Richard Bluhm, Andreas Fuchs, Austin Strange, Axel Dreher · 6 authors
This paper studies the causal effect of transport infrastructure on the spatial distribution of economic activity within subnational regions across a large number of developing countries. To do so, we introduce a new global dataset of geolocated Chinese grant- and loan-financed development projects from 2000 to 2014 and combine it with measures of spatial concentration based on remotely sensed data. We find that Chinese-financed transportation projects decentralize economic activity within regions, as measured by a spatial Gini coefficient , by 2.2 percentage points. The treatment effects are particularly strong in regions that are less developed, more urbanized, and located closer to cities.
The issue of whether contracts promote innovation and sustainability is an important but overlooked aspect for achieving energy and environmental targets, as well as for creating smart and sustainable cities. In this article, based on the principle/agent problem and Holmström and Milgrom’s work on optimal contracts it is argued that the current general conditions of architectural and engineering consulting agreements in Sweden (ABK 09)—a standard type of contract often used in developer/consultant relations—may not incentivize choices that support the long-term goals of society. Furthermore, although this exploratory study specifically analyses a Swedish standard contract, the question of how contractual incentive structures can optimize real-world performance is a general one, and thus the article’s findings have general applicability. This exploratory study also points to further research into how contractual structures impact climate-neutral buildings. In this way, Swedish consultants who use ABK 09 are incentivized to include low-risk, well-proven, and widely used technologies in order to minimize risks for themselves. This study contributes to resolving this dilemma by suggesting how ABK 09 could be restructured to change the balance between incentives and risk and incentivize innovation and sustainability. As mentioned above, the current study operates at a theoretical level. It discusses six possible changes that would better align the contract with the societal goals of innovation and sustainability.
The Kenya Vision 2030 flagship projects expected to generate rapid economic growth in the country are threatened by inadequate source of funding, financial management problems and failure to link policy, planning and expenditure budgeting. The projects continue to experience inadequacies in project appraisal and implementation time overruns. Therefore, without a clear financial framework, fiscal indiscipline, resource misallocation and inefficient use of resources will militate against achieving the Kenya Vision 2030 targets. The overall objective of this study was to evaluate determinants of government expenditure on public flagship projects in Kenya. The specific objectives were to: evaluate the influence of planning process; source of funds; and management responsibility on government expenditure on public flagship projects in Kenya. The theories reviewed in the study were public finance, budget, cost-benefit analysis and principal-agent which provided grounds for conceptual framework. The study employed descriptive research design, positivist philosophy and multiple regression model. The target population was the planned 348 flagship projects for the period 2008-2012. The unit of analysis was projects based on sample size of 96 stratified random sample while data was collected using a questionnaire. The findings showed that planning process, source of funds and management responsibility had significant positive influence in determining government expenditure on public flagship project in Kenya. The study recommended that, public entities should strengthen and improve planning process by deepening MTEF within programme-based budgeting; the National Treasury should increase resources required for financing public flagship projects by considering public-private-partnerships as a potential source; and public entities should improve, strengthen and enforce management responsibility when designing public flagship projects. The two areas suggested for further research were; impact of project characteristics on the choice of Public-Private Partnership financing model; and impact of fiscal decentralization on financing public projects in light of devolved systems of governance in Kenya.
