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Urban Sector Strategy : IV. Objectives and Policy Priorities
F. Policies for Urban Subsectors
1. Integrated Urban Development Projects
93. Given the necessity to retain a holistic approach to addressing urban development
issues, IUDPs will continue as a mainstay of the Bank’s urban assistance. However, such
projects should be based more firmly on institutional reform and have a clearer client focus.
IUDPs will benefit from the following modifications:
Incorporate institutional strengthening and policy dialogue. IUDPs should be developed following or in parallel with a sustained process of institutional development and policy dialogue in the participating agencies and local government units. Where commitment or capacity is weak, related physical components will be reduced in size or eliminated unless commitment and capacity is enhanced through dialogue and capacity building. Where poor capacity or inadequate awareness is preventing the expression of demand in circumstances of clearly demonstrable need, capacity should be strengthened and awareness heightened so that demand will be adequately expressed. Select cities in response to demand. Candidate cities and towns will be selected only if the potential beneficiary local government demonstrates commitment, and has urban management capacity. Participation criteria should include (a) a staff structure and complement adequate to undertake current.33 obligations and project activities; (b) preparation of annual accounts to prescribed standards; (c) demonstrable financial soundness (e.g., an accumulated surplus, no recent deficit, and positive net working capital); and (d) manageable accounts receivable. Furthermore, continued improvement in management and financial performance should be a condition of remaining in the program. Tailor the scope of projects. The scope of projects, though not necessarily the number of components, will increase to reflect the new demands of effective urban management, including reforms to the land and housing market, capacity-building in public-private contract procedures, new roles for the public sector, the use of microcredit and skills upgrading for the poor, and the application of management information technologies. Projects will include only subsectors that will clearly benefit from synergies between components under the IUDP approach. Develop long-term relationships. To the extent possible, the Bank should seek to develop long-term relationships with participating agencies and local government units to achieve effective improvements in their institutional development, including management reforms.
94. In summary, the changes in the approach to IUDPs should be evolutionary rather than radical, building on the extensive experience of their use in DMCs, with the aim of generating as large a catalytic effect on the urban sector as possible. Long-term relationships with particular towns and cities also lend themselves to pilot tests of sustainable development policies, information exchange, cofinancing opportunities, and demand-driven approaches to service delivery.
2. Water Supply, Sanitation, and Solid Waste Management
95. Based on the overall objective of providing equitable, cost-effective, and sustainable investments in urban water supply, sanitation, and solid waste, subsector policies should include the following:
Increase institutional autonomy. Autonomy in water supply, sanitation, and solid waste management agencies, should be increased through decentralization, devolution, and community participation and responsibility. Public awareness of issues such as hygiene education, water conservation, and - waste minimization needs to be strongly developed. Where appropriate, private sector participation under the direction of a regulatory agency should be encouraged to help support the autonomy objective through management contracts, leasing, or concession arrangements. If there are severe financial constraints on water resource development, concession contracts may be most appropriate.
Improve financial resource management. Improved financial resource management can be achieved by (a) ensuring the utility has well qualified and trained staff appropriate to the volume of funds being handled; (b) seeking independence from government subsidies, (e.g., following Bank policy to restrict subsidies to piped metered water supplied in bulk to informal settlements, even where residents do not have official tenure to the land); (c) giving priority to a sound cash flow that allows revenues from tariffs to meet O&M costs, debt servicing, and a contribution to capital investment; (d) reducing accounts receivable to the lowest practical amount; and (e) ensuring the utility produces an audited annual report. Ideally, the financial management of the utility will be guided by a government statement on tariffs. Use performance indicators. Improved management of water resources or solid waste can be achieved if the utility uses performance indicators to measure unaccounted-for water, collection efficiency, etc. This enables the utility to compare its performance over time, monitor the performance of contractors, and compare its performance with that of other utilities. For water utilities, leak repair, accurate measurement of consumption, identification of illegal connections, and up-to-date mapping all contribute to reductions in unaccounted-for water. The Bank strongly encourages water demand management through high tariffs to discourage excessive consumption and supports the development of public awareness programs to help public understanding of the need for tariff increases, water conservation, waste minimization, etc.
