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Joint Meeting on the Impact of Decentralization and
Privatization on Municipal Services
Geneva, 15-19 October 2001
 Background
In the context of public service reforms, decentralization is regarded
as an important means to achieve improved efficiency and quality of services.
One of the challenges in this context is the financing of such services,
since tax and fee systems are often not changed simultaneously or sufficiently.
Consequently, municipalities and local government institutions opt for
a variety of approaches to privatizing services provided in the public
interest. Decentralization affects the terms of employment and working
conditions of municipal workers, as well as labour-management relations,
in a number of ways. Moreover, public employees from government agencies
at district, regional and national levels are often transferred to local
authorities. Such developments are common to different services that
are provided in the public interest, such as education and health services
as well as utilities and transport. Despite the differences between these
sectors, there is a case for discussing jointly the implications of decentralization
on the municipal services. Responses to the challenges arising from decentralization
might be found jointly or through alliances between some of the sectors.
The purpose of the Joint Meeting was:
- to exchange views on the impact of decentralization and privatization
on the municipal services, using the report prepared by the Office
as a basis for its discussions;
- to adopt conclusions that include proposals for action by governments,
employers' and workers' organizations at the national level and by
the ILO, and
- to adopt a report on its discussion.
Agenda and report to the meeting
A report was prepared by the International Labour Office as a basis
for the discussions, The impact of decentralization and privatization
on municipal services is available in English (pdf,
478k), French (pdf,
677k) and Spanish (pdf,
689k) (with summaries in Arabic, Chinese, German and Russian). It reviews
the following sectors:
Education
 Reforms
in the education sector have, in many cases, decentralized financial
responsibility and decision making from central to local government or
school levels. While this is considered to offer possibilities for broadening
participation through the establishment of community and other partnerships,
as well as more flexibility and better access to educational services,
it has often given way to declining resources at municipal level, changing
working conditions and patterns of social dialogue. In decentralized
systems challenges include the capacity to finance and manage at local
levels and to build linkages and effective partnerships between the various
institutions concerned and at different governance levels.
Health Services
In the context of rethinking the role of the State and downsizing of
public budgets, the cutting of public health expenditure is one of the
prime targets. Since this expenditure approaches 9 per cent of GDP with
an increasing tendency to rise, there is a need to improve the efficiency
and effectiveness of the health services. The decentralization of management
and provision of health care to local agencies or hospital levels is
considered one of the means to achieve this. As the flow of financial
resources to these local agencies often does not take place at the same
pace, privatization is used as a complementary tool to this restructuring.
Both trends have considerable impact on the employees (legal status,
terms of employment, working arrangements, pay, collective bargaining,
etc.) while the impact on the quality and accessibility of the services
is not clear.
 Transport
Forced by progressive reductions in public expenditure, municipal authorities
have had to cope with the problems of the growing deficits of urban transport
services and the reduction in the quality of services and the number
of passengers. The authorities have developed different ways of dealing
with the problem, including the privatization of all or part of the services,
often acquired by foreign transport operators, the corporatization of
the services and the introduction of private competition or the concessioning
of parts of the system to private operators. These changes have had an
impact on the employees (legal status, security of tenure, total employment,
workload, work rules) as well as on labour-management relations.
 Utilities
Water, gas, electricity and waste management have a vital role to play
in the provision of basic services to the population, the growth of other
economic sectors and in the development of society as a whole. The provision
of such services - regardless of the type of ownership of the provider
- must be in the public interest. Ensuring universal access to these
services remains a worldwide challenge, especially in developing countries.
Restructuring and privatization of utilities have impacted on the terms
of employment and working conditions of the workforce in this sector
which was - and often still is - located within the municipal services.
The report includes information and analysis of the following issues:
- Municipal services in various regional contexts;
- Trends in decentralization;
- Trends in privatization of public services;
- Interlinkage of decentralization and privatization with efficiency,
quality and decent work;
- Approaches to facilitating decentralization from central to local
government levels and privatization;
- Development of employment;
- Impact on working conditions and terms of employment in municipal
services;
- Summary: Comparative analysis.
Following the meeting, the ILO published a Note
on the Proceedings (pdf  ,
309k), including a report of the discussion and the meeting's adopted
conclusions.
Working papers relating to the meeting's themes have also been published
by the ILO:
For additional information concerning ILO work in the sectors under
review, please visit the ILO sectoral Website pages for the sectors education, health
services, transport and utilities and
the website page for public
service.
Additional sites:
Contact address for more information
Sectoral Activities Branch
International Labour Office
4 route des Morillons
CH-1211 GENEVA 22, Switzerland
Tel. +41 22 799 7513 Fax +41 22 799 7967
e-mail: sector@ilo.org
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