ASIAN CITIES IN THE CENTURY - Asian Development Bank€¦ · Syed Mansoor Ali Shah Afridi, Shah and...

Review of Management Structure

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ASIAN CITIESIN THE21ST CENTURYContemporaryApproaches toMunicipal Management

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Municipal Management Issues in South Asia

© Asian Development Bank 1999

All rights reserved

First published April 1999

This publication was prepared by Asian Development Bankstaff. The findings, interpretations, and conclusions expressedin it do not necessarily represent the views of the Bank orthose of its member governments. The Asian DevelopmentBank does not guarantee the accuracy of the data includedin this publication and accepts no responsibility whatsoeverfor any consequences of their use.

ISBN 971-561-211-3Publication Stock No. 010599 (Vol II)

Published by the Asian Development BankP.O. Box 789, 0980 Manila, Philippinesemail: [email protected]: http://www.adb.org


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Volume II

Municipal ManagementIssues

in South Asia

Proceedings of a Seminarin Lahore, Pakistan16-18 October 1997

Edited byNaved Hamid and Mildred R. Villareal

Published by theAsian Development Bank

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CONTENTS

FOREWORD v

I. INTRODUCTION 1

PART A: MUNICIPAL MANAGEMENT IN LAHORE

II. KEYNOTE ADDRESS 11Iftikhar KhalilManaging Director, National Engineering Services of Pakistan

III. INAUGURAL ADDRESS 17Mian Shahbaz SharifChief Minister of Punjab

IV. REVIEW OF MANAGEMENT STRUCTURE FORTHE CITY OF LAHORE 19Syed Mansoor Ali ShahAfridi, Shah and Minallah Advocates and Legal Consultants

V. REFORMING THE REVENUE BASE FOR URBAN SERVICES 29Anwar KamalAnwar Kamal Law Associates

VI. PROVISION OF PUBLIC SERVICES: PUBLIC-PRIVATE MIX 37Anjum NasimProfessor of Economics, Lahore University of Management Sciences

VII. PLAN FOR SOLID WASTE COLLECTION AND DISPOSAL 53M. P. AftabVice President, National Engineering Services of Pakistan

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VIII. AN OUTLINE ACTION PLAN FOR MANAGEMENT OFLAHORE CITY, WITH EMPHASIS ONSOLID WASTE DISPOSAL 59Iftikhar KhalilManaging Director, National Engineering Services of Pakistan

IX. CONCLUDING ADDRESS 65Shahid HamidGovernor of Punjab

ANNEX: FINDINGS OF A DIAGNOSTIC STUDY OFTHE METROPOLITAN CORPORATION OF LAHORE 71Alan H. EdmondAbt Associates Inc., Cambridge, Massachusetts, USA

PART B: URBAN GOVERNANCE IN OTHERSOUTH ASIAN COUNTRIES

X. URBAN GOVERNANCE IN SRI LANKA ANDTHE COLOMBO REGION 103Padma D. JayaweeraActing Secretary, Ministry of Provincial Councils and Local Government

Omar Z. KamilDeputy Mayor, Colombo Municipal Council

V. K. NanayakkaraSecretary, Ministry of Housing and Urban Development

XI. ISSUES AND PROBLEMS CONFRONTING MANAGERSIN DHAKA CITY 117Md. Shahidullah MiahSecretary, Dhaka City Corporation, Bangladesh

XII. MANAGING A MEGACITY: SOME LESSONS FROMCALCUTTA 127Asim BarmanMunicipal Commissioner, Calcutta, India

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XIII. FINANCIAL INNOVATIONS ANDMUNICIPAL MANAGEMENT IN AHMEDABAD 137B. K. SinhaMunicipal Commisioner, Ahmedabad, India

XIV. DECENTRALIZATION REFORMS AND INNOVATIONSIN MUNICIPAL MANAGEMENT IN INDIA 149P. K. MohantyDirector, Ministry of Urban Affairs and Employment, New Delhi, India

XV. VISION 2021: URBAN GOVERNANCE IN INDIA 167Dinesh MehtaRegional Adviser South AsiaUNDP/UNCHS (Habitat) Urban Management Programme, New Delhi, India

ABBREVIATIONS 185

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FOREWORD

The Bank hasidentifiedimprovement inmanagementand publicservice deliveryat the municipallevel as apriority area inits governanceagenda.

M unicipal managers in Asian cities today arefaced with the formidable challenge of finding

effective and innovative ways of dealing with rapidurbanization, growing demand for improved publicservices, and declining financial support from centralgovernments. Moreover, in developing countries inAsia, the infrastructure requirements of the urbansector are so large that the multilateral developmentbanks and other donors can at best contribute onlya small fraction of the total. However, there is asolution to this apparent dilemma. Becauseeconomic activity and wealth in these countries willbe largely generated by the expanding cities, theresources needed for municipal infrastructuredevelopment will be available. Tapping theseresources, however, will require significantimprovement in the management of the cities.

Toward this end, and in recognition of theimportant roles that municipalities will play in theareas of economic growth, human development, andenvironmental management, the Asian DevelopmentBank (ADB) has identified improvement inmanagement and public service delivery at themunicipal level as a priority area in its governanceagenda.

In 1997 and 1998, ADB and the AsianDevelopment Bank Institute (ADBI) organized anumber of workshops aimed at creating awarenessof recent developments in public sector managementat the local government level. Participants sharedexperiences of successes in reforming municipalitiesand in motivating citizens and municipal managersto embrace change. Two of the workshops wereorganized under ADB�s regional technical assistanceon Governance and Development, which facilitatedcitizen initiatives to promote municipal government

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reforms in Lahore, Pakistan, and Dhaka, Bangladesh.The third was the ADBI-sponsored MunicipalManagement Forum in Tokyo, Japan, which wasattended by over 30 municipal managers from 10countries.

The three volumes on Asian Cities in the 21stCentury: Contemporary Approaches to MunicipalManagement are the outcomes of these initiatives.

� Volume I, Leadership and Change in CityManagement, discusses concepts such asleadership, vision, mission, planning, andcustomer focus to which participants of the Tokyoforum were exposed. It also provides examplesof the application of these concepts bymunicipalities in tackling their problems andimplementing change programs.

