Addressing Growing Income Inequalities in Cities Through Inclusive Local Financing

JOIN US for a panel discussion on November 25, 2020, 9:30 -11am EST

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There is growing inequality in cities as more and more people are rapidly moving to urban areas creating enormous pressure on existing resources and resulting in economic disparities. The urban population of the world has grown rapidly from 751 million in 1950 to 4.2 billion in 2018 (UN Habitat). UN estimates[1] that by 2050, 68% of the world’s population will live in the urban areas. Cities in developing countries face increasing pressure from rural-urban migration, climate shocks, unplanned growth and inadequate basic services and infrastructure. Moreover, inequality is not only a problem in the developing world but affects every city irrespective of the level of wealth and prosperity and it cuts across rich and poor world economies.[2]

Cities accommodate rapidly growing migrants often without any settlement plans with limited municipal resources. As a result, city dwellers including women and youth, persons with disabilities, slum dwellers, minorities and marginalized groups experience inequality and vulnerability in various forms. This includes unsafe working conditions, challenges in accessing decent work opportunities, dealing with the burden of earning income while balancing unpaid care work, accessing financial assets and housing security, and access to services and infrastructure such as safe transport, mobility, and water and sanitation.  These problems are compounded by the fact that such vulnerable groups are also under-represented in governance structures and decision making.

Growing urbanization can be a transformative opportunity to achieve greater equality if cities are planned and financed better. Participation of vulnerable groups in decision making and governance systems can lead to better prioritization of urban investment needs and management of budget allocations.  Cities can offer an improved quality of life for inhabitants through better services, housing and infrastructure if they incorporate the special needs of marginalized and excluded groups. For example, cities can be made safer and free of violence through better street lighting, safer transportation, improved security, and increased focus on areas at risk through vocational training and job creation.

As the Decade of Action for achievement of the SDGs commences, a focus on localization of the SDGs and financing of local development needs is crucial. The 4th report of the Local and Regional Governments Forum[3], at the High Level Political Forum 2020 revealed that at the local level, most cities will not be able to raise the finances that they require to meet their existing and projected demands. This means that services that are critical for millions of vulnerable populations and excluded groups specially in Africa and Asia cannot be guaranteed. In many cities, planning and financing specially for safe transport, inclusive services and gender responsive local economic solutions remains inadequate.

Building inclusive cities will require better planning and stepped up investments in essential services and infrastructure that incorporate the special needs of vulnerable groups. The New Urban Agenda reiterates that an ‘adequate stream of finance to empower local and regional governments and to boost innovation and investment in sustainable public services’ is critical. The cities of the future will need innovative ways of generating financing to ensure sustainability and delivery of essential services for all citizens. With growing inequalities, city governments’ role in prioritizing financing to address deep rooted inequalities, targeting interventions towards most under-developed neighbourhoods, and collaborating with local private sector to generate additional financing will be critical.

Event Objective:

Through this Technical Roundtable, the UN Capital Development Fund aims to gather experts, practitioners including city government representatives and development partners to discuss how to address growing inequality in cities and how to make cities of the future more inclusive and responsive to the needs of all citizens including women and youth. The event builds on the newly launched UNCDF initiative ‘IncluCity’ and will highlight key underlying bottlenecks leading to persistent inequalities in cities and show how city governments can respond to those challenges.

The event will particularly focus on the importance of investing in local solutions that address the needs of the most vulnerable populations and increase their access to economic opportunities, better services and infrastructure. It will showcase best practices and lessons on how an enabling policy and institutional environment for an inclusive agenda for cities can be developed and implemented. The event will provide a forum for discussion and contribute to key recommendations and ways forward for alliance building to produce new knowledge and tools such as measurement systems to track progress on local commitments on equality and economic inclusion.

Speakers:

Moderator: David Jackson, Director, Local Development Finance, UNCDF

Two panels will be organized to focus on two sub-themes. Each speaker will have 5-7 minutes, followed by 15-20 minutes of Q&A.

  • 9:35 – 10:15am: Panel 1: Mayors and Local governments share experience in championing Inclusive Urban Development
    • Honorable Mayor Valerie Plante, Mayor of Montreal, Canada
    • Honorable Mayor Yvonne Aki-Sawyerr, Mayor of Freetown, Sierra Leone
    • Honorable Mayor Uma Chowdhury Jolly, Mayor of Natore, Bangladesh
    • Honorable Mayor Zandya Mutwalib, Mayor of Mbale City, Uganda
  • 10:15 – 11:00am: Panel 2: Development agencies and practitioners discuss priorities for promoting inclusive urban development 
    • Mr. Rene Peter Hohmann, Acting Head of Programmes at Cities Alliance
    • Ms. Angela Mwai, OIC – Human Rights and Social Inclusion Unit, Urban Practices Branch, UN-Habitat
    • Ms. Susana Torre, Architect, Critic and Educator
    • Ms. Samina Anwar, UNCDF –IncluCity Index: Tool for Sourcing and Financing Inclusive and Gender Responsive Municipal Priorities in Cities  

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[1] UN (2018), ‘World Urbanization Prospects 2018’.

[2] Fran Tonkis, ‘City Government and Urban Inequalities’ (2020)

[3] UCLG (2020), Fourth Report of the Local and Regional Governments, ‘Towards Localization of the SDGs: How to Accelerate Transformative Action in the Aftermath of the COVID-19 outbreak’.

Development & Multilateral Finance Instruments: Time to transform

The MedaWeek Barcelona (Mediterranean Week of Economic Leaders) is nowadays the iconic conference dedicated to promoting the Mediterranean region worldwide. This event endorses the key economic sectors and the cultural values of this region through a wide variety of forums. MedaWeek Barcelona serves as the main meeting point for voicing the interests of the private sector in the socio-economic development of the Mediterranean countries.

On the 18th November 2020, MedaTalk held an important talk to provide an updated comprehensive overview of donor and financial instruments available to institutions, chambers, business associations and start-ups, and SMEs across the region and about mechanisms available for the private sector in the Mediterranean.

Issues discussed can be found below:

A. Multilateral Finance Instruments post COVID-19

  • How the pandemic has forced organisations in the development sector to change their approaches to fundraising?
  • Supporting Mediterranean Private sector’s economic empowerment post-pandemic.
  • Role that impact investors, financial institutions, responsible investors and the private sector could play in sustainable job creation and why this must be at the forefront of the Mediterranean region economic recovery post-pandemic.

B. Time to transform Development & Multilateral Financial resources in the Mediterranean region

  • Donor funding, banking and novel financial Instruments.
  • The rise of Development & Multilateral Finance institutions.
  • 2020-2025 funding preview: Looking at donors’ pipelines for the coming years.
  • What kind of work will the selected fund be used for?
  • Financing and promoting Mediterranean investments, creating partnerships, improving governance and mitigating risk can help make the region more attractive to business interests.
  • How can the necessary financial resources be mobilised and available to the Mediterranean private sector?
  • How can we help Business Support Organizations (BSOs) in the Mediterranean play a more active role in developing the private sector, SMEs and entrepreneurs, beefing up exports, luring investments and creating new jobs?

Guests:

Mohammad Abbadi, Senior Investment Manager, United Nations Capital Development Fund (UNCDF), participated to the talk and offered the contribution below:

The United Nations Capital Development Fund (UNCDF) makes public and private finance work for the poor in the world’s 47 least developed countries and developing countries. With its capital mandate and instruments, we offer ‘last mile’ finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

Let me focus my intervention on two areas:

One on urbanization in developing countries as trends clearly show that it is happening at an unprecedent rates… we see small villages and towns evolving to urban cities or towns at a rate that does not catch up with the infrastructure needs, creating an over load to the existing infrastructures and the inability of local governments and municipalities to meet the basic demands of their people.  To top it off, many cities and local governments in the developing countries depend largely on fiscal transfers from central government, with limited authority over their own source revenue, such as tax collection, which in most part is collected by local governments but transferred upward to central government, so it limits the revenue streams under local management and investment.

To add to the complication, in many developing countries, national policies may not always provide flexibility for municipalities to access capital markets, which further limits the financing flows to the local level which is where most development efforts are needed, and where over 50% of the SDGs targets must be met. So clearly we have a choice to make here, Either we build green cities that provide quality lives for the next generation or we face a paradigm shift in our existence with millions of people facing enormous challenges in their lives – many of whom will choose to migrate, as the increasing migration trends we are witnessing to the Mediterranean region.

At UNCDF we see this as a challenge and an opportunity, especially as a result of the Covid-19 Crisis, it was very evident that Local Governments were at the front line in the emergency response, and their role in the preparations, mitigations and rebuilding became center point in every discussion.

Here, it opens the question on what the role of the private sector is in fostering local economic development and the challenges faced at the local level. I think we can all agree that the private sector is the backbone of all developing countries, but such role cannot be looked at in isolation, because if we want a systemic approach that is inclusive and sustainable to the people and local territories, we must create an eco-system where both local officials, local planning and investment bodies are working hand in hand with private sector entrepreneurs and the youth in a coordinated way that can transform economies and investment in productive capacities. Not every growth is meaningful growth, and for growth to have an impact on the people, it has to be transformative and sustainable.