У статті розглянуто особливості фінансової децентралізації в Україні. Досліджено повноваження отримані органами місцевого самоврядування для надання якісних та доступних суспільних послуг громадянам. Також, охарактеризовано відповідальність органів місцевого самоврядування перед виборцями – за ефективність своєї роботи, а перед державою – за її законність. Крім того, досліджено основні джерела ресурсів об’єднаних територіальних громад та проведено групування за критеріями їх сутності та ролі у формуванні конкурентних переваг. Проаналізовано фінансову спроможність громад. Визначено, інші інструменти забезпечення економічного розвитку громади, зокрема, здійснення зовнішніх запозичень, самостійне обрання установ з обслуговування коштів місцевих бюджетів відносно розвитку та власних надходжень бюджетних установ, сформовано теоретико-методологічні положення, які можуть бути покладені в основу сучасної системи управління ресурсоефективністю територіальних громад. Доведено, що добровільно об’єднані територіальні громади мають усі можливості й ресурси для повноцінного функціонування та розвитку. Сьогодні органи місцевої влади беруть на себе цілковиту відповідальність за всі сфери життя на власних територіях, що і є показником успішної й доцільної діяльності ОТГ. Визначено, що за умови добросовісного виконання зобов’язань, підвищується ефективність використання бюджетних коштів, а це – прямий і правильний шлях до стабілізації соціально-економічної ситуації в усій країні. Визначено проблеми з якими стикаються місцеві органи влади на шляху до децентралізації. Проведено аналіз видаткових повноважень органів місцевого самоврядування у сучасних реаліях.
Despite a world awash with liquidity, \n large infrastructure supply gaps exist across developing and \n emerging markets. Infrastructure has been largely \n decentralized to subnational governments in many countries, \n and many policymakers are keenly interested in developing \n subnational bond markets to give subnational governments \n access to private financing for infrastructure. Despite \n this, the transaction costs of bond issuance are still \n prohibitive for many subnational governments to access \n financing. Pooled financing, through regional infrastructure \n funds, municipal funds, or bond banks, has become a \n sought-after solution for helping subnational governments \n access private financing for infrastructure. In the United \n States, municipal bond banks that were established since the \n 1970s have become a cost-effective and stable model for \n expanding subnational financing for many small \n municipalities, while maintaining strong credit ratings with \n virtually no defaults from sub-borrowers. The municipal bond \n banks have been successful in lowering financing costs for \n many small, unrated local governments, with loan sizes as \n low as less than $50,000. This paper examines the policies \n and structures that have made pooled financing successful in \n the United States, including regulatory frameworks, \n governance and managerial systems, the role of project \n appraisal, operations and pricing, and managing the default \n risks of borrowers. The paper also explores broader lessons \n for developing countries that are interested in establishing \n pooled financing for subnational infrastructure.
Due to decentralization policy in Malawi, district government water offices responsible for providing\ndirect support for water service delivery find themselves with an increase in devolved responsibilities but\nwithout the corresponding funds to carry them out. EWB has been implementing a strategy to advocate\nfor a realistic devolution of funds to district level government to carry out the minimum direct support\nnecessary to improve water point functionality. This approach is focused on the generation of specific\nevidence, as well as mapping and coordination of sector stakeholders to generate a feasible plan for an\nincrease in devolved funds. This case study highlights the key lessons learned in advocating for more\nresources to an underfunded sector in a competitive resource constrained context where most sectors\nremain severely underfunded.
Taiwan, like many other countries, often incentivizes private investors to participate in the construction of infrastructures for environmental protection. The build-operate-transfer (BOT) or build-operate-own (BOO) model of financing public infrastructure was introduced to Taiwan in the 1990s. Among them, the construction of incinerators to treat the municipal solid waste using the BOT/BOO model was quite a success in the beginning. With the socio-technical change of lifestyle and waste generation, the amount of amount of trash dropped dramatically. The policy failed eventually, however, because the government over-estimated the trash quantity and refrained from inter-municipality cooperation to treat trash efficiently. This failure triggered a rash of intense debates and legal disputes. In the case of the Taitung incinerator, the 26th incinerator located in southeastern Taiwan, the arbitration resulted in the government making significant compensation payments to the private sector. The finished construction was consequently converted into a “mothballed and pensioned off” facility. This study applies in-depth interviews and literature review to discuss aspects contributing to the policy failure and proposes some possible remedial measures. Five aspects are summarized, namely, the administrative organization’s rigid attitude, the irrationality of the BOT/BOO contracts, the loss of the spirit of BOO partnerships, the heavy financial burden on local government, and the abandonment of inter-municipality cooperation. The remedial measures for the policy failure are presented in the form of thorough policy evaluation, room for contract adjustments under the BOT/BOO model, encouragement of cross-boundary cooperation, and revision of the legal framework for implementing decentralization.
