SHAPING THE FUTURE HOW CHANGING DEMOGRAPHICS CAN POWER HUMAN DEVELOPMENT

Investing in essential
infrastructure propels
growth and human
development
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Consider alternative instruments of finance to
increase fiscal self-reliance. These could include
user fees, real estate taxes, municipal bonds,
land-based financing instruments, development
impact fees, 55 tax increment financing, special
tax districts, business improvement districts
within cities, and redistribution of property
tax base growth within a metropolitan area. 56
Options should be considered based on a sound
assessment of local capacities for management.
Municipal bonds are increasingly used to raise
capital, where bond markets have begun to
emerge. In Viet Nam, Ho Chi Minh City issued
the country’s first municipal bond in 2003 to
supplement capital for infrastructure investment.
Principal and interest payments came from the
city’s budget. This opened a new fundraising
channel and was replicated in other Vietnamese
cities. 57 Similar instruments have been used in
Bangladesh, Indonesia and the Philippines.
User fees and charges are another option for
funding. In many Asia-Pacific countries, user
fees cover substantial parts of urban services such
as electricity, water and public transport. They
can be beneficial both for containing excessive
demand and increasing the supply of public services.
Appropriate user fees for environmentally
sensitive services such as waste collection, water
treatment and transportation can help contain
environmental degradation. A congestion charge
or parking fee can be an effective instrument for
regulating traffic and decreasing air pollution,
while funding urban infrastructure.
Explore new partnerships to finance infrastructure.
In the Philippines, Mandaluyong City
used a public-private partnership to rebuild its
public market. In China, India and Indonesia,
public-private partnerships have been used
to stimulate affordable housing construction
for the poor. 58 Careful consideration needs to
be given to these partnerships to ensure they
provide a public benefit and minimize public
risk, however, including through a clear initial
process of assessment, and sound project design
and management.
Ensure resources reach the most vulnerable.
Raising sufficient resources only serves human
development goals if they are used to promote
balanced growth and reach underserved or
disconnected populations. Fair and effective
resource allocation has always been a challenge in
Asia-Pacific, both at the local and national levels.
Allocations in urban areas need to prioritize
providing services to vulnerable communities
and reaching all people at all stages of life. Intergovernmental
transfers should aim to equalize
economic and income disparities among local
governments, recognizing that the dominance of
primary cities in Asia-Pacific has often resulted
in skewed regional development. One approach
is to compensate for inequalities through income
transfer mechanisms and targeted investments
in disadvantaged areas, such as in infrastructure
and public education. Effectiveness depends
on long-term strategic planning to allocate resources
appropriately, ensuring they reach first
the poorest and most vulnerable communities.
IMPROVE INFRASTRUCTURE TO MAKE
CITIES MORE COMPETITIVE
A substantial infrastructure gap exists across
the region, with cities plagued by power cuts,
poor quality roads, inefficient ports, inadequate
schools and insufficient transit systems, among
other issues. While some progress has been
made in narrowing the deficit over the past
few decades, much more needs to be done to
remove bottlenecks and upgrade systems that
make cities competitive and positioned to sustain
economic growth.
Close the infrastructure deficit. To make cities
more liveable, governments need to provide
high-quality infrastructure—physical and social.
Asia-Pacific’s ability to continue growing at current
rates and advance its human development
will largely depend on adequate transport, energy,
water, waste management, banking services,
telecommunications, drainage, flood control
and preparation for the adverse effects of climate
change, among other issues. Infrastructure
provision needs to be inclusive, reaching all citizens—including
through targeted investments
to reach the most marginalized people. It should
also be environmentally sustainable. Integrated
transport infrastructure, for instance, can link
people to jobs, convey products, connect economic
centres, stimulate business development
and reduce air pollution.