The UNCDF Center of Excellence in Local Government Finance and Local development Finance brings these two together. Our award Winning Dual Key approach, investing with impact, works through our various programmes, financing tools and instruments with cities and the private sector on three fronts:

  1. Systematically identify and encourage productive and catalytic investments in the developing countries;
  2. Strengthen small and medium-sized enterprises (SMEs) to make them bankable and investment ready;
  3. Unlock access to domestic finance and international commercial finance for private and public private investments that are revenue generating, but most importantly, have a transformative and measurable impact on the local economy such as on climate change, women’s economic empowerment and resilience.

Putting this in practice, we support Local Partners to source investments, undertake full due-diligence, structure the investments, assess the development impact and the financial impact additionality and sustainability, unlock additional financial flows to each investment through various blended finance instruments including UNCDF’s own grants, reimbursable grants, loans and guarantees, support the investments in the implementation phases, and advise on performance and impact measurement and reporting.

Our SME pipeline of investments have unlocked significant flows of financing from domestic commercial banks, and in some countries such encouraging results transformed into building national financing systems, such as sovereign wealth funds and line of credits in commercial banks that apply our Dual Key Approach on financing SMEs.

On the Municipal Front, we are building a global coalition with our partner UCLG on Municipal investment Finance to support local governments and municipalities in accessing financing flows, including blended finance instruments, to respond to their most pressing infrastructure needs including revenue generating investments, PPPs, Special Purpose Vehicles and even Pure Private Sector Investments that can transform local economies, create local jobs, protect the environment.

We have also entered into an agreement with a third party fund manager for the creation of the first in the world International Municipal Investment Fund (IMIF), which will provide debt instruments to cities and local governments for revenue generating investments at conditions that are more favorable to cities. UNCDF also entered into another agreement with a third-party fund manager dedicated for SME loans in the growth stage called Build. These are just few examples of new tools and financing flows that we are making available to developing countries.

The Covid19 experiences tells us that we need to build back better, but we cannot build back better if we keep looking at each client in isolation.  Our efforts brings both actors towards a common Local Economic Development approach that identify capacity gaps in promotion of LED, economic analysis, planning and investments, financing modeling and other tools to public and private partners; it focuses on building national platforms and mechanisms that sustain our approaches through local development funds, guarantee schemes, technical assistance facilities and financing networks’ and the Enabling environment to tackle policy, legislative and regulatory support for privates sector development and finally; supporting the development of pipeline of revenue generating investments in catalytic sectors that drive local value chains and add value to local economies and proof of concepts to markets, domestic commercial banks, international financiers.

LFI Global Board Meeting: Local transformation is critical for Agenda 2030 – ten years left…

Welcome to the second of two blog posts that will be issued this week about recent global meetings. The first post was about the 17th November meeting on Local Fiscal Space and the recovery from COVID 19. This second post is a report of the recent Board meeting of the Local Finance Initiative that discussed and approved strategies for local transformation in its member states.

But first, some context. The blog posted on November 4th outlines some of the differences between transformation and growth which informed the discussion at the meeting. A further feature of the conversations was a sense of urgency.

The next ten years are the last decade of action for the attainment of the SDGs. They will also see the graduation of many countries from the “least developed country” category to the “middle income country” group. But what do these categories really mean? In individual and personal teams we measure our wealth in terms of health, happiness, security and prosperity. We can argue about which of the four is most important to us at any given time, yet at a personal level we all know true wealth when we see it. After all, the etymology of wealth is in the old English word “weal” which means “a sustained pattern of health and happiness”

On an aggregate level, how to measure national wealth? The criteria for graduation from the status of “least developed country” include a per capita GNI of above $1,030, and a high enoughe score on two indices of social and economic conditions – the Human Assets Index and the Economic Vulnerability Index. But does meeting these data points really mean that the health, happiness, security and prosperity of a countries population is secured? Clearly, graduation is a milestone in a journey rather than a destination. It is also clear that to continue this journey graduation must be driven by sustainable transformation in social and economic conditions. Otherwise the journey risks coming to a premature stop shortly after passing the milestone. Bhutan recognizes this. Its planning ministry is called the Gross National Happiness commission has developed indicators that reflect not only growth, but transformation as well.

In broad terms, these were the issues debated at the Local Finance Initiative (LFI) Global Board meeting, which saw a high level representation from government, UN agencies, development partners and donors whose deliberations identified the modalities and range of support from the LFI programme that will help achieve stronger, more inclusive, and more resilient economic growth, particularly in light of the impact of COVID-19 on those furthest behind in our societies.

In his opening remarks, Ben Kumumanya, the Permanent Secretary in the Ministry of Local Government – Uganda said it was time for LFI to rethink and realign its priorities in the area of training for local governments and SMEs noting its relevance in accelerating local economic development. He added,

‘At the policy level, LFI should support the amendment of legislations to encourage private sector participation in the economies and also identify new sources of capital.’

Mr. Ben Kumumanya,
Permanent Secretary, Ministry of Local Government, Uganda

As an investment support capacity, the Local Finance Initiative helps countries deliver local economic development in collaboration with national institutions, local authorities and the private sector through a range of pioneering development capabilities and services which include but are not limited to: support to governments and the private sector with project preparation to meet the expectation and standards of financiers, Credit Guarantee Schemes (CGS) that help SMEs secure financing, and UNCDF financial instruments that catalyse access to additional funding for local economic development projects.

Ms. Rosa Malango,
Resident Coordinator, UN Uganda

Speaking at the meeting H.E. Rosa Malango,UN Resident Coordinator, Uganda declared :

I would like to commend UNCDF for supporting the transformation of communities in developing economies, especially in Least Developed Countries (LDCs) like Uganda in Africa and Asia. UNCDF programmes such as the Local Finance Initiative (LFI) respond to emerging needs being identified by Member States as each one of them strives to leverage the 2030 Agenda Sustainable Development Goals, the Addis Ababa Action Agenda, the Paris Agreement, and the New Urban Agenda to achieve their development and growth aspirations. 

She emphasized that she was pleased to learn that LFI is currently operational in eight countries including, Uganda, Tanzania, Benin, The Gambia, Bangladesh, Nepal, Lesotho and Guinea. She also said that it was important to acknowledge that LFI provides specific assistance to nine additional countries including Mali, Senegal, Kenya, Cambodia, Mozambique, Morocco, Ghana, Sao Tome and Principe, and Moldova.

She concluded saying that in Uganda UNCDF is a key member of the UN family and as such played a key role in the formulation of the new UN Sustainable Development Cooperation Framework 2021-2025, which was recently launched by H.E. President Yoweri Museveni.

She added that the Cooperation Framework is an inclusive partnership agreement which enables the United Nations to support the third National Development Plan and the national Vision 2040, by using the SDGs as shared targets for national prosperity for all.

H.E. Ambassador Dr. Perks Master Ligoya,
Chair of LDC Global Coordination Bureau, Permanent Representative of the Republic of Malawi to the UN and former Governor of the Reserve Bank of Malawi

Speaking at the meeting, the Chair of LDC Global Bureau, Ambassador Dr. Ligoya highlighted that financing is a cross-cutting issue in all areas of development from gender to private investment.

‘Financing does not reach the intended people – one study showed that only 20% of development funds reach the ultimate beneficiaries. Initiatives such as LFI will help governments’ development efforts to reach the ultimate beneficiaries,” he said.

This becomes more critical as countries move to middle income status, he asserted that, ‘Graduation to middle income should result in sustainable and resilient economies.’

Ambassador Ligoya also cautioned that rapid urbanization in LDCs is not matched with investments and welcomed initiatives such as the International Municipal Investment Fund that can co-invest with domestic banks in growing cities. LFI drives the technical assistance facility for this fund.

Explaining the role of LFI in supporting inclusive and sustainable development in local communities, David Jackson, the UNCDF Director of Local Development Finance said, 

“Through LFI we have supported the building of local capacities in production and enhancement of local capital markets. For example, our work with governments to establish Credit Guarantee Schemes (CGS) helps SMEs who are the backbone of economies so countries can achieve the transformation at various layers and improve the lives of millions of people.”

Mr. David Jackson,
Co-Chair of LFI Board, Director of Local Development Finance, UNCDF

The practical acceleration of local economic development and economic transformation solutions that reach the grassroots and solve development problems affecting communities require igniting sources of domestic finance especially as countries start to rebuild their economies from Covid 19.  And as more LDCs move to middle-income status, interventions such as those championed by LFI will ensure they do so sustainably.

H.E.     Ambassador     Rabab     Fatima,  
Permanent Representative  of Bangladesh to the UN

H.E.     Ambassador     Rabab     Fatima,  Permanent Representative  of Bangladesh to the UN stated her appreciation that UNCDF with an array of innovating financing tools including LFI have been providing critical support to SMEs in many LDC.

In my own country, its partnership with the Central Bank lead to a much needed credit guarantee scheme for the SMEs to fight back against the pandemic.