Luis Andrés, S. A. Dan Biller, Matías Herrera Dappe
If the South Asia region hopes to meet its development goals and not risk slowing down or even halting growth, poverty alleviation, and shared prosperity, it is essential to make closing its huge infrastructure gap a priority. Identifying and addressing gaps in the data on expenditure, access, and quality are crucial to ensuring that governments make efficient, practical, and effective infrastructure development choices. This study addresses this knowledge gap by focusing on the current status of infrastructure sectors and geographical disparities, real levels of investment and private sector participation, deficits and proper targets for the future, and bottlenecks to expansion. The findings show that the South Asia region needs to invest between US$1.7 trillion and US$2.5 trillion (at current prices) to close its infrastructure gap. If investments are spread evenly over the years until 2020, the region needs to invest between 6.6 and 9.9 percent of 2010 gross domestic product per year, an estimated increase of up to 3 percentage points from the 6.9 percent of gross domestic product invested in infrastructure by countries in the region in 2009. Given the enormous size of the region's infrastructure deficiencies, it will need a mix of investment in infrastructure stock and supportive reforms to close its infrastructure gap. One major challenge will be prioritizing investment needs. Another will be choosing optimal forms of service provision, including the private sector's role, and the decentralization of administrative functions and powers.
This paper will review the key elements required for effective decentralized implementation of rural roads programs. It will review the range of options available and the evidence for successful implementation where it exists. Section 2 makes the case for the importance of rural roads and sets out the evidence for the socio-economic benefits. Section 3 addresses the responsibilities for implementation and critical importance of having clarity over network ownership. Section 4 highlights the difficulties of finance, particularly for longer term maintenance, and sets out options for improving allocations and the reliability of receipt for those allocations. Section 5 sets out the project cycle from planning, design, implementation, maintenance and subsequent evaluation. Section 6 summarizes the key issues and highlights the main policy considerations.
The subnational dimension of infrastructure emerges as one of the greatest challenges in contemporary public finance policy and management. Given the localized nature of most infrastructures, ensuring its efficient provision represents a challenge for all countries irrespective of their level of centralization or decentralization. This paper introduces the fundamental questions surrounding the provision of infrastructure in decentralized settings and summarizes the findings from a collection of original essays prepared for this volume by a set of worldwide experts on this subject with the objective of advancing our understanding of the interplay between decentralization and infrastructure. More specifically, the paper discusses the extent of infrastructure gaps and the quality of subnational spending; inquires how functional responsibilities, financing and equalization can be designed; discusses sector-specific arrangements; drills down to the key steps of the public investment cycle and management aspects; and analyzes the political economy and corruption challenges that typically accompany decentralized infrastructure projects. The paper also presents avenues for the strengthening of decentralized public investment and infrastructure provision processes, concluding that they need to be country-, sector- and place-specific. While it is clear that institutional arrangements for infrastructure management will vary across countries, in all cases several decision-making steps need to be coordinated across levels of government in order to ensure efficiency in delivery, equity in spending, and accountability over final results.
Jackson O Otieno, Paul A. Odundo, Charles M. Rambo
The Local Authorities Transfer Fund (LATF) is an intergovernmental transfer system, supplementing the financing of service delivery within the framework of fisc0al decentralization. LATF’s objectives are to improve service delivery, enhance financial management and accountability as well as reduce debts accumulated by local authorities. The purpose of this study was to establish the influence of LATF on service delivery by local authorities, focusing on Siaya Municipal Council. We gauged residents’ perspectives about improvement of water supply, garbage collection, and sewerage services. We sourced primary data from 188 household heads and 202 market traders. The study found that 63.2% of the participants believed that there was no change in water supply consistency, while 69.5% reported the same about adequacy of water provided by the Council. Besides, 55.6% of the participants indicated that garbage collection had deteriorated, while 63.8% said the same about sewerage services. The findings suggest that access to LATF resources over the preceding decade had not improved service delivery in Siaya Municipality. Delivery of services was constrained by political interference (57.4%), procurement malpractices (44.1%), weak revenue base (38.7%), and understaffing (33.1%), among other factors. In view of this, local authorities should shape up to meet the current service demand, as well as gear up to address the needs of urban population, which is set to grow over the coming years.
