School of Business Seminar Series
Transforming Egypt: The Future of Decentralization in Post Revolutionary Egypt

How does a country’s governance change after a revolution? The answer: "With various forms of decentralization.” World-authority Professor Ray Kelly offered this explanation in his information-packed and inspiring talk, as part of the “Transforming Egypt” seminar series put on by the School of Business. The crux of  Kelly’s argument stated that the Egyptian revolution is far from over; it is an ongoing process that will continue until specific reforms and goals are achieved. Although the main theme of the talk was decentralization, Kelly also focused on the importance of timely reform for achieving effective and positive changes following the revolution.

Professor Kelly, a renowned expert in public sector reform who taught at Harvard for 19 years before becoming Professor of Practice of Public Policy at Duke University’s Center for International Development, gave a talk that drew heavily on his practical and field experiences consulting for governments world-wide, including Mexico, Cambodia, Indonesia, and Kenya. During his talk, he focused in particular on Indonesia, which – as a country with a large Muslim majority that ousted a dictator after thirty years in power – Kelly felt offered valuable lessons for Egypt during this transitional period.

Kelly contended that decentralization is crucial to Egypt’s success in the post-revolution era. Decentralization is an all-encompassing phenomenon: it includes economic and social development, government re-engineering and privatization, and improved service delivery efficiency and accountability. He emphasized the last two components as key; local issues like road maintenance, reliably good schools, and dependable garbage collection are what affect the electorate’s daily life and contribute to successful revolutions. If the electorate’s demands for empowerment and results on the ground go unheeded, revolutions fail. 

According to Kelly, the practicalities of policy implementation are also key considerations. A functioning and accountable democracy cannot exist without taxation. This taxation “pain” is necessary for electorate buy-in; it ensures that the majority of the population has a stake in making the government accountable. Kelly emphasized one tax that is particularly effective – property tax on buildings and land. It is highly visible, and it annoys enough people to be a good launching point for taxation reform. In most developed countries, it forms 1-3 percent of GDP, but the average falls to 0.5 percent of GDP for developing or transitional countries. Yet in Egypt, property taxes only constitute 0.3 percent of GDP.

Property taxation is a useful tool because revenue potential is good and stable, administration is straightforward, the tax is economically efficient and ability-based, and the tax benefits from capital expenditure. Furthermore, it is a politically-sensitive tax, so a good design and implementation strategy and effective tax administration are critical. As Kelly noted, the best tax policy in the world is of no use if taxes are not being collected.

Finally, Kelly suggested four lessons Egypt can learn from revolutions abroad: (1) be comprehensive, i.e. include administrative and fiscal facets to the ongoing political reform; (2) focus on the fundamentals; (3) build capacity by decentralization; and (4) realize quick results while establishing long-term change. Offering a quick-win suggestion for Egypt, Kelly said, “It has to be highly visible. In Washington, the first step for their local government reform was to fix parking meters. People there associated broken meters with a broken local government. Perhaps cleaning up the streets here would send the same message. Clean streets provide a positive health, fiscal, and aesthetically pleasing result.”