Morever she explained that Bangladesh is subscribing to the recommendation of the LFI report for an enhanced focus on productive capacity building in LDC for value creation and diversification of their economics.

LDC need enhanced assistance for equitable financing equitable access to financing advanced technologies and no house productive capacity building.We are keen to working with our partners to make this issue a central theme in the upcoming LDC five conference in Doha.

For climate vulnerable LDC’s like Bangladesh, the pandemic has forced multi-faceted challenges, like floods cyclones and other natural calamities, she declared that the country  happy to partner with UNCDF to scale up preparatory activities such as assessments, survey of different municipalities and districts to identify the vulnerabilities to tackle such risks.

Mr. Roland Mollerus, Secretary of the Committee for Development Policy, Chief of Development Policy Branch, UN Department of Economic and Social Affairs

Speaking at the meeting Mr Rolland Mollerus Secretary of the Committee for Development Policy, Chief of Development Policy Branch, UN Department of Economic and Social Affairs, declared that the new Doha PoA for the LDC will need to reflect the lessons from the unfolding global health and economic crisis and the implications for the LDC’s vision of improving the lives of millions of people in the most disadvantaged countries.

He stated that , ultimately, the success of this new programme of action will depend on the actions taken by the LDC and their development partners.

He stressed that it is equally important and an essential precondition for the success of the program of action is the choice of the framework used to organize the new programme of action.

The committee for development policy recommends that LDC5 adopts the theme expanding productive capacity for sustainable development as a framework for organizing the next programme of action.

The framework was developed by the committee based on analytical studies which built on the work UNCTAD and other organizations such as UNCDF

This analysis identified the limited development of productive capacities as the root cause of LDC persistent challenges, including insufficient progress in resilience building ,the failure to create decent and productive jobs and limited technological upgrading


Enhancing the role of inclusive financing vehicles such as the UNCDF’s LFI and integrating them into the financial sector are critical policy interventions for most of the LDC

If implemented successfully this  and other key measures towards the expansion of productive capacity will contribute to the implementation of the 2030 agenda for sustainable development thereby by ensuring that no country is left behind.

Mr. Ola Sahlen,
Program Manager, Swedish International Development Cooperation Agency (Sida)

Mr. Ola Sahlen, Program Manager, Swedish International Development Cooperation Agency (Sida) said that Sida is funding LFI through the Last Mile Finance Trust Fund mechanism and that it is part of the Swedish Governments support to UNCDF’s work. Ola recalled his field visit to LFI investments in Tanzania and the lessons learnt there.

The LFI BOARD Decision is currently being finalized and will be communicated once it has received official approval from the LFI member states.

Agenda of the LFI Board:

8:00am – 8:30am (New York time)3Opening
 Virtual Welcome :

Mr. Ben Kumumanya, Permanent Secretary, Ministry of Local Government, Uganda and co-chair of the LFI Board
Ms. Rosa Malango, Resident Coordinator, UN Uganda

Opening Remarks
H.E. Ambassador Dr. Perks Master Ligoya, Chair of LDC Global Coordination Bureau, Permanent Representative of the Republic of Malawi to the UN and former Governor of the Reserve Bank of Malawi
 H.E.     Ambassador     Rabab     Fatima,  
Permanent Representative  of Bangladesh to the UN

Mr. Roland Mollerus, Secretary of the Committee for Development Policy, Chief of Development Policy Branch, UN Department of Economic and Social Affairs

Mr. Ola Sahlen, Program Manager, Swedish International Development Cooperation Agency (Sida)
 
Moderator: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
8:30am – 9:20amSession 1: Presentation of LFI 2017-2019 Global Report and 2021 Draft Workplan
 Presentation Mr. Peter Malika, Global LFI Manager, UNCDF   Discussion session Board Members and observers   Moderator: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
9:20am – 9:30amBreak
9:30am – 10:20amSession 2: The Way Forwards
 Presentation of Country Examples:

The role of local economic development finance in accelerating the recovery from COVID-19
(Ms. Christel Alvergne and Ms. Sirra Foon)

Building productive capacity for structural transformation of local economies
(Mr. Dmitry Pozhidaev and Mr. Imanuel Muro)

Financing sustainable urban growth in developing countries (Mr. Jaffer Machano and Mr. Iqbal Abdullah Harun)  

Breakout Discussion on the three topics above Group 1: with French interpretation (Moderator: Ms. Christel Alvergne)

Group 2: without French interpretation (Moderator: Mr. Dmitry Pozhidaev)  

Each group will focus on the practical lessons learnt by LFI and the practical implications for LFI in 2021. Guidance will be provided to support 2021 activities.  

Recommendations from breakout discussions

Representatives from each breakout group  

Moderator: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
10:20am – 10:30amBreak
10:30am – 11:00amSession 3: Discussion and endorsement of the LFI Board Decision
 Closing Remarks: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
11:00amEnd of event

Rebuilding Local Fiscal Space

Welcome to one of two blog posts that will be issued this week about recent global meetings. This post is about the conference on Local Fiscal Space and the recovery from COVID 19 held on November 17th.

REGISTER HERE

During 2020 the coronavirus pandemic has rocked the world’s economy causing pain, tragedy and hardship at many levels and effecting seismic changes on how most people live and work. The primacy of local government as an essential institution in mobilizing an effective response and recovery to the pandemic has been demonstrated. The virus has shown that the social and economic response requires a localized but joined up action across different departments and agencies.

Economically, the pandemic has created the sharpest and swiftest drop in global economic activity ever recorded. This contraction has reduced revenues for households, governments (central and local) and for private sector enterprises. Looking ahead to 2021, whether or not there is a swift vaccine and things return to “normal” or whether the pandemic continues for some time, some things are already clear.

Firstly, there have been winners and losers. Online platform providers, remote conferencing software providers, streaming services, delivery services and other businesses that do not require face to face customer interaction have clearly benefited from the pandemic. The “street sector”, which is a major contributor to fiscal revenue and constitutes a social safety net that connects the urban and rural economies (in many developing countries), has been a loser from the pandemic – the consequences of this loss will become apparent in 2021. This sector includes transportation, street sellers, markets, shops and stores and light processing and value addition such as mechanics, tailors, and ironware welders.

Secondly, the geographical scope of value chains has shrunk and many governments and policy makers have been reminded of how far the “just in time” economic model has spread. Attention is now being paid to the local de-industrialization of the last 20 years and governments are seeking to rebuild a domestic capacity to produce basic food and consumer produce within their own national economies. Examples include garments and basic pharmaceuticals. There is surprise that many countries, including developing countries, no longer have the capacity to domestically manufacture soap, for example.

Finally, fiscal space has contracted significantly. In 2021 governments will have less money to spend at time when there will be greater demands on their services. This may have political consequences and there is a risk that citizens will lose faith in government’s ability to serve them leading to further loss of trust and privatization of these services with consequences for those less able to pay.

Experiences so far have shown that especially four factors have impacted the local government fiscal space – 1) Loss of own source revenues due to COVID-19, 2) Non-conducive intergovernmental fiscal transfer system and/or insufficient adjustments of this, 3) Loss of local economic development and finally 4 ) Increase in local government costs due to the impact of COVID-19.

In this context, UNCDF started the Rebuilding Local Fiscal Space Initiative in close collaboration with various partners. Its overall objective is to provide tools and recommendations on the improvement of the local fiscal space in light of the COVID-19 challenges through a case-by-case review and analysis of the core factors impacting this in a range of selected municipalities. The focus of the review will be the four factors mentioned above (1, 2, 3 and 4), which contribute to this loss in the fiscal space and review of possible measures which can rebuild local fiscal space and accelerate national economic recovery and rebuild trust in public institutions, which should be both central government’s and local government’s responsibility.

This initiative will include two main phases – Phase 1) Understanding the four factors that contribute to the loss of local fiscal space, and Phase 2) Designing and testing the three measures to accelerate recovery and rebuild trust. Currently six cities have participated in the initial study including Kumasi (Ghana), Chandpur (Bangladesh), Gulu Municipality (Uganda), Chefchaouen (Morocco), Chiapas (Mexico), and Telita (Moldova).

Objective

The UNCDF Rebuilding Local Fiscal Space Conference will bring together mayors and local government officials of the participating cities and other interested cities, central government representatives and high-level participants from development partners, with the objective to:

  • Present the findings of the initial study in phase 1 of the initiative;
  • Discuss and explore the measures to accelerate economic and fiscal recovery in phase 2 of the initiative;
  • Raise awareness of the imperative of rebuilding local fiscal space.

