Financing the Sustainable Development Goals at local level
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Venice City Solutions 2030 Venice, Italy November 2018
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Financing the Sustainable Development Goals at local level
- 1. @wbg2030 worldbank.org/sdgs November 16, 2018 Mahmoud Mohieldin Senior Vice President World Bank Group Financing the Sustainable Development Goals at local level Venice City Solutions 2030
- 2. Global Megatrends and Challenges Demographic transitions Urbanization Fragility and violence Climate change Market volatility and commodity cycles Technological changes Shifts in the global economy Renewed debate about globalization
- 3. Demographic Transitions & Urbanization 64 65 66 67 68 69 70 71 72 73 74 Middle East & North Africa Life expectancy at birth, total (years) 50 52 54 56 58 60 62 64 66 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Middle East & North Africa Urban population (% of total) Source: World Development Indicators, World Bank Median Age
- 4. Well-managed urbanization can result in better development outcomes Proportion of urban population living in slums, 1990-2010Proportion of population living in urban areas, 1960-2011
- 5. Climate change risks undoing development progress Index of risk preparation across countriesGlobal disaster losses, 1980–2012 The number of disasters and losses has been rising. Cities are very vulnerable to climate change but also have a critical role to play in the fight against climate change. Development progress needs to integrate resilience to avoid undoing hard fought development gains
- 6. The rate of technological advancement is unprecedented
- 7. Plus 3 major society-wide divides Source: The Future of Capitalism, Paul Collier Geographic divide between declining provincial towns and thriving metropolitan centres Value divide between the educated/skilled elite and the less educated Global divide between rich countries and poor
- 8. Localizing the global goals (SDGs)
- 9. Adapted from: WDR 2019 Changing Nature of Work, World Bank Managing these trends requires a comprehensive response Public policy: manage the direction and effects of change Invest in human capital Invest in resilience (incl. social protection) Invest in infrastructure Policy Enablers Goal Data Finance STI
- 10. The World Bank Group is supporting the implementation of the 2030 Agenda at local level Promoting territorial development Building resilience Maximizing finance
- 11. Territorial and Spatial Development A territorial lens allows policies & investments to be better tailored to local endowments and constraints
- 12. Resilience to natural disasters and climate change Preparing cities for disaster and climate risks and strengthening urban resilience are critical to development and poverty reduction efforts.
- 13. Maximizing finance for development (MFD) at local level Global investment needed for urban infrastructure: $4.5-5.4 trillion per year, including a 9-27% premium to make this low emission and climate resilient, most of which lies in the developing world. Only a very small fraction of this can be supplied by official development assistance.
- 14. The key components of financing sustainable developmen t Source: World Bank Group, 2015
- 15. Source: Municipal Finances Handbook: Managing Local Expenditures, Morrell and Kopanyi 1. Preschool education 2. Primary and secondary school 3. Health care 4. Social assistance and poverty alleviation 5. Public order and civil protection 6. Infrastructure and public services 7. Environment protection 8. Social, cultural, recreational expenditures 9. Local economic development 10. Social housing 11. Urban development 12. Civil security 13. Transfer to sub-local government entities 14. Support to public utility companies 15. Loan repayment 16. Interest charges 17. Guarantees paid by the municipality Expenditures Sample Municipal Budget
- 16. Source: Municipal Finances Handbook: Managing Local Expenditures, Morrell and Kopanyi Sample Municipal Budget 1. Property tax (rates) on land and/or buildings 2. Tax on the transfer of immovable property 3. Tax on motor vehicles 4. Local sales tax and/or tax on the sale of local products (or surcharge) 5. Tax on local businesses and services 6. Tax on electricity consumption (surcharge) 7. Tax on nonmotorized vehicles 8. Tax on tourism, hotels, restaurants, and entertainment 9. Tolls on roads, bridges, etc., within the limits of the local government 10. Charges for public works and public utilities such as waste collection, drainage, sewerage, and water supply 11. Charges for markets and rents for market stalls 12. Charges for the use of bus stations and taxi parks 13. Fees for approval of building plans and erection and re-erection of buildings 14. Fees for fairs, agricultural shows, cattle fairs, industrial exhibitions, tournaments, and other public events 15. Fees for licensing of businesses, professions, and vocations 16. Fees for other licenses or permits and penalties or fines for violations 17. Fees for advertisement 18. Fees on sales of animals in cattle markets 19. Fees for registration and certification of births, marriages, and deaths 20. Fees for education and health facilities established or maintained by the local government 21. Fees for other specific services rendered by the local government 22. Rent from land, buildings, equipment, machinery, and vehicles 23. Surpluses from local commercial enterprises 24. Interest on bank deposits or other funds Revenues
