KATHMANDU, September 25, 2012— “Global experiences demonstrate that local governments are best placed to provide services according to local needs and preferences. In South Asia, local fiscal and financial capacity need to keep pace with these increasing responsibilities,” said Ellen Goldstein, the World Bank’s Country Director for Nepal and Bangladesh.
Goldstein was speaking at a cross country learning forum entitled Strengthening Local Government Finances for Better Service Delivery and Greater Accountability organized jointly by the Swiss Development Cooperation (SDC) and the World Bank. The three day forum brings together over 80 policy makers and local finance practitioners from central, state and local governments across various Asian nations. The forum intends to provide participants a platform to share experiences in reform processes at the local, state and federal levels with regard to local finances and good practices and instruments.
Goldstein highlighted three challenges. Inter-governmental fiscal frameworks need reform, she said, so that functional responsibilities are clearly defined and funded and fiscal transfers are received in adequate amounts and on time. Secondly, local governments need to mobilize new resources and increase their capacity to borrow responsibly for investments in local services. Finally, local governments need to seek ways of attracting private participation in the financing and delivery of local public services.
Goldstein also highlighted the World Bank’s support for local governance programs across South Asia. In Bangladesh, the Local Governance Support Project supports 4,501 rural local governments. In Pakistan, the Punjab Municipal Services Improvement Project supports 135 small local governments. In Afghanistan, policy analysis is helping to shape up the sub-national system and enhance decentralization. In Nepal, the Emerging Towns Project supports intergovernmental frameworks and strengthening infrastructure and services in small and medium sized municipalities. In India, the recently approved Local Governance and Service Delivery Projects in West Bengal and Kerala reach about 2,000 small local governments.
“To exercise autonomy, local governments need to generate their own revenues through taxes, fees, user charges and other forms of cost recovery and borrowings,” said Goldstein.
Goldstein said two key challenges that confront South Asia with regard to local finances are the dominance of central transfers and low capacity to generate revenues at the local level.