REGISTER HERE

Opening Remarks

Ms. Maimunah Mohd Sharif,
Executive Director, UN-Habitat
Dr. Rathin Roy,
Managing Director (Research and Policy), Overseas Development Institute (ODI)
Mr. David Jackson,
Director of Local Development Finance, UNCDF

Presentation of Initial Study Findings :

Ms. Gundula Löffler,
Research Fellow, ODI
Mr. Jesper Steffensen,
Senior Partner, Dege Consult

Panel Discussion

Honorable Mayor Mohamed Sefiani,
Mayor of Chefchaouen, Morocco
Honorable Mayor Osei Assibey Antwi,
Mayor of Kumasi, Ghana
Honorable Mayor George Labeja,
Mayor of Gulu Municipality, Uganda
Honorable Mayor Rodica Russu,
Mayor of Telita, Moldova
Honorable Mayor Advocate Jillur Rahman Jewel,
Mayor of Chandpur Municipality, Chandpur, Bangladesh
Dr. Javier Jimenez,
Secretary of Finances of the State of Chiapas , Mexico
Mr. Jaffer Machano,
Municipal Investment Finance Programme Manager, UNCDF

Closing Remarks:

Ms. Emilia Saiz,
Secretary General, United Cities and Local Governments (UCLG)
Mr. David Jackson,
Director of Local Development Finance, UNCDF

REGISTER HERE

8:00am – 8:15am (New York time)[1]Opening
 Opening Remarks
Ms. Maimunah Mohd Sharif, Executive Director, UN-Habitat
Dr. Rathin Roy, Managing Director (Research and Policy), Overseas Development Institute (ODI)
Mr. David Jackson, Director of Local Development Finance, UNCDF  
8:15am – 9:20amMain Session
 Presentation of Initial Study Findings :

Ms. Gundula Löffler, Research Fellow, ODI
Mr. Jesper Steffensen, Senior Partner, Dege Consult  

Panel Discussion
Honorable Mayor Osei Assibey Antwi, Mayor of Kumasi, Ghana
Honorable Mayor Advocate Jillur Rahman Jewel,
Mayor of Chandpur Municipality, Chandpur, Bangladesh
Honorable Mayor George Labeja, Mayor of Gulu Municipality, Uganda
Honorable Governor Rutilio Escandón, Governor of Chiapas, Mexico
Honorable Mayor Rodica Russu, Mayor of Telita, Moldova
Honorable Mayor Mohamed Sefiani, Mayor of Chefchaouen, Morocco  
Q&A   Moderator:
Mr. Jaffer Machano, Municipal Investment Finance Programme Manager, UNCDF  
9:20am – 9:30amClosing
 Closing Remarks:
Ms. Emilia Saiz, Secretary General, United Cities and Local Governments (UCLG)
Mr. David Jackson, Director of Local Development Finance, UNCDF  
9:30amEnd of event

International Municipal Investment Fund – Technical Assistance Facility

Welcome to another local government finance blog from United Nations Capital Development Fund. This is the third of three blogposts leading up to the November 5th meeting of Finance ministries, Central Bankers, and Local Governments from a group of developing countries that are members of the Local Finance Initiative (LFI). The meeting will discuss strengthening domestic capital markets and promoting investment in local economic development by domestic banks. Today’s post is on financing urbanization. The previous two posts looked at financing local economic transformation and at how the Local Finance Initiative applies spatial economics to finance at the (real) frontiers. On the 75th anniversary of the United Nations it is useful to reflect on the changed demographics of the world and the type of financial arrangements and institutions that are now required. When the UN began the world was predominatly rural with only 30% of people living in urban areas. By 2010 we reached a 50/50 share. Today around 66% of us live in towns and cities – a complete reversal of the situation at the founding of the United Nations. This reality required a refreshed development paradigm and innovative financial thinking. In 2016 the New Urban Agenda was adopted at the United Nations Conference on Housing and Sustainable Urban Development (Habitat III) in Quito, Ecuador. It was endorsed by the United Nations General Assembly in December 2016. UNCDF shared its reflections on development financing and cities in the New Urban Imparative for Secondary Cities and increased its capacity in local infrastructure finance. UNCDF and UNDESA also published best practice case studies in Financing Sustainable Urban Development in the Least Developed Countries. In 2018 UNCDF began working with development finance institutions and United Cities and Local Governments (UCLG) in the Malaga Coalition for a global financial ecosystem that works for cities and local governments. The Malaga Coalition partners agreed that a dedicated local government friendly investment fund would contribute to the goals of the coalition by making capital available at the right price and in the right format for local investments with high impact. Such a fund would also contribute to policy and regulatory reform through demonstration investments that could be replicated by others, particularly in co-financed with domestic financial institutions. At the UCLG congress in Durban, November 2019 it was announced that Meridiam was selected as the Fund Manager for the International Municipal Investment Fund. In January 2020 UNCDF launched the prospectus for the Technical Assistance Facility for the IMIF (IMIF-TAF) and provided some initial funding to enable work to begin on the IMIF pipeline. Thanks to the generous support of Sweden and Switzerland (through the BluePeace initiative) the IMIF – TAF is now operational. It uses UNCDF’s local development finance “dual key” pipeline management and the Local Finance Initiative investment structuring capacity. The LFI Board will discuss the progress on both investment structuring and regulatory reform. IMIF TAF also offers technical support to prepare the policy and regulatory environment for municipal finance. In summary, it supports cities and local governments in the following areas:
  • Capacity Strengthening: Support for local governments to promote local economic development, economic analysis, planning and capital investments; capacity support to investment projects on business plan development, financial modeling and other tools;
  • Enabling Environment: Policy, legislative and regulatory support to central and local government authorities to promote local economic development finance and local capital markets including technical support to mechanisms such as project finance and domestic bond markets;
  • Pipeline of Revenue Generating Investments: Support to projects in catalytic sectors that address the urbanization and climate imperative, add value to local economies and provide proof of concept to market regulators, domestic financial institutions, commercial banks, and international financiers. “Dual Key” Pipeline and Local Development Investments
Development work should not be paused due to COVID-19, rather, development institutions need to focus on a way to work with certain restrictions in place. Despite COVID-19, the technical team of the IMIF TAF have started working on project preparation in the target cities. For areas where UNCDF does not have geographic presence, or in unable to physically be present its partners, a considerable amount of work is being undertaken virtually. Project preparation work does have some dependency on the need to be physically present, however, a considerable amount of work can be completed virtually. The team is working on developing these project, so that once travel restriction are lifted, we would be able to send our technical teams to fill any gaps which require physical presence on the ground. Some cities that have been involved in this process so far include Freetown, Sierra Leone  20200620_MAP502 UNCDF is in partnership with Freetown City Council (FCC – the municipal government of the city of Freetown, the capital of Sierra Leone, established in 1893) to enable its access to market financing for its development plan “Transform Freetown”, thereby contributing to transforming the City of Freetown for the benefit of Freetown’s residents. UNCDF and FCC will partner through the Blue Peace Financing initiative set up within the framework of UNCDF partnership with the Swiss Agency for Development and Cooperation and Geneva Water Hub. Freetown is Sierra Leone’s capital city and the seat of government. It is the largest city in Sierra Leone and the engine of Sierra Leones economy, creating 30% of the country’s GDP despite housing only 15% of its population, and occupying less than 0.5% of the national land mass. With over one million residents, and a growth rate of 4.2% per annum, Freetown’s population is expected to double by 2028 Chefchaouen, Morocco chefchaouen The municipality of Chefchaouen seeks to modernize its public lighting system. It has an estimated population of over 45,000 inhabitants and has a public lighting network with an estimated length of 105 kilometers, serving 3,534 lighting points controlled by 51 electrical cabinets totaling an estimated installed power requirement of 530 KW. By upgrading the public lighting to energy efficient light emitting diode (LED) bulbs, which can be up to 90% more energy efficient than incandescent and mercury light bulb, the city can realize cost saving from lower energy consumption and reduced maintenance and operational costs. To realize these financial benefits, an upfront cost of the upgrade is required with a high cost per unit. LED upgrade of public lighting does not only increase luminosity but are also more climate friendly that their tadeonal counterparts due to longer lifespans and improved efficiency. UNCDF has initiated the project with the municipality and some of the areas of the engagement cover:
  • Review of the current status of the available public lighting system to have an updated technical study.
  • Financial analysis of the project and the city to understand the debt carrying capacity of the city and a due diligence on the quality of revenue generated by the city to cover debt obligation.
  • Revise the actual cost of the project – estimated at 1.3 million Euro – to reflect current market pricing.
Since the project does not generate revenue this means that revenue risk is managed by the city. The team is structuring a mechanism to legally ring-fence municipal revenue to service the debt obligation. Kumasi, Ghana Kumasi_cdb The Kumasi Metropolitan Assembly (KMA) seeks address the issue of lack of available parking in the city and to redevelop an existing market. These are two priority areas identified by the KMA that require support. It may be worthwhile to note that Kumasi is the second largest and fastest growing city in Ghana. The issues of congestion and lack of available parking is hindering the ability to properly manage the growth of the city.
  • Development of a multi-story parking lot: Seeks to create room for an efficient movement of people, good and services in and out of the city center, by developing a centralized parking lot with the capacity for 2,500 vehicles. This will reduce the on-street parking facilities which currently clog 88% of the Central Business District.
  • Redevelopment of the Afaso market: Seeks to redevelop the market into a modern market with 988 retail spaces and additional support services needed..
UNCDF has initiated the project with the municipality with the end goal of a fully funded and constructed project which is operational. Some of the areas of the immediate engagement covers:
  • Technical Analysis
  • Economic Implication Analysis
  • Environmental and Social Analysis
  • Project Finance Model
  • Demand Risk Assessment
  • Legal and Tax Review
Kumasi, population 2.5 million, is the capital of the Ashanti region, a formerly independent kingdom pre-dates the formation of Ghana by 100 years. The city has a rich cultural heritage that is particularly evident in smaller surrounding towns. Trade, textiles, farming and mining are leading industries in Kumasi. It is among the largest metropolitan areas in Ghana. Agua Granda, Sao Tome agua-grande-2São Tomé is the capital and largest city of the Central African island country of São Tomé and Príncipe. Its name is Portuguese for “Saint Thomas“. Founded in the 15th century, is one of Africa’s oldest colonial cities. Poi Pet, Cambodia
Municipal solid waste disposal in Poit Pet
The current pandemic means that Cambodia is keen to accelerate its economic integratation with its neighbours and diminish its relieance on global value chains. Poi Pet, on the border with Thailand, expanded from 43,000 inhabitants in 1998 to 90,000 in 2008 and over 140,000 today. Vehicle parts manufacturing in Poi Pet is supplied by cheap electricity from Thailand. The long closed international rail link was re-established in 2018. The local government in Poi Pet is struggling to keep pace with the rapid increase in waste.
The government and UNCDF are working on an innovative Public Private Partnership for a $30m waste to energy project in Poi Pot which will simultaneously fix the waste problem and generate power for the expanding economy. This uses incineration with energy recovery technology and is expected to have an annual waste processing capacity of 50,000 tons and an electricity generation output of 25,000 MWh per year. The plant will also supply steam for nearby processing industries. The financial structuring includes creative solutions that build on the border location. Chadpour, Bangladesh Bangladesh’s rapid urbanization has incentivized UNCDF to pilot its Municipal Investment Financing (MIF) programme and to develop financing instruments, such as Public Private Partnerships and Municipal Bonds, that diversify and aggregate municipalities’ financial base beyond annual grants provided by the central government. DCIM101MEDIADJI_0133.JPG 121959478_3359841880789598_1705263764498917874_n