� Volume II, Municipal Management Issues in SouthAsia, discusses issues in selected South Asiancities, with a special emphasis on organizationalproblems in Lahore. It also provides a review ofmunicipal reforms and urban governance issuesin India and Sri Lanka.

� Volume III, Reforming Dhaka City Management,discusses the institutional issues, financialmanagement, and solid waste management of onespecific city � Dhaka � and providesrecommendations on organizational reforms todeal with these issues.

We are indebted to many individuals for thecompletion of these publications. We recognize thecontribution of the participants and speakers in theworkshops, who continue to do their best, every day,to make their communities livable through bettermunicipal services. Naved Hamid coordinated theworkshops and supervised the preparation of the

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reports. Rosario Belen and Merly Mallion assistedin organizing the workshops and preparing thematerials for publication. Eric McGaw providedediting services and Ramiro Cabrera did the coverdesign.

We trust that this set of publications will makea positive contribution to the literature on municipalmanagement. Further, we hope that it will prove auseful resource for city managers in their efforts toimprove the quality of life for their citizens, and thuspromote the development of responsive and effectivelocal government.

Yoshihiro IwasakiChief, Strategy and Policy OfficeAsian Development Bank

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I. INTRODUCTION

In 1997, the Strategy and Policy Office of the AsianDevelopment Bank decided to make municipalgovernance the focus of activities under its

ongoing Regional Technical Assistance onGovernance and Development. For this purpose itwas decided to undertake small projects in two SouthAsian cities. The idea was to create, over a period offour to six months, an awareness among key decisionmakers of the importance of improving municipalmanagement by involving both the community andthe service providers in a dialogue on how to improvethe quality of urban services. The projects would alsotest the hypothesis that, given favorable conditions,the Bank could serve as catalyst for a process of changeleading to more effective municipal governments.

A key element in the �favorable conditions�was identified as commitment and support at thehighest level of government to the objective ofimproving city management. A new governmentcame to power in Pakistan in February 1997, andthe provincial government of Punjab was found tosatisfy the above criterion. Thus the city of Lahorewas selected for the first project and the process wasinitiated in partnership with National EngineeringServices of Pakistan (NESPAK). They identifiedresource persons, established groups of concernedcitizens, organized meetings between serviceproviders and the citizens, and developed an actionplan for reforming municipal management in Lahore.To present the action plan to the key decision makersin the province and to make them aware of thepossibilities by exposing them to success stories fromSouth Asia, a Seminar on Municipal ManagementReform was organized in Lahore 16-18 October 1997.

The seminar brought together the rich anddiverse experiences of municipal officials and experts

Given favorableconditions, theBank couldserve as acatalyst for aprocess ofchange leadingto moreeffectivemunicipalgovernments.

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from Bangladesh, India, and Sri Lanka, as well asfrom Malaysia and the Philippines. The successstories served as eye openers for the participatinggovernment officials from all provinces of Pakistan,and for concerned citizens, government officials, andpublic representatives from Lahore. The ChiefMinister and the Governor of Punjab both attendedthe seminar. The media took a special interest in theproceedings, and provided extensive coverage within-depth reports on civic problems in Lahore. Theyalso reported in detail how some cities in the regionhad successfully tackled these problems, and articleson the subject continued to appear in the press manymonths after the seminar. The Chief Minister had along private meeting with the visiting municipalofficials and was so impressed that he immediatelyinstructed the Administrator from Lahore to plan avisit to Ahmedabad and Calcutta to learn how themanagers of those cities had succeeded in turningtheir municipalities around.

After the seminar, the exposure of municipalofficials from Lahore to modern municipalmanagement techniques was sustained throughparticipation in a Municipal Management Forum inTokyo hosted by ADBI, as well as the city �sinvolvement in the Bank�s ongoing regional technicalassistance for Enhancing Municipal Service DeliveryCapability. The seminar, and the process ofcontinuous interaction following it, was so successfulthat a large number of the recommendations madeat the seminar are currently being implemented.

Today Lahore has an elected Lord Mayor, andeach of its eight zones is administered by a DeputyMayor chosen from the elected councilors. A newlaw is being drafted which will make theMetropolitan Corporation of Lahore (MCL) the firstautonomous municipal council in Pakistan by 1 July1999. The accounting and budgeting systems havebeen modernized and, for the first time, its annualaccounts have been audited by a private chartered


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accounting firm. Public relations materials explainingthe programs, services, and accomplishments of MCLare prepared regularly, and citizens groups areencouraged to interact with city administration onissues of common interest.

One of the most interesting by-products of theexposure to innovative practices in other cities wasthe initiation of a partnership between the publicsector and a nongovernment organization (NGO) ineducation. The municipality runs over 300 primaryschools in Lahore and a large number of these areunderstaffed and poorly maintained. MCL and a localNGO called CARE entered into a partnership underwhich MCL handed over the management of 10schools in particularly poor condition to CARE.Under this arrangement, MCL provides the buildingand pays the salaries of the existing teachers, whileCARE is responsible for any new teachers, teachingmaterials, and supervision. In the first six months,the number of students in these schools increasedseveral fold, and the school environment and qualityof education improved significantly. Other proposalsfor public-private partnerships such as restorationand maintenance of streetlights and traffic signalsare under negotiation.

Lahore is a city in which change is takingplace. It is possible that the seminar was the catalystthat triggered this process, but the key factor in thereforms was the polit ical wil l and strongcommitment of the leadership, as well as theinvolvement of the stakeholders. The challenge, ofcourse, will be to sustain these efforts, but with thenew and dynamic leadership in Lahore there iscause for optimism.

This volume provides a collection of the paperspresented at the seminar. It is divided into two parts:Part A focuses on municipal management in Lahoreitself, while Part B reviews municipal governmentreforms and urban governance issues in other SouthAsian countries.

The key factorin the changeprocess was thepolitical willand strongcommitment ofthe leadership,as well as theinvolvementof thestakeholders.

Introduction

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Part A. Municipal Management in Lahore

The Keynote Address of Iftikhar Khalil describes theprocesses and findings of concerned citizens inLahore regarding the levels of institutions andindividuals responsible for managing the city. Hestresses the complexity and seriousness of the issues,and notes that easy solutions are unlikely to be found.On a positive note, he states that the gathering itselfis an important step toward resolving the problemsand difficulties faced by the citizens of Lahore.

