed “people-
oriented” solutions to inadequate public sector performance. This is because it
offers the greatest probability of maximizing the means and the actors required to
promote the accountability needed for the production and provision of selected
public sector tasks (Cohen and Peterson, 1997). Under the existing situation both
‘business approach’ and ‘people oriented ‘approaches are in place.
There are problems to local governments related with resource mobilization.
Public sectors at the local level are less familiar in mobilizing resource. They
perceived working on resource mobilization through stakeholder participation and
other people oriented approaches as temporary phenomenon. While these
resources are critically considered as potential resources (as pluralism strategy) in
improving urban service delivery for the time to come, civil servants at the local
level have less experience in maximizing them. Moreover, problems related to
decentralization include limited budget allocation while LGs take many
responsibilities with a small number of trained and skilled staff. Therefore, LGs are
overwhelmed by many sectoral activities and unable to adequately manage SWM
holistically. Decentralization is therefore commonly regarded as providing an
opportunity for improved coordination between closely related areas of
administrative responsibility to ensure consistency among the policies of different

agencies, to prevent wastage and duplication of effort and to ensure integration
when a programme requires inputs from a number of agencies as is often the case
in urban development activities (Smith, 1993).
Clarity of role, power and right was one of the issues seen whether to improve
the task specificity of local governments. Role clarity of local government is
improved in the public sector at local level due to the reform process as seen in the
third figure in this chapter. Local governments as they are working with different
stakeholders (vertically and horizontally), the roles to these different stakeholders
are not explicitly stated. Local governments have the initiation and wish to
implement policies but they do not have in-depth knowledge about different policies
and the guidelines and their directions. This has created problems in implementing
policies and guidelines at the local level. Manuals are prepared to support and
facilitate the reform process at the centre. These manuals lack clarity in specifying
roles and responsibilities to both the central and local governments.
The success of solid waste collection decentralization is determined by
devolving power not only by the local government but also to the community as
well. Power is devolved to a certain extent to the local government but it is still not
yet sufficiently devolved to the community. Community power as a resource for
local government is still small to shoulder responsibilities. Accountability of local
government is improving if local government position as enabler is increasing. As
community enabler under the auspice of institutional pluralism principle, local
government role is tremendous. W ithin the local government circumstance of Addis
Ababa, only the solid waste collection part has been devolved to the kebele level.
All other functions are still in the hands of the City Administration centrally. For the
local governments to be accountable fully, some of the tasks are not within the
realm of their power and jurisdictions. This situation contributed for the diffusion of
role and power between the city government and local bodies.
The Agency and the sub-city have both control of financial and human
resources thus not providing full authority to the local governments. Local
governments/kebeles are not in a position to deal with all issues. Some of their
problems are still solved at agency and sub-city level. There exists the gap as there
are cases that require the interference of the sub-city. There are issues getting
decision through the Agency. For instance, if local governments want to deal with
anything about MSEs the kebele administrations need to do it through the agency.
Some materials and equipment that are more expensive, like waste bins and wheel
barrows, have to be bought through the Agency. The local governments, so far,
have only the authority to buy things that require a small budget. However, in
certain local governments it was argued that they should be authorized to
independently function and manage their own budget and even recruit and assign
workers.
It was indicated that there is a loose relationship between the agency and the
sub-city. The sub city authorities are directly accountable for the sub-city officials
administratively, where as the agency is accountable for the city government
through municipal function. This has further complicated the outlook of local
government in decisions as to which way to follow and act.
Task Environment
Institutional Pluralism resonates with many of the current proposed “people-
oriented” solutions to inadequate public sector performance. This is because it
offers the greatest probability of maximizing the means and the actors required to
promote the accountability needed for the production and provision of selected
public sector tasks (Cohen and Peterson, 1997). According to Cohen and Peterson,
(1997), empirically to assess the task environment, the key elements to be

explored are: political and legal oversight, institutional competition, and
administrative mechanisms (Ibid). Helmsing, (2002) claimed the importance of
plurality as; decentralization has ceased to be a local-government affair and has
turned into a local-governance issue.
Due to the recently launched reform program and the pluralistic approach
employed, improvements in accountability of local government are expected to
happen through means (administrative, institutional, legislative and political)
improvement. Given this is the general understanding, this research was initiated to
answer the following research question; has decentralization reform in Addis Ababa
city improved the task environment at local governments’ level?
Van Dijk (2006) notes in order to establish to what extent functions and
responsibilities have been decentralized within the organization, it is imperative to
examine the decisions that are likely to be taken within the local governments. We
can notice from the survey result that the leader’s commitment is high. There is
also an effort to include the marginalized in the service provision process.
Institutional collaboration is in a poor state of condition where as the contribution of
administrative mechanisms to the task environment is in good condition, though
incorporation of user perspectives in planning, application of performance
measurement to local governments and availability of binding contract for
manager’s performance are in a poor state of condition. Rules and regulations are
stipulated sectorally although they suffer from a smooth and workable environment
and progressive institutional interactions at LGs level. Local governments totally
failed to implement enforcement mechanisms.
The importance of this research, besides dealing with the accountability level
from the supply side, it shades some light on decentralization from role and
institutional perspective. The research has also looked at the functional relations of
stakeholders and their implications in promoting accountability level of local
governments. As noted by Cohen and Peterson (1997), the most robust and
important sources of accountability are external, particularly political oversight and
laws. Administrative mechanisms and institutional collaboration are the least robust
means of promoting accountability. This is because they are relatively complex and
managerial intensive. Given the above argument by Cohen and Peterson about the
robustness of the means, though there is a general trend of accepting this
argument, it is unreasonable to predetermine some of the factors which have the
same trend. From the result of the analysis, it is indicated that there is high political
commitment by leaders and good regulatory frameworks at the local government
level. But when we see the factors separately, local government influence to the
centre (as an effective political system) and enforcement capacity of local
government (as an effective legislative mechanism) are nearly absent. As a
pluralism approach the contribution of these factors is assumed to be substantial in
achieving the intended objective of improved solid waste collection service through
enhanced governance at the local level.
Conclusion
This study began with the premise that through decentralization of urban
service delivery to local government level, it is possible to achieve efficient and
effective ways of running the state, and in response to demands from civil society.
The theory behind decentralization is that people will solve problems better at the
local level, if they are allowed to do so. To improve the city situation,
decentralization processes took place in the city of Addis Ababa by the year 2003.
Solid waste collection service was the case in point as a sector, had various
transformations to overcome the existing overwhelming city sanitation problems.
This research tried to answer whether the decentralization in Addis Ababa solid
waste collection function to local government improved the task specificity and the
task environment (means) in the urban service delivery. In the case of task
specificity there is improvement despite resource constraints. In the case of the
task environment although there are differences among the factors, improvements
were experienced at local government level. Indeed all means were not in equal
position. Overall the system in function, which is oriented towards pluralism, was
not sufficiently promoted accountability of local governments.
The implication of the research results, given Institutional pluralism as a
strategy to improve the solid waste collection service delivery of Addis Ababa city
through accountability improvement, suggested that the following situations need
to be addressed; mainstreaming the participation of the community, compromising
political-administration relationship (to create win-win situations), pay attention in
developing and introduction of new regulations (looking them from different
perspectives as they are minimizing conflict and facilitate working conditions), and
promoting further unbundling and economic decentralization (privatization) of the
rest of the solid waste functions (like; transfer station management, transportation
and dumping).
Reflections on Women Participation in Solid Waste

Collection in Bole Sub City, Addis Ababa, Ethiopia
Emaculate Ingwani
Introduction
For many years management of solid waste in African countries, Ethiopia
inclusive has been a burden to governments and local authorities who are often
overwhelmed by other service provision obligations. Both traditional and innovative
modes of service delivery have clearly indicated that there is no single solution to
service delivery (World Bank Report 2004). As such, the issue of solid waste
management remains an integral component of city administration; and requires
concerted efforts from different actors ranging from public, private, and Non
Governmental Organizations. Thus, decentralization of service delivery in solid
waste management has been one of the major agendas of developing countries as
an opportunity for reform. It strengthens different parts of the service delivery chain
(World Bank Report 2004). The objectives of decentralization in Ethiopia are to
improve the quality of service delivery and to empower local communities to take
responsibility for determining their priorities (Millennium Development Goals needs
Assessment Report 2005). In Ethiopia, decentralization in solid waste management
was driven by the desire to move administration of service delivery to the people
(Assefa and Gebre-Egziabher, 2007); due to the magnitude of the waste generated.
An estimated 170,000 tons to 47,000 tons have been produced in 2003 alone; and
this is expected to increase by 30% in 2010 (W oldeyes et al 2008). The rationale of
this paper is to highlight the significance of the decentralization initiatives in
Ethiopia with regards to the participation of women in solid waste collection, in Bole
Sub City of Addis Ababa, Ethiopia; reflecting on the fundamental principles of the
Women In Development (WID) approaches to gender. This research acknowledges
that the decentralized structures are capable of generating participation of women,
empower them at grass roots level; and the output from such participation pays
back national development initiatives in solid waste management.
Aim of the Research

The purpose of this research was to highlight the significance of the
decentralization initiatives in Ethiopia with regards to the participation of women in
solid waste collection. The focus was to identify priority areas of action, and
highlight the benefits accrued by women as they participated in solid waste
collection.
Methodology
This descriptive case study made use of both primary and secondary methods
of data collection. A total of 35 women engaged in solid waste collection were
snow-balled and interviewed. The Delphi technique (serious brainstorming) was
employed with 3 purposively selected City Administrators. On-site observations
were conducted regarding the process and practice of solid waste collection in Bole
Sub City, Kebele 14/15 were also carried out by the researcher to triangulate and
authenticate data collected through literature, interviews and the Delphi technique.
Generally, qualitative data was generated by the research. The W ID approaches to
gender were adopted as the conceptual framework for this research to reflect on
women’s participation in solid waste collection.
Decentralization Initiatives in Ethiopia

After the 1974 revolution, the Ethiopian Government embarked on a
progression of policy initiatives in order to democratize the system of governance.
Decentralization of service delivery was one of the initiatives adopted by the
Ethiopian government. Decentralization in Ethiopia looked forward to bringing
harmony and cooperation among different groups of people through devolving
powers and responsibilities to district administration levels (Assefa and Gebre-
Egziabher, 2007). Numerous policy initiatives were initiated to guide this vision.
Concurrent national development policy programmes, for instance, the
Millennium Development Goals (Millennium Development Goals Needs Assessment
Report 2005) and PASDEP (2006) have also witnessed the government strengthen
its position in decentralization of service provision at the local level by making
women participate in development issues. Policies and strategies were formulated
to integrate and mainstream the gender dimensions in economic, social, and
political decisions (UNDP, 2008). W ith reference to the Millennium Development
Goal number three that seeks to, “Promote gender equality and empower women”,
gender equality and mainstreaming in sectoral strategies has been recognized as
integral in this foci. Women in Ethiopia are playing significant roles in service
provision such as solid waste collection.
The Ethiopian Government has placed strong emphasis on the participation of
women in the development process. Participation is one of the major components
of the three dimensions of decentralization, which are, political, fiscal and
administrative (Pallai 2001). Through decentralization initiatives, Bole Sub City of
Addis Ababa Ethiopia has been engaging a variety of performers ranging from
public, private and Small and Medium Enterprises in collection of solid waste. This
research focused on primary solid waste collection of household waste in Kebele
14/15 of Bole Sub City by women. Thus, using the WID approaches as a framework
of analysis, this research explored the role of women in solid waste collection.
The Solid Waste Collection Process