New Public Management (NPM) is considered as a global paradigm emerging in response to economic, institutional, political, and ideological changes.Many attempts to define the New Public Management have been made and there are several definitions of this notion, referring to the implementation of management ideas from business and private sector into the public services.Over the past few years, Romania has been facing a great challenge as it has to enhance its public management for achieving the European standards and values of transparency, predictability, accountability, adaptability and efficiency. The necessity of a modern administration at European standards exists both at the level of the citizen, and at the level of institutions delivering public services.According to the provisions of its last stand-by arrangement with IMF, Romania placed emphasis on restoring medium- and long-term sustainability and paved the way for future growth. Structural reforms were a large component of the program, including tax administration, pensions, public wages and employment, and social benefits, improving public sector efficiency, as well as enhancing the business environment. Since 2009 a public financial management structure was introduced for multi-year budgeting while limiting intra-year budget revisions. Fiscal rules were introduced on spending, public debt and primary deficit, and a framework for managing guarantees and other contingent liabilities was approved. Local public finance law was amended to bolster fiscal discipline and limit risks from local governments.Thus, presently, the legal framework envisages the use of new instruments and structures to support local administration authorities to increase their administrative capacity in order to perform in accordance with their new authority and thereby increases the quality of the already decentralized public services.The Common Assessment Framework (CAF) ' the total quality management tool was introduced in Romania, public institutions acknowledging the need for change and improvement, the importance of people'(tm)s involvement within the organization'(tm)s self-assessment process, the importance of measuring the results, objectives prioritization, the need to assume responsibility for the identified improvement actions, as well as the need to share knowledge and experience.Most of the Romanian public institutions apply the diagnosis obtained through CAF implementation as a solid ground to develop and implement their Multi-annual Modernizing Strategies, thus assuring the sustainability of the results accomplished so far.Concluding, we consider that the changes incurred and the significant transformation of Romanian public services include important elements of NPM.
This research examines the efforts of the Public Private Comparator (PPC) at the decentralized level in the Netherlands. The PPC is a financial-economic assessment tool that can be used before a tender to determine whether there is a surplus value for a specific project (real estate or infrastructure) in the form of a Public Private Partnership based on a DBFM(O)-contract compared to a traditional form of contract. At state level, this assessment tool has been successfully implemented for a few years now whereas at the decentralized level there is still little experience with this tool and there are mainly pitfalls. Recently the Ministry of Finance launched a pilot for local authorities to examine the need for knowledge and experience regarding DBFM(O)-contracts, after an advice of the Commission on Private Financing of Infrastructure, also known as the Ruding Committee. The main question that will be answered by means of this research is: Under which conditions, with regard to content and process, is it possible to use the PPC within the municipality? This study shows which conditions are needed at State level and how these can be translated to a municipal situation and organization. The result of these findings is converted in a report and a step-by-step plan with regard to content and process for the implementation of the PPC at municipal level. This research has been conducted within, and focuses specifically on the municipality of Rotterdam. Particularly for the theoretical part, the practical part (case studies) and most of the conclusions it is possible to see the results in a broader context, so that this research also applies to local authorities more generally.