In his Inaugural Address, Punjab�s ChiefMinister, Mian Shahbaz Sharif, recognizes that theproblems of Lahore require immediate attention,particularly with regard to the working arrangementbetween MCL and the Lahore DevelopmentAuthority (LDA). He discusses the provision ofservices and the need for professional staff andinnovative practices. Finally, he commits Punjabgovernment support to the improvement of thesocioeconomic conditions of the urban populationand to the implementation of the recommendationsunder existing constraints and resources.

Syed Mansoor Ali Shah reviews theinstitutional structure and framework of Lahore Cityand assesses its managerial performance andpotential. He focuses on the legal structure,performance, external pressures, internal policies,staffing, and relation of Lahore City with otheragencies, as well as its interaction with private andcommunity organizations.

Anwar Kamal describes the findings of a groupthat examined Lahore�s financing services and maderecommendations for reforming its revenue base.Addressing Lahore�s lack of financial resources forproviding essential services to the urban population,he recommends that the city seek such innovativefinancial sources as municipal bonds, pollution taxes,and surcharge on petroleum consumption. Mostimportant, he advocates transparency of the


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budgetary process so that people can see how theirmoney is being used.

Anjum Nasim presents an analysis of the needto involve the private sector in the provision ofservices, traditionally a public sector domain. Helists ways to delegate some areas of solid wastecollection and disposal to the private sector, andemphasizes the regulatory role of the public sectorif there is privatization. Finally, he summarizes thediscussion and recommendations of the workshopparticipants which examined issues related to thecollection of solid waste, transfer of refuse, and thedevelopment and administration of disposal sites.

M.P. Aftab outlines the steps to be incorporatedin the plan to improve solid waste collection inLahore. He emphasizes the efforts of the privatesector, increased public awareness, construction ofa sanitary landfill site, and improved disposalarrangements for hospital wastes. He also encouragestraining programs for the staff on solid wastemanagement.

Iftikhar Khalil presents an Outline Action Planfor Lahore based in part on the recommendations ofthe resource persons and key stakeholders. The planincludes provision of public services, public-privatemix, financing of services, institutional strengthening,and handling of solid waste. He recognizes that giventhe limited time frame and resource input, it is notpossible to recommend a comprehensive packageof appropriate measures for making Lahore a modelcity. He stresses that in improving the basic services,the public perception of how the services are beingprovided and managed should be taken into account.

The Honorable Shahid Hamid, the Governorof Punjab, candidly admits that Lahore is faced withserious urban problems because its currentinfrastructure and public facilities have not matchedits rapidly growing population. He strongly believesthat without the willing support of the community,and a conscious effort to bring about a positive change

Introduction

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in public attitude, Lahore will make little headway inachieving the desired municipal reforms. He urgesthe educational institutes, government departments,and media to play their roles in ensuring greater publicparticipation in community welfare projects.

Alan H. Edmond conducted a diagnostic studyof MCL from June to October 1997 to define theorganizational problems and suggest a plan forreforming the methods by which services aredelivered. He recommends that local and provincialofficials must take a hard look at not just thesymptoms, but the root causes of the problems. Heunderscores the necessity for a working relationshipamong elected officials, local leaders, and citizensto improve the workings of MCL and LDA.

Part B: Urban Governance in Other South AsianCountries

Padma Jayaweera, Omar Kamil, and V.K.Nanayakkara discuss the historical background ofSri Lanka�s local government system as a significantcomponent of its development processes. Theydescribe the various urban infrastructure issues,problems, and constraints confronting the ColomboMetropolitan Region. They also present solutionsundertaken by the national and local governmentsto address these issues.

Shahidullah Miah outlines some of the basicurban issues and problems besetting Dhaka City,including rapid population growth, massive poverty,an inadequate transport system, and deteriorationof service facilities. Through its own initiatives, andwith assistance from the Government of Bangladeshand foreign donors, the city government has beenable to curb most of these issues and problems.Today, it continues to find ways to improve livingconditions in Dhaka.

The Municipal Commissioner of Calcutta,Asim Barman, highlights the fact that his city used


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to be derided internationally as a terminal case ofurban degeneration because of continueddeterioration of civic facilities, inadequate cash flowand database, and unmanageable service deliverynorms. The political will of both the politicalinstitutions and the state government, however,enabled the city to tread the tracks of sustainablemunicipal reform. Action plans were drawn up,objectives and priorities clearly defined. Structuralreforms were carried out, mass-scalecomputerization was introduced, resourcemobilization was enhanced, and the existinginfrastructure, services, and facilities strengthenedto effectively support the population and activitiesin the urban center. More importantly, a number ofpublic-private participation programs were started,and substantial NGO support was mobilized.

B. K. Sinha illustrates how the AhmedabadMunicipal Corporation dramatically improved itsfinancial and corporate stature. Some of the financialinitiatives adopted include corporate planning,public-private partnerships, bond flotation, build-operate-own/build-operate-transfer schemes, newtax measures, and access of local governments tofinancial institutions and markets. He emphasizesthat financial innovations cannot succeed withoutthe support of efficient municipal governance.

P.K. Mohanty describes how a new Act of theConstitution of India decentralized the powers andresponsibilities that enable municipalities to functionas effective democratic institutions of local self-government. The Act emphasizes the participationof directly elected representatives of people inplanning, management, and delivery of civicservices. It provides a blueprint of municipalgovernment reforms in India featuring stronggrassroots democracy in the effective functioning ofvarious key institutions. The Act also provides forenhanced tax effort, application of user charges tomost urban infrastructures, dedicated taxes and

Introduction

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levies, interagency partnerships, accessing marketfunds, and financial intermediation.

Dinesh Mehta provides a perspective of urbanIndia in 2021 against the rapid economic changes,increasing urbanization, and declining capacities ofnational and local governments to manage cities. Heunderscores that the process of decentralization ofurban governance in India has not been veryencouraging, partly because it is difficult to expectthe national government to shed its powers andauthority to local governments. In strengtheningmunicipal governance, he stresses the need for thestate governments to create an enabling environmentwithin which the local governments are able toexercise their functional and fiscal responsibilities.He cites the cases of cities in India that havesuccessfully managed to cope with urban challenges,and have recognized that improved governancebrings about improved productivity, generatesinvestments, and alleviates poverty.


