Cities Alliance Consultative Group Meeting

Report of the Meeting of
the Cities Alliance Consultative Group
October 16-17,  2003, São Paulo, Brazil

• Agenda

• Participants List

• 1. Secretariat Report

• 2. Policy Advisory Board Report

• 3. Members' Reports

• 4. Substantive Discussion

• 5. Follow up on Independent Evaluation Outcomes

• 6. Cities Alliance Finances

• 7. Facilities Status Reports

• 8. FY04 Work Programme

• 9. Implementation of Communications and Dissemination Strategy

• 10. Partnership Matters

• 11. Next Meeting of the Consultative Group

The Consultative Group meeting was chaired by Daniel Biau of UN-Habitat and by John Flora of the World Bank. The Co-Chairs began by warmly welcoming the United Nations Environmental Programme (UNEP) as the newest member of the Cities Alliance, and Brazil which had announced its intention to join the Alliance. Brazil was represented by Ermínia Maricato, Deputy Minister of the Ministry of Cities, who paid tribute to the candid dialogue and spirit of learning and partnership fostered by the Alliance and welcomed the opportunity for Brazil's participation as an equal partner. 

In his opening remarks Daniel Biau noted that the Alliance was growing stronger and demonstrating the strategic value of multilateralism and bilateralism working together. He also stressed the importance of increasing Core funding to the Alliance, as well as enlarging the Alliance membership. John Flora noted that the World Bank also very much appreciated the growing strength and enlargement of the Alliance and valued the Alliance as one of its best partnerships. The Co-Chairs suggested that the meeting focus on scaling up successful strategies and on how to truly become a 'learning alliance'. The meeting's agenda and the list of participants are attached.  

This year's CG Meeting followed a Public Policy Forum (PPF), hosted by the City of São Paulo, which focused on sustainable financing strategies for cities and financial services for the urban poor. The Forum brought together close to 250 participants, including mayors and civic leaders from Latin America, managers of Brazilian financial sector institutions and other public and private sector financial institutions, includinginternational rating agencies, real estate developers and building industry practitioners. Presentations made at the PPF are available on the Cities Alliance website and a CIVIS note on the Forum's findings and outcomes is being produced.

1. Secretariat Report

Summaries of the individual presentations made by the Secretariat follow. The full powerpoint presentations are on the Cities Alliance website.

Summary of Secretariat's Keynote Presentation (Mark Hildebrand)

• The world is only half way through its urban transformation with a projected urban population growth of over 2 billion in the next 30 years.

• Since virtually all of this growth is now taking place in developing country cities the extent to which the management of cities and their growth continues to be sidelined as a core development issue is truly alarming - it is time for a loud wake up call in development agencies.

• Urbanisation is a positive force in development, cities are where economies modernise, and sustained economic growth is always accompanied by urbanisation.

• In modern economies, government activities must answer local needs and be shaped by local revenues and opportunities and developing countries are increasingly recognising that decentralisation provides opportunities for more responsive service delivery.

• The combination of urbanisation and decentralisation also directly benefits rural areas, with positive impacts on the environment, on incomes and on reducing disparities.

• Yet since few countries and development agencies have adopted policies and investment strategies designed to realise these positive impacts of urbanisation – poverty is urbanising, inequality and social and political exclusion are growing, and the number of slum dwellers is projected to double in the next 30 years.

• The Alliance's learning agenda should focus on policy and investment responses to this knowledge gap, including helping cities grow without new slums and to develop long term sustainable financing strategies – leveraging non-public sector resources.

Summary of Slum Upgrading Presentation (William Cobbett)

• Current challenges for slum upgrading include:
  • Slums are growing faster than the response, and urban poverty is deepening;
  • Failure of the "project approach";
  • The central importance of land issues and access to credit.
• The Secretariat undertook a survey of nationwide slum programmes in nine countries in 2003, including strengths and innovations and the challenges and obstacles from each country. The summary results were presented, and were included in the 2003 Annual Report.
• Essential ingredients of nationwide slum upgrading include:
  • Political will – consistent political leadership; long-term targets; and including slum upgrading on budget as core business;
  • Policy reform – clear policy and institutional frameworks; open and transparent land markets; and accommodating future population growth;
  • Leverage resources – mobilise non-public sector resources; expand access to credit; engage private sector as risk-taking partner; and slum dweller involvement and investment.