The Private Finance Initiative (PFI) is frequently portrayed as a vehicle for change for the UK construction sector. Significant change in the working practices of construction companies is predicted as new business models based on whole-life value creation emerge. This paper shifts the focus of discussion from projected ideals and possible developments to the current situation. More specifically, it focuses on the challenges that large firms participating in both PFI and traditional markets face. The analysis focuses on the relations between business units and on day-to-day challenges to greater long-term commitment, through life-service provision and increased integration between construction and service provision. The paper offers insights into the effects of PFI on construction practice and their implications for theorizing on organizational and strategic change. It suggests abandoning a simplistic model of the centralized, homogenous firm and instead capturing the dynamics of decentralized, large firms working in multiple markets on a variety of projects. This would assist in the provision of more realistic and fruitful models of how to realize the PFI vision. L'Initiative Financière Privée (Private Finance Initiative – PFI; contrats de concession d'ouvrages publics à paiements publics) est fréquemment dépeinte comme un moyen de faire évoluer l'industrie britannique du bâtiment. D'importants changements dans les pratiques de travail des entreprises du bâtiment sont à prévoir au fur et à mesure qu'apparaissent de nouveaux modèles d'entreprise basés sur la création de valeur pour toute la durée du cycle de vie. Cet article déplace le centre de la discussion des idéaux envisagés et des développements possibles à la situation actuelle. De manière plus précise, il se concentre sur les défis auxquels se trouvent confrontées les grandes entreprises qui participent à la fois aux marchés PFI et aux marchés traditionnels. L'article porte principalement sur les relations entre les Business Units et sur les défis qui se posent au quotidien par rapport à un engagement à long terme plus grand, au maintien de la qualité des prestations pendant la durée du cycle de vie, à une plus grande intégration entre la construction et les prestations fournies. L'étude de cas et l'analyse élargie qui sont présentées permettent une évaluation de l'effet des contrats PFI sur les pratiques du bâtiment et une théorisation sur les organisations et les changements stratégiques. L'article suggère d'abandonner le modèle simpliste de l'entreprise homogène, centralisée, et de s'inspirer plutôt de la dynamique des grandes entreprises décentralisées opérant dans de multiples marchés sur des projets variés. Cela contribuerait à fournir des modèles plus réalistes et féconds permettant de savoir comment concrétiser la vision PFI. Mots clés: travail collaboratif entreprises de construction solutions intégrées marchés multiples Initiative Financière Privée (PFI) initiative financière publique création de valeur
Since South Africa held its first democratic elections in 1994, it has given significant attention to building an effective system of decentralization including provincial and local government. While provincial governments are responsible mainly for the implementation of social services such as health and education, the provision of much of the urban infrastructure is the responsibility of local government. Although many challenges remain, the country has made significant progress over the past decade in addressing urban service backlogs in poor areas. At the same time, it has greatly improved macroeconomic fundamentals. The system of financing local government seeks to place accountability firmly at the local level, with most revenues in the larger urban centers raised locally through a combination of local taxes and fees for services, while poorer regions are predominantly grant funded. The objective has been to encourage the financing of capital infrastructure through local borrowing based on sustainable, transparent local finances rather than national repayment guarantees, which are outlawed. There is some indirect subsidization of loans through the state-owned Development Bank of Southern Africa. But the emphasis is on achieving redistribution through transparent, formula-based grants paid directly from national to local governments. While further bedding down of the system is needed, the approach is proving largely successful. The paper concludes by recommending that the existing division between provinces as providers of social services and local governments as the key locus of responsibility for services related to the built environment should be strengthened, particularly through the devolution of more urban transport related functions. A number of key risks are also highlighted, including issues related to the reform of local business taxes.
