From the history of Tibet, it can be seen that the recognition of tulku especially the recognition of high profile incanation such as Dalai Lama, Karmapa, the previous Trijang Rinpoche, have been clouded by power struggle to get political power and authority. The concept of tulku system is straighforward, but the execution may not be as straightforward.
When there is a power struggle especially in the government, the welfare of the people is sacrificed. History has witnessed this over and over again (e.g., civil war in the US, power struggle in middle east, French Revolution, Dynasty changes in China, etc.). I think the Dalai Lama has forseen this risk after he passed away, so out of great compassion, to spare a lot of sufferings of Tibetan people, he gave up his political power.
Unlike 300 years back when the idea of a republic or giving political power to the people was not widely practiced, now the circumstance is very much different, which makes it possible for Dalai Lama to withdrew from his political power.
By doing this, I could see that H.H. Dalai Lama is a great statesman. He has studied government types well. The idea of giving power to the people and elections were practiced by ancient Greek and Rome. After some setbacks, the concept is revived after many revolutions and bloodbath (e.g., French Revolution, Rusian Revolution, Chinese revolution, and the latest being the struggle of the Middle East). By voluntarily withdrawing from power, H.H. Dalai Lama reduces the risk of political power struggle in the event of his death and spare the Tibetans in exile a lot of sufferings.
In addition, he is also setting an example to many dictators that still exists today on how to gracefully withdraw from power and protect the welfare of the people.