• CDSs are increasingly being recognised by local governments as a vehicle for problem identification, consensus building, implementing wide-ranging reforms, and long-term investment strategies.
• In the Alliance's portfolio of 90 CDS in 24 countries, there is evidence that partnerships with Local Government Associations (LGA) are on the rise and that bilateral and multilateral CA members increasingly work together at the country level.
• Essentials of a CDS include:
  • An assessment of the city and its region;
  • A long-term vision but with immediate actions and a focus on results;
  • Value the contributions of the poor, encourage local business growth, and engage networks of cities;
  • Focus on implementation, concentrate on priorities, and foster local leadership;
• CA members should respond to this local government demand, acknowledge local leadership, ensure consistent response from CA members' decentralised offices, and emphasise the centrality of domestic investment.

Discussion of Presentations 

The subsequent discussion focused around two main gaps/issues identified by members: 

• Lack of sustainable financing strategies embedded in CDS and to underpin citywide slum upgrading;
• Keeping the MDG target and urbanisation issues in front of policy makers.

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2. Policy Advisory Board Report

The São Paulo meetings marked the first time all eight members of the Policy Advisory Board had convened. The PAB's report to the CG focused on organisational and policy issues, as summarised below;

Organisational Issues and PAB Recommendations: 

(i) PAB Role and Function
The PAB felt that additional Secretariat staff time could further enhance its contribution to the Alliance. The PAB also expressed its wish to become more involved in developing regional links and networks to promote Alliance goals. At its annual spring meeting with the Secretariat, members proposed to discuss preparations for the PPF, along with any issues the Secretariat might seek the PAB's guidance on.

(ii) PAB Membership and Rotation
The PAB proposed to begin rotation of its members in 2005, with two members rotating each year, so as to have all current PAB members rotated by 2008. The PAB suggested that the CG identify and approve two new members on an annual basis who would join the PAB at its spring meetings in conjunction with the exit of two members. This process would begin in 2004. The PAB hoped that past members would be kept abreast of Alliance developments and continue to serve as resources in regional activities.

(iii) CG Membership
The PAB expressed its interest in extending Alliance membership to more stakeholders to broaden the Alliance partnership. In view of the impending unification of associations of local authorities, the PAB suggested that representation on the CG of the newly formed United Cities and Local Governments world organisation might be on a regional basis.

Policy Issues and PAB Recommendations: 

(i) Cities Alliance and the urban agenda
Echoing CG members' call for urban issues to figure more prominently on the development agenda of the international donor community and many national governments, the PAB recommended the following:

• A more concerted effort amongst CG members to ensconce the urban agenda within their respective organisations and international fora;·
• Shifting away from the negative concept of 'slum prevention' towards the more positive concepts of new emerging urban settlements and managed urban growth;
• The 2004 Public Policy Forum should focus on the relationship between city development strategies and anticipating and managing urban growth;
• The Alliance should continue to contribute to the MDG Slum Task Force and World Urban Forum.

• Municipal finance is an essential component of a realistic CDS;·
• Without sustainable financing, it will not be possible to scale up;·
• Just as the microfinance movement created innovations in the financing of entrepreneurs, microfinance and other alternative financial institutions may be able to innovate by creating appropriate, profitable loan products to acquire, rehabilitate or expand housing;
• "Alternative" financial institutions may be organised as for-profit, regulated financial institutions by raising equity capital which seeks both financial and social returns or on an unregulated basis as NGOs, or they may be regulated as cooperatives or credit unions with member ownership. 

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3. Members' Reports

CG members took the opportunity of this session to highlight new developments and areas of particular interest or concern. Among those raised:

• IULA, UTO and Metropolis are joining forces and the new world organisation which will be called United Cities and Local Governments will hold its founding congress in Paris from 3-5 May 2004. The new organisation will include over 1500 local authorities and 200 national associations, plus regional associations and other local government actors.

• Local authority members also expressed their satisfaction with the steps that have been taken as a follow-up to the evaluation's recommendations for a stronger engagement with local authorities. At the same time there was clearly scope for greater engagement of LGAs' regional representatives to strengthen local ownership and the potential for scaling up. The Secretariat was also asked to share proposals with LGAs earlier in the proposal identification stage so that they might generate greater involvement of LGAs. They reiterated their strong commitment to realise this goal.

