Governance shifts, urban Governance shifts, urban management and the management and the

provision of urban servicesprovision of urban services

Julio D. Dávila

Development Planning UnitDevelopment Planning UnitUniversity College LondonUniversity College London

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Governance shifts, urban management and the provision

of urban services

1. Infrastructure and development

2. The provision of urban services prior to the 1980s

3. The context and nature of governance shifts, 1980s-2000s

4. Effects on the provision of urban services of:

Decentralisation Privatisation, competition &

partnerships Regulation

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1. Infrastructure and development

Growth in infrastructure is closely associated with increases in per capita income

Investment in infrastructure has expanded enormously in recent decades

Infrastructure investment may be linked to poverty reduction and job creation (esp. with labour-intensive methods of construction, provision and maintenance)

Investments in infrastructure and human capital tend to increase the returns to the other

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Infrastructure and economic growth are correlated

Source: World Development Report 1994

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KEY: Green: low-income countries; blue: middle-income countries

Source: World Development Report 1994

Infrastructure weighs heavily on public investment

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Public investment is higher than private sector or external aid

Govt./publicutilities

Private sector

Intl. aid

Source: DFID (2002)

*Excludes contribution of local private sector and users

Infrastructure investment in LDCs (late 1990s)*

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Infrastructure and the poor

In people’s self-perception of poverty lack of infrastructure is an important factor (esp. roads, transport and water)

Not all infrastructure investments benefit the poor

Local infrastructure (at residential level) tends to be of more direct benefit to the urban poor than large-scale national infrastructure

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In most countries, income determines access to water

supply

Source: World Development Report 2004

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…and the poor pay more for it

Source: World Development Report 2004

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Chennai, India

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Piped water requires good management

Source: World Development Report 2004

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2. The provision of urban infrastructure prior to the

1980s

State apparatus grew since the 1950s: To meet the needs of nation-

building To seek economic self-sufficiency To generate employment Planning became a central

instrument of intervention

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Prior to the 1980s…

Central government tended to own and manage urban services

Targets for services set by technical personnel and politicians from the centre

Larger cities and wealthier neighbourhoods serviced better than smaller cities, peripheral areas of large cities and poorer neighbourhoods

Patron-client relations: mechanism for the delivery of services to poorer urban areas

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Prior to the 1980s…

Local government administration usually appointed by central or provincial governments: limited transparency and accountability

Little or no involvement of users in administration or monitoring of utility companies

Increasing difficulty of financing infrastructure investments

In the absence of a large unionised labour force, lack or urban services became focus of political struggles and urban social movements

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3. The nature and context of shifts in local governance,

1980s-2000s

Governance:“The exercise of political, economic and administrative authority in the management of a country’s affairs at all levels. It comprises the mechanisms, processes and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations and mediate their differences.”

Source: UNDP, 1999, quoted in UNCHS, 2001

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Urban governance

“The sum of the many ways individuals and institutions, public and private, plan and manage the common affairs of the city. It is a continuing process through which conflicting or diverse interests may be accommodated and cooperative action may be taken. It includes formal institutions as well as informal arrangements and the social capital of citizens”.

Source: UNDP, 1997, quoted in UNCHS, 2000

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Shifts in local governance in the 1980s-2000s (1)

Greater democratisation and emergence of elections as a stable feature of government

Structural adjustment policies Ideological pressure from influential

international actors (US & UK) and other donors to liberalise and reduce state expenditures while fostering market forces (the “Washington Consensus”)

Pressures from within countries and internationally to decentralise government functions

The ‘new architecture of aid’ (PRSPs, SWAps)

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Shifts in local governance in the 1980s-2000s (2)

Greater mobility of international capital and acquisition of utility companies by large transnational corporations

Increased role of the state as regulator Increased citizen and community

pressure, in the context of the global environmental movement

Growing attempts at delivering urban services through privatisation, partnerships and user involvement

Often increasingly fragmented urban/metropolitan space (socially, economically, institutionally)

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4. Effects on the provision of urban services of: a. Decentralisation

Decentralisation has been studied by different disciplines: political sciences, public administration, economics, planning.

Four forms of decentralisation: political, administrative, spatial and market.

Each discipline has a different focus: economists and planners focus on spatial and market forms; public administrators focus on administrative forms, etc.

There are differences also in the way concepts are used in different languages; in French literature decentralisation tends to be equated with devolution.

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For example, one can speak about three types of administrative decentralisation:

Deconcentration: transfer of authority over specified decision-making, and financial and management functions by administrative means

Devolution: authority is transferred by central governments to local-level government units

Delegation: transfer of government decision-making and administrative authority and/or responsibility for carefully spelled out tasks to institutions that are either under its indirect control or independent.

Source: Cohen & Peterson, 1996, “Methodological issues in the analysis of decentralization”, Harvard Institute for International Development, Discussion Paper No. 555.

