SHAPING THE FUTURE HOW CHANGING DEMOGRAPHICS CAN POWER HUMAN DEVELOPMENT

TABLE 5.4:
Revenue mobilization options vary considerably for the region’s major cities
Authority Jakarta* Manila Mumbal**
Control Over:
Rate
setting
Base
setting
Collection
Rate
setting
Base
setting
Collection
Rate
setting
Base
setting
Collection
Revenue
Property tax P N P F F F P P F
Taxes on vehicles F F F N N N N N P
Fees F F F F F F P P F
User charges for
services
F F F F F F P F F
Expenditure
Expenditures from
own-revenue
F F F
Expenditures from inter-
P F P
governmental transfers
Inter-governmental transfers
Distributable pool Formula based Formula based Formula based, ad hoc
Distribution across local
governments
Formula based Formula based Ad hoc
Purpose of transfers
Unconditional block grant,
conditional earmarked grant
Unconditional block grant
Management of transfer
system
N N N
Discretion to borrow P F*** P
Unconditional block grant,
conditional earmarked grant
170
Poor urban
infrastructure
reduces urban
economic prospects
Notes: Control of the local government: F = Full control; N = No control; P = Partial control.
* Property tax is in the process of devolution to the local government level. This will give full authority over base setting, collection, and, up to a limit,
rate setting. Jakarta is currently piloting bond issuance.
** In theory, the city has control over setting rates. In practice, the state exercises considerable control through its approval powers.
*** Local government units are accorded the power to undertake loans and borrowings subject to a statutory debt limit; annual debt service cannot
exceed 20 percent of income.
Source: Sud and Yilmaz 2013.
dated transfer is 40 percent of gross national
internal revenues, which accounts for 94 percent
of total transfers to subnational governments. In
Indonesia, the amount is set at a minimum of
25 percent of the national budget, constituting
about 75 percent of local government revenues.
While most countries have more than one type
of transfer, there is a trend towards consolidation.
All cities need resources for infrastructure
and services for their citizens, given direct
links to human development and the realization
of the demographic dividend. These
also improve city competitiveness and growth
prospects—or the opposite where gaps occur.
Dhaka’s inadequate and intermittent power
supply costs an estimated 8 percent per year of
GDP, for instance. 46 In Latin American cities,
poor or inadequate infrastructure is estimated
to have reduced urban economic output by 10
percent to 15 percent. The impact seems to be
even higher on small firms and home-based
enterprises, which cannot afford more reliable
private sources, such as power generators and
wells for water. 47
Successful cities anticipate demand rather
than playing constant catch-up, yet as urban
populations expand, infrastructure demand often
quickly outstrips supply due to constrained municipal
finances. Providing even the most basic
infrastructure becomes difficult. For Asia-Pacific
as a whole, an estimated $8 trillion will be
needed for national infrastructure in the areas of
energy, transport, telecommunication, water and
sanitation from 2010 to 2020 to redress historical
underinvestment and keep up with population
growth; 48 much of this will investment will have
to be made in urban areas