rural-urban dynamics_report.pdf - Khazar University

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156 URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 constitutes one of the “dangers” of decentralization (Prud’homme 1995). Assume, for example, a SNG whose total revenue is composed of 10 percent in taxes and 90 percent in transfers. All other things equal, financing a 10 percent increase in expenditures requires doubling the tax effort. That often exceeds the institutional capacity as well as the willingness to assume the political cost of raising taxes. Transfer dependence is particularly large for regional governments in many unitary government systems where policy decisions are channeled to subnational governing units for implementation (such as Bangladesh and Bolivia), because tax bases that are best suited to regional management (automobile taxes, for instance) have been given to municipalities. For SNGs in rural areas, therefore, the possibilities to engage in redistribution through local taxation are limited. Redistribution therefore needs to come mainly from the expenditure side, which depends critically on the level of expenditure decentralization. More often than not, an SNG manages only parts of the service delivery: public investment and infrastructure. Human resource management, particularly in the social sectors (health and teaching personnel) has long been a politically sensitive area, and most management decisions remain centralized in many countries. Given these uneven advances and levels of autonomy in expenditures, SNGs in rural areas are often constrained in their ability to provide packages of services to the poor and to target the incidence of spending so that services are directed where the needs are greatest. In addition, the often low population density implies higher per capita costs in providing public services (Hon 2009; Kitchen 2006; McMillan 2007). Consider that the marginal cost in service provision for water and sewerage increases substantially in rural areas, and it is particularly high for tertiary education. Although education costs for primary and secondary education are often less affected by economies of scale than other services, factors such as very small class size can increase costs substantially even in rural areas. Roads can facilitate access between rural areas and economic centers, but, given the limited possibility to establish user fees and toll roads, financing by other entities or higher levels of government is required. These challenges have important consequences. They require different levels of governments to contribute with grant financing to service delivery. These coordination requirements can be particularly significant at the regional or intermediate level of government, where there may be dual authorities. Investment funds can play a large role in rural areas because they cofinance or execute public works directly. Some of these entities have been trying to substitute for weak institutional capacity. But such efforts have also led to a bypassing of rural SNGs in service provision, creating an undesirable spiral of weak accountability and capacity. The financing challenge of the MDGs in metropolitan areas In contrast to rural areas, SNGs in urban areas have greater fiscal capacity and hence can influence outcomes much more through their own revenue decisions. Nevertheless the overall level of transfer dependence of metropolitan governments can be substantial. Some of the more financially autonomous metro areas include Addis Ababa, Melbourne, and Pretoria (Shah 2012). Cities like Berlin, Bucharest, and London, however, are dependent on central grants for about 80 percent of their revenue. Absent any convergence effects regarding how to structure revenues, fiscal capacity will increase as agglomeration unfolds. The tax incidence of revenue decisions naturally depends on the particular taxes and user fees applied. Common revenue sources are land-related revenue (property taxes, improvement levies, auctions, leases), which can affect the locational decisions and income of individuals; personal income taxes (applied at the local level in 13 of 27 Organisation for Economic Co-operation and Development [OECD] countries); and user fees, which are usually applied at uniform rates and therefore can have regressive effects. Institutional changes often cannot keep up with rapid urbanization and therefore usually remain informal. It is no surprise then that many informal local institutions are merely
GLOBAL MONITORING REPORT 2013 URBANIZATION AND THE MDGS 157 BOX 3.9 The complex structure of metropolitan governments Metropolitan governance is complex in many cases, involving several single- or multiple-purpose jurisdictions covering a whole metro area or just parts of it. Metropolitan areas and their surrounding jurisdictions are either managed by subnational entities or have some central government involvement, given the complexity in finding purely local solutions. For example: • New Delhi is affected by overlapping jurisdictions: power is divided among all three levels of government—the central government, the Union Territory of Delhi, and three municipal bodies (the Delhi Municipal Corporation, New Delhi Municipal Committee, and Delhi Cantonment). • In Jakarta’s metropolitan area, there are three urban municipalities and three rural municipalities (districts) that are split among three provinces (Banten, Jakarta, and West Java). • Mexico City’s metropolitan area spans parts of two states and has a national capital district and more than 50 municipal-type local governments. • The São Paulo metropolitan area (with 39 municipal governments) operates with relatively little coordination, because a suprametropolitan entity has yet to emerge. • The Cairo region incorporates five contiguous governorates (the intermediate tier of Egyptian administration) and eight new cities. Governorates represent the central government. New cities were created to attract people from the Nile Delta to Cairo and have no formal relationship with local administration. They are overseen by the Ministry of Housing, Utilities, and Urban Development. planning entities with no taxing powers, or that the central government influence is considerable. These institutional arrangements also affect if and how citizens are represented and can make their voice heard (box 3.9). The informality of these institutional arrangements has three consequences: • It rules out more firmly establishing the authority to tax at these levels, which can be used to finance local expenditures. • It limits possibilities for redistributing within metro areas or to other subnational units, which is critical for maintaining a level playing field for all entities. For example, redistributive efforts will be more difficult to be launched from subnational levels themselves—in contrast, in Argentina and Canada, for instance, the provinces are entitled to choose formulas for redistribution in some of the financial instruments. Although vertical equalization can achieve the same results from any level, such a subnational solution would need political consensus that would perhaps not exist on a nationwide scale. • If revenues are further decentralized in urban areas, it can undermine the capacity of the central government to redistribute to other areas, among them the rural SNGs. Setting up a financing system that sets the right incentives for service delivery can be challenging for a metropolitan area (World Bank 2013a; Kim 2013; Shah 2012; Slack 2006; Sud and Yilmaz 2013). The high proportion of commuters leads to a breakdown of the tax-benefit principle: citizens may benefit from the public services provided by a metropolitan area but pay taxes at their residence in medium-size towns at the outskirts. Cross-territorial transactions can occur more frequently in areas with many entities and jurisdictions, affecting collection and distribution of sales taxes and corporate income taxes, for example, unless they are administered at a higher level of government. Service delivery itself is challenging for several reasons—all of which limit accountability and efficiency: • The multiple territorial boundaries of metropolitan areas can complicate the assignment of responsibilities for delivering the service, as well as accountability.
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Global Monitoring Report 2013 Rural
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© 2013 International Bank for Reco
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vi CONTENTS GLOBAL MONITORING REPOR
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viii CONTENTS GLOBAL MONITORING REP
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Foreword Global Monitoring Report (
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Acknowledgments This report has bee
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Abbreviations and Acronyms ADB Asia
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GMR 2013 Rural-Urban Dynamics and t
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4 OVERVIEW GLOBAL MONITORING REPORT
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10 OVERVIEW GLOBAL MONITORING REPOR
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Goals and Targets from the Millenni
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Progress toward the MDGs Only two y
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primary completion, and access to s
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FIGURE 1a Poverty rates (living on
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MDG 2 Achieve universal primary edu
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MDG 3 Promote gender equality and e
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MDG 4 Reduce child mortality In mos
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MDG 5 Reduce maternal mortality MDG
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MDG 6 Combat HIV/AIDS, malaria, and
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FIGURE 6e Children under age 5 who
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FIGURE 7b Access to sanitation by r
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Improving the measurement of develo
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1 Macroeconomic, Trade, and Aid Dev
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GLOBAL MONITORING REPORT 2013 MACRO
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2 Rural-Urban Disparities and Dynam
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GLOBAL MONITORING REPORT 2013 RURAL
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