• John Flora gave a brief report on the activities of a consultative group of which he was a member and which had been set up by UN-Habitat to advise on the development of a new facility being considered by UN-Habitat in conjunction with the Habitat Foundation to increase the flow of funds from domestic and international sources for improvements in human settlements. This followed from the decision of the UN General Assembly to establish a fourth sub-programme for UN-Habitat's work, on financing human settlements, and from the decisions of the recent session of the UN-Habitat Governing Council. Consultants had been hired (PMGlobal, financed by DFID and Sida), to develop a concept, organisation, and operational agenda for such an undertaking. The consultative group had been appointed by UN-Habitat to review and advise on the work of the consultants, and particularly to ensure effective integration and complementarity with existing initiatives. The study was on-going and the consultative group had met twice, but as yet no final conclusions as to the scope of the facility or what activities would be included in its programme had been reached. The consultative group, however, had made the recommendation at its meeting in September that synergies could be achieved if the facility were to be developed as a programme implemented by UN-Habitat, under the umbrella of the Cities Alliance, similar to the way the CLIFF programme had been organised. The consultative group did not feel a separate organisation should be created. Further information would be made available to Cities Alliance members as the study progressed.

• USAID presented its Development Credit Authority (DCA) which builds partnerships with local financial institutions, sharing up to 50 percent of debt risk, to facilitate the financing of 'bankable' development projects that otherwise lack access to credit from private financial markets. For every US dollar (or local currency equivalent) loaned pursuant to a DCA guarantee, the cost to USAID has been approximately 2 to 7 cents.

• As one of the Alliance's newer members, UNEP reaffirmed its interest in contributing to the operational and normative aspects of Alliance activities, including in the areas of water and sanitation, urban mobility issues, and the urban environment and its linkages with poverty and national PRSPs.

• France updated members on its contributions to the Alliance's learning agenda in preparation for the Africities Summit in December 2003, its initiative to support access to urban services for the urban poor, and, more generally, its efforts to ensure greater alignment between its programmes and those funded by the Cities Alliance.

• There was also a renewed call for coherence of effort with particular reference to poverty assessments Alliance members may be undertaking, to ensure methodologies are aligned.

• Several members reflected again on the position of the urban agenda within th

• eir organisations, with varying conclusions: that sectoral, thematic divisions within bilateral organisations remain a challenge that must be overcome; that as bilateral organisations are decentralising budgets, programmes are shifting from global to country-specific; and that there is a growing appreciation for the need to embrace all sectors within urban projects. 

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4. Substantive Discussion

Substantive discussion focused on three questions: (i) What can we do as an Alliance to promote scaled up actions?; (ii) How can we improve and measure impacts?; and (iii) Are there knowledge gaps that we should address. Among the comments and recommendations made were:

• Developing domestic credit markets for scaling up is critical, but close attention should be paid to which roles are to be assumed by the private and public sector. Good governance and management of financial institutions will be equally important;
• To achieve scale, the focus needs not only to be on nationwide programmes, rather than local projects, but national plans for slum upgrading will need to be incorporated into governments' PRSPs;
• Scaling up requires interventions at different levels: at the city level, where there may be room for more action, at the political level, both nationally and internationally, and within Alliance members' own agencies;
• With the recruitment of a Senior Urban Finance Advisor, the Alliance will be better placed to begin filling a recognised knowledge gap: the methods by which developing cities can mobilise domestic capital, from the perspective of cities, as opposed to suppliers of credit;
• Members agreed on the need to continue documenting and disseminating successful and instructive experiences and examples, as the 2003 Annual Report set out to do;

• USAID proposed setting up a Task Force which would explore creating an endowment fund by raising private sector funds to help scale up Alliance activities.

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5. Follow up on Independent Evaluation Outcomes

Further to the Summary table the Secretariat had provided members before the meeting on the follow up to the Independent Evaluation, the Secretariat updated the CG on the framework it had developed for evaluating the impacts and drawing out the lessons of completed Alliance activities. Desk reviews of completed grants would be undertaken as well as several field evaluations per year. The Secretariat indicated that it would involve PAB members as well as specialists from its permanent roster of Independent Technical Assessors. The Secretariat welcomed feedback from members on the Terms of Reference being developed for the evaluations of completed grants.