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Part A

MUNICIPALMANAGEMENTIN LAHORE

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II. KEYNOTE ADDRESS

Iftikhar KhalilManaging Director, National Engineering Services of Pakistan

Lahore is a large sprawling city covering anarea of over 220,000 hectares and hostingan estimated population of more than 6

million. It has an annual population growth rate ofover 4 percent. It is widely perceived that becauseof this rapid growth, the level of services providedto the city inhabitants has substantially deteriorated.The deterioration pervades every sector and varies indegree, whether one looks at traffic congestion, publictransport, or quality of roads. Rapid growth hassimilarly affected storm water drainage, solid wastecollection and disposal, water supply, sewerage, airquality, public hygiene, and availability of housing.

These problems are not unique to Lahore. Theyare experienced in varying degrees in most largecities. However, most of us believe that things canand should be much better. What is heartening isthe realization � both at the Government level andat the public level � that there is a need to dosomething very quickly.

Let me briefly describe the background andthe process that led to this seminar. About five monthsago, some of us (in our capacity as concernedcitizens) discussed the rapid and uncontrolled growthof Lahore and the ever-growing demand forinfrastructure to keep pace with this growth. We alsodiscussed the general public perception that theconcerned agencies were unable to provideacceptable levels of services. The need for a reviewof the existing system of city management was alsodiscussed. We realized that the citizens of Lahoreshould play an important role in this review process.

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We were informed that ADB was interestedin these problems, not only in Lahore but throughoutAsia. NESPAK, which was preparing an integratedmaster plan for Lahore, was aware of certaindimensions of these problems. We also felt that itwas time to initiate such an exercise since the newGovernment had been receptive to publicperceptions regarding the affairs of the city.

It was a result of these and many subsequentdiscussions that this exercise was undertaken. TheBank agreed to provide financing as well as otherforms of support and NESPAK offered to act as afacilitator and catalyst.

Because this exercise has a limited time frameand resource input, we recognized from the verystart that it would not be possible to identify andaddress all the issues relevant to making Lahore amodel city. Similarly, it was not feasible to attemptto recommend a comprehensive package ofappropriate measures for the achievement of thisobjective. Nevertheless, we felt that it could serveas an important first step in the development of apackage of participatory measures to resolve oururban problems.

Let me now describe the process we haveundertaken. To ensure a participatory basis for theprocess, we made extensive contacts with a cross-section of the citizenry of Lahore. These citizenscomprised businesspersons, professionals, workingwomen, housewives, NGOs, market committees,union councilors, and the media.

We selected four resource persons to organizeand conduct discussions on institutional design,provision of public services, public and private mix,and the financing of public services.

We held a series of meetings between citizensand service providers. We conducted twoworkshops where participants discussed the majorissues of city management. In the second workshop,participants developed several preliminary


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recommendations on measures to improve citymanagement. Through this participatory process,the citizens group acquired an appreciation for thetremendous difficulties of managing a large city.We also achieved an understanding of thecomplexity of the interrelated issues that must beaddressed to meet the level of expectation of thecitizens of Lahore.

I will briefly outline the major issues identifiedduring the exercise. By so doing I can set the stagefor the discussion that will take place during thisthree-day seminar.

The effectiveness of urban governmentdepends not only on the people who run it and theenvironment within which it operates, but on itsinstitutional characteristics. Therefore, in anyassessment of urban government the issues must beaddressed on three levels:

� the level of the institutions entrusted with the taskof managingLahore,

� the level of the people selected to run theseinstitutions, and

� the level of the environment in which theseinstitutions operate.

Let us first focus on the institutional frameworkwhich, in many ways, forms the core of the citymanagement issue. The aspects pertinent to effectiveurban government are the structure of urbangovernment agencies, the division of tasks betweenthem, and their staffing and resource bases. We mustalso consider the internal organization andmanagement processes, relations with the provincialgovernment, and interaction with private andcommunity organizations.

In assessing the effectiveness of theseinstitutions, one has to examine the responsivenessof the institution to the needs of a growing city andthe efficiency in the use of resources. One has to

Keynote Address

Through thisparticipatoryprocess, thecitizens groupacquired anappreciation forthe tremendousdifficulties ofmanaging alarge city.

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also account for the technical competence in theselection, design, execution, operation, andmaintenance of infrastructure projects, as well as thefinancial viability of the institution.

In the case of Lahore, two organizations areentrusted with the responsibility of managing the city.These are the MCL and LDA. Subordinate agenciesinclude the Traffic Engineering and TransportPlanning Agency and the Water and SanitationAgency.

The first issue that arose during groupdiscussions and workshops was the existence of twoorganizations with geographical and functionaloverlaps. The dilution of responsibility and divisionof resources resulting from this overlap, it was felt,did not contribute to effective city management. Thediscussions also identified overlapping functionsbetween MCL and the Education and HealthDepartments of the provincial government.

A related issue was the desirability ofsubdividing Lahore into a number of zones, eachresponsible for providing its own services. These issueswere discussed at some length during the twoworkshops, and I am sure they will be discussed furtherduring this seminar. Based on our discussions,appropriate recommendations will be made forinclusion in the Outline Action Plan.

Regarding MCL itself, a variety of constraintswere highlighted that underline the need for theintroduction of professional management. Theseinclude:

� ineffective management,� lack of management systems,� lack of performance indicators,� lack of accountability,� allegations of widespread corruption,� external interference,� rapid changes in management, and� lack of decentralization.

The dilution ofresponsibility

and division ofresources

resulting fromthe overlap of

twoorganizations

did notcontribute toeffective city

management.


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In addition to these constraints, a criticalproblem is the inflexible and limited revenue base.Traditional sources of revenue are inadequate andalternative revenue sources must be identified. Issuessuch as cost recovery, service rates, subsidies, theappropriate mix of taxes, and user charges stimulatedconsiderable debate. It was generally agreed thatthe range and extent of these problems called forsubstantial overhauling of the city�s management.