- 17. Generate more own source of revenues Increase fiscal transfers based on a formula (not ad hoc) Improve the accounting and financial management performance of city governments and service delivery agencies Establish regulatory frameworks for facilitating private investment in urban entities and projects Strengthen building blocks of sound city financing systems Assist cities expand access to finance
- 18. The World Bank Group is supporting cities and national governments put in place the financial framework to attract investment and grow in a sustainable manner. In East Africa, the World Bank has an operational portfolio of almost $1 billion in urban projects focusing on improving financial and institutional performance in Ethiopia, Kenya, Tanzania, and Uganda. In Morocco, a EUR 172 million World Bank loan aims to improve the city of Casablanca’s investment capacity by improving its revenue management and attracting private investment to municipal infrastructure and services through public-private partnerships. Assist cities expand access to finance
- 19. Assist cities expand access to finance Provide capital directly to cities for investment in infrastructure The World Bank current urban portfolio encompasses 180 projects with a commitment value of around $24bn globally.
- 20. Assist cities expand access to finance Innovative ways of leveraging investment from private and non-traditional sources need to be explored Through the capital raising strategy of the World Bank Cities Resilience Programme, we are helping cities around the world raise the finance they need to build resilience to climate change and disaster risks. City Creditworthiness Initiative strengthens the financial performance of local governments, and prepare them to tap domestic and regional capital markets without a sovereign guarantee. The initiative has trained over 600 municipal officials from 240 cities in 25 countries.
- 21. Assist cities expand access to finance Unlock social, human, and economic wealth that cities already own but is out of sight – or “hidden” Understanding the city’s balance sheet to better recognize the long-term consequences of political decisions and make choices that mobilize real returns rather than rely on more taxes, debt, or austerity. Public assets: even poor cities own large swathes of poorly utilized land, or they control underperforming utilities and other commercial assets. Most cities could more than double their investments with smarter use of these commercial assets.Source: The Public Wealth of Cities: How to Unlock Hidden Assets to Boost Growth and Prosperity, Detter, Fölster, 2017
- 22. worldbankgroup.org/sdgs Follow us on twitter @WBG2030 Mahmoud-Mohieldin on @wbg2030 worldbank.org/sdgs Mahmoud Mohieldin Senior Vice President World Bank Group
Editor's Notes
- State of tech: Although there are many individual success stories, the effect of technology on global productivity, expansion of opportunity for the poor and the middle class, and the spread of accountable governance has so far been less than expected. Firms are more connected than ever before, but global productivity growth has slowed. Digital technologies are changing the world of work, but labor markets have become more polarized and inequality is rising—particularly in wealthier countries, but increasingly in developing countries. These trends persist, not because of digital technologies, but in spite of them. So, while digital technologies have been spreading, digital dividends have not. Why? For two reasons. 1. nearly 60 percent of the world’s people are still offline and can’t participate in the digital economy in any meaningful way. 2. some of the perceived benefits of digital technologies are offset by emerging risks. Many advanced economies have increasingly polarized labor markets and rising inequality—partly because technology augments higher skills while replacing routine jobs, forcing many workers to compete for low-paying jobs. Public sector investments in digital technologies, in the absence of accountable institutions, amplify the voice of elites, which can result in policy capture and greater state control. To maximize the digital dividends requires better understanding of how technology interacts with other factors that are important for development—“analog complements.” Digital technologies can make routine, transaction-intensive tasks much cheaper, faster, and more convenient. But most tasks also have an aspect that cannot be automated and that requires human judgment, intuition, and discretion. When technology is applied to automate tasks without matching improvements in the complements, it can fail to bring broad-based gains. Technology can make workers more productive, but not when they lack the know-how to use it. Digital technologies can help monitor teacher attendance and improve learning outcomes, but not when the education system lacks accountability. What should countries do? Making the internet universally accessible and affordable should be a global priority. The internet, in a broad sense, has grown quickly, but it is by no means universal. For every person connected to high-speed broadband, five are not. Worldwide, some 4 billion people do not have any internet access, nearly 2 billion do not use a mobile phone, and almost half a billion live outside areas with a mobile signal. The unfinished task of connecting everyone to the internet—one of the targets in the recently approved Sustainable Development Goals (SDGs)—can be achieved through