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6. Cities Alliance Finances

The Secretariat provided a summary of the current financial status of the Alliance, noting that nearly US$28 million in Core commitments (including funding for the Secretariat) had been made to date. Additional earmarked commitments for special facilities and other Non-Core uses have brought total commitments to over US$50 million, which is slightly below the funding targets set in the Cities Without Slums action plan. Approximately US$5.5 million Core funding is projected for FY04, of which approximately US$3.75 million in Core funding plus US$4 million in Non-Core funding would be available for FY04 programme proposals. The balance of Core funding would be for the Secretariat budget, evaluation, and knowledge and learning activities.

During the ensuing discussion, some members called for more financial resources and proposed that the Secretariat develop a fundraising strategy and give consideration to creating an endowment fund. Another member said the Alliance should be proud of the "quite remarkable" fundraising efforts, but cautioned that the Alliance should mainly be a political alliance to mobilise political will, and not primarily a fundraising mechanism to achieve the CWS action plan. The real benefit of the Alliance is the leveraging of the political commitment.

Report by Steering Committee on Secretariat budget for FY04 

The Steering Committee Co-Chairs announced the SC's endorsement of the US$1.7 million Secretariat budget for FY04, including the proposed US$1.25 million from Core funds, and complimented the Secretariat on its performance. The balance of the Secretariat budget is provided through in-kind staff secondments. 

Pledging for 2004

Approximately US$9.0 million in confirmed or tentative pledges by Alliance members were announced during the meeting. Alliance members voiced their strong satisfaction with the progress of the Alliance to date, citing the Cities Alliance as "an admirable example of the harmonisation" of the efforts of governments, multilaterals and cities in targeting urban poverty reduction.

Asian Development Bank announced that a 2004 contribution of US$250,000 was under consideration but not yet approved.

Canada announced that it could not confirm its 2004 pledge at this time, but noted that a visit of the Secretariat to CIDA in January should help facilitate the commitment.

France announced its intention to fulfil its 2003 commitment of €250,000, and its hope to maintain that contribution in the future. It was also noted that a staff secondment to the Secretariat was being processed through the World Bank's Staff Exchange Program with Caisse des dépôts et consignations (CDC).

Germany announced that a new, two-year commitment had been made for 2004-2005 in the amount of €250,000 per year, and that the two-year secondment of Peter Palesch to the Secretariat had been renewed for an additional two years.

Italy confirmed a contribution of at least US$250,000 for 2004, and noted its new Non-Core commitment of €5.0 million for the Bahia, Brazil, statewide slum upgrading programme and its consideration for a renewal of its Non-Core support for Latin America regional activities.

Japan noted that it could not officially pledge, but expects continuation of its US$1.0 million per year contribution, with US$250,000 for Core funding and the balance earmarked for Asian CDS activities linked with Japanese development cooperation and benefitting from Japanese experts in the region.

Netherlands announced its intent to contribute US$250,000 for 2004 (and subsequently has indicated that an additional US$50,000 in Non-Core funding would be provided for CDS pro-poor LED activities).

Norway noted that it could not announce a formal commitment since the Government was still negotiating its 2004 budget, but aspired to maintain the same level of financial commitment as in the current year (approximately US$1.2 million in combined Core and Non-Core funding).

Sweden announced that it is renewing its Core agreement, on the basis of the independent evaluation of the Alliance and pending internal-Sida endorsements, for four years at approximately US$300,000 to US$500,000 per year. Sida also announced it will consider Non-Core contributions for CLIFF, the Africa Facility and/or country-specific activities. (Notification was received subsequent to the meeting that the Core commitment will likely be US$650,000 equivalent per year, at today's rate, for three to five years, and that at least US$1.7 million equivalent will likely be contributed to the Africa Facility over three years, with a possible additional US$650,000 in each of years 4 and 5).

United Kingdom noted that it was finalising the arrangements for a new, three-year commitment announced at last year's meeting, for a total amount of £3.0 million including £2.1 million in Core funds. DFID also continues to finance a Cities Alliance Regional Advisor for South Asia.

United States announced its intention to continue its financial contribution of US$250,000 per year.

UN-HABITAT announced it was continuing its contributions of US$280,000 per year, including the secondment of William Cobbett to the Secretariat.