Metamorphosis: Kafka or Cytora?

Welcome to the latest local government finance blog from United Nations Capital Development Fund. Finance ministries, Central Bankers, and Local Governments from a group of developing countries are meeting on Thursday November 5th at the Local Finance Initiative annual board meeting to discuss strengthening domestic capital markets and promoting investment in local economic development by domestic banks.

This is the second of three blogposts leading up to the global board meeting which will highlight some of the local development finance issues that will be addressed. Today’s post is on financing local economic transformation. Yesterday’s post was about how the Local Finance Initiative applies geographical economics to finance at the (real) frontiers. Tomorrow we will look at financing urbanization.

We are living in unprecedented times – the 2020 global Coronavirus pandemic has totally dominated attention in all corners of the World. The economic effect of the 2020 means that 2021 will be a year of economic recovery. The speed and inclusiveness of that recovery remains to be seen. Will the recovery will be driven by pre-existing value chains or new ones? Most importantly, will the recovery continue the transformation of local economies, raising their productivity, diversifying their base and increasing their resilience to external shocks? Or will the economic transformation of developing countries be knocked backwards or sideways by a recovery that weakens fiscal space and reduces local productivity whilst nominally providing jobs? These are not simply academic questions. 2021 will also be the year of LDC V – the fifth UN conference on the Least Developed Countries which will set the new Programme of Action for the LDCs (PoA) for the period 2021 -2030, during which many of them are expected to graduate from LDC status. Graduation requires reaching a GNI per capita of $1,230 for three successive years and reaching a specified level on the Human Assets Index and Economic Vulnerability index. However sustainable graduation means more than passing statistical milestones. It means transforming local economies – through a metamorphosis into new economic structures.

Metamorphosis means more than growth

Growth is not the same as change. This is especially the case in countries that are rapidly urbanising without the concomitant productivity gains in urban areas and agricultural transformation in peri-urban and rural areas. Recent studies by UNCTAD and by the European Investment Bank suggest that this exactly what is happening in many current LDCs.

Perhaps for this reason the United Nations Committee for Development Policy recommends that LDC V adopt the theme “Expanding productive capacity for sustainable development” as a framework for the next PoA. Their analysis points to the longstanding vulnerabilities exposed by the Coronavirus pandemic (such as over exposure to single industries like tourism or extractive industries and an inability to produce locally basic essential products such as hand sanitizer). The Committee identifies “the limited development of productive capacities as a root cause of LDCs’ persistent challenges, including insufficient progress in resilience building, the failure to create decent and productive jobs, and limited technological upgrading.”

The United Nations Capital Development Fund, as one of the support measures for the LDCs works with local governments, ministries of finance and central banks to develop national platforms for building productive capacity financed through primarily domestic capital markets. The Local Finance Initiative deploys technical expertise in local economic development to engage directly with the private sector and primarily domestic banks to stimulate increases in productive capacities in specific local economies. This contributes to, inter alia, economic development initiatives, or area development programmes, or municipal development strategies, or building climate resilience.

Currently the Local Finance Initiative, is deployed in seventeen countries in cooperation with their central and local government institutions and domestic banks. These include broad support to Tanzania, Uganda, Benin, Gambia, Bangladesh, Nepal, Lesotho, Guinea Conakry and specific support to transactions in Mali, Senegal, Kenya, Cambodia, Mozambique, Morroco, Ghana, Sao Tome and Principe, Moldova. The Local Finance Initiative’s team of investment officers works with local developers and local public institutions to structure investments and bring them to financing through domestic banks and the domestic capital markets. Each transaction is identified with two key criteria in mind: Firstly, its transformational effect on the local economy in line with the CDP analysis; Secondly, its ability to change risk perception of domestic institutions and crowd in further local investment in line with sustainability and development effectiveness. The “dual key” investment approach and its pipeline were awarded a prize for innovation in SME finance by the International Finance Corporation during 2019.

The annual report that will be discussed at the board meeting is now online here. It highlights the work of the Local Finance Initiative during the 2017 – 2019.

Of course, during 2020 a key focus of LFI was COVID-19 using UNCDF’s Dual Key Rapid Response System. As the COVID-19 pandemic is inflicting economic harm in global markets, small and medium-sized enterprises stand the greatest risk of experiencing devastated impacts. Businesses in the service and manufacturing sectors were significantly impacted, due to the halting of operations, slow down of production inputs and demand on products and services, or their inability to implement preventative health measures imposed by the governments or due to the rise in operating costs due to adopting these additional health measures.

The SMEs sector is considered the backbone of the LDCs. Sustaining SMEs in local settings is also crucial to sustainable local economic development. In response to these challenges, UNCDF in collaboration with UN sister agencies and with local governments deployed the LFI approach and its Rapid Dual Key SMEs Grant System to support local governments in identifying SMEs in critical value chains that require injection of capital to sustain their operations due to their financial and development impact importance to local communities and local governments.

For example, in Senegal a partnership between UNDP, UNIDO, UNFPA, UNCDF, FAO, UNWOMEN utilised the Dual Key SMEs Grant System to contribute to the resilience of enterprises and to Support the prevention of COVID-19 by ensuring that the most vulnerable people have access to protective resources in Sandiara, Bargny, Ndiob, Ndiaffate and Mont Rolland localities. As a result, of 139 applications screened 20 SMEs passed through the Dual Key financial and technical impact criteria. At the national scale, UNCDF has worked with FONSIS, the sovereign wealth fund of Senegal to invest in the sectors that promote Women’s Economic Empowerment.

n Zanzibar, in UNCDF LFI partnered with UNDP to support the Government of Zanzibar and its local governments recover from the shock to the tourism industry by re-investing in other value chains such as such as Fishing and Aquaculture. 22 screened project developers aiming to secure required capital to sustain their operations.

Full credit to the Governments of Sweden, Tanzania and Norway, and the ONE UN Fund Tanzania for their generous support to the Local Finance Initiative during the period 2017–2019.

Space – The Final Frontier: Its closer than you think

Welcome to the latest local government finance blog from United Nations Capital Development Fund. Finance ministries, Central Bankers, and Local Governments from a group of developing countries are meeting this Thursday November 5th Local Finance Initiative annual board meeting to discuss strengthening domestic capital markets and promoting investment in local economic development by domestic banks.

This is the first of three blogposts leading up to the global board meeting which will highlight some of the local development finance issues that will be addressed. Today’s post is about how the Local Finance Initiative applies geographical economics to finance at the (real) frontiers. Tuesday’s post is on financing local economic transformation. Wednesday’s post is about financing urbanization,

Fans of Star Trek will recall the original series featuring a collection of planet Earth’s best and brightest including Lieutenent Nyota Uhura, Lieutenant Hikaru Kato Sulo and their colleagues venturing beyond our solar system “To explore strange new worlds. To seek out new life and new civilizations. To boldly go where no one has gone before”

Space is not only a galactic frontier, it remains a terrestial one. The continuing pandemic and our different responses to it demonstrates that places and spaces remain unique across the globe. Whilst ideas and money flow across some frontiers at the speed depicted as science fiction in Star Trek 50 years ago, paradoxically sometimes the people who thought those ideas or whose labour made that money find that frontiers remain stubbornly terrestial, especially if they are seeking new lives.

