Financing Metropolitan Governments in Developing Countries
The economic activity that drives growth in developing countries is heavily concentrated in cities. Catchphrases such as “metropolitan areas are the engines that pull the national economy” turn out to be fairly accurate. But the same advantages of metropolitan areas that draw investment also draw migrants who need jobs and housing, lead to demands for better infrastructure and social services, and result in increased congestion, environmental harm, and social problems.
The challenges for metropolitan public finance are to capture a share of the economic growth to adequately finance new and growing expenditures and to organize governance so that services can be delivered in a cost-effective way, giving the local population a voice in fiscal decision making. At the same time, care must be taken to avoid overregulation and overtaxation, which will hamper the now quite mobile economic engine of private investment and entrepreneurial initiative.
Metropolitan planning has become a reality in most large urban areas, even though the planning agencies are often ineffective in moving things forward and in linking their plans with the fiscal and financial realities of metropolitan government. A growing number of success stories in metropolitan finance and management, together with accumulated experience and proper efforts and support, could be extended to a broader array of forward-looking programs to address the growing public service needs of metropolitan-area populations. Nevertheless, sweeping metropolitan-area fiscal reforms have been few and far between; the urban policy reform agenda is still a long one; and there is a reasonable prospect that closing the gaps between what we know how to do and what is actually being done will continue to be difficult and slow.
This book identifies the most important issues in metropolitan governance and finance in developing countries, describes the practice, explores the gap between practice and what theory suggests should be done, and lays out the reform paths that might be considered. Part of the solution will rest in rethinking expenditure assignments and instruments of finance. The “right” approach also will depend on the flexibility of political leaders to relinquish some control in order to find a better solution to the metropolitan finance problem.
This book is also the basis for a Policy Focus Report, Governing and Financing Cities in the Developing World, by Bahl and Linn, published in May 2014.
About the Editors
Roy W. Bahl is regents professor of economics and founding dean of the Andrew Young School of Policy Studies at Georgia State University and a member of the Board of Directors at Lincoln Institute of Land Policy.
Johannes F. Linn is senior resident fellow with the Emerging Markets Forum, nonresident senior fellow at the Brookings Institution, and a member of the Board of Directors at the Lincoln Institute of Land Policy.
Deborah L. Wetzel is country director for Brazil at the World Bank.
Table of Contents
Foreword, Douglas H. Keare
1. Governing and Financing Metropolitan Areas in the Developing World
Roy W. Bahl, Johannes F. Linn, Deborah L. Wetzel
2. Metropolitan Cities: Their Rise, Role, and Future
3. Metropolitan Cities in the National Fiscal and Institutional Structure
Paul J. Smoke
4. The Decentralization of Governance in Metropolitan Areas
Roy W. Bahl
5. Institutions and Politics of Metropolitan Management
Inder Sud and Serdar Yilmaz
6. Metropolitan Public Finance: An Overview
Richard M. Bird and Enid Slack
7. Property Taxes in Metropolitan Cities
William J. McCluskey and Riël C.D. Franzsen
8. Local Nonproperty Revenues
9. Grant Financing of Metropolitan Areas: A Review of Principles and Worldwide Practices
Anwar M. Shah
10. Metropolitan Public Finances: The Case of Mumbai
Abhay M. Pethe
11. Paying for Urbanization in China: Challenges Municipal Finance in the Twenty-First Century
Christine P. Wong
12. Metropolitan Governance and Finance in São Paulo
Deborah L. Wetzel
13. Metropolitan Infrastructure and Capital Finance
Gregory K. Ingram, Zhi Liu, and Karin L. Brandt
14. Slum Upgrading
Maria E. Freire
15. External Assistance for Urban Finance Development: Needs, Strategies, and Implementation
Homi Kharas and Johannes F. Linn