a judicious mix of market competition, public-private partnerships, and effective regulation of the internet and telecom sector. Access to the internet is critical, but not sufficient. The digital economy also requires a strong analog foundation, consisting of regulations that create a vibrant business climate and let firms leverage digital technologies to compete and innovate; skills that allow workers, entrepreneurs, and public servants to seize opportunities in the digital world; and accountable institutions that use the internet to empower citizens. The long-term development impact is by no means definitive, being continuously shaped by the evolution of technology (connectivity) and the country’s choice of economic, social, and governance arrangements (complements). Countries that are able to swiftly adjust to this evolving digital economy will reap the greatest digital dividends, while the rest are likely to fall behind. The triple complements—a favorable business climate, strong human capital, and good governance— will sound familiar—and they should because they are the foundation of economic development. But digital technologies add two important dimensions. First, they raise the opportunity cost of not undertaking the necessary reforms. They amplify the impact of good (and bad) policies, so any failure to reform means falling farther behind those who do reform. With digital technologies, the stakes have risen for developing countries, which have more to gain than high-income countries, but also more to lose. Second, while digital technologies are no shortcut to development, they can be an enabler and perhaps an accelerator by raising the quality of the complements. How disruptive is disruptive tech: Technology is disrupting traditional economic, social, and political models. Disruption has a negative connotation, but if we invest in our ability to adjust to change and maximize its positive utility, these disruptions are quite an opportunity to meet our development goals and improve the quality of life for people everywhere. For example, technology can allow people living in rural communities without access to the grid, and thus no access to electricity, to still get power by installing solar panels or farms. In post-disaster areas or areas affected by conflict, satellite imaging technology can provide accurate pictures of the situation on the ground, and thus allow for better delivery of services and more effective and efficient reconstruction efforts. On the other hand, technology is disrupting traditional labor markets. Developing countries’ traditional path to development is often driven by manufacturing. New technology, including advanced robotics, industrial automation, and 3-D printing, are changing the landscape of global manufacturing, and the criteria for becoming an attractive production location are changing. Although there are challenges, opportunities remain for developing countries to adapt and benefit from the rapidly changing global landscape. However, what we’ve learned is that developing countries do surprisingly little when it comes to adopting advanced-country techniques to upgrade their products, technologies, and business processes. “The ability of … countries to tap into a now-massive stock of global know-how and technical knowledge — to be able to adopt what has already been invented — is a potential transfer of wealth … of historic proportions, … yet relatively few developing countries have proven able to leverage this stock of knowledge. They invest relatively little to realize this potential.” That’s the origin of what the World Bank has termed ‘The Innovation Paradox’. -Maloney, Chief Economist of the World Bank Group’s Equitable Growth, Finance and Institutions practice group. The problem is most readily visible at the firm level. “Many companies in developing countries have proven to be unable to recognize and adopt higher-level technologies. Yet the problem is aggravated by weaknesses in the public sector, which shape enabling environments that offer little support for innovative thinking and that have little capacity to design and implement policies that promote innovation through the upgrading of management techniques and firm-level processes.” “Firms in developing countries should focus on building the foundations for successful innovation,” said Cirera, Senior Economist in the WBG. “Innovation policies in developing countries cannot focus primarily on research and development. Instead, they must begin with strengthening managerial and organizational practices.” Stronger management and a more nimble application of organizational science can help unlock economies’ growth potential – which hinges on moving countries closer to the “technological frontier.” For the private sector in developing countries, the adoption of better firm-level managerial and organizational practices is an overlooked ingredient of success – a critical factor in innovating in products, processes, and upgrading the quality of their goods. These practices are also the building blocks to developing more sophisticated innovation projects that include the invention of new products and technologies. Developing-country ministries and agencies often lack human capital and effective organizational structures at a time when designing and implementing innovation policy is becoming even more complex. Effective innovation policy requires choosing the appropriate combination of policy instruments in the context of scarce government capabilities.