The process of solid waste management involves the collection, transfer,
treatment, recycling, resource recovery and disposal of municipal solid waste
(Schubeler et al 1996). The primary goal of solid waste management is to protect
the health of the population (ibid). Solid waste collection involves collection of solid
waste from different sources such as households, commercial, hospitals and
industries to temporary storage sites and final disposal (Tessema 2010). Collection
of solid waste is characterized by primary and secondary collection (ibid).
Solid waste collection carried out by Small and Micro Enterprises in Addis
Ababa has been highly localized through decentralization of service provision in
Ethiopia (Tessema 2010). In most cities of Ethiopia the municipalities are
responsible for solid waste management. Municipal solid waste is defined as refuse
from households, non hazardous waste from industrial, commercial and institutional
establishments (including hospitals), market waste, yard waste and street
sweepings (Schubeler, et al 1996).
This research established that solid waste collection in Bole Sub City, Kebele
14/15 is being done by Small and Micro Enterprises commonly referred to as
‘Associations’. The role of these Associations is to collect waste from residents
using a door-to-door method. The Sub City Administration licenses all Associations
engaged in solid waste collection (W oldeyes, et al 2008). Thus, solid waste
management action plans are designed and implemented at the lowest
administrative units of urban administrations to ensure community participation
(Solid W aste Management Proclamation Number 513/2007 p3524). The
decentralization of solid waste collection to Small and Medium Enterprises has
witnessed an increase in competition for household solid waste collection

(Woldeyes, et al 2008). This can also explain the limitations in data extraction as
interviewers were viewed with suspicion despite assurance of confidentiality and
data being used for research purposes.
This research established that the practice of solid waste collection in Bole Sub
City, Kebele 14/15 is moderately mechanized. It is more of manual labour. W omen
use sacks and wheelbarrows to collect solid waste from houses to the temporary
storage sites. Observations revealed that the wheelbarrows and carts used in solid
waste collection were old, rusty and obsolete. This often made the job tougher for
women. In some cases, women were observed carrying sacks with solid waste to
the temporary storage sites on their backs. There were 5 temporary storage sites in
the neighbourhood which were approximately 1.5km apart. Men were observed
complementing women in these activities using donkey driven carts to collect solid
waste from houses to the main temporary storage. Frequency of solid waste
collection in the neighbourhood was three times a week on average (Tuesdays,
Thursdays and Saturdays); mornings only. Women who collected solid waste were
very consistent in their practice. This proved to be very efficient and was
surpassing some international standards on solid waste collection, such as, the
City of Phoenix, USA, where solid waste is collected twice a week on a door-to-
door basis. Observations revealed that the system of solid waste collection in Bole
Sub City, Kebele 14/15 was very significant in keeping the neighbourhood
environment clean.
Evolution of the WID Approach

The evolution of the W ID approaches can be traced way back to the 1950s,
however, the W ID approaches in gender emerged as a powerful force in the 1970s.
These approaches seek to put women in the spotlight in development issues and
reflect on the benefits of inclusion of women in the development process (Miller and
Razavi (1995). According to Moser (1993:63), the W ID approaches recognize,
‘women as active participants in the development process, who through both their
productive and reproductive roles provide a critical, if often unacknowledged,
contribution to economic growth.’ Consequently, the advent of W ID approaches
provides recognition of women’s effort in societal activities as women seek
livelihood. The productive role of women takes centre stage in this research as
women participate in solid waste collection.
An interesting underlying rationale of W ID approaches is that women are an
untapped resource that can provide an economic contribution to development
(Moser, 1993). This research reflects on the need to bring women into the
development process as they access employment through participating in solid
waste collection. W omen have been regarded as second-class citizens and victims
of systemic and multidimensional discrimination in society through religion, sex and
social class (Benhadid, 2005). The decentralization initiatives by the Ethiopian
Government enabled women to participate in activities that can enable women earn
a living. The W ID’s approach to gender issues has been chosen as a framework for
this research because the approaches are very popular in gender and development
debates globally. These approaches can easily translate gender discussions into
practice; for example, extracting evidence on women participation in solid waste
collection in Bole Sub City.
The following figure provides an illustration on how the W ID’s approach to
gender issues has evolved over time. The shift in emphasis of this framework
remains significant in making analyzes on the role of women in development in
current situations. According to ILO (1998), the WID approaches evolved from the
Welfare approach (1950-1970), the Equity approach (1976-1985), the Anti-poverty
approach (1970s), the Efficiency approach (1980s) and the Empowerment

approach (after the 1980s). This evolution lays a foundation on which policy
initiatives on women’s participation in development issues can be established.
Figure 13: Evolution of WID’s Approach to Gender Issues
Empowerment
approach Welfare
approach
after 1980s, the
current 1950 -1970
approach
Efficiency Equity
approach approach
1980s 1976 - 1985
Anti-poverty
approach
1970s
Source: researcher’s perception of the evolution of WID’s approach over time to

gender issues
Discussion and Findings

The WID’s approach to gender issues discussed below, continue to inform and
to provide opportunities for women participation in development initiatives. The
analysis tried to reflect on the significance of women’s participation in solid waste
collection as an outcome of decentralization initiatives in service provision by the
Ethiopian Government.
Welfare Approach
The earliest WID approaches between the 1950s - 1970s focused mostly on
women’s welfare in trying to bring women into development as better mothers (ILO
1998). At this stage, women were regarded as passive beneficiaries of
development. The W elfare approach only focused on a women’s reproductive role.
The W elfare approach remains critical in current debates as the reproductive role
of women still remains vital in perpetuating life. Apart from performing their
reproductive role women in Bole Sub City, Kebele 14/15 participated in service
provision, for example, solid waste collection. The decentralization initiatives in
Ethiopia redefine the role of women in welfare provision; and make a shift in
emphasis from the traditional conceptions of women as better mothers to women
service providers.
Equity Approach
The equity approach was developed between 1976 - 1985 and the period was
dubbed UN W omen’s Decade, in an attempt to accord equity for women as active
partners in development (ILO 1998). The Equity dimension recognized women’s
triple role and seeks to reduce inequality for women. In this research both women
and men were observed participating in solid waste collection activities; but women
made the bulk of the workforce. The solid waste collection process in Bole Sub
City, Kebele 14/15 regards women and men as equal partners in service provision,
for example, solid waste collection.
There were 156 Associations involved in solid waste collection in Bole Sub City.
From these Associations, 96 (61.5%) were men’s Associations; while 60 (38.5%)
were women’s Associations. Although the number of men’s Associations that
participated in solid waste collection was significant; women’s Associations that
participated in solid waste collection constituted more than the 30% benchmark; the
standard yardstick on gender representation in any service sector in Ethiopia (The
National Policy on Ethiopian W omen 2004). The national constitution of Ethiopia
has also given attention to equity through emphasizing participation of women in
economic, political, social and cultural activities of the country.
Women used to collect money for solid waste collection services from residents
on a door to door basis. However, the Municipality has since improved the system.
Money is now being charged on water bills to all residents on a monthly basis for
accountability purposes. It is important for community based collection systems to
be carefully linked with the Municipality system for ease of coordination (Schubeler,
et al 1996). Adding solid waste collection on utility charges such as water bills
increases finance operation and accountability of such in solid waste collection
(ibid). However, according to the KOICA-W orld Bank report (2007) it could be
difficult to extract service charges for solid waste collection from water bills which
also carry other user charges. This exposition may explain why women were paid
quarterly wages by the Municipality for solid waste collection.
Anti-poverty Approach
The Antipoverty approach sought to ensure that poor women increase their
productivity and work in order to earn a living particularly through income
generating projects (ILO 1998). This research established that, both men and
women were directly benefiting from carrying out solid waste collection activities as
they earned a regular income (quarterly wages). On average women earned 300
birr per month through the Municipality. Women stated that with the money earned
they were able to; buy food, buy clothes, pay rent (in some instances), make their
Idir contributions (an indication towards savings), and generally look after the
family. Through participating in solid waste collection, women were further
expanding their productive role. In addition, women participation in solid waste
collection was viewed as imperative in fighting poverty.
This research also revealed that women participating in solid waste
management in Kebele 14/15 of Bole Sub City were doing a tremendous job, that
is, apart from contributing to family income; they were also ensuring a clean
environment within the neighbourhood as they collected solid waste from door to
door to the various collection points. As such, the neighbourhood environment and
the residents at large were and are still among the beneficiaries of women
participation in solid waste collection. Schubeler et al (1996) reiterate that, the
other goals of solid waste management include promotion of environmental
sustainability, support of economic productivity and employment generation.
The research found out that women benefited from recyclable discarded
materials as they collected solid waste from the different houses, for example,
discarded empty containers, boxes, clothes and shoes. These items were traded
for an extra income. This method of reuse of solid waste has been regarded as
environmentally friendly. It fulfils one of the major principles of sustainable waste
management by maximizing reuse and recycling solid waste.
Efficiency Approach
This Efficiency approach was adopted in the 1980s. The purpose of this
approach was to ensure efficient and effective development through women’s
economic contribution, and participation was equated with equity (ILO 1998).
Through the Efficiency approach, women were viewed as having the capacity to
contribute positively towards declining social services. As women in Bole Sub City,
Kebele 14/15 participated in service provision such as solid waste collection; they
were determined to earn a living through a reliable wage. However, the outcome of
the women’s efforts could further be perceived through achievement of the national
Solid W aste Management goals of Ethiopia; and the achievement of the
government’s goals on decentralization of service provision at large. Community
participation in solid waste collection has been considered an integral component
in the prevention of adverse effects; and in enhancing benefits resulting from solid
waste (Solid W aste Management Proclamation Number 513/2007 p3524)
Empowerment Approach
The Empowerment approach is the most recent and its focus is on empowering
women through self-reliance. The approach recognizes the significance of the
triple role of women. Women empowerment entails opportunity and equity between
different genders, social classes, age groups; and it enhances human potential at
individual and social level of expression (Sahay, 1998). Lucy (1995) in Sahay
(1998) further states that empowerment is the improvement of women’s status,
their decision making capacity, and to make them full partners in the development
process.
This research established that the decentralization process in Ethiopia is
recognizing women as agents of development. Women waste collectors dominate
primary solid waste collection. W omen of different age groups were observed
collecting solid waste in Bole Sub City, Kebele 14/15. The age range of these
women was from 20 years and above. The educational background also ranged
from primary school, secondary school, diploma and first degree. Women with
Diplomas, and First Degree qualifications had been elevated to officers, but were
relatively few. Only 2 (5.71%) of the interviewed women had a diploma or a first
degree; the rest 33 (94.29%) had primary or secondary education. This research
also established that as women participated in solid waste collection, they
continued to perform their household duties and community service obligations.
The process of primary solid waste collection on a door-to-door basis has
provided a platform for women to meet, discuss and prioritize their needs. It was
realized that the success of the decentralization initiatives in solid waste collection
in Bole Sub City, Kebele14/15 could contribute to changing society’s attitude
towards solid waste collection as a profession. The solid waste collection
profession is regarded as meant for the ‘not educated women’ (Schubeler et al,
1996). As much as the solid waste collection profession may not be attractive to
many people, in Bole Sub City, Kebele 14/15 the profession could be valued in
terms of income generation and employment opportunities for many women.
Women had been empowered through the government decentralization
initiatives as they worked side by side with their male counterparts, as such,
women were viewed as significant partners in the solid waste collection process,
and also contributed to national decentralization goals.
Challenges
Observations in this research established that households were either unwilling
or unknowledgeable about segregating waste as a way of assisting women in
recycling solid waste, and for ease of carrying. Many households placed different
forms and kinds of solid wastes in the same container or bin. Women transferred
the solid waste into sacks. Schubeler et al (1996) warns that dangerous items pose
risk of injury or poisoning to people who collect or sort waste.
The research established that most of the women who participated in solid
waste collection belonged to the low-income category earning on average 300 birr
per month. This has resulted in the profession being despised and as such women
being looked down upon by the residents and society. Schubeler et al (1996) states
that, people who work as solid waste collectors were driven by poverty, absence of
more attractive employment possibilities; and solid waste collection is associated
with filth trends. However, revelations from this research demonstrate that, as
much as women who collect solid waste were despised, their line of work is
indispensable and remains critical in reducing negative impacts of solid waste on
health of residents; and in maintaining the environmental aesthetics of
neighbourhoods. Kebele 14/15 of Bole Sub City enjoys a clean neighbourhood.
Way Forward
Education and Training