The role of the private sector is critical to anydiscussion about improving the provision of servicesto the citizens of Lahore. The issue of private sectorinvolvement generated considerable controversyduring the group discussions and workshops. Thekeen interest of the participants in this subject wasperhaps due to a general perception that the questionof the relative roles of private and public sectors inthe national economy is part of an even biggerdebate. It is also linked to the ongoing debate onthe impact of private sector power plants on theelectricity tariff. A great deal of doubt was expressedconcerning the effect of giving free reign to the privatesector in municipal management without a properregulatory framework in place. This issue is likely togenerate considerable discussion during this seminar,and it will be enlightening to incorporate the ideasand experiences of neighboring countries into therecommendations emerging from this seminar.

These were issues related to the institutionalframework. Other critical issues included staffing andthe environment in which these institutions operate.

MCL suffers from a host of staffing problemsat all levels of the organization. These include rapidchanges in top management, absenteeism, excessiveunion influence, and above all a general lack ofstaffing policies aimed at creating a productive andresponsive work force. These issues will be addressedin this seminar.

The overall economic, political, and socialenvironment in the country also has a significant

Keynote Address

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impact on the performance of MCL. Although it maynot be necessary or possible to discuss these aspectsin detail at this seminar, we hope to discuss certainaspects directly relevant to the effective functioningof MCL.

The main focus leading up to this seminar hasbeen on solid waste management. NESPAK�s in-house team has led the discussion of this subject.Various options for improving solid wastemanagement were considered and the finalrecommendations of the seminar will be incorporatedin the Outline Action Plan.

Our expectations from this seminar are in somerespects very high and, in others, modest. Becausesenior government officials, city managers fromPakistan and neighboring countries, and a crosssection of concerned citizens and publicrepresentatives from Lahore will attend this seminar,expectations are high that major issues relating toeffective city management for Lahore will be identifiedand discussed. On the other hand, it is sobering torealize that easy solutions to these complex problemsare unlikely to be found.

What we do hope to achieve is to identify, atleast on a broad canvas, the particular aspectsrequiring urgent attention and the likely directionsto take to find solutions. In my opinion, this gatheringis in itself an important step toward resolving theproblems faced in managing the city. I hope that thecitizens of Lahore will continue to work toward theseobjectives, perhaps in a more formal organization.It is also heartening to note that if press reports arecredible, some of the possible measures discussedin the workshops are already being considered forimplementation. A beginning has thus been madefor city managers and citizens to jointly seek solutionsto the problems of Lahore. It is now up to all of thosegathered here to build on this fine beginning.


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I would like to congratulate the organizers ofthis seminar, especially the AsianDevelopment Bank and National Engineering

Services of Pakistan, who have painstakinglyarranged and coordinated this huge effort fordeliberations on a subject long overdue.

Many problems, such as overpopulation,slums, sanitation, transportation, encroachments, andpollution, are common to large Asian cities. The cityof Lahore is typical in that it suffers from all thesemaladies. Organized and planned development ofLahore has been largely ignored in the past. Themetropolis has grown from a small city 50 years agointo a megacity without any effective planning.

The government of Punjab is committed to doits utmost to improve the socioeconomic conditionsin the province on an urgent basis. One of our toppriorities is to resolve the problems of the citizens ofmetropolitan Lahore.

The keynote address has highlighted a numberof issues that require immediate attention. We needto address these issues in a comprehensive andintegrated manner. I hope that you will give specialattention to five key issues during this seminar andincorporate appropriate recommendationsconcerning them into the Outline Action Plan. Theseissues are:

� streamlining the two public sector organizationsmanaging the city of Lahore, MCL and the LDA;

� pinpointing the flaws in MCL�s organizational set-up and proposing ways of removing them;

III. INAUGURAL ADDRESS

Mian Shahbaz SharifChief Minister of Punjab

One of our toppriorities is toresolve theproblems of thecitizens ofmetropolitanLahore.

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� dividing Lahore into a number of zones for theprovision of services;

� drawing on the experiences of other cities andthe proactive role played by local nongovernmentorganizations to prepare schemes for servicedelivery through an appropriate public-privatesector mix; and

� seeking innovative ways of financing variousservices such as solid waste collection anddisposal, and of curbing wasteful expenditure.

With the expertise available at this forum, it ismy earnest desire to fuse the experiences of nationaland international experts on environment,management, finance, and economics into an OutlineAction Plan. This Plan can form a basis for makingLahore a well-managed city.

On behalf of the government, which iscommitted to improving the life of the urbanpopulation, I offer you my complete cooperation,and assure you that I plan to seriously consider therecommendations of this forum. I will endeavor toput them into practice given the existing constraintsand available resources. All valuable suggestions willbe welcome and this government will endeavor toimplement them expeditiously.

I wish you all productive deliberations.


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This review looks at the institutionalstructure and framework of Lahore Cityand assesses its implications for managerial

performance as Lahore assumes the status of amegacity. Part of the review process is theexamination of the various factors that make up theinstitutional framework of Lahore City. These includelegal structure, performance, external pressures,internal policies, staffing, relations with otheragencies, and interaction with private andcommunity organizations. The effectiveness of citymanagement depends on the strength of these factors.

INSTITUTIONAL FRAMEWORK

MCL is the local government institution responsiblefor Lahore. It was constituted under the Punjab LocalGovernments Ordinance in 1979. In addition, astatutory agency called LDA provides themetropolitan planning and development to improvethe quality of life in the metropolitan area. LDA isassisted by two of its agencies, the Traffic Engineeringand Transport Planning Agency (TEPA) and the Waterand Sanitation Agency (WASA).

A major section of the city, the Cantonmentarea, is run by the Cantonment Board. Some areasof Lahore are managed by cooperative societies, such

IV. REVIEW OF MANAGEMENTSTRUCTURE FOR THECITY OF LAHORE

Syed Mansoor Ali ShahAfridi, Shah and Minallah Advocates and Legal ConsultantsLahore, Pakistan

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as the Cooperative Model Town Society (MTS) andthe Lahore Cantonment Cooperative Housing Society(LCCHS).

METROPOLITAN CORPORATION OFLAHORE

A Chairman and a Vice-Chairman, who are electedby the members of MCL from among themselves andare referred to as the Mayor and the Deputy Mayor,respectively, run MCL. The MCL members (orcouncilors) are elected at the ward level, as well asfrom special interest groups, for a four-year term andthe elections are based on adult franchise.

