Using Poverty and Infrastructure Gap Data to Design Fiscal Flows to Local Governments: The Case of Bhutan

The World Bank's South Asia Multisectoral Decentralization Group announces a presentation by Andy Kotikula, Economist, SASEP.

LPSI News: Posted January 20, 2012

Fiscal transfers to local governments in many developing countries are sometimes done in an arbitrary fashion. Where this is not so it is often based on simple formulas that take into account population or geographical size. A more sensitive formula could be developed with the use of poverty statistics. There is however often a dearth of good data in this regard. In Bhutan under the auspices of the Gross National Happiness Commission(GNHC) and supported by a grant from the AusAID-WB Policy Facility for Decentralization and Service Delivery reliable indicators based on poverty and infrastructure gap data were developed.The team used a “Small Area Estimation” method developed by Elbers et al. (2003). This method used the Population Census 2005 and the household Bhutan Living Standard Survey 2007 (BLSS) to produce reliable poverty estimates at lower levels of disaggregation than existing survey data permits. In the case of Bhutan, the team managed to come up with reliable poverty estimates at the sub-district (known as Gewog in Bhutan) level. These have been used by GNHC to design fiscal flows to local governments. The Ministry for Finance allocates around 24% of the national budget at the local level so this has a significant impact on resources flowing to the local level. The presentation will include a demonstration of the Map Portal developed to make the use of these development indicators user friendly, the experience of developing the Portal and its policy impacts. See related blog by the presenter on the Bank's website.

Bhutan held its first country wide local elections in June 2011 and local representatives are to be trained in the use of this portal. The ministries of agriculure and forestry, health and education have also expressed interest in using this data to allocate their resources at the local level. The Bank has also been asked to collect information on the MDGs at the local level to refine this formula further. The team will attempt to use mobile devices to capture this data in a second phase funded by the Facility.

Presenter: Andy Kotikula, Economist, SASEP
Chair Vinay Swaroop, Sector Manager, SASEP
Discussants: Nobuo Yoshida, Senior Economist, PRMPR
Bala Menon Senior Urban Specialist, SASDU
Wednesday, January 25, 12:30 - 2:00 PM, MC 10-850.

The presentation is at the Main Complex of the World Bank, 1818 H Street N.W. For a visitor's pass or more information, please contact Tara Sharafudeen at tsharafudeen@worldbank.org.