Women engaged in solid waste collection often lacked protective clothing as
they participate in their their work. According to Schubeler et al (1996) such women
worked under extremely hazardous conditions to health, as protective clothing is
imperative in any kind of profession involving hazards. Observations revealed that
women participating in solid waste collection lacked training and education with
regard solid waste collection. Solid waste collection is still one of the despised
professions; and yet it is one of the most vital activities in the urban areas. There is
need to provide education and training through short courses and demonstrations
to women who participate in solid waste collection. This will increase efficiency and
motivate women as they provide services to residents in Bole Sub City, Kebele
14/15.
Access to Equipment
Scaling up opportunities in women’s participation through access to equipment
is a prerequisite for sustainability of decentralization initiatives in solid waste
collection at local level. There is need for assisting Associations to secure bank
loans for purchasing equipment and vehicles for use in solid waste collection for
efficiency of solid waste collection in the neighbourhood.
Conclusion
The WID approaches illustrated that, women’s participation in solid waste
collection remains an integral component for sustainable decentralization efforts in
urban Ethiopia. Decentralization of service provision in Ethiopia seems to pay off
(Millennium Development Goals needs Assessment Report 2005). W omen’s role in
solid waste collection remains significant. Efficient solid waste collection in Bole
Sub City however depends on scaling up education and training efforts; and access
to equipment for sustainable service provision where activities have been
decentralized.
Education
The Effects of Administrative Decentralization on

Education Provision in Addis Ababa
Tesfaye Teshome, Ranavijai Bahadur Singh, and Sudhir

Kumar Singh
Introduction
Decentralization is defined as the transfer of decision-making authority closer to
the consumer or beneficiary. This can take the form of transferring powers to lower
levels of an organization, which is called deconcentration or administrative
decentralization. A popular form of deconcentration in education is to give
additional responsibilities to schools. This is often called school autonomy or
school-based management and may take the form of creating elected or appointed
school councils and giving those budgets and the authority to make important
educational decisions. Deconcentration may also take the form of empowering
school directors or directors and teaching faculty to make decisions within the
school.
Many recent studies, most countries of the developing regions are currently
trying out new forms of decentralization or are planning to do so. These countries,
ruled by their own specific political traditions, are often faced with competition from
different political legitimacies, in particular those linked to policies of more or less
"socio-democratic" inspiration and those bound up with the resulting budgetary
adjustment and restriction policies advocated over the past many years. The last-
mentioned policies, tending towards greater decentralization, are usually
underpinned by ideas of efficiency, participatory democracy or governance (McGinn
et al., 1999). Ethiopia is also not an exception to this state of affairs.
Currently, the Ethiopian government has firmly decided to achieve the
Millennium Development Goals (MDGs) by 2015. Education can play a very
important and effective role towards the achievement of the goals. But low
educational quality, relevance, efficiency, equity, and low coverage were the
features of the Ethiopia education sector before 1991/92, but it still needs
improving. To change or to improve the situation the government decided to shift
more effectively towards the decentralization of education provision and its service
delivery. In the line of this, the Ethiopian government launched the National
Education and Training Policy in 1994. To implement this policy, the Education
Sector Strategy was designed in 1994/95.The general objectives of the policy was
to produce skilled man power with the necessary quality and quantity to meet the
national socio economic development requirements, to bring up citizens who
understand, respect and defend the constitution, a citizen who respects democratic
values and human rights moreover with good work culture and ethics. The policy
emphasizes on changing curriculum, preparation of learning material, giving due
attention for career development of teachers and changing the organizational
structure.
The Ethiopian Education Sector Development Programme (ESDP) is in its third
phase of implementation, spanning for the years from 2005/06 to 2009/10. The
major objective of the Programme is to provide demand driven skilled human labour
to the economy through improving the quality of education, increasing access to
educational opportunities with enhanced equity, equality and relevance. Access to
primary education, as measured by enrolment in grades 1-8, has increased in

2007/08 by promoting universal primary education and community control over
schools and resources.
During 2007/08, total primary enrolment reached 15,341,121 pupils, which
brought up the Gross Enrolment Ratio (GER) to 96.7% (i.e. girls 91.0%, boys
102.4%) from its level of 91.6% in 2006/07. Apparently, the change in net
enrolment ratio (NER) for primary education (1-8) followed a parallel trend with that
of gross enrolment ratio. The NER increased by 5.8 percentage points pushing it up
to a level of 84.4% in 2007/08 from 78.6% in 2006/07, which indicates an
encouraging trend in the age structure of primary school students.
With substantial success in raising the level of enrolment ratio, educational
quality appears to be the main challenge of Ethiopia’s ESDP. To overcome this
challenge, programs have been designed and implemented during the year under
review, including upgrading teacher’s quality and increasing the number of
teachers through on the job training and summer training. Accordingly, pupil-
teacher ratio for grades 1-4 has improved to 61:1 in 2007/08 from 65:1 in 2006/07.
The availability of text books for core subjects contributes significantly for the
quality of education. During the year under review, student text book ratio stood at
1.25:1. All the educational development plans are structured within the frame of
decentralization policy which is promoted by the Ethiopian Federal government.
Theoretical Background
Definitions
There is currently a global trend of decentralizing education systems. Most
countries are experiencing or contemplating some form of education
decentralization. The process transfers decision –making powers from central
Ministries of Education to intermediate governments, local governments,
communities and schools. The extent of the transfer varies, however, from
administrative de-concentration to much broader transfer of financial control to the
regional or local level.
Rondinelli et al (1984) defines decentralization in terms of four degrees of
transfer of authority: de-concentration, delegation, devolution and privatization. De-
concentration reforms shift authority for implementation of rules, but not for making
them. Delegation refers to the appointment of representatives of the Minister,
located in each of the state or provincial capitals. The term devolution implies that
something is given back to an organization from which it had been taken. The term
is often used by those calling for transfer of authority to more local units of
government, for example, provinces or municipalities.
Decentralization is also defined by W inkler et al (2000) as the transfer of
decision-making authority closer to the consumer or beneficiary. This can take the
form of transferring powers to lower levels of an organization, which is called de-
concentration or administrative decentralization. A popular form of de-concentration
in education is to give additional responsibilities to schools. This is often called
school autonomy or school-based management and may take the form of creating
elected or appointed school councils and giving budgets to them and the authority
to make important educational decisions. De-concentration may also take the form
of empowering school directors or directors and teaching faculties to make
decisions within the school.
In a world where most governments have experienced the pitfalls of centralized
education service provision, mainly: opaque decision-making, administrative and
fiscal inefficiency, and poor quality and access to services, the theoretical
advantages of decentralization have become extremely appealing. In general, the
process of decentralization can substantially improve efficiency, transparency,

accountability, and responsiveness of service provision compared with centralized
systems. As McGinn and W elsh (1999) indicated decentralized education provision
promises to be more efficient, better reflect local priorities, encourage participation,
and eventually improves coverage and quality. In particular, governments with
severe fiscal constraints are enticed by the potential of decentralization to increase
efficiency. Beneficiary cost recovery schemes such as community financing have
emerged as means for central governments to off-load some of the fiscal burden of
education service provision.
The ways in which public primary and secondary education is financed and
delivered varies greatly throughout the world. In France, education is highly
centralized at the level of the national government, whereas in Canada the national
government does not even have an education ministry, and in the United States
education is mainly the responsibility of local school districts. Many developing
countries and countries in transition to market economies have highly centralized
government administration of education and other public services. During the
1990s and early twenty-first century, many of these countries began to decentralize
education. This phenomenon proceeded fastest in Latin America and Eastern
Europe, but several countries in Asia and Africa also began initiating
decentralization policies (Fiszbein, A, 2001).
Reasons for Decentralization

The rationale for education decentralization tends to be associated with four
distinct objectives: democratization, regional and/or ethnic pressures, improved
efficiency, and enhanced quality of schooling. Several countries with a history of
authoritarian government have decentralized government in the name of
democratization. More specifically, decentralization in these countries is designed
to increase the voice of the local citizen and to empower the citizen to more fully
participate in decision-making at the local level. Democratization has been the
rationale for transferring education responsibilities to local governments in
countries as diverse as Poland and Brazil.
McGinn and W elsh (1999), indicate three major factors that account for the
upsurge of interest in decentralization beginning around 1970. First, the political-
economic debates of the 1970s and 1980s resulted in the disintegration of the
western ‘Keynesian consensus’ that had favoured strong, centralized governments.
A similar repositioning happened in Russia and Eastern Europe. The outcome was
a reformulation and reduction of the role of central government and an increasing
role for the market.
Second, economic and financial globalization has further weakened central
government. On the one hand, supranational organizations have reduced national
sovereignty. On the other hand, a shift towards market-based decision making has
strengthened local groups. This makes it more difficult for governments to capture
funds for social programmes. Decentralization advocates included roles for
privatization and the encouragement of non-government organizations (NGOs). In
essence a new political-economic paradigm emerged. At the same time, education
systems around the world had doubled and tripled enrolments. The increases in
teachers and students strained the capacity of centralized bureaucracies to
maintain quality. Increasing public dissatisfaction has resulted in pressures to shift
decision-making to local groups.
Finally, the emergence of new information and communication technologies has
made it possible to achieve high levels of control over systems, with decentralized
management. A new paradigm of management emphasizing attention to output
rather than inputs gave increased importance to strengthen local capacity for
decision-making.
Education Financing
The financing of decentralized education can be very complicated in systems
where two or three levels of government share financing responsibilities. As Gabor
(1996) indicates the choices for financing education in such systems can be framed
as follows: (1) central versus local funding, (2) conditional versus unconditional
grants, and (3) negotiated versus formula-driven grants. The choices made
concerning education finance are extremely important as they determine both the
degree of effective control local governments have as well as the implications for
efficiency and equity.
Countries where local governments finance education from their own source
revenues (e.g., Brazil, the United States) have adopted intergovernmental grants to
help even out spending inequalities. In the case of Brazil, the central government
provides additional financing to ensure each jurisdiction spends a minimum amount
per student. In the case of the United States, school finance policies vary by state,
but in general they, too, ensure a minimum level of spending and, in some cases,
put a cap on the maximum amount a local school district can spend (W inkler,
2000).
Most countries have made the choice to fund a large portion of primary and
secondary education spending from either the regional or national government
budgets. This funding can be provided in one of two ways. Money can be
transferred from the central government to either the general fund of the local (or
regional) government or to a special education fund of the local (or regional)
government. In the former case, the local or regional government receives funding
sufficient to cover a large portion of expected education expenditures, but the local
or regional government makes the decision of how much to spend on education. In
the latter case, the local or regional government is required to spend the grant
money on education only. Requiring grant money to be spent on education ensures
adequate education spending but reduces the expenditure autonomy of the local
(or regional) government.
Effects of Decentralization
It is extremely difficult to disentangle the effects of education decentralization
policies from other variables simultaneously affecting educational outcomes, and
there have been few rigorous attempts to do so. Two studies that did attempt to
isolate the effects of devolution in Central America concluded that it increased
parental participation, reduced teacher and student absenteeism, and increased
student learning by a significant amount (Winkler, 2000).
Objectives of the Study

• To identify the distribution of schools by level and ownership so as to
compare the roles of different actors.
• Assess the extent of improvement in education provision as a result of
decentralization of education in the city.
• To disclose the need to decentralize education and identify which
decisions are decentralized.
• Assess the regulatory role of the City’s Education Bureau.
Data and Methodology

In context to the above background information, the overall aim of the present
paper is to asses the extent of improvement in education provision as a result of
decentralization of education in Addis Ababa. Federal government is highly
committed and devoted itself to empower all four tiers of the government through
shifting power and responsibilities. However, the present study focuses key
attention on the degree of decentralization in the management of education sector
in Addis Ababa. The following approaches were used during the process of the
study: Documents and literature were reviewed at Addis Ababa City Administration
Education Bureau, Sub City Education Offices and Kebeles (lowest administrative
structure in the city) education offices. Individual discussions were organized with
concerned authority of Education Bureau at city and sub-city level. Moreover, data
was obtained for both government and nongovernmental schools from the
Educational Management Information System. In addition, research undertaken by
the different researchers was critically analyzed from the Ministry of Education,
Addis Ababa University and Ethiopian Civil Service College library. The primar y
and secondar y data were systematically organized and analyzed by using
qualitative analysis after which findings regarding the degree of decentralization in
education sector in Addis Ababa were made.
Typology of Schools in Addis Ababa