The number of members to be elected dependson the population of MCL. If the population is 4 millionor more, the maximum number of seats is 150. Themembers from special interest groups represent non-Muslims, workers, and women. Members should becitizens of Pakistan and at least 25 years old. Executiveauthority is exercised either directly by the Chairmanor delegated through his subordinates.

MCL oversees the following operations.

� Sanitation� Collection and disposal of refuse� Prevention of infectious diseases� Drainage and sewerage schemes� Town planning� Maintenance of public streets� Prevention of environmental pollution� Encroachment

MCL functions under the Punjab LocalGovernment Act. Each local council in the Punjabcontrols funding for its area. Funding is generatedthrough the following means.

� Proceeds of all taxes, tolls, fees, rates, and othercharges levied by the local council


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� Grants made by government or other authorities� Loans raised� Profits accruing from investment� Fines imposed under the Punjab Local

Government Act� Other proceeds placed at the disposal of the local

council by the government

Other than the executive authority of theChairman, there is also a Punjab Local GovernmentBoard, consisting of an ex-officio Chairman(Secretary of the Punjab, Local GovernmentDepartment) and three to five members. Themembers hold office for two years. The Board is acorporate body with perpetual succession and thepower to hold, acquire, and transfer property. It hasa Board Fund, which consists of contributions fromlocal councils and grants from governments. It ismandated to perform the following functions:

� act as a planning commission for the localcouncils,

� undertake research and evaluation in localgovernment and issue publications for the benefitof local councils,

� operate the Punjab Local Government BoardFund, and

� recruit and appoint members of the Punjab LocalCouncil Service.

The Punjab government exercises generalsupervision and inspects the councils once eachfiscal year. By notification, the Punjab governmentcan suspend a local council if it has reason tobelieve that the council is unable, or persistentlyfails, to discharge its duties. Upon publication ofthe notification, the Chairman and members of thecouncil shall cease to hold office. During thesuspension period, such person or authority shallperform all functions of the local council as the

22


government may appoint. All councils in thePunjab, including MCL, have been suspended since1994 and are being run by government-appointedadministrators.

LAHORE DEVELOPMENT AUTHORITY

LDA is a statutory body under the Housing, Physicaland Environmental Planning Department. It wasestablished under the Lahore Development AuthorityAct, 1975. The Chief Minister of Punjab Provincechairs it. Its members are the Secretaries of almostall allied departments of the Punjab government. Itis a high-powered body and functions like the boardof directors of a corporation. Some powers of theday-to-day running of the LDA are delegated to theDirector General, who holds office for a three-yearterm.

LDA is charged with the responsibility for:

� developing a comprehensive system ofmetropolitan planning and development toimprove the quality of life in metropolitan Lahore;

� establishing integrated and continuingmetropolitan and regional developmentapproaches to ensure optimal utilization ofresources; and

� evolving policies and programs relating to theimprovement of the environment, housing,industry, traffic, transportation, health, education,water supply, sewerage, drainage, and solid waste.

In the presence of a municipal government,LDA appears redundant. MCL undertakes all theresponsibilities charged to LDA under the 1975 LDAAct. Because LDA is not a fund-generating agency,it is not a sustainable institution. It has to be constantlyfunded through the property tax, which actuallybelongs to MCL. Twenty percent of the property taxgoes to the Excise and Taxation Department as

All localcouncils in the

Punjab,including MCL,

have beensuspended

since 1994 andare being run

by government-appointed

administrators.


23

collection charges. The remaining 80 percent aredivided between LDA (20 percent), MCL (20 percent),and WASA (40 percent). LDA and its subsidiaryagency WASA thus receive the major portion of theproperty tax.

A nominated Board runs LDA with no publicparticipation. The full Board has not met for 10years. It is therefore neither a credible publicorganization nor a deliberative body. The conceptof placing control of municipal government in thehands of MCL is sabotaged by this unreal andunsustainable parallel system. Coordination is alsolacking between MCL, LDA, and the latter �sagencies, TEPA and WASA. Roads built by MCL aredug up by WASA or TEPA � one undoing the effortsof the other.

Justifying the existence of LDA just because itis the custodian of all the urban records is untenable.The records can easily be shifted to MCL. Anotherway of addressing the problem is to assign LDA aspecific role under the auspices of MCL. LDA couldfunction as a development wing of the corporation.Right-sizing or right-placing of LDA could releasefunds for utilization by MCL.

If LDA is to be retained as a governmentagency, it must operate in harmony with MCL. Forexample, development of about 200 colonies(neighborhoods) has been approved by LDA, eachof which lacks provisions for sanitation. This problemwill inevitably fall on the shoulders of MCL, andundoubtedly the corporation will fail to deliver. Theabsence of relationship between two such importantservice providers does not permit the developmentof a workable system.

CANTONMENTS

Outside of the local councils are the cantonments,originally built as quarters for the armed forces butnow supporting large civilian populations as well.

24


Except for purposes relating to the armed forces, thefunctions and objectives of the cantonments are almostthe same as the local councils.

Every cantonment has a corporate body calledthe Cantonment Board with powers to hold, acquire,and transfer properties. It comprises the commandingofficer of the station as the Board President, as wellas 12 elected members, a health officer, amaintenance engineer, a magistrate, and nine civilor military officers nominated by the commandingofficer. Cantonments are divided into wardsaccording to the number of elected members.Members sit for four-year terms and are elected basedon adult franchise.

COOPERATIVE SOCIETIES

Cooperative societies are organized to promote thriftand self-help among people with common economicneeds. Housing is one of the areas in whichcooperative societies have been quite active. Thecooperatives fall under the Cooperatives Departmentof the provincial government. At present, MTS andLCCHS, the largest housing societies in Lahore,perform functions similar to those of MCL and LDAcombined. Cooperative society funding is comprisedof sales of shares, collection of admission fees, loansraised, deposits, donations and grants, sale ofmovable or immovable property, and user fees. BothMTS and LCCHS have general bodies and are steeredby managing committees.

MANAGERIAL PERFORMANCE OF MCL

Experience shows that structural solutions alonecannot rectify the deficiencies of urban government.Improving internal management is equally important.MCL suffers from an ineffective set of managementcontrols, alleged corruption, unduly strong unioninfluences, and a poor image. It is incapable of raising


25

new revenue sources and is unsure of its relationshipwith LDA. The population of the city has outpacedthe revenue contributed to the local council.