In economics space is also a frontier. Orthodox economic theory is often spatially blind and dismisses the effects of space and place as market imperfections or market failures. In this way, abstract theory supposes a world without space and distance and sees their existance as a nuisance that gets in the way of its assumptions about how markets should “ideally” operate. By contrast, Local Economic Development takes locational specificity as the starting point and builds outwards on the foundation of local resources (human, environmental and financial). This is why whilst everything happens somewhere, not all development is local development. John Tomaney explains this well in the Capital LoCAST podcast earlier this year. Leonardo Romeo puts it like this…

Clearly it [Local Development] is not just development that happens locally (as all development ultimately does), but rather development that leverages the comparative and competitive advantages of localities and mobilizes their specific physical, economic, cultural, social and political resources. Said differently, in the expression local development the adjective local does not refer to the where, but to the who and the how of development promotion. It refers to the actors that promote it and the resources they bring to bear on it. Development is local if it is endogenous, open and incremental, that is: if it makes use of locality-specific resources, combines them with national/global resources and brings them to bear on the national development effort as additional benefit in a positive sum game.(Romeo, The Imperative of Good Local Governance, Chapter 3: 2013)

Frontiers are a great opportunity for local development because the latent place based economic potential is often untapped. In many places the road becomes less trafficked and the economic activity less noticeable in frontier regions. Cross border trade means sealed containers travelling between crossing the border rather than actual trade between the local economies of the border regions on each side of the frontier.

Each side of the frontier is a different economic space with different factor endowments that can complement those on the other side. The opportunity for arbitrage can also exist. The regulatory environment and availability of capital is different on each side. In theory, this presents opportunity. In practice however border regions can be poorer than other parts of the country and often face inwards towards the hinterland rather than outwards towards the opportunities across the frontier. Yet, there are also cases where the frontier does act as a magnet to economic activity.

How can we promote economic development in frontier regions of developing countries? This issue becomes more critical in the light of the recent report from the United Nations Committee for Development Policy which calls for the building of productive capacity in the least developed countries as part of the economic recovery from COVID-19. For the reasons outlined above, frontiers provide a specific set of circumstances that can provide the foundation for a local development finance approach that puts space and place at the heart of the matter.

With the generous support of Luxembourg, Sweden, Switzerland UNCDF, with other UN agencies, has been working in cross border areas for over a decade. This blog entry provides three recent examples that succintly but vividly explain how local development finance in frontiers can have a rapid catalytic effect, sparking exponential increases in living standards. Exactly what the world will need to recover from the Coronavirus

Tanzania – Burundi frontier

Look at a map of the world. Many frontiers follow natural features such as rivers or ridges, others are straight lines drawn during negotations far from the terrain. Communites and economies have been divided by these lines and the new political realities that they produce. Kakonko, on the border between Tanzania and Burundi is one example of how borders imposed from outside reduced pre-existing trade patterns.

The good news is that this is changing, and fast. A local development finance approach is driving public and private investments that are quickly strengthening the local economy and raising household incomes. The Kakonko Cross Board Market will have more than 23 new buildings in the village for trade and public services (e.g. Police Gender Desk, immigration services). Over 150 youth and women have been allotted permanent trading stalls. More than 100 women in Muhange Women Cooperative Group have benefitted from trainings on good agricultural practices, post-harvest handling and storage, access to finance, access to markets, and gender awareness. The Kakonko District Council’s own source revenue from this area is also expected to increase fourfold in one year of operation.

Don’t take my word for it – the short video above provides inspiring details..

Full credit to the Tanzania One UN fund for their support of the Kigoma Joint Programme in which this approach is embedded.

Burkina Faso – Niger frontier

Cross frontier local economic development in the Sahel

Security concerns often hold back a frontier economics approach. Traficking, (unwanted) migration, contraband and terrorism are real. Yet if designed correctly, local development can mitigate these concerns. A recent example is in West Africa’s Sahel region where UNCDF worked with the ECOWAS peacekeeping operation, UEMOA monetary union and the governments of Burkina Faso, Mali and Niger. At the confluence of these three countries security concerns overlapped with the nomadic cattle trade and it was possible to boost the traders and other local families whilst reducing security risk by investing in cross border value chains taking advantage of factor endowments on each side. The diagram below illustrates the interlinking of investments in border economic activity stimulated by the local development finance intervention.

UNCDF invested of $260 000 to pilot this process of cross-border local development to support for the implementation of pastoral infrastructures.

Full credit to the government of Luxembourg for supporting UNCDF and the Sahel countries to make this happen.

Cambodia – Thailand frontier

Municipal solid waste disposal in Poit Pet

The current pandemic means that Cambodia is keen to accelerate its economic integratation with its neighbours and diminish its relieance on global value chains. Poi Pet, on the border with Thailand, expanded from 43,000 inhabitants in 1998 to 90,000 in 2008 and over 140,000 today. Vehicle parts manufacturing in Poi Pet is supplied by cheap electricity from Thailand. The long closed international rail link was re-established in 2018. The local government in Poi Pet is struggling to keep pace with the rapid increase in waste.

The government and UNCDF are working on an innovative Public Private Partnership for a $30m waste to energy project in Poi Pot which will simultaneously fix the waste problem and generate power for the expanding economy. This uses incineration with energy recovery technology and is expected to have an annual waste processing capacity of 50,000 tons and an electricity generation output of 25,000 MWh per year. The plant will also supply steam for nearby processing industries. The financial structuring includes creative solutions that build on the border location.

Full credit to the governments of Sweden and Switzerland for supporting UNCDF and Cambodia to make this happen.

Finally, whilst borders are often the result of past conflict they present great opportunities for peacebuilding. The European Union began with cross border trade along the River Rhine borders following the devastation of the 1939 – 1945 war.

Working with the Swiss and German governments, UNCDF is also supporting cross border trade and development in another area – Ground Water Management and Water Basin Management with a strong focus on peacebuilding through the sharing of water resources. But that is a subject for another blog – watch this space!

International Municipal Investment Fund news…

Technical Assistance Facility to be launched at 75th Anniversary of United Nations at Global Governance Forum Thursday 17th September

Dear Friends and Colleagues,

Following a long northern hemisphere summer the Local Development Finance blog has returned… After the initial COVID-19 responses, the focus of many local governments has largely moved to the monumental challenge of driving economic recovery, rebuilding local fiscal space and mitagating the continuing effects of this global pandemic whose impact is most acutely felt at the local level.

One critically important feature is that long term development plans and capital investment programmes must continue. This blog unites those who understand that local government finance is development finance and that local investment is a vehicle to accelerate the achievement of Agenda 2030. Our recent roundtable with cities and Development Finance Institutions discussed how the Covid-19 crisis has not halted work on high impact local investments but it has altered some of the calculations (see previous blog entry).

The global pandemic has hit towns and cities hard and the global recovery will be urban. On the 75th anniversary of the United Nations it is useful to reflect on the changed demographics of the world and the type of financial arrangements and institutions that are now required. When the UN began the world was predominatly rural with only 30% of people living in urban areas. By 2010 we reached a 50/50 share. Today around 66% of us live in towns and cities – a complete reversal of the situation at the founding of the United Nations.

This reality required a refreshed development paradigm and innovative financial thinking. In 2016 the New Urban Agenda was adopted at the United Nations Conference on Housing and Sustainable Urban Development (Habitat III) in Quito, Ecuador. It was endorsed by the United Nations General Assembly in December 2016. UNCDF shared its reflections on development financing and cities in the New Urban Imparative for Secondary Cities and increased its capacity in local infrastructure finance. UNCDF and UNDESA also published best practice case studies in Financing Sustainable Urban Development in the Least Developed Countries. In 2018 UNCDF began working with development finance institutions and United Cities and Local Governments (UCLG) in the Malaga Coalition for a global financial ecosystem that works for cities and local governments.

Malaga coalition inaugral meeting – 2018

At the first meeting of the coalition in 2018, UCLG President Parks Tau argued that “it is time for the international community to admit the insufficient allocation of resources to meet the challenges of sustainable urban development“. With regards to the Financing for Development the UCLG President also stressed the need to monitor the commitment made by Member States in paragraph 34 of the Addis Ababa Action Agenda. Within the framework of the global agendas, Local and Regional Governments investment and budgeting are part of the needed paradigm shift. From the local level, innovative practices emerge, such as implementing inclusive and participatory decision-making mechanisms (SDG 16.7) or enhancing financial instruments to access Climate Finance such as the Local Climate Adaptive Living Facility (LoCAL).

It was agreed that a dedicated local government friendly investment fund would contribute to the goals of the coalition by making capital available at the right price and in the right format for local investments with high impact. Such a fund would also contribute to policy and regulatory reform through demonstration investments that could be replicated by others, particularly in co-financed with domestic financial institutions.

