empowering cities to implement the 2030 agenda and new ... ppt_financing_… · empowering cities...
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Empowering Cities to Implement the 2030 Agenda and New Urban Agenda:
Mobilising Municipal Finance for Sustainable Infrastructure in Asia-Pacific
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Today’s Presentation
1. Background, context and key questions
2. The infrastructure gap in Asia-Pacific 3. Key components of municipal
financing systems 4. Financing instruments which assist in
leveraging capital 5. Summary reflections for discussion
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§ Part of UN Secretariat: 62 member states - 58 are regional members
§ ESCAP covers the world’s most populous region - two thirds of humanity
§ Based in Bangkok, with 4 Sub-regional offices
§ ESCAP fosters: - regional cooperation through an
intergovernmental platform to promote social & economic development
- normative, analytical & technical cooperation at the regional level
- a platform for South-South dialogue / exchange of practices
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Regional Partners Forum @Quito+1 28-29 November 2017, Bangkok
Over 70 representatives from 17 countries
met one year after Quito to drive implementation
of the outcomes of Habitat III and
localisation of the SDGs in Asia Pacific
Priorities for Effective Implementation at national and local levels
Financing
Data
Local partnerships
National Urban Policies
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2030 Agenda and Cities
Cities well positioned for the implementation of Global Development Agendas
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Key question
What are the enabling institutional conditions which need to be in place for cities to be able to leverage long term financing for sustainable infrastructure to deliver against global development agendas?
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What’stheinfrastructuregapinAsia-Pacific?
Whichpublicgoodsneedtobefinancedatthecitylevel?
Whatarethekeycomponentsofafunctionalmunicipalfinancingsystemtosupportinvestmentinsuchgoodswhichgovernrelevantpolicydecisionmakingandaction?
Whatarethefinancialinstrumentswhichlocalgovernmentshaveattheirdisposalwhichcanbeusedtoleverageprivatefinancefortheseinvestments?
Empowering Cities to Implement the 2030 Agenda and New Urban Agenda: Mobilising Municipal Finance for Sustainable Infrastructure in Asia-Pacific
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The current GAP
InfrastructureNeedsandGaps:AsiaPacific,USDBillion2015prices
EstimatedCurrentInvestment(2015)
BaselineEstimates
AnnualNeeds Gap Gap(%ofGDP)Total(25) 881[5.5] 1,211 330 1.7TotalwithoutChina(24) 195[3.8] 457 262 4.3SelectedLowtoLowerMiddleIncomeCountries(18) 178[4.2] 422 244 4.7withoutIndia(17) 60[2.9] 192 132 5.4
SelectedUpperMiddleIncomeCountries(7) 703[6.0] 789 86 0.6withoutChina(6) 17[2.0] 35 18 1.8
SelectedCentralAsiaCountries(3) 6[2.9] 11 5 2.3
SelectedSouthAsiaCountries(8) 134[4.8] 294 160 4.7
SelectedSoutheastAsiaCountries(7) 55[2.6] 147 92 3.8SelectedPacificCountries(5) 1[2.7] 2 1 6.2India 118[5.4] 230 112 4.1Indonesia 23[2.6] 70 47 4.7China 686[6.3] 753 68 0.5EstimateswithinparenthesesarenumberofcountriesandthoseinbracketsarepercentagesofGDPSource:basedonADB,2017
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Empowering Cities to Implement the 2030 Agenda and New Urban Agenda: Mobilising Municipal Finance for Sustainable Infrastructure in Asia-Pacific
PublicandPrivateInfrastructureInvestment,2010-2014(%ofGDP)
Private Public
25ADBDevelopingMemberCountries 0.4 5.1
EastAsia 0 6.3
SouthAsia 1.8 3
CentralandWestAsia 0.3 2.6
ThePacific 0.3 2.5
SoutheastAsia 0.5 2.1
China,People'sRepublicof 0 6.3
India 2.1 3.3
Indonesia 0.3 2.3
Source:ADB,2017
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The Future GAP
TotalinfrastructureinvestmentneedsfortheregionwillreachUS$22.6trillionoverthenext15years(2016to2030)
Publicsectorreformsonbothtaxrevenuesandexpenditurescanmeetaround46%ofthisgap(US$121billionoutof
US$262billion)betweencurrentandneeded
investments
Theresultisa54%gap(orUS$141billion)specifically
forprivatesectorinfrastructurefinance
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Waterandsanitation.Asia-Pacific’sprojected
investmentneedsinwaterandsanitationfor
2016-2030basedon2015pricesstandsat
approximatelyUS$787billion,withclimate
adjustedestimatesatover800billion.
Transport.Asia-Pacific’sinvestmentneedsin
transportfor2016-2030basedon2015pricesstandsatapproximatelyUS$7,796
billion,withclimateadjustedestimatesatover
8,300billion.
Energy.Thissectorhasthelargestinfrastructure-
financinggap.Asia-Pacific’sinvestmentneedsinpowerfor2016-2030basedon2015pricesstandsat
approximatelyUS$11,689billion,withclimate
adjustedestimatesatover14,700billion.
The Future Gap - sectors
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Which public goods need to be financed at the city level?