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Decentralisation

Often a response to fiscal deficits

Often imposed from above, with modest targets so some control is exerted from the centre (exceptions: Kerala in 1990s, some cities in Brazil)

Rarely accompanied by increased democratisation

Danger that local elites may hijack power

Politically more complex than privatisation

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Decentralisation and local provision of services

Improved service delivery at the local level requires: Enhanced human resources Increased fiscal capacity Greater user involvement Improved technical capacity (e.g.

cadastres, cost recovery, project appraisal)

Addressing policy issues of cost and welfare (e.g. target poverty reduction or increased employment)

Recognition (and support?) of other forms of delivery and access (the State as ‘enabler’)

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b. Privatisation, competition and partnerships

Neoclassical economic theory and theories of ‘state failure’ argue for efficiency of competitive market mechanisms.

In this view, non-competitive provision leads to: Allocative inefficiency (services not

what consumers want at a price they can pay)

Productive inefficiency (resources not used efficiently)

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According to this view, government intervention is

only warranted exceptionally

For case of ‘public goods’: non-payers are ‘non-excludable’ and consumers do not compete for them (‘non-rival’)

In case of market failure (when private sector cannot operate efficiently: e.g. monopoly, large-scale investments needed, positive externalities)

For case of ‘merit goods’: basic social commitments to provide access to everyone (primary education, health)

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Infrastructure services as economic goods

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Does the private sector perform better?

In a research covering services in six countries, Batley et al. (1996) found ten types of organisational arrangement.They also found that more important than ownership in determining performance are: Existence of competition Operational autonomy Political support for management Local politico-institutional

environment The political visibility of the service

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LDCs: Investment in WSS projects with private

involvement, 1990-2001

Source: World Development Report 2004

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Forms of private participation in water &

sanitation

Asset owner-ship

Capital invest-ment

Com-mercial risk

Oper./ maint-enance.

Contract duration

Service contract

Public Public Public Private/ Public

1-2 yrs

Manag. Contract

Public Public Public Private 3-5 yrs

Affermage/lease contract

Public Public Shared Private 8-15 yrs

Conces-sion contr.

Public Private Private Private 25-30 yrs

BOT Private/public

Private Private Private 20-30 yrs

Divestiture Private Private Private Private Indefinite

Source: UN-Habitat (2003)

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Private investment in WSS by type of project, 1990-2001

Source: World Development Report 2004

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Source: ID21, 2001, Insights No. 37

Public-private partnerships are on the increase

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But the reality of access to water and sanitation is more

complex

Policy-rooted

Community-based

provisionPublic-community

partnerships

Fully public

Passive private investment

Service contracts

BOT and concessions

Joint ventures

Fully private

Public provisiondistorted by bribery

Clandestine connexions

Water asa ‘gift’

Informal sector vendors (e.g. push carts)

Water sold from privately owned

wells

Needs-rooted

Public-private cooperation

Private competition

Community cooperation

Public-community cooperation

Source: Allen, Dávila and Hofmann (2004)

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Access to water by peri-urban dwellers in five case

studies Provider Policy-driven practices Needs-rooted practices

Public (state) sector

Piped network (Household connections and public standpipes)Wells and bore-wells (not Mexico)Provision by tankersWater kiosks (Dar es Salaam)Negotiation with communities through ‘technical water boards’ (Caracas)

Public provision distorted by bribery practices

Private sector Buying from licensed tankers (not in Cairo)Buying packaged water (cans, bottles, sachets)

Buying from tankers Private vendors drawing from own site piped connections/own boreholes or wells sold directly by bucket or through push carts and bicycle vendors (Dar es Salaam)

Community Own individual wells and bore-wells (not Mexico or Caracas)Piped network (community organisation agreement with local authority (Mexico)or public water company (Caracas)) Piped network kiosks and taps run by the community with NGO support (Dar es Salaam)Boreholes and kiosks run by the community (Dar es SalaamHorizontal condominiums (Caracas)

Rainwater harvesting (not Caracas)Water theftGifts or paid provision from neighbours Clandestine connections

Source: Allen, Dávila and Hofmann (2004)

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Peri-urban Giza, Egypt

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Peri-urban Caracas, Venezuela

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Do the poor lose out from utility privatisation?

Losses from joining the formal economy

Losses from changes in tariff levels and structure

Losses in discretion of quality decisions (willingness to pay)

Unwillingness of some providers to service less profitable areas

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Greater Buenos Aires: Price changes of gas and

electricity, 1991-1998

Service

1998 Index (March

1991=100)

Retail price index 163

Natural gas:

Residential 212

Large industrial user 101

Electricity:

Residential (average) 91.5

Low consumption 98.4

High consumption 29.6

Industrial (average) 86.1

Source: Pirez (2002)

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4.3 The role of regulation in infrastructure services

A formal regulator: Acts as a referee between the

operator, the consumer and the relevant government bodies

Should be independent of both government and operator

Functions: Ensure adequate service levels Ensure investors receive

reasonable return on capital Ensure standards are met

But there is also informal regulation (between individuals and communities)

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Effective formal regulation of local service provision

requires:

Sound technical knowledge of the sector

Well-paid, well-trained staff A robust legal framework, in

place before contracts signed Sound urban/metropolitan plans

(to guide future growth) Political stability (frequent

changes undermine local government) and continuity

A recognition of informal/customary regulation