By the second meeting of the coalition in 2019, UNCDF and UCLG, with their technical partner FMDV had begun the International Municipal Investment Fund initiative to channel private sector finance from pension funds and other investors towards impactful projects sponsored by cities and local governments. Each project will deliver a measurable impact towards Agenda 2030 (the Sustainable Development Goals) and the Paris Agreement. The fund will be dedicated to developing country cities and will demonstrate practical examples of how expanded local fiscal space can drive development.

During 2019 UNCDF completed the transparent selection process for the third party fund manager. The coalition partners also began work on the submissions from an initial city self-assessment and open call for projects issued through the UCLG network. At the UCLG congress in Durban, November 2019 it was announced that Meridiam was selected as the Fund Manager for the International Municipal Investment Fund.

UCLG President Parks Tau and UCLG General Secretary Emilia Saiz at Durban Congress 2019

In January 2020 UNCDF launched the prospectus for the Technical Assistance Facility for the IMIF (IMIF-TAF) and provided some initial funding to enable work to begin on the IMIF pipeline. Thanks to the generous support of Sweden and Switzerland (through the BluePeace initiative) the IMIF – TAF is now operational. It uses UNCDF’s local development finance “dual key” pipeline management and investment structuring process – which in 2019 was awarded by the International Finance Corporation in the financial product innovation category at the SME finance awards. For the IMIF, the process is adapted to local government led infrastructure finance.

On Thursday 17th September 2020 at 09.25am New York time IMIF Technical Assistance Facility will be formally launched at the Global Governance Forum taking place during the UN General Assembly. The session of the Forum, chaired by Gro Harlem Bruntland former Prime Minister of Norway, will highlight noteable sustainable development partnerships on the occasion of the 75th Anniversary of the United Nation’s.

It is fitting that one of the chosen partnerships recognises that the world is now two thirds urban. Agenda 2030 is an urban agenda. The route to the SDGs is not an elevated expressway on concrete pillars; rather it is a winding route that passes through every town and city and builds sustainability, resilience and better living as it goes.

In two short years the inspiration of the first Malaga coalition meeting is becoming a reality. Many thanks to the numerous governments, cities and partners for the leadership, support and hard work that has coalesced to make this happen.

The event will be live streamed at the following link

Translation is available here

Local Government Finance is Development Finance #3

Dear friends and colleagues

Welcome to #3 of the Local Government Finance blog – which will come out once or twice a week. Not everyone gets it – but many support our assertion that local government finance is development finance.

We are in the middle of the (virtual) High Level Political Forum (a UN review of progress towards the Sustainable Development Goals) where the role of local governments in Covid19 Response and Recovery is being highlighted. This week the Global Taskforce on Regional and Local Governments issued the following declaration and on Monday 13th June the taskforce be co-organised the third edition of the Local and Regional Governments’ Forum with UN DESA, UN-Habitat, UNDP and the Executive Office of the UN Secretary General. The overall objective of the Local and Regional Governments Forum is to produce a fruitful debate and strong commitments from local and regional governments, national authorities and the international community to support a transformative bottom-up process grounded on multilevel governance based on the achievement of the SDGs in the aftermath of the COVID19 crisis, while contributing to the Decade of Action. You can catch a recording of the session here.

LISTEN

This week’s posting is more focused on the RECOVERY. Local governments are key to driving the recovery, despite limited financial resources and mandates there is a lot that they can do, as this (very short) video from Tanzania demonstrates…

But what is the INVESTMENT AGENDA for INCLUSION. What does an inclusive capital expenditure programme or an inclusive local economic development strategy look like. The video provides one small example, yet the challenge is to make sure that this economic recovery is INCLUSIVE. How to do this through INCLUSIVE CITIES will be discussed at the High-Level Political Forum on 15th July at 8.00am. Please register for the event Here All are welcome… A flyer is attached to this message.

On a substantive level the meeting will discuss how Rapid urbanization in many developing countries is becoming a significant challenge for governments, particularly local governments to whom citizens turn for ensuring access to basic services and urban governance.  Meeting the demand for infrastructure and services, ensuring inclusive territorial governance, and promoting inclusive local economic and social development are essential for inclusive growth of cities in the developing world, yet local governments themselves often lack the fiscal space and authority for development planning. Unless local government are empowered (including financially empowered) to make inclusion a priority in their agendas, and unless urban infrastructure investments are designed with the needs of all citizens in mind (not just the mobile, not just those with spending power, and not just those with formal, regular jobs) cities can become the location of ever widening inequalities and associated increases in extreme poverty and insecurity.

By ensuring that access to local leadership, provision of public services, access to public space, and availability of finance, among other things, to wide segments of the population, including women, urban poor, youth, migrants etc. cities in developing countries can provide greater opportunities for leveling the playing field and for sustainable and equitable development and growth. For instance, improved street lighting, safe transportation, childcare services, vocational training, smooth access to the jobs market and municipal access to concessional finance are examples of solutions that can increase women’s economic empowerment opportunities in developing cities. At the same time informal employment is far more prevalent in developing countries, the significant numbers of men and women in the informal economy, are vulnerable to economic downturns and emergencies. Responses such as social safety nets, job security and benefits are largely absent for these workers.

Join us to hear some examples of how city leaders are promoting inclusion within developing cities and making sure it is locked in through investment plans as the cities grow. We will also hear from funds and development finance institutions on what steps they are taking to make inclusion a priority in urban investments and projects and what measures are being used to assess this. The Side Event will conclude with a brief discussion with panelists and question and answer with participants.

Agenda:

Opening remarks: Judith Karl, Executive Secretary, UNCDF

Moderator: David Jackson, Director, Local Development Finance, UNCDF

Panelists:

·       Honorable Madam Noraini Binti Roslan, Mayor of Subang Jaya, Malaysia

·       Khomotso Letsatsi, Chief Officer: Municipal Finance, Fiscal Policy & Economic Growth, South African Local Government Association (SALGA)

·       Michael Wodzicki, Director, Strategies and Development, Federation of Canadian Municipalities (FCM)

·       Frederic Audras, Head of Urban Development Division, Agence Française de Développement (AFD)

·       Tehmina Akhtar, Deputy Director, Local Development Finance, UNCDF

Looking forwards to seeing you at the meeting.

David Jackson

Director, Local Development Finance

United Nations Capital Development Fund

Local Government Finance is Development Finance #2

Dear friends and colleagues

Welcome to #2 of the continuation of Local Government Finance blog –  which will come out once or twice a week. Not everyone gets it – but many support our assertion that local government finance is development finance. This includes those participating in the Webinar held on Thursday July 2nd that explored how the Coronavirus will affect municipal finance investment projects. It was a delightful privilege to be joined by some very distinguished guests. If you missed the broadcast you can click the link below to listen in or read the summary below.

Best wishes

David Jackson,

Director, Local Development Finance

United Nations Capital Development Fund

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David Jackson Director, Local Development Finance, UNCDF – Introduction

David Jackson stated that the session will focus on looking ahead beyond the immediate pandemic at the investment horizon of the next 24 months. He stated that

“in this world of reduced fiscal space, reduced local receipts, reduced local tax revenue, sometimes reduced local transfers from central government to local government and reduced economic activity there is a need to rebuilt all of these. In the meantime urbanization is not going to slow down specially in sub-Saharan Africa. This Webinar will explore the investment climate of the moment.”

“Urbanization continuing at a very rapid rate, Africa should no longer be thought of as a rural continent, African cities are growing, especially intermediary cities.”

“Africa requires the Investments to make sure that is urbanization is accompanied by increases in productivity, increases in livelihood and increases in the quality of life as well as environmental sustainability so that it can be the springboard to an environmentally sustainable, livable, healthy and prosperous continent.”

That is the challenge of Municipal Finance, of Local Government Finance, of investment finance in urban areas in Africa. This is the challenge we are taking on. The pandemic is here to stay and has affected our work. We will have perspectives from Mayor’s and investors on the investment climate, and how the COVID pandemic has affected their pipelines, what practical measures and policy guidelines are required, and more…”

He then introduced the Mayor’s who provided introductory remarks…

Mayor of Kumasi- Honorable Mr. Osei Assibey Antwi, Mayor of Kumasi, Ghana

Kumasi is strategically located in Ghana, everyone having to go the northern part of the country has to go through Kumasi, people coming from Burkina Faso, Ivory Coast are going to the city.

Every day more than 1,5 million people are adding up to the already congested number of inhabitants that transit and rest in the city.

The hotel business has been helping us a lot economically, the hospitality industry was booming, the number of hotels in Kumasi outnumbers the number of hotels in Accra the capital City.

Kumasi is home of the largest market in West Africa and is the oldest city in Ghana, it has always been a place of business and transit and commerce since more than 300 years

COVID-19 has really affected Kumasi, all the regions around are not bringing trade anymore , the borders are closed , the trade has dropped down significantly , items coming from Nigeria, Ivory Coast, Ghana, Burkina Faso , import /export  and trade links have diminished every source of revenue of the city.