The financing challenge higher in the second category, named as
the "missing middle”, where private capital needs to be supported by public funds
• first,investmentsthataremoreinthenatureofpublicgoods
• second,investmentsthataremoreprivatizedinnature
• third,purerevenueprojects
From a financing perspective,
urban infrastructure
investments can be divided into three categories
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What are the key components of a functional municipal financing system to support investment in such goods which govern relevant policy decision making and action?
Actionsthatenhancethepowersofcitiesto
• Improvetheirownrevenuesources(OSR),• Rationalizeintergovernmentaltransfers(IGFT)• Providetheregulationsforaborrowingframework(BF)thatcanattractlong-termcapital
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What are the key components of a functional municipal financing system to support investment in such goods which govern relevant policy decision making and action?
Debtfinancingdependsontherationalityofthe
intergovernmentalfiscalrules
De-riskinvestments
Policiesthatempowerlocalgovernmentsthrough
rationalizingintergovernmentalflows,
strengtheningownrevenuesandfinancialintermediaries
Investinstructurestopoolthesedemandsandlowerrisksthroughefficient
intermediation
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Financing instruments which assist in leveraging capital – Fiscal decentralisation
Fiscaldecentralisation
BenefitsandRiskstodevelopingcountries
• Designandmanagementofintergovernmentaltransfers• Canincreasetheefficiencyofpublicfinances• Transfersmaycontinuetoplayanimportantroleinordertosupplementlocaltaxation• Ensureappropriateaccountability• Needtoberationalandpredictable• Coordinationbetweennational,regional,andlocalgovernmentsiskey
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Financing instruments which assist in leveraging capital – debt financing
DebtFinancing
BenefitsandRiskstodevelopingcountries
• Creditworthynationalgovernmentscancollaboratewithcitiestoidentifyinvestmentpriorities
• Secondarymarketsandinstrumentsreducethecostoflonger-termlocalcurrencyfinance
• Citiesneedsufficientown-sourcerevenuesformakingdebtrepayments,alongwithcapacityforbudgetary,accounting,andfinancialmanagement
• Riskmitigantsandcreditenhancements
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Financing instruments which assist in leveraging capital – PPPs
Public–privatepartnerships BenefitsandRiskstodevelopingcountries
• PPPscanplayaroleindeliveringurbaninfrastructureprojects• Allocaterisksbetweenpublicandprivateentities• Involvecommercialreturnsonrevenue-generatingassets
• UniverseofsuitableprojectsforPPPsislimitedprincipallytothosethatcangeneratesufficientincome-backedreturns
• EffectivenessofPPPshasbeenmixed
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Financing instruments which assist in leveraging capital – LVC
Landbasedfinancing
BenefitsandRiskstodevelopingcountries
• Helpsfinancelargeurbantransportanddevelopmentprojects
• NationalgovernmentscanincentivisemunicipalitiestoassessandimplementLVCasaconditionofallocatingnationalfundstopart-financeinfrastructureprojects
• Nationallegislationandframeworksarecriticalenablersforcreatingtherevenuestream
• Higherlevelsofgovernmentoftenretainthepowertosetassessmentparametersortaxrateswhichrepresentsasignificantrisk
• LVCismostriskywhencombinedwithanineffectivetaxsystemandopaquepropertymarket
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Financing instruments which assist in leveraging capital
TamilNadu,India:EmpoweringMunicipalDecisions
• Linkingfiscaltransferstostatetaxes(rulebasedratherthanonpatronage),strengtheningownsources(includingpowerstosetrates)andsettingupasupplysideintermediary
• Demonstratedthatdomesticprivatedebtcanfinancemunicipalinfrastructureatlowcosts
• Marketaccessforsmallandmediumcities,demonstratingtheadvantagesofpoolinginovercomingsmallsizeofissues
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Financing instruments which assist in leveraging capital
ThePublic-PrivatePartnershipCenter(PPPC)ofthePhilippines
• PPPCassistsandsupportsimplementingagenciesanddepartmentsonprojectpreparation
• EstablishmentoftheProjectDevelopmentandMonitoringFacility(PDMF)in2010
• Byend2016,PDMFhadcommittedatotalofnearlyUS$56million• MorethanUS$4.3billionofprivateinvestmenthasbeensecured
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Financing instruments which assist in leveraging capital
LandBasedFinancingintheRepublicofKoreaLandandHousingCorporation(KLHC)
• KLHCfinancednewtransportinfrastructure,suburbanrailwaysandexpressways
• Companiesboughtsomeofthenewlydevelopedlandforhousing• Usersalsobenefitedfromappreciatedvalues• From2001to2008,38landdevelopmentprojectswerebuilt-theaveragelandvaluecaptureperprojectwasaroundUS$559billion(21.5%)oftheaverageUS$2.6billionprojectcost-totallandvaluecapturedreachednearlyUS$2.8trillion
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In conclusion
Combiningtheaboveinstrumentswithenhancingthepowersofcitiestoimprovetheirownrevenuesources,rationalizeintergovernmentaltransfersandprovidetheregulationsforaborrowingframework
capitalizingonthebenefitsandreducingtherisksinanintegratedfashioncanattractlong-termcapital
Thesepolicymeasureslieundergovernmentcontrolorinfluenceandhavesupportingevidenceofpreviouseffectiveness
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What do you think?
How can we support a more enabling environment for cities to be able to leverage long term financing for sustainable infrastructure?
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Thank you! www.escap.org
Supporting the Implementation of Agenda 2030 and the New Urban Agenda