This study aims at assessing the performance of local government in Palestine in regard to fiscal and administrative decentralization. Data was gathered from the Ministry of Local Government, Ministry of Finance and a questionnaire was sent to 12 municipalities' key officials. It was found that the government is organized into the central government headed by the president, the cabinet, the governorates, mayors and village councils. The main functions of the local governments are to provide the necessary needed services. It was found that there is a degree of decentralization in providing the intended services as the functions of each level is clearly defined by the law, even though there is an overlapping amongst these functions due to the current situation instability The study explains several aspects including organization of the local government, decision making process, functional responsibilities, partnership among local government and the performance of these partnerships, employment, training programs, the most urgent issues regarding decentralization process, local government finances, financial standing of municipalities, relationship between central and local governments, and decentralization reforms under preparation, The study ends up with conclusions and recommendations. تهدف هذه الدراسة إلى تقييم أداء الهيئات المحلية في فلسطين فيما يتعلق باللامركزية الإدارية والماليـة. وقد تم جمع البيانات اللازمة للدراسة من وزارة الحكم المحلي ووزارة المالية، إضافة الى استبانة كانت قد أرسلت إلى 12 مسئولاً من مسئولي 12 بلدية. وتبين من البحث أن التنظيم الإداري للحكومة يتكون من الحكومة المركزية والمحافظات والبلديات والمجالس القروية. ووجد أن وظائف الهيئات المحلية تتركز في تقديم الخدمات الأساسية للمواطنين. وتبين أن لدى هذه الهيئات درجة كبيرة من اللامركزية في تقديمها لهذه الخدمات، لأن وظائف هذه الهيئات محددة بشكل واضح في قانون الحكم المحلي الفلسطيني، إلا أن هناك بعض التداخل في بعض الصلاحيات نتيجة للظروف الحالية. وأوضحت الدراسة العديد من القضايا الخاصة باللامركزية المالية والإدارية منها: التنظيم الإداري للهيئات المحلية، وعملية اتخاذ القرارات، والمسئوليات الوظيفية، والتعاون بين الهيئات المحلية في تقديم الخدمات، القوى العاملة في الهيئات المحلية والتدريب والحوافز، والقضايا الملحة فيما يتعلق باللامركزية، وتمويل الهيئات المحلية، والأوضاع المالية لهذه الهيئات وعلاقاتها بالحكومة المركزية، والإصلاحات الجارية الخاصة باللامركزية. وانتهت الدراسة بالخلاصة وعدد من التوصيات.
In this contribution, we analyse the pattern of the so-called PIP (Partnerships and Public Initiatives) that have been approved between 2000 and mid-2003 in the POE1 framework. In particular, we will evaluate the extent of decentralisation that this new instrument has generated in competitiveness policy. Partnership approaches are a relatively recent phenomenon, but partnerships have received widespread attention and support from economic and political agents, including policy makers at national, regional and local levels. In fact, the term “public-private partnership” covers a wide range of concepts and practices. In our contribution, we will focus on partnerships in a competitiveness policy framework. In a first section, we discuss briefly the meaning and the extent of what we call competitiveness policy. Then, in a second section, we focus our attention in public-private partnerships as a specific instrument for policy. In particular, we make a first assessment on the distinctive principles that differentiate public-private partnerships from more traditional instruments such as direct investment in public agencies or direct subventions to firms. We follow the perspective that these principles, mainly decentralization of policy, may contribute to a greater effectiveness of policy, because a more decentralised policy is supposed to increase focus and accountability and to involve agencies with specialized skills and a more narrow range of objectives. But, also, we will refer that some inefficiencies and some lack of equity may arise from the use of private-public partnerships instrument. Finally, in the main section of this contribution, we will analyse the above-mentioned questions considering the case of the 131 PIP projects approved and financed by the POE between 2000 and mid-2003. As the major part of the variables used are nominal, and in order to define the decentralization pattern induced by this new instrument, we will use multivariate data analysis techniques in order to establish associations between several variables linked to decentralisation criteria and, also, to identify clusters of projects.
Through analyzing the softness and hardness of budgeting constraints in research and development (R&D) investment under different institutions, we develop a theory of optimal R&D financing. Our theory not only provides a clear comparison of investment efficiency between centralized economies and market economies but also extends the analysis of soft budget constraints to firms in market economy. Based on this theory, we characterize optimal choices of R&D project financing in centralized and decentralized economies. Our results explain why some projects are financed internally by a large firm but others are cofinanced externally by several firms. We also explain what makes a centralized economy inefficient in R&D.