UNEP announced that it expects to contribute US$250,000 in Core funding for 2004, plus might make Non-Core contributions for specific activities or programmes. There are also possibilities for in-kind cofinancing of projects.World Bank announced its intent to contribute US$1.7 million for 2004.

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7. Facilities Status Reports

Pelle Persson, a member of the CLIFF Advisory Group, gave an overview presentation on the Community-Led Infrastructure Finance Facility (CLIFF), and reported on first year progress under the Facility. Six CLIFF-supported projects are now under implementation in India, five for housing and one focusing on sanitation.  An estimated 1,343 families will benefit from the housing projects and 64,000 families from the sanitation. These impacts are being achieved by the Mumbai partners with the benefit of £2.5 million in bridging loans from CLIFF, as part of £10.4 million total project budget. CLIFF is also preparing to expand into its second pilot country, Kenya. DFID (US$10.0 million equivalent) and Sida (US$2.3 million equivalent) have made substantial Non-Core contributions to the Facility.  
The Secretariat reported that the Cities Without Slums Facility for Africa provided preparatory assistance grants for four programmes during its first months of operation – the Lagos CDS (Nigeria), Kumasi CDS (Ghana), Mbabane slum upgrading (Swaziland) and for the Addis Ababa-Johannesburg Partnership Programme. Several other activities are in the pipeline. These four preparatory grants are each expected to result in four full-scale funding applications during FY04, and could eventually be linked to approximately US$1 billion in investments. Norway (US$675,000) and USAID (US$100,000) have made Non-Core contributions to the Facility to date. 

The first funding allocation for the Community Water and Sanitation Facility was approved during the meeting (see next section of report), US$500,000 for the South African Municipal Water and Sanitation Partnership Initiative. Proposals in the pipeline – including for Panama, Peru and the Philippines – are expected to quickly deplete the remaining amount of the initial US$2.0 million contribution made by USAID in launching the Facility. During the ensuring discussion, members were called on to contribute to these facilities, which would strengthen the positions of existing facility contributors to replenish their commitments. Members were also briefed on the involvement of local authorities in CLIFF projects, with strong local commitment cited as the reason that CLIFF is moving so quickly into Kenya. 

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8. FY04 Work Programme

The Secretariat provided members with an overview of the final FY03 work programme, part of which was approved during the Brussels CG meeting in October 2002, and the rest subsequent to the meeting. Funding allocations were quite evenly split among regions and types of activities. The increase in FY03 allocations made for Sub-Saharan Africa were largely attributable to the new Africa Facility.  

Approximately US$9.5 million was available for allocation at the beginning of FY04, including US$5.5 million in Core funds. US$575,000 had been approved for allocations early in FY04, US$3.1 million was recommended for approval during this meeting, and US$0.85 million was in the immediate pipeline, which would leave a balance of nearly US$5.0 million (including US$2.0 in Core funds).  

Decisions: Members approved the US$3.1 million in new FY04 work programme allocations during the meeting, including Core funding for programmes in Niger (US$245,00) and Colombia (US$324,120), and a Community Water and Sanitation Facility allocation for South Africa (US$500,000). Seven global allocations totalling US$2.05 million were also approved, more than half of which is for the Secretariat budget (US$1.25 million). Three of the global allocations were related to monitoring and evaluation of Cities Alliance activities, including US$425,000 for a CDS Impacts Study and a CDS Conference on Measuring and Improving CDS Impacts, most of the funding provided by Japan Non-Core resources, and also benefitting from Japanese expertise.

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9. Implementation of Communications and Dissemination Strategy

The Secretariat updated the CG on progress made in implementing the communications and dissemination strategy set out at its last meeting in Brussels. The partnership with ISTED had been operationalised, which included the joint production of a brochure on the Cities Alliance and its funding procedures, and a Villes en Développement Bulletin devoted to the Cities Alliance, both produced in multiple languages and widely disseminated. These and other knowledge outputs developed by the Secretariat, in collaboration with Alliance members and partners, had been designed to serve multiple fora and audiences and were being well received. 

Among the comments and suggestions raised by CG members in the brief discussion that followed were: 

• At the Brussels CG Meeting, the Secretariat had been asked to focus on content and distil lessons learned, and were commended for their achievements, including in the Alliance's 2003 Annual Report;

• More publicity was needed of the urban agenda, Cities Alliance activities, its areas of concentration and its progress;

• Members were again encouraged to engage their own communications and dissemination capacities to reach out with Alliance materials and messages, both externally and internally.

