Factors hindering decentralization include weak local administrative or technical capacity, which may result in inefficient or ineffective services; inadequate financial resources available to perform new local responsibilities, especially in the start-up phase when they are most needed; or inequitable distribution of resources. Decentralization can make national policy coordination too complex; it may allow local elites to capture functions; local cooperation may be undermined by any distrust between private and public sectors; decentralization may result in higher enforcement costs and conflict for resources if there is no higher level of authority. Additionally, decentralization may not be as efficient for standardized, routine, network-based services, as opposed to those that need more complicated inputs. If there is a loss of economies of scale in procurement of labor or resources, the expense of decentralization can rise, even as central governments lose control over financial resources.
Other challenges, and even dangers, include the possibility that corrupt local elites can capture regional or local power centers, while constituents lose representation; patronage politics will become rampant and civil servants feel compromised; further necessary decentralization can be stymied; incomplete information and hidden decision-making can occur up and down the hierarchies; centralized power centers can find reasons to frustrate decentralization and bring power back to themselves.
It has been noted that while decentralization may increase “productive efficiency” it may undermine “allocative efficiency” by making redistribution of wealth more difficult. Decentralization will cause greater disparities between rich and poor regions, especially during times of crisis when the national government may not be able to help regions needing it.
The literature identifies the following eight essential preconditions that must be ensured while implementing decentralization in order to avert the “dangers of decentralization”:
- Social Preparedness and Mechanisms to Prevent Elite Capture
- Strong Administrative and Technical Capacity at the Higher Levels
- Strong Political Commitment at the Higher Levels
- Sustained Initiatives for Capacity-Building at the Local Level
- Strong Legal Framework for Transparency and Accountability
- Transformation of Local Government Organizations into High Performing Organizations
- Appropriate Reasons to Decentralize: Intentions Matter
- Effective Judicial System, Citizens’ Oversight and Anticorruption Bodies to prevent Decentralization of Corruption