The typology of schools in the city is the direct reflection of the owners.
Therefore, based on ownership the following are identified:
• Government schools: these are fully administered, managed and financed
by the City’s Education Bureau.
• Public/Local community schools: this refers to those private schools
which were made public property in accordance with proclamation number
54/75 as well as those schools which have been established subsequently
by the public, with the structure of the City government of Addis Ababa. The
financial sources of these schools are mainly internal i.e. received from day
school students, extension division students, and the selling of products,
handicrafts or other similar sources. They are managed by a board
responsible to for administration and management. The main difference
between Public/Local community schools and Private schools is that they
are not privately owned. Currently the City’s Education Bureau partially
provides them with government employed teachers and facilitating
conditions to fully transform them in the government schools.
• Private schools: the establishment of private schools is the outcome of the
new Education Policy endorsed by the current (EPRDF) government based
on the decentralized political system (FDRE, 1994). The current education
policy encourages the participation of the private sector in education service
provision. As a result these schools are fully administered and managed by
their respective owners. The sources of finance are mainly internal i.e. from
day school and extension division students.
• Donor NGO’s: these schools are established by philanthropic
organizations. Their main objective is to provide education service for
orphans and children from poor families. The sources of finance for these
schools are largely from external donors.
• Church, Mission and Mosque schools: These are schools established and
managed by their affiliate religious organizations i.e. the Orthodox Church,
Mission (Catholic, Protestant and Islamic). The sources of finance are day
school and extension division students. The administration and
management of all non-government schools is being carried out by their

respective owners and affiliate organizations signifying the extent of
decentralization of education in the city.
• Foreign Community schools: As their name indicates these schools are
limited to children of the international community who reside in Addis
Ababa. According to the Education Policy of the country, Ethiopians are not
allowed to enrol in these schools because they do not adhere to the
Ethiopian curriculum and system. Therefore the study does not include
these schools.
Table 32: Distribution of Schools in Addis Ababa by Ownerships and Levels, (2007/08)
Levels
Ownership KGs Primary Secondary
No % No % No %
Government 6 0.65 111 16.94 42 28.97

Public/Community 84 8.97 119 18.17 10 6.90
Private 737 78.66 355 54.20 63 43.45
Donor/ NGO’s 59 6.30 19 2.90 4 2.76
Church 22 2.34 19 2.90 4 2.76
Mission 23 2.45 24 3.66 14 9.65
Mosque 4 0.42 2 0.31 2 1.38
Foreign Com. 2 0.21 6 0.92 6 4.14
Total 937 100.0 655 100.0 145 100.0
Source: Education Statistics Annual Abstract (2007/08).
The table above shows distribution of schools in Addis Ababa by ownerships
and levels in 2007-08. It is evident from the above table that the leading role is
taken by the private sector which accounts for over 78% of the KGs, 54% of the
Primary and 43% of the Secondary schools. The role of the government in
accessing KGs is found quite insignificant (0.65%) whereas, occupies the third and
second positions with respect to primary and secondary schools (16.94% and
28.97%) respectively. Based on the above table, the Private sector,
Public/Community, Donor NGOs and Missions are playing significant role in
accessing education service in the City.
Distribution of Schools by Sub-city

The distribution of kindergardens, primary and secondary schools signifies the
role played by non-government actors in accessing education in all sub-cities.
• Kindergarden: From among the non-government actors particularly the
private sector surpasses all in the number of Kindergardens in every sub-
city. Next to the private sector Donor organizations, local community/Public,
Orthodox Church and Missions are found playing significant role. Regarding
the distribution of Kindergardens government owned are found only in five
sub-cities in addition to their insignificant number. Therefore, the gap with
respect to the distribution of Kindergardens is filled by non-government
actors (the third table in this chapter).
Table 33: Distribution of Kindergardens by Ownership and Sub-city
organization
Government
community
community
Mosque
Mission
Foreign
Church
Private
Donor
Local
Total
Sub-city
Addis Ketema 8 1 2 24 2 37
Akaki-Kaliti 8 1 5 73 2 89
Arada 1 16 3 6 25 3 54
Bole 1 4 2 4 119 2 132
Gullele 2 9 2 6 41 4 64
Kirkos 1 10 2 4 45 1 63
Kolfe-Keraneo 5 5 13 114 1 2 140
Lideta 13 2 4 28 1 48
Nefas Selk
Lafto 4 2 6 133 1 4 150
Yeka 1 7 2 8 130 1 3 152
Total 6 84 22 58 732 4 22 1 929
Source: Compiled from Education Statistics Annual Abstract (2007/08)
• Primary Schools: Likewise in the case of Kindergardens the non-
government actors take the lion’s share particularly the private sector. The
private sector (the leading), Local community/public, Missions, the Orthodox
Church and Donor organizations are playing an irreplaceable role in
accessing primary education in all sub-cities (See the fouth table in this
chapter).
Table 34: Distribution of Primary Schools by Ownership and Sub-city
organization
Government
community
community
Churches
Mosque
Mission
Foreign
schools
Private
Donor
Local
Total
Sub-City
Addis Ketema 9 15 3 1 5 1 1 35
Akaki-Kaliti 12 7 1 2 23 2 47
Arada 9 20 2 2 12 8 4 57
Bole 11 3 3 1 65 1 84
Gullele 12 9 2 1 18 4 46
Kirkos 10 78 1 30 119
Kolfe-Keraneo 17 9 4 5 47 1 1 84
Lideta 7 18 1 13 1 40
Nefas Selk Lafto 10 10 1 1 70 1 2 95
Yeka 14 10 1 4 70 3 102
Total 111 179 18 18 353 2 23 5 709
• Secondary Schools: As indicated in the table below the private sector
surpasses all including government in the number of secondary schools.
Moreover, the private sector has a greater number of secondary schools in

five sub-cities than all and in the other five sub-cities the privately owned
secondary schools are close in number to government owned secondary
schools.
Table 35: Distribution of Secondary Schools by Ownership and Sub-City
Private schools
organization
Government
community
community
Churches
Mosque
Mission
Foreign
Donor
Local
Total
Sub-City
Addis Ketema 3 1 2 1 1 8
Akaki-Kaliti 5 1 3 1 10
Arada 5 4 2 1 4 4 20
Bole 3 1 15 1 20
Gullele 5 1 4 2 12
Kirkos 4 1 11 1 1 18
Kolfe-Keraneo 4 2 7 1 2 16
Lideta 3 1 4
Nefas Selk Lafto 4 4 13 1 1 23
Yeka 5 1 6 12
Total 41 10 4 4 63 2 13 6 143
According to the Education Statistics Annual Abstract (2007/08) for the City, the
total Gross Enrolment Rate in Kindergardens is 50.1% for both male and female
whereas it is 51.1% & 49.2% for male and female respectively. The total Gross
Enrolment Rate at primary level (Grade 1 – 8) is 135.9%. The Gross enrolment
Rate for boys, 124.0% and girls 147.5%. The total Gross Enrolment Rate at
st
secondary 1 cycle (Grade 9-10) in the above mentioned academic year i.e.
2007/08 is 111.8% or 120.2% and 104.3% for boys and girls respectively. On the
nd
other hand the total enrolment at secondary 2 cycle (Grade 11-12) increased by
83.2% between the years 2003 and 2007.
Table 36: Student Enrolment at Different Levels in Addis Ababa
Level Type No %
Government 627 0.7
Kindergarden Non-government 93365 99.3
Total 93992 100.0
Government 181,848 46.9
Primary Non-government 207,258 53.1
Total 390,106 100.0
Government 84,763 72.8
Secondary Non-government 31,673 27.2
Total 116,436 100.0
Source: Education Statistics Annual Abstract (2007/08).
Decentralization enabled and increased the participation of non-government
stakeholders as indicated in the first and second tables in this chapter. In addition
to the number of schools at all levels student enrolment figures show the same
trend. For instance with regard to Kindergarden enrolment 99.3% of the total
Kindergarden population attend non-government establishments.
The proportion of students enrolled in non-government primary schools is over
53% further signifying the growing participation of different actors in education
service provision. With regard to enrolment in secondary schools despite the
number of government owned schools are less than non-government the
percentages of enrolment show over 72% (seen in the second table in this chapter)
of the student population belongs to government owned secondary schools. There
are two possible reasons for this.
• Education is free in the first cycle of the secondary schools (Grades 9 – 10).
In second cycle of the secondary schools i.e. Grades 11 & 12 the amount of
payment is less than all non-government secondary schools.
• Comparatively all government owned secondary schools have large
compound and more number of rooms/sections. According to Education
Statistics annual Abstract of (2007/08) in all secondary schools there are
2,074 classrooms. Out of these 1,395 or (67.26%) belong to government
owned secondary schools. Despite their number is at least three times
greater than government owned secondary schools, the non-government
secondary schools together share the remaining 32.74% of the student
population.
Education Finance
Education is free in all Government schools both primary (Grades 1- 8) and
secondary (9-10) levels. Currently the main source of education finance is the
government in both primary and secondary education, though it is found difficult to
provide the service for all and government expects and encourages the support of
the public to expand education.
Objectives of education finance:
• Decentralize the financial management and administration to the lowest
level i.e. school based and
• Broaden the sources of education finance
• Sources of education finance:
• In countries like Ethiopia the main source of education finance is
government budget. But the community also supports in terms of finance
materials and labour. The private sector and NGO’s also are important
sources. The main sources are: Government, internal sources (within
schools), community support, private investors and NGO’s
Effect of Decentralization in Education Provision

To analysis the effects of decentralization policy on education sector in Addis
Ababa city, a survey was conducted. The target population was Addis Ababa
education bureau official, sub-cities education officials, directors of the schools,
teachers of the schools and representatives of parent-teacher associations. To
understand the perception of the respondents towards the decentralization for
education provision question was asked; “Are you aware about decentralization in
education sector and is decentralization has improved the conditions of education
provision and its service delivery in the city”. It is interesting to note that all the
respondents replied that they are aware about decentralization in the education
sector and certainly decentralization in the education sector has improved the
education provision and its service delivery in the city. Further, in which component
of education provision improvement is visible? this question was also asked

regarding this issue.
Table 37: Responses to the Question “How Decentralization has improved the Conditions of
Education Provision and its Service Delivery in Addis Ababa City”
Responses (in numbers)
Increase Qualit y of No. and Accessibility Teachers Participation
in no. of education qualit y of to and and
Respondents schools has teachers educational students commitment
improved has material has absenteeis- of
improved improved m has stakeholders
reduced has enhanced
Yes No Yes No Yes No Yes No Yes No Yes No
Addis Ababa 1 0 0 1 1 0 1 0 0 1 1 0
Education
Bureau
12
Official (1)
Sub-city 3 0 0 3 3 0 3 0 3 0 3 0
Education
Officials (3)
Directors of 3 0 0 3 3 0 3 0 3 0 3 0
the Schools
(3)
Teachers of 6 0 3 3 1 5 5 1 0 6 4 2
the Schools
(6)
Representativ 3 0 2 1 2 1 2 1 3 0 3 0
es of Parents-
Teachers
Association
(3)
Total (16) 16 0 5 11 10 6 14 2 9 7 14 2
Source: Field Survey, 2010
The above table shows the responses to the question “how has decentralization
improved the conditions of education provision and its service delivery in Addis
Ababa city”. It is evident from the table above, that majority of the respondents
replied that education provision and its service delivery has improved with respect
to; increase in the number of schools, improvement in the number and quality of
teachers, increase in the accessibility to educational material, reduction of teachers
and students absenteeism and enhancement of participation and commitment of
stakeholders. Interestingly it is observed that all respondents agreed that the
number of schools increased in the city. But in the case of component-
improvement in the quality of education, the majority of respondents still view that
the quality of education has not improved in the schools.
Decision Making and Levels of Authority

