SHAPING THE FUTURE HOW CHANGING DEMOGRAPHICS CAN POWER HUMAN DEVELOPMENT

e-governance, and better social infrastructure,
including for health care and education. ICT
will be used to improve day-to-day city management
and provide real-time information
guiding efficient service provision. 52
Increasingly, Asia-Pacific cities are using
new technologies, especially e-governance, to
bolster transparency and access to information.
In India, Mumbai has set up an online public
complaint management system, while Bangalore
has posted the city’s quarterly financial statements
online. 53 Malaysia’s Ministry of Housing
and Local Government has instructed all local
authorities to use computers and the Internet
for public transactions. 54 In general, several
issues block more widespread application of
e-governance, however, including a ‘digital
divide’, problems in connecting different systems
across government entities, and security and
privacy concerns.
SECURE ADEQUATE FINANCE
AND DISTRIBUTE IT EQUITABLY
Many cities need to find ways to address the
chronic imbalance between local government
BOX 5.6:
Better financial management boosted income in Ahmedabad, India
About 80 percent of Ahmedabad Municipal Corporation’s
income is derived from taxes levied on
residential and non-residential properties, and
goods imported into the city. But at one point, the
collection rate was very low, so in the mid-1990s,
the Corporation decided to implement a series of
improvements.
These included stiffening penalties for avoidance
of taxes on goods, and the preparation of valuation
books on the basis of prevailing market rates.
Goods entering the city were randomly verified to
prevent underinvoicing and undervaluation. Additional
vigilance squads were deployed in roundthe-clock
checking of vehicles entering the city,
and checkpoints were equipped with systems for
rapid communication.
responsibilities and their revenue. As a basic
starting point, each city, regardless of size, needs
a well-defined administrative area over which
it has full autonomy, and a clear formula for
intergovernmental transfers. In Organisation
for Economic Co-operation and Development
(OECD) countries, governments have created
transparent, formula-based finance-allocation
mechanisms, rather than ad hoc ones, to fund
their cities. Over time, if capacity for local government
administration improves, localities can
often boost local resource mobilization, such as
through better tax assessment and collection
practices. They can also ensure more equitable
distribution, and plan more systematically
for infrastructure investment, operations and
maintenance (Box 5.6).
Large metropolitan governments have significant
economic bases and can be expected to
have higher local revenue mobilization capacity,
compared with smaller cities. They might be
capable of self-financing given their economic
resources and potential fiscal capacity. Such
an arrangement favours making proportionally
larger transfers to smaller and medium cities
with insufficient capacity to fund public services.
In terms of property taxes, stronger enforcement
was taken against defaulters, including by shutting
down water and drainage services. Warrants were
issued for attachment of movable and immovable
properties. Properties were put to auction for tax
recovery.
Through these strategies, the city’s income rose
by 50 percent after one week and doubled after
one month. Later, the city registered its first annual
surplus in 10 years. After paying off its debts, the
municipality decided to access the debt market and
obtained a credit rating, becoming the first South
Asia city to obtain a rating of A+.
After six months, the rating was improved to AA,
higher than that of the national Government. The
city issued municipal bonds in 1998 and raised
$25 million from over 5,000 investors to finance
infrastructure development.
New partnerships,
alternative financial
instruments and
effective resource
mobilization underpin
successful cities
Source: ADB 2000.
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