3. Urban Transport
96. Policies in the transport subsector should support the spatial and economic growth of urban areas, as well as contribute to urban sustainability in general. Policy priorities include the following:
Maximize the benefits of transport infrastructure. Benefits of current infrastructure can be maximized by (a) ensuring that roads and drainage are maintained; (b) providing for pedestrian access and safety; (c) managing traffic efficiently; (d) enforcing driver training, licensing, and compliance; (e) giving priority to public transport; (f) using traffic restraint measures such as road pricing and parking controls; and (g) reducing air and noise pollution. Establish clear roles for the public and private sectors. The public sector should be responsible for (a) developing overall city transport goals; and (b) taking policy decisions on public funding, tariffs, and environmental acceptability, as a framework for private sector operation of transport services and the implementation of transport projects. Once such restructuring is under way, the private sector is more likely to become substantially involved. Generate competitive markets. Transport sustainability requires generating competitive markets, including competition between modes. Public regulation will be needed to ensure that strategic goals are met, e.g., avoiding wasteful duplication of infrastructure, maintaining safety standards, and monitoring the performance of privatized or contractual operations of public transport services. A priority is to develop market-based skills and procedures among state-owned transport enterprises, in some cases aiming for full corporatization with a mandate to set tariffs, borrow, and determine expenditures. Prices should, as far as possible, reflect the externalities of (a) the sector in the form of user charges (with social objectives provided for separately through explicit subsidies to transport operators); and (b) the impacts of traffic congestion, pollution, and road damage. In the absence of more direct charging mechanisms, fuel taxation may be used. Develop public transport alternatives. Measures to restrain private transport will not be effective without a high quality public transport alternative. Mass rail.35 transit (MRT) is a vital long-term tool in structuring cities—especially megacities in the Region. However, experience in Bangkok, Metro Manila, and elsewhere shows that MRTs will only be effective as part of an integrated transport strategy that may take many years to complete. MRTs may not be viable without associated property development, as many of the benefits accrue to people who do not use the service and thus cannot be reflected in income. As such, MRTs are very suitable for cofinancing. An interim solution, where cities have not yet developed integrated transport policies and/or cannot afford the high costs of MRTs, is the use of high capacity dedicated bus lanes.
4. Urban Housing
97. Bank operations will aim to improve the efficiency of selected housing and housing finance subsectors so they can better serve the urban housing needs of the DMCs, particularly their low-income residents. Policy priorities include the following:
Implement legal and regulatory reforms. Legal and regulatory reforms allow for better operation of housing markets, for example by introducing simplified forms of tenure, procedures for using collateral and noncollateral to access credit, more flexible regulations for mixed land uses, and use of traditional building materials. Minimize use of subsidies. Cost recovery should be maximized and subsidies minimized in the financing of low-income housing and slum upgrading. Where subsidies are necessary, they should be transparent, up-front capital write-downs of the shelter package. Increase private sector participation. As part of the transition to an enabling role for governments in DMCs, the private sector, NGOs, community groups, and low-income householders should play an increasing role in the provision and maintenance of their own housing. Leverage financial resources. Financial interventions can be substantially leveraged by assisting formal housing institutions to establish lending windows and programs for community-based finance institutions. However, to successfully lend to low-income markets, the Bank must be prepared to program substantial amounts of TA to build the borrowing and operational capacity of these institutions. Restructure and refocus existing public institutions. Public housing institutions are in great need of restructuring and refocusing and should expand their links with NGOs and CBOs active in providing low-income shelter. Support innovative low-income housing schemes. Innovative low-income shelter schemes could have tremendous impact. They should be offered initially through pilot projects, using combinations of community groups, municipalities, and/or the private sector. Closely associated with such schemes are programs that, in addition to lending for housing, support income generation. Assist primary housing lenders. Using such models as India’s Housing Development Finance Corporation (private), assistance through loans and equity participation could leverage significant funds to help primary housing lenders mobilize long term-capital for mortgage lending. Support secondary mortgage markets. In many countries a number of primary lenders have been established and a secondary mortgage market would be helpful in recycling primary mortgage funds. Assistance could involve advice and expertise on establishing secondary mortgage markets and taking equity participation to assist the formation of such markets. The Bank is assisting India to develop such markets and insurance procedures18.
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