The Addis Ababa City Administration structure is comprised of 10 sub-cities and
99 Kebeles. The City’s education sector is organized hierarchically i.e. the
Education Bureau at the top, Sub-city and Kebele education offices in descending
order occupy the intermediate and the lowest level respectively. The study
attempted to disclose the type and aspects of decision-making or extent of
decentralization at the four levels meaning the role of the Education Bureau, Sub-
city and Kebele education offices and school based management.
12
Figures in the brackets are the total number/s of respondents in that specific category
The appropriate focus of decision-making within the education sector remains

unresolved because the process requires the rationalization and harmonization of a
complex set of complementary functions mainly: curriculum design, teaching
methods, student evaluation, text book production and distribution, teacher
recruitment and pay, school construction and rehabilitation, education financing,
and parent-teacher linkages. Following the introduction of decentralized
administration and the Business Process Reengineering (BPR) reform decision-
making in education service provision by the above stated structures is presented
as follows.
Education Bureau
The Addis Ababa City Education Bureau controls or makes decision on the
following functions:
• Curriculum designing
• Setting standards
• Student evaluation procedures
• Text books preparation, production and distribution
• Supervise Teachers Training Colleges and grant certificate of competence.
• Issuance of professional license and renewal, assess the portfolio of
teachers in secondary schools, teachers training institutes and teachers
training colleges.
• Give written (test) and unwritten (non-test) exams at every terminal level,
compile basic information and asses to promote city-wide admission
capacity and disclose the results to all stake holders.
Sub-City Education Office:

The following functions are entrusted to sub-city education offices.
• Supervise secondary schools and teacher training institutes as per the
standards and grant accreditation and licenses.
• Audit the quality of education in secondary schools and teacher training
institutes and grant certificates of competence.
• Assess the portfolio of kindergarden and primary school teachers, issuance
renewal professional licenses.
Kebele Education Offices

The following functions of Kebele education offices:
• Supervise kindergardens and primary schools as per the standard and grant
accreditation.
• Audit the quality of education in kindergardens and primary schools and
grant certificates of competence.
School Based management: is a concept based on the fundamental principle
that individuals who are affected by the decision, possess expertise regarding the
decision, and are responsible for implementing the decision, should be involved in
making the decision. This concept often is attached to the broader school-system
reform efforts of decentralization and school-based management (SBM), where
decision-making authority is shifted to the local school level. There are two main
bodies at school based management- Education & Training Board and Parent-
Teacher Association.
As indicated above the arrangement is most often referred to as de-
concentration and involves very limited transfer of authority. It involves the transfer
of authority for specific decision-making, financial and management functions by

administrative means to different levels under the same jurisdictional authority i.e.
the City Government and Addis Ababa city Education Bureau. According to UNDP
(1999) this is the least extensive type of administrative decentralization and the
most common found in developing countries. De-concentration occurs to the extent
a variety of tasks are de-concentrated to a hierarchically organized administrative
system that includes the City’s Education Bureau, sub-city education offices,
Kebele education offices and school based management. In a nut shell it is de-
concentration that entails a shift of authority for implementation of rules, but not for
making them.
Conclusion
Finally we can conclude that this study was an attempt to perceive the level and
the effects of administrative decentralization on education provision particularly on
efficiency, reflection of local priorities, participation and improving coverage and
quality in Addis Ababa. No doubt, Federal government has taken various steps to
decentralize power and authority to the next level in education sector and some
extent visible achievements can be seen particularly on quality aspects through
effective and prompt decision making and service delivery. Still focus should be
given on to the rationalization and harmonization processes in the area of
curriculum designing, teaching methods, student evaluation, text book production
and distribution, teacher recruitment and pay, school construction and
rehabilitation, education financing, and parent-teacher linkages.
The new structures i.e. levels of decision are definitely the manifestations of the
transformation of Ethiopia’s as well as the city’s education policy from centralized
administration to decentralized administration. Decentralization of education
systems demands harmonization of a complex set of functions at all levels. Issues
such as, how far to devolve decision making and to whom, continue to be debated.
There are a number of on-going experiments worldwide, ranging from
devolution of limited functions to intermediate governments and local governments,
to community- based management and financing of schools. The current consensus
is that tertiary education, and specific functions such as curriculum design and
standards setting are best retained by the centre; secondary and primary education
should be devolved to as far as possible; local participation in school management
improves accountability and responsiveness and fosters resource mobilization. The
education policy of the country in general and that of the Addis Ababa city
government in particular appears to be successful in enabling different
stakeholders’ participation in education service provision. The distribution of
schools by ownership and sub-city indicate a growing interest particularly of the
private sector which meets the definition of Rondinelli et al (1984), privatization as
one of the four degrees of transfer of authority.
The advantages of decentralized education service provision in the city includes
kindergarden education service is almost totally provided by the private sector and
other non-government organizations. Government expenditure or budget for
kindergarden education service is very minimal or insignificant. This indirectly
assists to reduce public expenditure on the part of the City’s government, the
participation of non-government stakeholders enabled the availability of education
service of all types in all sub-cities raising the opportunity of enrolment to all and
increased the participation of local community in school management improving
accountability, responsiveness and fosters resource mobilization particularly
finance.
Recommendations
Based on the above findings, the following recommendations have been
forwarded to the respective authorities of education bureau and sub city education
departments of Addis Ababa:
• Decentralization of education should not be limited to de-concentration, a
shift of authority but also include devolution which implies transfer of
authority to local unit such as sub-cities and Kebeles. Devolution entails the
making of rules and regulations.
• The majority of non-government and private schools suffer from small size
compounds, thus extra-curricular activities are limited and expansion works
are largely unthinkable. Therefore, considering their role in accessing
education in all sub-cities the city government should facilitate conditions to
provide sufficient land.
• Addis Ababa city’s situation is changing day by day, in this context
decentralization indicators particularly administrative should redevelop and
rearrange across varying degrees of devolution, de-concentration and
delegation that are related to quality education service delivery in the city.
Institutions, actors, laws and policies should given due attention in indicator
development.
• Authority should provide due attention on multi-stakeholders participation as
their different role and responsibility in harmony with the existing school
based management committee.
• Addis Ababa’s education bureau should create a conducive environment for
the participation and involvement of all concerned stakeholders in the
improvement of education system in the city.
• Mass and electronic media are one of the strong actors to reach mass
populous particularly in awareness creation and sensitization activities.
Appropriate place and platform should be in place for media people to come
forward and participate to ensure effective service delivery system in
education sector.
• Parent teacher association should have more power and authority to make
decisions on school development and management.
• Appropriate indicators should be developed to monitor and evaluate the
education development and management in the city.
Part VI Support of International Development Agencies
Decentralization and the Support Role of International

Development Agencies in Ethiopia’s Urban Development
Abuye Anleye
Introduction
Under the highly centralized Derg regime (1975 to 1991), Ethiopia’s
municipalities were marginalized and did not function as autonomous local
authorities. After the fall of the Derg, the incumbent Federal Government adopted
decentralization and democratization as the cornerstones for building a multi-ethnic
and market friendly democratic country. Since 2000, as part of a large-scale reform
of government, different proclamations providing the institutional and legal
frameworks for efficiently and effectively running the various affairs and geared
towards the establishment of autonomous city governments have been enacted and
put into full force. Coupled with a commitment to fiscal decentralization, the
legislative of several macro-scale federal governments reforms-touching upon a
host of issues- signified the government’s political will to grant local governments
more direct and transparent power over the management of their resources. In a
nut shell, the overriding objective orientated toward the creation and strengthening
of urban local governments in a manner that ensures public participation and
democratization, while enhancing decentralized service delivery.
Under the decentralized system, Addis Ababa and DireDawa are federal
chartered cities (whose city councils report directly to the Federal government).
Addis Ababa is the primate city with a population of over 3 million (about 25% of
the country’s urban population) and is said to be ten times larger than Dire Dawa,
the second largest city. There are nine Regional States, all of which have adopted
“City” Proclamations creating autonomous urban local governments which are
entrusted with the authority and mandate to raise revenues, deliver services and be
accountable to their own respective representative councils (which duly report to
the regional government). These Urban Local Governments (ULGs) have a
governance model that includes an elected council, an elected mayor, a Mayor’s
Committee and city manager system. Most of the regional capital and secondary
cities have been granted this legal status, although this number increases regularly
as more urban local governments are brought under the proclamations. Addis
Ababa, Dire Dawa and the ULGs in Ethiopia comprise over 60% of the total urban
population. In addition, there are about 1000 settlements classified as urban.
These settlements have populations of less than 20,000 (about 500 have
populations of less than 5,000). They are reporting to Woreda (rural district)
councils. In most regional sates, the Bureaus of Works and Urban Development are
responsible for providing technical leadership in the sphere of regional urban
management and development issues, supported by different bureaus (business
processes) in the Ministry of W orks and Urban Development (MW UD).
Urban Local Governments in Ethiopia have been assigned dual
responsibilities—provision of “sectoral services” such as education, health, justice
and security; as well as “municipal services” such as urban roads, drainage, solid
waste collection and sanitation. State functions are financed mainly through
regional to local block grant transfers, which are often not enough to cover the
recurrent needs for competently manage the sectors. All municipal functions are
expected to be funded from own local revenues-for both recurrent and capital
expenditures. Moreover there is an intergovernmental fiscal transfer framework
from the Federal Government earmarked to complement the shortfall to finance

urban infrastructure development programs and services. At times, urban local
governments do also receive financial assistance from specific donor/NGO
projects, and selected cash transfers and asset transfers from the federal and
regional governments. However, these fund flows more than being not sufficient
enough-as much as required- are not predictable to rely on.
Thus, the purpose of this chapter is aimed at providing a brief reflection on the
decentralization process taking place in urban Ethiopia by pulling together the
current sate of knowledge and practices along with the support of international
development agencies in actively assisting the decentralization effort of the
country..To that effect, official report of the government, World Bank and other
relevant publications have been briefly consulted as much as the scope of the
paper and time frame allowed.
Accordingly, the chapter is divided in to five sections. Section one deals with
the introduction,highlighting the decentralization process in Ethiopia, the purpose
and structure of the chapter. Section two dwells upon the basic concepts and
definition of decentralization from the perspective of the current state of knowledge
and practices. The third section grapples with the relevance of decentralization to
the wider international development agenda; the fourth section summarizes the
support that the international development agencies are rendering in bolstering up
the decentralization and local government development endeavors. In this section
emphasis is put on the urban sector; and the fifth and last section is a summary
and recommendation pertaining to the process and practices of decentralization.
Basic Concepts and Definition
Until recently, most local governments had fewer powers to weld when
compared with their respective national governments at the centre. More often they
used to enjoy limited powers to raise and appropriate local taxes on their own.
Conversely of these powers were exercised by higher levels of government’s
legislations. Similar to the experiences of some other countries local governments
had been partly or wholly funded by subventions from central government offers or
through intergovernmental transfers.
The institutions of local government vary greatly among countries, and even
where similar arrangements exist, the terminology often varies (Misuraca, 2007).
According to Misuraca, local governments are defined as ‘‘administration offices of
an area smaller than a state”. The term is used to contrast with offices at nation-
state level, which are referred to as “central governments, national governments or
(where appropriate) federal governments’’.
In Ethiopian context, the lower tiers of government are constitutionally
established where by the regional states (that involves nine ‘‘national regional
states’’ as well as two ‘‘city administrations’’ that is Addis Ababa and Diredawa),
are entrusted with the power to collect and utilize a substantial amount of
resources that commensurate with a part of the devolved responsibilities. Below
the regional level, we find the district level (in rural context) and urban local
governments (in urban context). In Addis Ababa alone there are ten districts
(known as Kifle Ketema) and Diredawa there are 9 kebele level administrations
(UN-HABITAT, 2002).
Linking local government and local governance is the strategic goal of the
decentralization policy. Conceptually, decentralization relates to the role of, and the
relationship between, central and sub-national institutions, whether they are public,
private or civic (ibid).The concept and definition of decentralization has evolved
over time and has acquired several shades of meaning. The classic definition by
Mawhood and Davey cited in Misuraca, (2007) is based on the following five
principles:
‘‘Local authorities should be institutionally separated from central government

and assume responsibility for a significant range of local services; these authorities
should have their own funds and budgets and should raise a substantial part of
their revenue through local district taxation; local authorities should employ their
own staff…; councils predominantly composed of popularly elected representatives,
would govern the authorities internally; and government administrators would
withdraw from an executive to advisory role in relation to local governance’’.
According to the Fifth African Governance Forum (2002), decentralization is

defined as:
‘‘a global process expected to enhance the opportunities for participation by
placing more power and resources at a closer, more familiar, more easily
influenced level of government. In an environment with poor traditions of citizens’
participation, therefore, decentralization is perceived to be an important first step in
creating opportunities for citizen-state interaction’’.
Organizationally, decentralization, or decentralized governance, refers to the

