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Urban Sector Strategy : V. The Bank's Urban Sector Strategy
B. The Recommended Urban Sector Strategy108. In the course of formulating the recommended strategy, a menu of alternative approaches was considered, including (i) a gradual change strategy, implying continued project-type lending with increased emphasis on institutional development; (ii) a broadened project lending strategy entailing an expansion in the scope of Bank assistance in neglected subsectors such as housing finance, urban land management, environmental protection, and urban transport; and (iii) a policy-based lending strategy that would address urban sector policy reform, development of sector institutions, public-private partnership issues, governance issues, sector financing, and project preparation. Also taken into account in formulating the strategy.39 were (i) the Bank’s overall strategic objectives, (ii) the strategic goals and policy objectives specific to the urban sector, (iii) urban sector priority needs, and (iv) the Bank’s comparative advantages and disadvantages with respect to other development agencies. The diverse and rapidly changing nature of urban sector issues requires that the strategy must be flexible. Consequently a combined strategy is recommended, comprising the following elements. 1. Developing Comprehensive Urban Sector Policy Frameworks109. Well-prepared policy frameworks are essential to the creation of well-defined institutional arrangements and the balanced structure of incentives, and to support effective provision of services and resource management. Countries with reasonably well-defined and suitably framed policy frameworks, such as Malaysia and the Philippines, are better able to absorb investment in the urban sector, while those with less developed policy frameworks are less able to do so. 110. Within these frameworks, the most important aspects relate to (i) governance and links between the public sector, private sector, and the community; (ii) the role of local governments and decentralization; (iii) corporatization and privatization of revenue-earning services; (iv) land management; and (v) access of sector institutions to funding, improved tariffs, and cost recovery. Where clear policies exist for one part of the sector but not the rest, for example, for water supply but not for the role of local governments, lending should concentrate on the well-defined areas and TA on the less well-defined parts. 2. Formulating Improved Integrated Urban Development Projects111. Improved IUDPs will remain the centerpiece of the Bank’s urban lending to DMCs. The critical IUDPs must (i) be demand-driven, (ii) contribute to improved urban management, (iii) reflect local government and community priorities, and (iv) be operationally sustainable. They will need to be carefully designed to create real synergy between a smaller number of components. The projects should be supported by thoroughly developed and strengthened institutional linkages, backed by capacity building and policy support TA. Where there is an urgent need to address particular subsectors, subsector-specific projects should be prepared. 3. Providing Subsector Programs112. Selectively, in accordance with DMC needs and priorities, the Bank should develop programs in priority new subsectors, including urban poverty reduction, urban environmental management, urban transport, land management, waste management, drainage, and housing finance. The Bank is preparing major lending and TA projects in urban poverty reduction in DMCs hard hit by the current economic crisis, starting with Thailand, Indonesia, and Philippines. In developing such subsector programs care must be taken to ensure that the programs are managed in a holistic manner to avoid negative impacts on related urban subsectors or the economic, cultural, or natural environment. 4. Providing Policy-Based Loans113. DMCs need increased Bank support for sector policy making and capacity building, and to mobilize their own resources. An element of the strategy is to further develop policy-based lending, including the use of sector development program modality. The scope for policy reform cuts across most subsectors, with common themes being (i) decentralization, increased community participation, and improved governance; (ii) institutional and financial management strengthening; (iii) facilitating, managing, and monitoring private sector provision of services; (iv) interagency cooperation; and (v) project preparation and evaluation. 5. Supporting Private Sector Investments114. The Bank has a major role in assisting DMCs and their urban governments by providing support for private sector investments through equity and long-term loans without or with partial government guarantee. Funding for water supply, sewerage, solid waste, mass transit, and other services will be attracted by the potential for economies of scale in the operation of the service, and by residents’ and business users’ greater ability-to-pay, particularly in larger urban agglomerations. The Bank could fund concession projects through its private sector window, and could assist governments in the tendering, selection, and monitoring processes. TA will be needed for in-house training and for investments related to the corporatization of government service departments and utilities. 6. Promoting Cooperation with NGOs and CBOs115. The Bank should increase its networking and cooperation with NGOs and CBOs, many of which are at the forefront of urban poverty and low-income shelter programs at the local level. NGO and CBO participation should be considered during project design, to build sustainable, long-term relationships between these organizations, local governments, and the Bank. NGOs and CBOs may also serve as training conduits and as a platform for sharing exercises. 7. Catalyzing Information Dissemination116. The Bank should use its comparative advantages of (i) involvement in the urban processes of nearly all DMCs, (ii) long experience in regional cooperation activities, and (iii) data bases to fulfill its role as a knowledge-based institution and premier information resource for the Region. The Bank should be an active member of the information networks in the Region. Exchange of information should include strengthening links with key external support agencies with interests in the urban sector in the Region. The Bank could have a key role in disseminating the findings of its ongoing regional TA program to DMCs and coordinating its urban research activities with other research centers in the Region to achieve the maximum benefits from its use of resources.
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