It was expected that the Communications Officer position in the Secretariat would soon be filled which would help move the Alliance's communications and dissemination ambitions forward.

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10. Partnership Matters

(i) Steering Committee representation

With the expiration of Germany's seat on the Steering Committee, members caucused to determine which bilateral representative might replace Germany on the Committee.

Decision: It was decided that Sweden would take over Germany's seat on the Steering Committee, a two-year appointment to become effective after this meeting until the conclusion of the CG meeting in 2005. The next in-person meeting of the Steering Committee is tentatively scheduled to take place in conjunction with the 13-17 September 2004 World Urban Forum in Barcelona, with electronic meetings during the intervening time. 

(ii) CG Membership - Development Country Membership 

The announcement by Brazil of its intention to join the Consultative Group was welcomed by all members. During its 13 October 2003 meeting the Steering Committee considered how best to facilitate developing country representation on the CG and recommended to lower the minimum annual Core contribution for developing country membership on the CG to US$50,000. The CG adopted this recommendation. 

Decision: Article 34 of the Cities Alliance Charter was amended by adding the new sentence, highlighted below:

"34. The Core Fund comprises a pool of resources that can be used for any activity falling within the work program approved by the Consultative Group. The funds will be applied to country-specific activities, multi-country activities, knowledge and learning activities, and governance costs. Contributions to the Core Fund are not subject to any donor restrictions, including in relation to nationality of consultants. Unless otherwise indicated, all contributions to the Cities Alliance would be designated to the Core Fund. All participating donors would be required to make a minimum contribution to the core fund of $250,000 per annum. In the case of regional development banks, such core contributions can be tied to their relevant operational regions where required by their statutes. Governments of countries referred to in article 12 will be required to make a minimum contribution to the Core Fund of $50,000 (or local currency equivalent) per annum."  

Article 12 specifies countries eligible to receive CA assistance (from the OECD development assistance list).

(iii) CG Membership - Associate Membership

The status of the Associate Membership clause of the Cities Alliance Charter was also reviewed by the Steering Committee, at the 13 October 2003 meeting, during its discussion on increasing Alliance membership. The Associate Membership category was set to expire at the end of 2003. Based on this discussion, the SC brought to the CG a recommendation to amend article 23 of the Charter, which was adopted and to become effective as of this meeting.

Decision: Article 23 of the Cities Alliance Charter was amended by replacing the first sentence:

"23. The CG will invite prospective financial partners to serve as "Associate Members" of the Cities Alliance Consultative Group for a maximum period of two years. During the first four years of operation (through December 31, 2003), the CG will invite prospective financial partners to serve as "Associate Members" of the Cities Alliance Consultative Group. The associate membership will be non-voting but will share information and participate in key meetings."

(iv) PAB Membership  

The CG briefly reviewed the Policy Advisory Board's recommendations on PAB member rotation given during its 16 October presentation to the CG, which were adopted.  

Decision: It was agreed that the rotation procedures proposed by the PAB (see Section 2) would be followed. In 2004, the CG would need to identify and approve two new members who would join the PAB at the Board's 2005 spring meeting at which time two existing members would depart.

 The CG also agreed to the following PAB members rotation chart proposed by the PAB:

•  2005: Somsook Boonyabancha and Richard Webb
• 2006: Mary Houghton and Akin Mabogunje
• 2007: Jean-Pierre Elong Mbassi and Sheela Patel> 2008: Yousef Hiasat and Ana Vasilache.

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11. Next Meeting of the Consultative Group

Monty Narsoo, Chief Executive Officer of the South African Cities Network (SACN), extended a formal invitation to the CG to hold its next meeting in eThekwini, South Africa (formerly Durban). The Alliance provides Core and Non-Core financial support to the SACN, whose membership consists of the nine metropolitan areas of South Africa. Mr. Narsoo briefed the CG on the selection process and criteria used by the SACN in nominating eThekwini, the capacity of the city to host the event and the prospects for site visits for delegates. 

Decision: It was agreed that the 2004 meeting of the CG would be held in eThekwini and that this meeting would be scheduled during the first half of November.

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