Justifications for Local Government Amalgamation in International Context

Abstract

This study aims to investigate the justifications for local amalgamation in international context. To achieve the objective, documentary research approach has been conducted. The relevant literature has been analyzed by using thematic and narrative analysis. It primarily shows that economic reasons namely efficiency and economies of scale are typically used as justification for merger. It also reveals that amalgamation does not allow local governments to achieve the efficiency and economies of scale significantly. Essentially, the efficiency of local governments’ service provision and delivery does not require a larger local government unit. Moreover, the phenomenon of local government amalgamation is seen as managerial fashion and suitably explained by mimetic isomorphism theory. A country imitates other countries’ merger approach because of the belief that such amalgamation is beneficial. Furthermore, it demonstrates that the better approach to realising the improved efficiencies and economies of scale is to amalgamate individual services, especially a shared services strategy, instead of the local governments providing them. Finally, the costs of amalgamation, i.e. the restructuring costs, which involve both direct and indirect costs, must be given a high consideration when formulating local government amalgamation proposal.