restructuring of authority so the there is a system of co-responsibility between
institutions of governance at central, regional and local levels according to the
‘‘principle of subsidiarity’’, thus increasing the overall quality and effectiveness of
governance system, while increasing the authority and capacities of sub-national
levels.
According to UNCHS (2001), decentralization of infrastructure and services are
considered in a similar fashion with the application of the concept of subsidiarity
and described as ‘‘…decisions regarding services should rest with the entity of
governance closest to the community that is able to deliver these services in a
cost-effective way while minimizing the externalization of environmental and social
costs’’.
In the context of Ethiopia, decentralization is a recent phenomenon with limited
experience, but on the rise. The culture and experience of local government has
been applied to W oredas (district) and municipalities. Since the 1950s Woredas
have existed as the lower tier of government or basic unit of administration. In
those earlier times, they were entrusted with a range of responsibilities over
matters such as education, health, law and security within urban areas and their
surrounding rural settlements. On the other hand with the further urbanization of
the country, municipalities of various categories have been entrusted with the
responsibilities of providing a range of services and carrying out the proper
planning and development of urban areas. Nevertheless, in order to build a well-
coordinated modern administration, as well as empowered, committed and
competent local authorities, informed and organized citizens and civil society
groups have to be nurtured. To that end, it is in the belief of the Federal
Government that a lot has to be done in the sphere of the capacity building, while
many of the bilateral and multilateral agreements focus on some other vital areas of
urban concern.
Relevance of Decentralization to the Wider International
Development Agenda
Since governments provide an enabling environment in which decision making
and service delivery can be brought closer to the people especially to the poor,
decentralization and local governance are increasingly recognized as basic
components of democratic governance. Decentralization is instrumental in the
overall attempts of re-inventing government and is essential to achieving the lofty
targets of the Millennium Development Goals (MDGs). Under the combined thrust
of accelerated globalization and persistent demands for deeper and expanded
democratization, central governments are seeing their traditional roles being

progressively squeezed. Re-inventing government would then require revisiting the
nature and role of the state itself and sharing of political power and administrative
responsibilities (UNDP, 2002).
In the global context, it is believed that decentralization increases popular
participation in decision making because it brings government closer to people,
making it more accessible and knowledgeable about local conditions and more
responsive to peoples’ demand (Misuraca: 43). Central/Federal governments
located far away and preoccupied mostly with national and regional issues, fall
short of adequately and efficiently providing services essentially local in nature.
The case for decentralization can, in fact, be made on a number of grounds such
as the following:
• Local authorities tend to act more in line with local preference s and
conditions, and their response to local needs is more expeditious;
• Because decentralization tends to enhance transparency and
accountability, the amount of money wrongfully diverted away from
development often declines;
• Decentralization makes development projects more sustainable and cost
effective because local people are more likely to be involved in the
design, execution, and monitoring.
• Decentralization encourages communities to find solutions to their
everyday problems, yielding innovative ideas, which are more attuned to
local conditions; and
• Decentralization provides opportunities for more people, including the
under-represented groups to participate in decision that affect their life.
But, for the process of decentralization to be sustainably successful there are

preconditions which may not exist in full circle in a country at a given time.
According to UNDP (2003), these prerequisites include: (i) Effective state capacity,
in which decentralization requires co-ordination between levels of government and
more regulation –not less-to ensure basic transparency, accountability and
representation and the state has to raise adequate fiscal resources to support
decentralization; (ii) Empowered, committed and competent local authorities; and
(iii) Engaged, informed and organized citizens and civil society.
Support of International Development Agencies in the
Decentralization Process
Introduction
The urban sector is increasingly receiving significant attention from the
government as well as the donor community in Ethiopia. Cities and towns are
growing rapidly and struggling to cope with the new challenges and problems. At
the same time, the huge potential of the urbanization process in enhancing
economic and social development in the country are now being recognized and
tapped.
To that end, the basic legislation for municipal self-government is in place, and
the Federal Government has accorded a political priority by establishing the
Ministry of W orks and Urban Development (MWUD) and the endorsement of the
Urban Sector Component of the first five-year (2004/5-2009/10) plan for
Accelerated and Sustained Development to End Poverty (PASDEP). In addition, the
outputs of World Bank assisted Deepening Decentralization Technical Assistance
(DD-TA) as part of the Capacity Building for Decentralized Service Delivery
Program (CBDSD), Public Sector Capacity Building Program (PSCAP) and the
German development cooperation (GTZ, now GIZ) support for Urban Governance
and Decentralization Program are concrete living testimonies to the very critical
need for translating the various strategies into a comprehensive and structured
action plan with defined millstones.
In fact, the significant role of donors and development partners has been
underscored by a higher official of MW UD during a joint workshop held in 2006 the
above mentioned that donor commitments are believed to enormously contribute
toward aggressively as well as uplifting and promoting the urban agenda;
deepening the discourse around the vital components of PASDEP and the on-going
urban packages; integrating existing and future programs into the PASDEP
framework. In the regard, joint effort is suggested essential to improve the
coordination among donors and development partners. Finally since the need for
more resource is becoming evident, it is now proposed to scale-up government
efforts to mobilize more resources such as financing urban infrastructure.
In light of the above new development, a brief assessment of the multi-faceted
supports being rendered by international development agencies in the spheres of
deepening decentralization effort of the Federal Democratic Republic of Ethiopia
(FDRE) government in tune with the direction set in the Urban Policy and goals
specified in the Urban Development and Urban Good Governance Packages is
discovered vital and timely worth conducting.
World Bank and other Donors Support for Decentralization Effort
in Ethiopia
The Bank has been involved in a long process of capacity building to improve
service delivery by the Ethiopian local governments. From the bank perspective,
this process began in 1999 when the bank unit (AFTU1) and Urban Development
Support Service (UDSS) (now UDCBO/UGGCBO) undertook a thorough review of
the Bank’s historic support to local governments and agreed on a phased work
program. Until 1999, W orld Bank support was provided through specific investment
projects –although physical achievements were made, success was limited
because of inadequate attention to fundamental capacity, financial and institutional
issues.
The first steps in the phased program were, CBDSD (2003-2007); PISCAP
(2005-2009); and broadly support by Local Investment Grant (LIG) and the very
recent Urban Local Government Development Project (ULGDP) which started in
2008. The vision of these programs were to start by creating conditions for
autonomous urban local government with rights and responsibilities for service
delivery; to build the capacity of federal and regional governments to support the
decentralization process through policies, systems and enabling environments; to
build the capacity of local governments to deliver services; and to provide financing
to local government through transparent, predictable intergovernmental fiscal
systems to address the capital investment backlog and enable cities to expand and
sustain the delivery of services and thereby fulfil their responsibilities as well as
generate more revenue (through LIG and ULGDP).
The final steps in this phased work program will be to support a sustainable
urban development finance system whereby cities will ultimately become
creditworthy and have access to financial markets to finance their infrastructure
and other capital investment needs (though future urban development operations).
A) CBDSD
According to the W orld Bank (2009), the World Bank’s involvement in the
project was valuable for several reasons. First, the Bank’s global experience with
the public sector capacity building and decentralized service delivery helped to
inform the overall design of the project. Second, the Bank’s knowledge of country-
specific issues gained through the preparation of several important pieces of
analytical work-the 1999 regionalization study, the 2000 review of the Civil Service
Reform Program, the 2000 public expenditure review, the 2001 rapid assessment of
municipal decentralization, and the 2001 woreda study-assisted in ensuring that the
project suited to Ethiopian circumstance. Third, the Bank’s experience in Ethiopia
with demand-driven models for providing assistance, particularly at the local level,
helped in persuading the authorities to include funds to be made available to
municipalities upon presentation of an acceptable proposal. Fourth, the Bank’s
involvement helped to leverage assistance for government’s program from other
development partners.
The project comprised of three components: (a) implementing civil service
reforms, (b) restructuring and empowering local governments, and (c)
strengthening the Ministry of Capacity Building. According the approved Project
Development Objectives (PAD), the second component (Restructuring and
Empowering Local Government) was to finance activities to build the capacity of
local governments to improve delivery of services. Assistance was targeted to local
governments that were already financially sound and that had some capacity to
deliver services. Strengthened municipalities could then serve as models for
others.
The subcomponents included in this specific component were designed to the
over all support of deepening decentralization initiative of the FDRE by
strengthening the capacity of different levels of governments and focused mainly
on federal and regional policy and analysis, regional technical assistance for
deepening decentralization, local government restructuring and capacity building,
and pilot investment for infrastructure rehabilitation.
The outputs of this component are rated satisfactory by the Bank and includes
among others the following main outputs. (Page 30, 31 and 32 of ICR Report):
• The Bank has supported the Federal and Regional Policy and analysis
that help for the development of many of the legislations including urban
development policy, urban land, urban planning and compensation laws;
and many of the operational manuals and standards applying in urban
development and management including the Urban Management
master’s program in the Ethiopian Civil Service College.
• The Regional technical assistances for deepening decentralization in
which urban development and housing strategies, and operational
manuals and specific technical support on digital map preparation for
Addis Ababa, and cadastre for Mekele city are prepared.
• In Local government restructuring and capacity building component the
preparation of the guidelines and the implementation of restructuring
and performance improvement plans, revenue enhancement plans and
financial management for 18 cities aimed at enabling them to improve
their local service delivery were established. This is also applying as a
performance measure under the ongoing Urban Local Government
Development Project.
• The Pilot investment for infrastructure rehabilitation finally leads to the
current ULGDP was designed and implemented in 17 participating cities
for urban rehabilitation of infrastructure projects. Cities have gained
experience through learning-by-doing in planning, prioritizing options
with public participation, and appraisal of proposed projects. All
participating cities are addressing sustainability through the preparation
of the asset management plans and budgets that provide the operation
and maintenance (this is an access criteria and performance measure
under the Urban Local Government Development project).
B. Public Sector Capacity Building Program (PSCAP)

The objectives of this program is to improve the scale, efficiency and
responsiveness of public service delivery at the federal, regional and local levels;
to empower citizens to participate more effectively in shaping their own
development; and to promote good governance and accountability. This objective
was to be achieved by scaling-up Ethiopia’s ongoing capacity building and
institutional transformation efforts in six priority areas: (i) Civil Service Reform; (ii)
District-Level Decentralization; (iii)Urban Management Capacity Building; (iv)Tax
Systems Reform; (v) Justice Systems Reform; and (vi) Information and
Communications Technology. According to the Result Analysis of the program
(2009), the support projects have made significant progress in achieving the
development objectives, as well as one of the major strategy pillars of the plan for
Accelerated and Sustained Development to end poverty (PASDEP) by building all-
inclusive implementation capacity across sectors in its four and half years
implementation of the first phase.
The project uses a sector-wide approach and pooled funding mechanism with
contributions from the government of Ethiopia, the Canada International
Development Agency (CIDA), the United Kingdom’s Department for International
Development (DFID), European Commission, International Development
Association (of the World Bank), and the Irish Aid. Total funds earmarked for the
program were about USD 100 million from IDA and more than 200 million dollar
from the government and other donors. Two out of six PSCAP programs supported
urban and local government development. This allowed for follow through on
recommendations raised by the CBDSD-DD-TA as well as other aspects of capacity
building particularly at local and regional levels. The second phase of the program
started this year and focuses mainly on scaling up the best practices of the first
phase and further improves the capacity the public sector at all levels.
According to the same report, PSCAP relating to its development objectives is
served as one of the primary tools that supported federalism in Ethiopia by (i)
concentrating most of the funding (over 80%) on capacity building at regional level
and below; (ii) granting fiscal and administrative autonomy to the regions that
allows for bottom-up regional planning, prioritization and implementation of
capacity building activities within the assigned resource envelopes and agreed
menu of activities. The regional PSCAP was the bulk of the program. It empowered
regions to adapt and implementation national reforms and capacity building
priorities envisaged under PSCAP’s six sub-programs in a manner that is efficient,
accountable and sustainable. This was complemented by the support provided by
Federal Directors such as development of prototypes for major reforms, quality
assurance and technical assistance. The results achieved in PSCAP clearly show
that regions have enhanced their capacity to manage major government-wide
programs and, in some cases, were found to be the pioneers in efficiently
organizing themselves to implement major programs such as Business Process
Reengineering, Good Governance Package, the Result-Oriented Performance
Appraisal Systems (ROPAS), etc.
C. Local Investment Grant (LIG)
Currently under implementation and is designed to provide grants for capital
investment to local governments through the intergovernmental fiscal transfer
system-paying special attention to bringing ULGAs into the system. Key features
are access criteria to be eligible for funding, to ensure implementation, sustainable
operations and maintenance, and participatory selection of investment priorities.
This is also designed to build on capacity (and create demand for capacity) for
service delivery through CBDSD and PSCAP.
D. The Ongoing Urban Local Government Development Project

