Strengthening the Colombia’s Policy Framework on Productive, Sustainable, and Inclusive Cities

Challenge

The efficiency and productivity of Colombia’s urban system have been considered essential components in the country’s transition from a middle-income, commodity-driven society to a higher-income economy rooted in knowledge and manufacturing. The efficient management of Colombia’s cities and urban areas is recognized as central to reducing poverty and inequality.  Although poverty rates are higher in rural areas, most of Colombia’s poor live in urban areas. In 2013, about 7 in 10 poor individuals in Colombia lived in an urban area (defined as metropolitan, medium, or small urban areas), and 6 in 10 were in the bottom 40 percent of national income distribution. Seventy-seven percent of Colombians live in cities, where unemployment has reached around 12 percent. Policies to improve productivity and living conditions in the nation’s cities thus have the potential, by focusing on urban areas, to contribute significantly to nationwide improvements in poverty reduction and shared prosperity.   

Approach

The Productive and Sustainable Cities Development Policy Loans (DPL) provided an innovative instrument for use in the urban development and transportation sectors, which have traditionally relied on investment operations. The DPL was chosen as the financing instrument because it could provide the government with flexible financial support and foster the sector reforms essential for catalyzing investment and reducing the negative externalities of urban life (among them, pollution, congestion, and lack of affordable housing). DPLs were seen as complementary to knowledge services and technical assistance engagements.

The 2012 World Bank report “Colombia Urbanization Review: Amplifying the Gains from the Urban Transition” provided the government with concrete policy guidance on maximizing efficiency in urban governance. The report’s diagnostic analysis served as direct input into the National Development Plan 2014–2018. Moreover, each project-supported policy area was backed by analytical work under the Sustainable and Productive Cities Programmatic Approach.

Using a number of knowledge and convening services, the Bank supported formulation of the Congestion Charging Decree and the fourth-generation policy document of the Council of Economic and Social Policy (El Consejo Nacional de Política Económica y Social). In addition, the Bank’s Global Facility for Disaster Risk Reduction supported Colombia’s Ministry of Housing, Cities and Territory (Ministerio Vivienda, Ciudad y Territorio, MVCT) through the preparation, validation, and dissemination of a standardized methodology for the National Inventory of Settlements in High Risk Areas. These programs contributed to closing the gap in the availability of affordable housing. Finally, Bank studies on access to affordable housing, carried out in association with the Macroproyectos Social Interest Program Project, determined the supply- and demand-side constraints contributing to Colombia’s persistent housing deficit.

Results

The Productive and Sustainable Cities DPLs supported the Colombia National Development Plan 2014–2018, the first structured using a territorial/regional approach recognizing the System of Cities framework and new National Urban Policy and using regional-level indicators to track progress. Results achieved during the life of the project (2013–2015) included:

• In cities with populations greater than 100,000 residents, an additional 30,159 households gained access to neighborhood water and sanitation networks.
• Eleven private-public partnerships (PPP), with signed contracts and financing frameworks,  implemented the ambitious 4G Roads Program under planning by the National Infrastructure Agency (Agencia Nacional de Infraestructura, ANI) to construct or rehabilitate roads, bridges, and tunnels to connect the country’s regions.
• Under the 4G Roads Program, 912 kilometers of principal road network are now under integral maintenance contracts.
• Conceptual design studies for congestion-charging schemes for Bogotá and Medellin were completed as of 2015.
• Available public space in cities with populations greater than 100,000 increased from 3.30 to 3.6 square meters per capita.
• A differentiated housing policy providing different subsidies depending on the household’s degree of vulnerability helped alleviate poverty. MVCT programs provided affordable housing to around 100,000 households, and around 130,000 low-income families gained affordable and safe housing solutions under the 2012 Public Housing Law and the Voluntary Savings Program (Programa de Vivienda de Interés Prioritario para Ahorradores, VIPA) introduced with support from the project.
• Eight memoranda of understanding were signed between the national and regional or local governments for cofinancing or for strategic infrastructure projects.                                                                                         

Bank Group Contribution

The World Bank, through the International Bank for Reconstruction and Development, financed two loans totaling US$850 million (US$150 million for DPL I and US$700 million for DPL II).

Partners

The DPLs were designed and implemented during the two administrations of President Santos, providing continuity for the high-level policies in the National Development Plans for 2010–2014 and 2014–2018. Improved coordination across different institutions and levels of government also contributed to project success, including efforts by the following:

• The National Planning Department (Departamento Nacional de Planeación, DNP) monitored progress of the policy framework and action plan.
• The MVCT conducted surveys of affordable housing beneficiaries and other relevant projects. In collaboration with the DNP, it helped evaluate the water and sanitation connection program, assessing its impact, costs, and benefits.
• The Ministry of Transportation prioritized traffic safety and travel-demand management, supporting municipalities in designing and implementing options. It also initiated work under the Road Safety Agency (Agencia de Seguridad Vial), to the extent possible, given budget and political constraints.
• ANI demonstrated leadership and technical capacity in forging new PPP contracts for infrastructure investment and in addressing pending challenges from previous PPP generations.

Beneficiaries

Through MVCT, the government implemented several programs to increase access to quality affordable housing, including the Social Housing Program (Programa de Vivienda Gratuita, PVG) and VIPA. The VIPA program aimed to increase access to affordable housing for low-income families with saving capacity. Beneficiaries of the program were families with two legal minimum salaries seeking to buy a house equivalent to seventy legal minimum salaries. The program benefitted 80,000 households between 2014 and 2016. In addition to contributing to the closing costs for buying a home, the program also enabled households with formal and informal incomes to gain access to the financial system. See https://www.youtube.com/watch?v=lr-c04yomIA for testimonies from beneficiaries.

Moving Forward

Colombia’s national policy on sustainable and productive cities is defined by its urbanization guidelines, the System of Cities, and the National Development Plan (NDP). The NDP highlighted the importance of formulating a long-term policy to consolidate a System of Cities that leverages the benefits of urbanization while increasing regional integration.

The Ministry of Transportation (MoT) and the transportation sector more broadly have been working on guidelines to expand the use of electronic payment, particularly in the areas of infrastructure, transit, and transportation. MoT successfully regulated the interoperability system for toll roads with an electronic payment system and is currently working to expand that system to parking garages and gas stations.    Additional resources are required to continue strengthening these initiatives.

ANI reached agreements with Colombia Humanitaria and the Fondo de Adaptación to support the most affected corridors. It renegotiated contracts with concessionaires to adapt to the new reality, and it defined new technical and insurance standards for the 4G infrastructure to protect against natural disasters. Contracts under third-wave 4G are currently underway.