MCL functioning is crippled by political as wellas bureaucratic interference and patronage at alllevels. The Administrator, who has all the powers ofthe Council and the Mayor, is a civil servant deputedto the city because elected bodies have beensuspended since 1994. He/she can be transferred bythe Chief Minister at a moment�s notice. The much-needed power and status to exercise clear managerialcontrol, particularly over departmental heads, andto deter political leaders from excessive intrusion intomanagerial functions, is missing. Elected bodies havea strong political background, but being electedrequires strong managerial control. Sadly, politicalintervention is exercised for personal gain at theexpense of MCL and disrupts systematicmanagement.

Top managers are constantly rotated. Uncertaintenure cannot possibly lay any foundation forconstructive and long-lasting work. Quick rotation,based on political considerations rather thanperformance, encourages inefficiency, weakmanagement, and corruption. MCL also lacksprofessional managers. Since MCL staff are notinsulated from political pressure, the need forprofessional people is critical. Professionals wouldbe in a better position to resist outside pressure andthus contribute materially to improving the qualityof operations.

There is also the problem of excessiveunionism. A total of 18 trade unions exists withinMCL. These unions frequently overstep theirjurisdictions and powers as defined under the law.They are known to be violent pressure groups andhave seriously undermined the effective working ofMCL. Thus, in addition to the problems brought onby external interference, MCL has also beenweakened from within.

Quick rotationof topmanagers,based onpoliticalconsiderationsrather thanperformance,encouragesinefficiency,weakmanagement,and corruption.

26


The problems are compounded by the factthat no monitoring or accountability presently existswithin MCL. Local accountability is usually regardedas the hallmark of municipal government. Thischaracteristic would distinguish MCL from mostother forms of public governance by making it moreresponsive to local needs, and by making municipalofficials more directly answerable for their decisionsand performance. Similarly, internal subcommitteesor committees comprising concerned citizens andsenior officers are lacking in MCL. Such groups couldoverlook the work of MCL junior staff. Withoutchecks and balances within the wards, subordinatescan do whatever they want and use the fundsallocated to them in whatever manner they choose.

MCL has a centralized organization structurewith the Administrator or Mayor (after elections) asits chief executive. However, because Lahore hasgrown so large, one administrator cannot possiblyattend to its needs. As a result, effective supervision,control, or accountability is impossible.

The city is divided into eight zones and 130wards. An Assistant Director, who reports to anOperations Director, administers each zone. TheOperations Director reports to the Chief CorporationOfficer, who in turn reports to the Administrator. Alldecisionmaking and authority is thus funneled intoa single individual for an entire city. This is absolutelyimpractical and ineffective today.

The examples of MTS and LCCHS establishthat small and localized administration is effectiveand accountable. The physical proximity of MCLand LDA to residents is also important. The TownHall, which is the head office of MCL, is notconveniently located for several neighborhoods ofLahore. MCL is therefore distant and user-unfriendly.

Finally, citizens need to be educated. Solidwaste should be shown as a menace and disposalprocedures explained. MCL suffers from low visibilityand consequently so do the crucial issues of solid


27

waste and sanitation. Citizens do not know how touse disposal facilities. Public relations or awarenessprograms could inform the public as to what streetis maintained by what agency, how often trash pickupis to be provided, the hazards of obstructing drainsand ditches, and so on. While MCL builds credibilitythrough internal management and structuralimprovement, it can neutralize bad publicity bypromoting written and spoken contact with thepublic. MCL can become a friendly corporation byusing the media to promote public awareness andcivic education.

Citizen participation is also essential at everylevel of decisionmaking. Provision of a link betweenthe residents and the authority would help keeppublic institutions flexible and dynamic. It wouldalso help in the quick and effective redress of thecitizens� day-to-day problems. A complaint systemis successfully working at LCCHS. The complaintbox is emptied every three hours and follow-upaction is taken. It was revealed during the workshopthat although MCL received several complaints itonly attended to them superficially.

28



29

O ne of the most critical issues tackled inthe Lahore City Management Projectwas that of financing services. This paper

briefly describes the findings of the subcommitteewhose mandate was to examine these issues. It alsoincludes the subcommittee�s recommendations.

The rapid growth of population and the extentand pace of urbanization have rendered Lahore�surban infrastructure totally inadequate. Thisinadequacy is attributed to the lack of financialresources available to those responsible for theprovision of services. Other relevant issues includethe adequacy of education and training of citymanagers.

REVENUES AND EXPENDITURE

Pakistan has three tiers of government and taxation:federal, provincial, and local. The central Governmentcollects taxes on income, wealth, capital value, andsales, in addition to customs levies and central exciseduties. The traditional sources of funds are taxationand domestic borrowing. The provinces and localbodies, on the other hand, collect land revenue andagricultural income tax, property taxes, octroi (a localtax on goods entering a city), and a host of minortaxes. The octroi is the most important local tax.

V. REFORMING THE REVENUEBASE FOR URBAN SERVICES

Anwar KamalAnwar Kamal Law AssociatesLahore, Pakistan

30


The total budgeted income of MCL in1996/97 was Rs1.16 billion. Its expenditure wasRs1.18 billion, leaving a deficit of Rs16 million. Thisdeficit was offset by a carry-forward of Rs73 millionfrom 1995/96. Given a city population of 7 million,the expenditure was a very low figure of Rs168 percapita. Sixty-five percent of the budget was allocatedto salaries. In addition to the MCL budget, LDAbudgeted a total expenditure of Rs904 million. Thisfigure included a Revenue Expenditure of Rs463million and a Development Expenditure of Rs441million. The combined per capita expenditure ofMCL plus LDA therefore amounted to Rs297.

