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Experience based on local governments' efforts made to implement a decentralisation policy suggests that a number of institutional factors influence the performance of local governments (LGs). This article analyses from an international perspective the extent to which the institutional factors influence the performance of LGs. Drawing experiences from developing and developed countries, it is demonstrated that the institutional factors that include the autonomy of LGs in exercising decentralised powers, the levels of capacity development in LGs, the working relations among intergovernmental organs, the degree of community participation in the implementation process, and the effectiveness of collaboration between LGs and CSOs have all limited the efficiency and effectiveness of LGs' efforts in implementing the decentralisation policy reforms. It is argued that central and LGs in both developed and developing countries will nee