Kumasi generates revenue from business operating permits, property rates, and fines and taxes it applies on the trade, these are our internal general funds and then from the central government support via the common fund which is drastically down.

Since COVID-19, the budget is down 30%, ($2 million are not available anymore) and this has affected all our projects.

The Central government has assisted us in getting funds of several million Euros which are used for the completion of a market, this project is ongoing, but another project of $20m has been stalled. We are the only city in Ghana which has benefited from that help from the central government.

More than 15 % of the expenditures are spent on COVID related issues, the central government is really constrained too and can’t provide a lot a support, most of its funding is now dedicated to health issues. Municipal funding is very important for us and we want to insist on the importance of it, we are in process to be able to borrow soon and this will change a lot of things for Kumasi.

Honorable Ms. Yvonne Aki-Sawyerr, Mayor of Freetown, Sierra-Leone

Mayor Yvonne presented the fiscal challenges that Freetown has been facing. Overall the investment climate in the city has been hard hit by the pandemic. There has been a shift in donor related funding from traditional projects to COVID-19 focused activities. For example, with limited funding from partners and private sector, Freetown has developed a comprehensive plan providing direct support for communications, preventive measures and community care.

However, the two main revenue sources – fiscal transfers from central government and own source revenue have experienced a significant downturn. The city has not received any Inter Governmental Fiscal Transfers at all this year and traditional Own Source Revenuewhich mainly came from property rates has been lost. She gave an example of Freetown’s innovation in digitizing their property rate system, geo mapping the entire city and building an automated point-based system linking into the banking system, which ensures transparency and accountability. The system allows the identification of payments made by wards and allows residents to participate in determining how the 20% of the revenue raised in the wards would be used. But one challenge the city faced was to issue property rate demand notices in this difficult time. She stressed the importance of support from the political leadership of the national government.

In summary, Mayor Yvonne made the point that the local challenges are also a national priority. During and post COVID-19 time, the most important element that needs to be elevated is the ability for cities to access financing without having to go through national government, whether it is financing from development partners or putting in place a structure or legislation that allows cities to make decisions. Cities need flexibility and assurance that cities who make commitments to deliver services as part of the leadership campaign have access to finance.

David Jackson then moved to question the panel members.

Question to Jaffer Machano

Jaffer, you are heading the technical assistance facility for the International Municipal Investment Fund you began doing this before the COVID-19 pandemics struck. Are you worried now that you’re not going to have enough projects to provide to Emanuelle Nasse Bridier (fund manager from Meridiam)  when the fund is capitalized?

Jaffer Machano Municipal Investment Finance Programme Manager, UNCDF  

Jaffer Machano:

To the contrary ,what we are seeing from our discussions with cities is exactly what the mayors have described the need for investment continues and the projects are there and we are on the ground in both of these cities in Freetown and in Kumasi  but the challenges to market have been complicated.

One of the major issue of course for sub-Saharan Africa is that the sub sovereign market technically doesn’t exist outside a few pockets like South Africa, Egypt and to some extent Mauritius.

This is why the legislation that the Mayor of Kumasi has mentioned that it’s in advanced stages for Ghana will be revolutionary for Ghana because that will allow for capital to circulate ,as the Mayor  of Freetown  has suggested and go directly to the cities in order to be consumed in line with the needs of social services. I am not worried in terms of projects but I’m worried in terms of the route that projects will have to pass to bankability and access to capital

Emmanuelle Nasse Bridier: Head of Urban Resilient Infrastructure, Meridiam

There is a good news, we have seen an increasing appetite and interest for infrastructure at a city level , clear willingness of private sector to be involved in the financing of what matters for the cities.

The investment industry have a clear understanding and realize the need  to  invest much more at the city level and  in infrastructure to cover the needs of the population.

We are seeing this trend in surveys too ,  investors are increasing allocations to infrastructure, but now the investment community needs to find a way to invest in projects which make sense for the cities but which are also which are bankable and valuable. How to find projects which can cover the needs of the population while contributing to the economy and recovery and that attracts private sector investors to provide investment capacity despite the perceived risk.

We need to find solutions that involved blended finance  and crowd-in additional counterparties with their capacity to take the risk and to fuel the source of funding  while covering the risks that private sector investors cannot take.

This is a matter of cooperation, preparation and  working all together to fuel the capacity to crowd in private investors

Overall, we have a long list of project, financial solutions and innovation and we are optimistic on the capacity to find solutions because the need is urgent and there is existing funding capacity to be deployed.

Mr Frederic Audras : Head of Urban Development Division, AFD

In 2008 AFD financed directly the city of Dakar without any guarantee from the national treasury and it worked, its was an innovative experience, we did an evaluation of this project financing and it was well evaluated.

After this crisis its really hard to present to a bank board or credit committee to present a new financing project, even it concerns a very important city

We are thinking of developing new guarantee instruments to encourage local banks to address the needs for finances of local authorities investment programs, to mobilize more financing resources for public infrastructure specially in Africa .

We are launching a partnership with the EU to this effect.

This initiative (Cityriz) aims at creating or developing domestic lending markets for local governments in Africa. Cityriz consists of partial guarantee on loans extended to local governments by domestic banks, with the purpose of channeling more financial resources to these entities that are so far underserved by the banking sector.

Cityriz will also lead to longer maturities and better interest rate offered by banks to local governments so that the latter can more easily fund their infrastructure needs such as roads rehabilitation, drainage, economic and social infrastructure, schools, health centers, public space, water supply, sanitation and solid waste management, etc. Priority will be given to investments with climate co-benefits.

The guarantee mechanism will also go with a technical assistance meant to help banks to develop internal tools and processes to address the local government market in Africa.

Targeted loans under CITYRIZ is €100M over the next four years.

Mr. Tshepo Ntsimane, Head, Metros, Intermediate Cities and Water Boards, DBSA

Tshepo highlighted the need for collaboration between domestic financial institutions and international development financing institutions given the impact of COVID-19. The recent sovereign downgrade of South Africa has made it difficult for DBSA and municipalities in South Africa to raise cost-effective funding for much needed urban infrastructure funding. There is a huge need to collaborate with good and strong rated international agencies such as AFD, AfDB, and IFC, which can reduce the cost of funding infrastructure in South Africa.

Furthermore, he stated that DBSA as the largest lender in municipal space in South Africa, its funding comes from domestic bond issuance and borrowing from commercial banks and international DFI partners. Following Johannesburg’s pioneering example, there are now 4 cities in South Africa that have issued municipal bonds. DBSA has been working to partner with government and private sector to increase private investment in municipal infrastructure to lengthen the maturity profile and deepen the capital markets. DBSA also works with international partners and institutional investors to bring credit enhancement into the domestic market to promote private sector participation in the market.

Mr. Kevin Nelson, Urban Team Lead, Land and Urban Office, USAID

Kevin stressed the connection of Own Source Revenue and investment from the perspective of USAID’s shift programmatically and operationally. He first talked about the connectivity between financing and public policy that guides service delivery. In the context of COVID-19, USAID has been focusing on linking urban planning and public health needs as part of the COVID-19 24-month response. From the angle of social contract and innovative development finance, they highlight the role of Own Source Revenue in the urban service delivery model. There has been greater articulation in connecting governance and USAID’s support in policy advisory to enhance cities’ financing self-reliance, specifically in terms of Own Source Revenue and domestic resource mobilization. For example, USAID is implementing a project in Ethiopia supporting local government in home grown economic growth strategy. He also underlined the importance of building a vicious cycle of investing in SMEs using guarantee mechanisms so that they can invest back into revenue streams. One example is a solid waste management project in Southeast Asia, which capitalizes on a fund of US$150 million. It will not only promote local business growth, but also drive city’s economic development.

Ms. Lisa Da Silva, Global Cities Lead, IFC

Lisa concluded the panel discussion by emphasizing that post-COVID-19 municipal investments will take different forms with different stakeholders in each city. COVID-19 is impacting municipal finance heterogeneously, depending from the revenue base and level of fiscal autonomy. It is expected to see a significant reduction of availability of funding and a scale back in capital expenditure. With a very limited budget next year, cities have to be strategic about investments and there is no one-size-fits-all solution for local governments. Furthermore, she suggested that cities can explore new streams of revenue such as fees for tech-based services. Where regulations allow, responsible fiscal decentralization should be promoted, which will allow cities for borrowing or PPPs.

In addition, governance and risk diversification are two important aspects of local government finance. Governance is important for creating ways to mobilize resources and for building economic resilience and financial strengths. Risk diversification will provide comfort for domestic financial institutions and mitigate loss. She also stimulated thinking around land value capture opportunities. How can cities partner with private sector in projects? How can cities become an investor and contribute land as part of a project and share revenue stream of the project over a longer time. In conclusion, resilience and green economic recovery is what investors look for.

Summing up David Jackson committed UNCDF to work with the panelists on the policy and structural reforms required for a global financial ecosystem that works for cities and local governments, which becomes more critical in the light of the current pandemic and its recovery. After all, Local Government Finance is Development Finance and the pandemic has taught us not only who are the true essential workers, but what are the essential public insititutions for our collective common good. Watch this space for more details.