(ULGDP)
This project based on priorities identified through projects like CBDSD (e.g.
municipal infrastructure plans) and consistent with PASDEP priorities and used as
an instrument to simulate Good Governance and Urban Infrastructure Development
program in the cities. The following are the rationale for the Bank’s involvement as
described in the Project Appraisal Document (PAD) of the Urban Local Government
Development Project (ULGDP).
This project aims to build on and consolidate the Bank’s previous support for
urban development. While a lot of progress has been made through the capacity
building efforts under CBDSD and PSCAP, it is known that for capacity building to
"take hold" it must be done in the context of real performance improvements with
real outputs-learning-by-doing. Now that the legal and institutional systems and
structures are in place (or in the process of being implemented), the provision of
predictable resource flows tied to improved performance in the delivery and
operation of services is the anticipated next phase in the Bank’s support for urban
development. The project is focused on the 19 cities that have been supported
through CBDSD (including Addis Ababa).
The Bank has also been instrumental in working with the government to
establish an intergovernmental fiscal architecture as part of its decentralization
strategy. The elements of this architecture which are already in place, all of which
have been supported by the Bank, include the following:
• The Regional Block Grant. This formula-driven “equity” grant provides
block transfers to regions from the federal treasury, and has been
enhanced through the Protection of Basic Services (PBS) project.
• The Regional PSCAP Specific Purpose Grant. This is a formula based,
conditional grant (performance driven) that provides programmatic
support for capacity building (initiated through the Bank’s PSCAP project
as described above).
• The Pilot Local Investment Grant. This provides support for capital
investments in rural woredas, and is being initiated as a pilot with Bank-
funding under the PBS project. If successful, it will be scaled up to
become a programmatic, formula based conditional grant (performance
driven) to finance capital investments to all rural local governments in
Ethiopia.
The only remaining piece of the fiscal decentralization architecture as originally
conceived that has not yet been implemented is a programmatic, formula-based,
conditional performance grant that would support the country’s urban local
governments’ ability to expand and sustain the full range of municipal infrastructure
and services. This project will support establishment of this grant mechanism as a
Specific Purpose Grant (SPG) for urban local governments that is incentive-driven
and supports enhanced performance by urban local governments in implementing
the government’s urban reform agenda. The Bank’s history in working with
Government of Ethiopia to set up the fiscal architecture for decentralized local
government provides a clear rationale for the Bank’s involvement in this project.
In addition to its historical involvement in urban development and the fiscal
decentralization architecture, the Bank has been providing support for conditional
grant transfers to local government through a number of projects in Africa
(including Uganda, Tanzania, and Swaziland) as well as in other regions of the
world. It therefore has a comparative advantage in supporting Government of
Ethiopia’s efforts in this arena by bringing in the experiences and lessons learned
from different countries.
Put differently, the project is definite to contribute to the successful execution of
the government policies, goals and programs in their respective pursuit of
achieving the Millennium Development Goals (MDGs) and PASDEP targets as

follows:
• Improved management of urban centers and improved performance in
sustained provision of services and infrastructure are expected to
promote local economic development, improve the investment climate,
generate employment and contribute to economic growth and poverty
alleviation.
• Implementation of the Urban Good Governance Program (UGGP) is
expected to lead to improved management of cities, participation of
citizens in, particularly, the investment planning process, and improved
downward accountability. ULGDP will enhance Ethiopia’s commitment to
decentralization as it has been designed to bring decision making closer
to local levels and to citizens.
• Improvements in municipal performance in providing sustainable, priority
services and infrastructure are expected to improve the environmental
conditions in cities, and lead to better health outcomes.
German Bi-lateral Cooperation (GTZ and Kfw)
The other development partners providing support for urban development in
Ethiopia currently include German bi-lateral cooperation, through GTZ and KfW
(the German financial aid) which have both been actively involved in capacity
building and investment projects for urban development in Ethiopia. The Urban
Governance and Decentralization Program (UGDP) as part of the bilateral support
agreement between the two governments designed the challenges of Ethiopia’s fast
urbanization. It contributes to Ethiopia’s comprehensive process of
decentralization, including the transfer of power to regional and local governments.
The program is jointly implemented by the Ministry of Works and Urban
Development (MWUD), together with four regional states, a total of 18 secondary
cities and Ethiopia’s capital Addis Ababa. They are supported by GTZ, KfW and
CIM on behalf of the German Ministry of Development cooperation (BMZ). Based
on the recent Ethio-German negotiation, the program support extended to eight
new cities including the capital cities of the four emerging regions.
The program aims to improve urban service and infrastructure for citizens, and
to enhance good governance. It includes local efforts as well as regional and
national policy advice to improve the participation of citizens in urban development;
ensure the city governments’ transparency and accountability; increase the city
governments’ capacities for financial management and revenue generation; and
improve urban service and infrastructure delivery.
To improve urban governance and municipal financial management the program
supports capacity building in municipalities. During the Urban Local Government
Development Program (ULGDP) design the program has contributed in the capacity
building of the 18 cities to access a performance grant for local service delivery co-
financed by the W orld Bank. The program is also well placed within the Ethiopia’s
national ‘‘plan for accelerated and sustainable development to end poverty’’
(PASDEP) and the urban governance reform.
In conclusion, capacity development-in a manner that enables participation of
stakeholders and international development agencies-is crucial to achieving
decentralized all round local governance. Experience has shown that there is still
gap between existing capacities and demand for services and accountability at the
local level. This situation calls for the creation of awareness, clear articulation of
roles and responsibilities, and harnessing of the potentials of the different actors
involved including the experience of international development agencies.
Hence, based on the previous experiences and lessons learned in the area by
the federal government, experts and practitioners and the involvement of different
development partners, the key message and recommendations for strengthening
local governance-decentralization efforts can be summarized as follows:
• Realizing that decentralized governance for local development and
poverty reduction is a long-term learning and development process
requiring a sustained commitment, coordination of efforts, and
strengthened capacities of all stakeholders at various levels is an
urgently needed endeavour worth expediting;
• Moreover, at the national/federal and regional levels, an enabling
environment to ensure that devolution of authority/power to the local
level shall be determinedly facilitated so that the drive toward
community empowerment could be rendered successful;
• For decentralization to contribute toward the attainment of local
development and poverty reduction goals, it is essential to give due
attention to the continuous deepening of the administrative, fiscal and
political decentralization.
• For decentralization to be effective, adequate emphasis should be given
to participatory monitoring and evolution at all levels; and
• Although the role of international development agencies and
development partners in transferring knowledge of good practices and
support the implementation of these practices are very crucial and has
significant impact, decentralization initiative should not be regarded as
venture entirely dependent on external assistance. Neither shall be
assumed as a sole panacea to mitigate the challenges that urban
Ethiopia is currently encountering. Nor shall it indulge into extending
wholesale prescription. Instead it shall seriously take into account the
specific contexts. Moreover, a specific incentives focused-framework
able to motivate local people shall be established and put in effect.
Part VII Conclusions
Conclusions and Future Research

A. Bongwa and S. Kasahun
This book describes decentralization and service delivery in urban Ethiopia.
Decentralization has become a buzz word within development discourses.
However, there is still an ongoing debate and disagreements on the different types
of decentralization and the extent of the success of decentralization on imposing
service delivery. Decentralization is a huge concept which describes, on one hand,
the transfer of authority and responsibility from the central government to the lower
levels. And on the other hand the concept includes political, fiscal, administrative
and market issues. The chapters in this book reveal how far decentralization has
been implemented in Ethiopia and how it affects urban areas in service delivery.
The book illustrates the outcomes of decentralization among local governments and
the challenges of decentralized planning, decision making, public participation, and
gives guidelines as to what should be considered by the policy makers. This book
could be regarded as a contribution to the debate on the decentralization with a
focus to what the extent decentralization enhances service delivery for urban
people.
Decentralization in Ethiopia
The book covers different types of decentralization. The first part is about
political decentralization (chapter 2) and explains how power has been
decentralized to local level governments and how the governance structure has
been restructured with the objective of establishing a broad based community
awareness of the participation in the reform process and promote principles of
democracy, transparency and accountability.
Ethiopia's ongoing political and economic reforms demand effective
decentralization in which, the involvement of the people directly or through their
democratically elected representatives are given paramount importance. since
1991 Ethiopia is engaged in the process of decentralization, by transferring
responsibilities of the state to lower tiers of government to bring not only political
stability and contribute to democratic governance, but also improve service delivery
and attain equity. According to Tegegne (1998), the first phase of decentralization
(1991-2001) concentrated on creating and empowering Regional Governments.
This has changed the local and central government systems whereby the Regional
Governments have been entrusted with legislative, executive and judicial powers
with respect to all matters concerning their areas. The second phase of
decentralization, which was initiated, in 2002-03, has been focusing on a series of
legal, fiscal, and administrative reforms beginning with four of the largest regions
(Amhara, Oromiya, SNNPR, and Tigray). During the second phase, some
devolution to the Woreda level was undertaken. In urban areas, urban
administrations with Woreda status and responsibilities were created. Moreover,
the second phase of decentralization has worked towards empowering communities
to actively participate in development activities, improve local democratic
governance, and strengthen the capacity of delivering basic services.
By and large in both phases of decentralization a new governance framework
has been established which serves to strengthen accountability for better service
delivery. Local governments have been delegated with responsibilities regarding
service delivery. However, clarification of these responsibilities has to be worked
out within all government levels. The decentralization process in Ethiopia has
created framework, whereby control over resources has been devolved

substantially and a platform for citizen participation has been developed.
As the result of the decentralization process the structure of the Ethiopian
government currently has four tiers. The highest tier is the ‘Federal’ then ‘Regional’
then ‘Woreda’ and the lowest ties are ‘Kebele’. All regional states have developed
their own constitutions, which are more or less a copied version of the federal
constitution. The country has introduced a vivid transformation in the governance
system underpinned by the legal framework allowing more participation of the
regional states regarding matters that concern them.
With the objective of creating and strengthening urban local government that
will ensure public participation, democratization; and enhance decentralized service
delivery through institutional reforms, capacity building, systems development and
training, the government has been engaged in a large scale government reform
resulting in the creation of institutional and legal frameworks for urban local
government authorities. This endeavor is consistent with the Habitat Agenda which
emphasizes the role of local governments in governance for sustainable
development that at the local level needs to be enhanced and promoted by further
strengthening local authorities. Empowering local authorities can play a more
effective role in local sustainable human settlements development through
appropriate decentralization of responsibilities and resources, and increasing local
participation, in conformity with the legal framework and policies of each country
(UN-HABITAT, 2001:8).
The decentralized governance in Ethiopia has provided the legal, administrative
and fiscal frameworks for the empowerment of people and their institutions at
woreda levels. However, capacity building of various levels of government is the
key factor in achieving successful decentralization. When addressing the issue of
capacity the government has carried out a Civil Service Reform Program (CSRP),
which focused on capacity building and adjusting to decentralization.
Administrative Decentralization
Administrative decentralization has an objective to enhance the effectiveness of
local government authorities in the delivery of quality services in a sustainable
manner. Chapter 3 showed how administrative decentralization has played a role in
planning, budgeting, staffing, program and project implementation, information
management and operation and maintenance. This has been also further elucidated
by taking the case of education service in Addis Ababa (chapter 12), as to how the
administrative decentralization improves the availability of resources to local
government authorities and improving the management of those resources.
Decentralization and Civil Service Reform

