Apart from these issues of content, a municipality should be concerned with understanding the government policy on the process and sequencing of reform that enables private sector participation. Are different interests mobilised in support of policy? Is there a coherent view among sector departments, agencies and levels towards private sector participation? How is government planning to address the vast range of issues concerning private sector participation? Will it resolve all the issues together, or proceed pragmatically with private sector participation and address barriers on the basis of need?
Clearly, the involvement of the large-scale private sector in municipal service provision benefits if there is cross- governmental policy coherence and consistency. However, in the context of resource-deficient government, when policy is developed at the insistence of donors, the capacity needed to facilitate such coherence is often lacking. Furthermore, incoherence often reflects a broader debate concerning the role of government in the provision of public services.
To support partnerships and promote key public policy objectives, the policy framework must be linked to sound regulatory practices such as curbing monopoly practices, alleviating poverty, promoting universal service access and fostering empowerment. This often requires dedicated institutional capacity to drive and coordinate policy and regulatory reform. If this leads to greater coherence, the foundation is in place for municipalities to embark on partnerships with private service providers. The following section considers the critical issue of this regulatory framework.
As part of a wider state reform process, Colombia underwent one of the most far-reaching processes of decentralisation in Latin America. Moving from a system of centralised departmental government, responsibility for major functions has been gradually devolved back to local government since 1987. This includes responsibility for water supply and sanitation, environmental health, construction and maintenance of schools, health clinics and roads, low-cost housing, agricultural extension, urban transportation and cadastral surveying (surveys that show the extent, value and ownership of land for taxation purposes). This decision to decentralise led to the closure of a number of ministerial departments and autonomous agencies of central government, such as the municipal development institute, which had previously held overall responsibility for water supply, school construction and environmental health. The implementation of this reform was not always properly planned and sequenced, however. For example, the hasty closure of the state water corporation led to considerable disruption in water supplies because many municipalities were not prepared for assuming this new responsibility. Following a public campaign spearheaded by university students, a new Constitution was promulgated in 1991. Its over-riding concern was to build a participatory democracy by opening up the political system, by including former guerrilla groups, decentralising political power, reducing bureaucratic controls and giving the executive more direct control over the administrative structure. The new Constitution defined the Colombian nation as 'decentralised', and several articles granted a new degree of political and financial autonomy to local government. The term of municipal office was lengthened, and the discretionary system of central government transfers to local government was replaced by one based on a constitutional guarantee. In 1993, legislation (Law 60) enabled the radical re-allocation of responsibilities between different layers of government that had been envisaged in the 1991 Constitution. This further deepened the process of fiscal decentralisation. Municipalities began to receive a new central government transfer, the situado fiscal, which arose from the devolution of responsibilities for health care and education. The VAT transfer was replaced by a general revenue-sharing agreement, the transferencia, under which the share of national fiscal revenue transferred to municipalities was envisaged to rise gradually from 14% in 1993 to 22% by 2001. The transferencia was earmarked for social investment. A minimum of 80% of the total received by each municipality must be spent on basic public services: education (30%), health (25%), water supply (20%) and recreation and culture (5%). By 2002, according to current constitutional requirements, the combined transfer to municipalities from the two main central government grants (situado fiscal and transferencia) is likely to surpass 30% of national fiscal revenue, the highest share in Latin America. The reform of the public water service (described in Box 10.3) in the early 1990s placed strong emphasis on efficient public services and promoted a market-oriented approach. Decentralisation created the scope within the state machinery to allow for localised services management and innovation, and PSP became a strongly supported way of assisting local governments in doing this efficiently. Municipal PSP is greatly facilitated by local government being able to effectively negotiate with potential private sector and community partners. The more municipalities have to get approval from higher strata, the less effectively they engage with other parties and the less confidence private partners have in them. This was avoided in Colombia through effective decentralisation policy and implementation. Often cited as a good example of decentralisation, the Colombian approach has placed municipalities in a position where policies can be developed that are appropriate to the local context, ultimately allowing partnerships to explore innovative alternatives and a range of service delivery options. Decentralisation helped to create a favourable environment for PSP in the 1990s, and together with a new pro-PSP stance, decentralisation policy and legislation opened opportunities for an enhanced private sector role in the provision of what were traditionally thought of as public services.
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