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A major outcome of the 28-31 October 2007 United
Cities and Local Governments 2nd World Congress in
Jeju, Korea was the adoption and formal approval of
the
“UCLG Policy Paper on Local Finance.” The paper
contains 25 recommendations for increasing local
government access to infrastructure financing,
particularly in developing country cities where
infrastructure planning and construction have not
kept pace with rapid urbanisation. The UCLG
Committee on Local Finance and Development, a
network of mayors and representatives of national
associations of local governments active in local
finance, drafted the policy paper.
The policy paper sets out to give voice to a local
government vision on financing with particular
emphasis on how relationships between local
governments, multilateral organisations, and
national governments would ultimately shape such a
process. The policy paper is an executive summary of
the principle findings and recommendations from a
broader technical paper, the “UCLG Support Paper on
Local Finance.” The
recommendations call on local governments, central
governments, donors, and international financial
institutions to address urban expansion and the
accompanying infrastructure requirements by
redirecting development aid, and establishing
national strategies to boost local public
investment.
At the global level, UCLG advocates that at least 20
percent of development aid and debt relief be
allocated directly to local governments to enable
them to address poverty reduction through public
infrastructure provision. At the country level, UCLG
proposes boosting local public investment through
several courses of action: increased local
government autonomy, fiscal decentralisation,
regular financial transfers from central to local
governments, revenue generation at the local level,
and improving the ability of local governments to
borrow.
The
“UCLG Support Paper on Local Finance” is the
background paper to the “UCLG Policy Paper on Local
Finance.” The document first sets the context—the
ongoing urban explosion is not yet met by
appropriate investments in local infrastructure—and
provides an overview of the current financing
options and their limits: intergovernmental
transfers and local taxes, public private
partnerships, infrastructure development through
national and/or local public utilities, land and
asset management, local public borrowing, funding
through development banks, and official development
aid.
The paper emphasises the need to reform both demand
and supply sides of financing to boost local
infrastructure investments. On the demand side, as
shown by historical and empirical evidence, fiscal
decentralisation frameworks should be enhanced to
ensure local government’s financial autonomy and to
generate swift and significant investment in public
infrastructure. On the supply side, given the
current constraints put on local government’s access
to finance for infrastructure, there is an urgent
need for change and for an improved intermediation
at the national level. In particular, municipal
development funds performance need to be reviewed
and reformed to provide small- and medium-size local
governments with adequate funding for their urgent
local infrastructure.
The “UCLG Policy Paper on Local Finance” is
available in
English,
French, and
Spanish.
Key information on local governments and local
finance has also been compiled in a pocket book,
“Key Indicators on Local Government for 82 Selected
Countries,” thanks to a UCLG-DEXIA
collaboration.
More information:
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