The Civil Service Reform Program (CSRP) in Ethiopia has been used as a
supporting strategy for more decentralization in government operations and
improving service delivery. CSRP, besides supporting decentralization, has helped
to bring a better service delivery and efficient resource management. CSRP in
Ethiopia, is the process of capacity building by altering limitating rules and
regulations to obtain a more efficient dedicated and ethically performing civil
servants in the newly decentralized environment.
There is national accord in Ethiopia that capacity-building at all levels of
government warrants a serious intervention and is indispensable in implementing
decentralization. The intervention starts with training and education especially in
addressing the human resource demand of regions to be able to implement the new
responsibilities. In this regards, the Ethiopian government has established the
Ethiopian Civil Service College with the objective of building the capacity of the
civil service through education, research, training and consultancy work. This
capacity building on one hand addresses the need of human resource to regions
and local government and on the other hand changes the working system: - rules
and regulations, and structure and procedures have played a significant role in
implementing the decentralization program and improving the service delivery.
Fiscal Decentralization
Financial responsibility is a core component of decentralization. If local governments and
private organizations are to carry out decentralized functions effectively, they must have
adequate revenues—raised locally or transferred from the central government—as well as
the authority to make expenditure decisions. Fiscal decentralization can take many forms,
including:
1. Self-financing or cost recovery through user charges

2. Cofinancing or coproduction, in which users participate in providing services and
infrastructure through monetary or labor contributions
3. Expansion of local revenues through property or sales taxes or indirect charges
4. Intergovernmental transfers of general revenues from taxes collected by the
central government to local governments for general or specific uses
Authorization of municipal borrowing and mobilization of national or local governme
resources through loan guarantees. In Chapters 4 and 5 we take this a step further
and look into detailed aspects of institutionalizing fisacal decentralization. Financial
decentralization has increased the resources available to local government
authorities and improved the efficiency of their use. Decentralization has
encouraged the expansion of local revenues through property, sales, local taxes
and indirect charges. As a result of decentralization the source of public revenue is
being revised in order to develop a fairer sharing of revenue and revenue sources
between federal, regional and Woreda level governments.
Market (Economic) Decentralization 13

The most complete forms of decentralization from a government’s perspective
are privatization and deregulation; they shift responsibility for functions from the
public to the private sector. They allow functions that had been primarily or
exclusively the responsibility of government to be carried out by businesses,
community groups, cooperatives, private voluntary associations, and other
nongovernmental organizations.
Privatization and deregulation are usually accompanied by economic
liberalization and market development policies.
 Privatization—Privatization can range in scope from the provision of goods and

services based entirely on the free operation of the market to public-private
partnerships in which government and the private sector cooperate to provide
services or infrastructure. Privatization can mean allowing private enterprises to
perform functions that had previously been monopolized by government. It can also
mean contracting out the provision or management of public services or facilities to
commercial enterprises. There is a wide range of public-private institutional forms
and of ways in which such functions can be organized, particularly in infrastructure.
Privatization can also include financing public sector programs through the capital
market, with adequate regulation or measures to ensure that the central government
does not bear the risk for this borrowing, and allowing private organizations to
participate. And finally, it can mean transferring responsibility for providing services
13
See Litvack et al. (2001?? ) Decentralization briefing notes
from the public to the private sector through the divestiture of state-owned
enterprises.
 Deregulation—Deregulation reduces the legal constraints on private participation in
service provision or allows competition among private suppliers for services
previously provided by the government or by regulated monopolies. In recent years
privatization and deregulation have become more attractive alternatives to
government provision in developing countries. Local governments are also
privatizing by contracting out service provision or administration.
This is an area where more still needs to done in terms of research as regards
Ethiopia.
Information and Monitoring

Accountability is a prerequisite for improved public sector performance, and
information is the key to accountability. The systematic collection, analysis, and
reporting of information are critical elements in decentralization programs because
that information can be used to verify compliance with policy goals, analyze
alternative outcomes, and guide future decisions. Information on financial flows
(i.e., budgeting and expenditure reporting) as well as other inputs, outputs and,
where possible, outcomes, is essential at the local level, to encourage public
participation. Public participation in a decentralized system is vital in improving
service delivery and the access to services. It also supports tailoring government
actions to public necessities and in increasing the opportunities for state-society
interactions.
Unless the local public is aware of what public goods and services are
provided, how well they are provided, who the beneficiaries are, how much the
goods and services cost, and who paid for them, the public will not encourage an
effective government. Central monitoring and evaluation of local performance, has
much the same effect, except that national interests replace particular local
interests.
The monitoring aspect has to be combined at both the centraland local levels.
Without some central monitoring, there can be no assurance that functions of
national importance are adequately performed once they have been decentralized.
There must be an understanding as to the implication of the macro economy on
decentralization. In this regard, Ethiopia has made great strides in implementing
the decentralization of power to lower-level governments. As a result, regions
appear to have a large amount of autonomy and decision-making power, which also
includes monitoring at local level. Regions are allowed to determine what formula
to use to distribute block grant resources across W oredas. The task of monitoring
and assessing Woredas finances can be strengthened considerably through
improvements in financial accounting and reporting, and the establishment of
analytical capabilities for monitoring and evaluation. But the need for careful
monitoring goes beyond finance. Depending on the service delivery objectives, the
need for monitoring differs, for example, different aspects of decentralization may
have different effects on the construction and maintenance of various types of
infrastructure, or health care programs, or education. If the objective is for safety
nets to reach the poor, information is required regarding who the poor are and
where they are located, and how much of the benefits from the program are
reaching this target group. Hence, to improve monitoring and reporting, data should
be regularly collected and reported the respected level of government and to the
public. The data should be collected and processed on a regular and timely basis.
Otherwise, it is difficult to consistently monitor decentralization.
Capacity of Local Governments

There is an ongoing debate regarding decentralization and the capacity of local
governments to assume new roles and responsibilities as a result of
decentralization. Decentralization proposes that local governments’ proximity to
their constituents will force them to be better than central governments at managing
resources and matching the public preferences. However, it is not at all clear that
local governments and communities have the capacity to translate this information
advantage into an efficiency advantage. Local governments may not have the
technical capacity to implement and maintain projects effectively. For instance in
Ethiopia, regional and city governments have been taking measures to improve the
delivery and management of urban land. The development and delivery of land in
industrial zones for private investment in the major cities has, in particular, been
encouraging, although a comprehensive evaluation of their impact remains to be
done. Many cities have also been delivering land for private housing construction.
Yet land development and management remains one of the areas where significant
improvement in terms of governance is required. Hence, Improve local government
capacity is still an area warranting a huge intervention by federal, regional and
local governments.
The Way Forward

The chapters in this book have vividly elucidated that Local capacity can be
built by the process of decentralization, particularly when appropriate programsthat
increase interaction with the private sector are included the decentralization
design. However, a large up-front investment is essential in local capacity building.
It has been observed in the case of Ethiopian decentralization capacity is one of
the most important factors creating a well-functioning decentralization. The
decartelization has been implemented with existing local institutions. The remaining
challenge will be to reinforce these institutions. In its democratic political aspect,
decentralization, as currently conceived and increasingly practiced in the
international development community, has two principal components:- participation
and accountability.
There are of course key questions that have not been addressed in this book
and should be the platform for future research: ( and in this case we focus on
service delivery)
14
Questions on decentralized services include :
 Where has decentralization been associated with improved service delivery and how
can these improvements be explained?
 What mix of institutional arrangements increases the efficiency of service delivery?
 What roles do competition and accountability play in improving services?
 Through what mechanisms can service delivery institutions—whether central states,
local governments, NGOs or private institutions—be held downwardly accountable
to the populations they serve?
 What are the best means for also holding them accountable to central government
standards?
 What are the best arrangements for financing service provision?
 Which decisions concerning service provision should be retained by the central
government?
 Which require local decision making and participation? How can the transaction
costs of participatory approaches be weighed in this balance?
14
See Ribot (2002) African Decentralization: Local Actors Powers and Accountability
 Service provision is an important aspect of decentralization, and it has recently been

at centre stage. There is a need to better understand the sequencing of service
provision with respect to other aspects of decentralization such as the establishment
of democratic local authorities, the establishment of revenue mechanisms and so
forth. Comparative research on sequencing is very important. Indeed, the question
could be posed: Are decentralizations that place service delivery too early in the
process running into problems, or is service provision a good lead activity?
We can also look at other cross cutting as participation and accountability.

Participation is chiefly concerned with increasing the role of citizens in choosing
their local leaders and in telling those leaders what to do, thus, providing inputs
into local governance. Accountability constitutes the other side of the process
whereby local governments have to explain or justify what they have done or failed
to do for the public. Accountability can be seen as the validation of participation, in
that the test of whether attempts to increase participation prove successful is the
extent to which people can use participation to hold a local government responsible
for its actions. Improved information about local needs and preferences is one of
the theoretical advantages of decentralization. Therefore, there must be a
continuous effort in improving public participation and accountability at all levels of
government structures in Ethiopia. Moreover, given the crucial position of the
Woredas in the service delivery chain, the functional relationships between the
Woredas and the regional and Federal governments have to be consolidated and
more clearly articulated. Otherwise, the benefits of decentralization will not be
maximized without the involvement of citizens, the community, and services users.
The democratic local governance currently under way in Ethiopia holds much
promise for developing effective systems of public accountability that will ensure
that civil servants are responsible to elected officials, and that the latter are in turn
responsible to the public that elected them. In the process these systems of
accountability should increase the pressure for more transparent local governance,
in which corruption will be easier to bring to light and thus to curtail. Moreover,
Ethiopia’s policies and strategies for a development framework emphasises the
need of public participation. Citizens are acknowledged as playing a crucial role in
mobilizing their communities, holding local governments accountable, and
accelerating the process of democratization. Official pronouncements are matched
by numerous local organizations, including community level organizations, in the
education, health, and water sectors. However, walking the talk is an area requiring
enormous attentions.
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Decentralization and Service Delivery in Ethiopia

Book · January 2011

Meine Pieter van Dijk Samson Kassahun

SEE PROFILE SEE PROFILE

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decentralization and service delivery in ethiopia

ihs is an international institute of the Erasmus University Rotterdam, in the field of

This is the third book in a series on Urban Management in Ethiopian Cities.

The titles of other books in the series are:

ihs is the international institute of urban management

Institute for Housing and Urban Development

Erasmus University Rotterdam

Ethiopian Civil Service College (ECSC)

Decentralization and Service Delivery

A. Bongwa, S. Kassahun and M.P. van Dijk (eds.)

Shaker Publishing, Maastricht

Printed in The Netherlands.

English Editing and type setting: S.N. Welsh

This is the third book in a series on Urban Management in Ethiopian Cities

Decentralization and Service Delivery

Decentralization and the Support Role of International Development Agencies in

Dr. Hailemichael Aberra

Governing cities, New institutional forms in developing countries and transitional

Part I: Overview: Decentralization and Service Delivery in

Professor Meine Pieter van Dijk

The decentralization concept

pluralism can be spatially centralized as in Quadrant II or decentralized

Centralization & Decentralization

Which theoretical framework can be used for research concerning

2. Assessment of concepts 7. Selection of feasible

4. Analysis of existing 5. Assessment of

Examples of Decentralization: Ethiopia and Tanzania

2. Recently government worked on the privatization of the railroads, hoping to

The Structure of the Book

policy-making and political processes of sub city or kebele governments is

emphasized by enabling strategies promoted by the United Nations Centre of

initiatives. Decentralization offers urban managers more opportunities to create the

Part II Political Decentralization Gives More Power in

Political Decentralization and Service Delivery in Addis

Background and Rationale

success in achieving the intended objective of being an instrument of promoting

Statement of the Problem

Objectives of the Study

Significance of the Study

Scope and Limitation

Approaches and Methodology

Organization of the Study

According to the World Bank 1, political decentralization often requires

According to John-Mary Kauzya (2007), Political decentralization can also be

Decentralization in Addis Ababa

structure created a culture of “Command and Control”. The increasing relevance of

Data Presentation and Analysis

Background of Addis Ababa

Oromia Regional State. Third, it is also an autonomous local government authority

Power and Functions of City Government

Power and Functions of Sub City Council