The details of MCL�s sources of revenue for1996/97 are shown in Table 1. The Rs70 millionrevenue from the municipal property tax constitutedMCL�s share of the property tax realized by theprovincial government in 1996/97, Rs10 million ofwhich was arrears from previous years. While MCL�s

Table 1: Details of MCL�s Sources of Revenuefor 1996/97

Amount(Rs million)

Octroi 702.0Municipal property tax 70.0Sale of the rights of immovable property 190.0Fee of maps, etc. 20.0Taxes and fines on animals, hand carts, and cinemas 5.8License fee for foodstuff, hazardous trade, slaughterhouse,

fairs, taxi stands, etc. 51.6All types of rents of property, board-rent, etc. 54.7Fees pertaining to schools, dispensaries,birth certificate

copies, sweepers, etc. 15.9Other types of fines including expulsion of stray cattle, etc. 17.3Temporary balance, road cuts 34.5

Total 1,161.8

Revenue source


31

budget estimate of property tax for 1995/96 wasRs180 million, only Rs17.5 million was collecteduntil March 1996. Although more revenues wereexpected during the last three months of the financialyear ending on 30 June 1996, the budget estimatewas reduced to Rs70 million.

As regards octroi, the net income was Rs702million after deducting Rs35 million for salaries ofstaff and payment of Rs58 million, or 8 percent ofRs760 million, to the Lahore Cantonment Board.Generally, this tax is farmed out to contractors inthe private sector through open auction. However,during 1995/96, recovery of the octroi tax was notauctioned due to legal complications and MCLcollected the tax itself. A target of Rs760 million wasfixed for the first nine months of 1996/97, slightlymore than the estimate for 1995/96. Table 2 shows

Reforming the Revenue Base for Urban Services

Table 2: Development and Non-Development ExpenditureBudget for 1996/97

Budget Total(Rs million) (%)

General Department 64.1 5.4Finance Department 24.9 2.1Tax Department 50.2 4.3Education Department 207.6 17.6Social Welfare 4.2 0.4Health Department 466.5 39.6Medicine Department 51.1 4.3Livestock Department 10.0 0.8Fire Brigade/Water Supply 35.1 3.0Engineering and construction of parks/street lights 259.5 22.0Temporary accounts (employee loans) 2.5 0.2MNA/MPA grant 2.5 0.2

Total 1,178.2 100.0

MNA = Members of National Assembly; MPA = Members of Provincial Assembly.

Department expenditure

32


the department-wide development and non-development expenditure budgeted for 1996/97.

While octroi constituted MCL�s single mostimportant source of revenue (60 percent of the total),the health department utilized 40 percent of theexpenditure. Solid waste management falls withinthe health department. Table 3 reflects the capitalexpenditure for the Public Health Department for1996/97, and Table 4 shows the distribution of totalexpenditure on solid waste management within thepublic health department. This total amountrepresented an increase of 8.76 percent over theprevious year�s revised figure of Rs378 million.

The issue of finding funds for capital outlayfor future development could at best be termedtheoretical in the absence of firm estimates of moniesrequired for planned development. Reappraisal ofthe structure and internal dynamics of MCL must beundertaken in order to identify problems and workout strategies for change, in particular arationalization for budget allocation.

The question of raising the requisite funds fromthe capital market, both domestic and international,through municipal bond flotation was considered. The

Table 3: Capital Expenditure for the Public Health Department

Amount(Rs million)

Construction (sewerage, etc.) 22.2Purchase of spare parts, tires, etc. 6.0Repair of automobiles of SWM 8.0Payment of customs duty for machinery of SWM 10.0Purchase of five automobiles 13.0Health center 3.0

Total 62.2

SWM = Solid waste management.

Expenditure items


33

Managing Director of Pakistan Credit Rating AgencyLimited provided useful theoretical input. It wasspecifically pointed out that raising funds from thecapital market for an organization like MCL, althoughpossible, is subject to the following preconditions.

� The organization should be a separate legal entity.� It should have a defined and predictable stream

of income.� The accounts of the organization should be

subject to external audit by qualified charteredaccountants.

� The purpose for raising funds should be specifiedand its income generation capacity evaluated.

PRIVATE SECTOR PARTICIPATION

Greater private sector involvement has beenproposed as an alternative because of the failure ofpublic sector managers. Far from serving as a panaceafor all the problems faced by Pakistan, injudiciousprivatization or unregulated involvement of theprivate sector may lead to greater trouble. If regulatoryand supervisory functions are not in place prior toprivatization, it may be more difficult to deal with aprivate sector firm than with an inefficient,irresponsible, and possibly corrupt public sector


Table 4: Allocation for Solid Waste Management

Budget Total(Rs million) (%)

Salary of sanitation and health staff 333.1 81.1Contingent expenses 37.5 9.1Development and plant 38.0 9.3Total repairs 2.0 0.5

Total 410.6 100.0

Item

34


organization. Public sector management should bereformed so that it better represents the interests ofthe people. The methods by which public assets areconverted into private ones are therefore critical tothe future of the country.

Regardless of whether the lives, needs, andresources of the Pakistani people are handled throughthe public or the private sector, good governanceand management are crucial. In both cases, citizensmust be actively involved as the matter concernsthem vitally, and both the tax and the user chargecome from their pockets. In both cases, the structurescan be abused.

At worst, the public sector is inefficient andirresponsible, the private sector greedy and predatory.Ways and means must be found to make people workefficiently, honestly, and responsibly. In the case ofpublic sector management, both incentives andpenalties must be built into the terms and conditionsof service, and performance indicators must be putin place for objective evaluation. In the case of theprivate sector, since conflict between public interestand private profit is inevitable, the need is to regulate,supervise, and control.

PLANNING AND BUDGETING

MCL does not have a proper system of planning andits budgetary process is grossly inadequate for a largemodern city. The decisionmaking process is arbitrary.In the absence of an elected body, it is managed bypublic servants with no professional expertise in citymanagement. The MCL budget shows annualadditions to the previous year�s provisions, and nosystematic adjustment is made to take into accountthe inevitable demographic changes or variations inthe city�s development. Add-ons to the previous year�sbudget appear to be the sole way of formulating newbudgets. Budgetary provisions have little relevanceto reality and monies budgeted for one purpose are

TheCorporation

does not have aproper system

of planning andits budgetary

process isgrossly

inadequate for alarge modern

city.


35

used with impunity elsewhere. Because the MCLbudget is revenue- rather than demand-driven, it issimply not used as a planning tool.

Similarly, audit procedures are grosslyinadequate and reporting is not done on anallocation/use basis. Audit reports are therefore notforthcoming. Citizen representation is ineffectual inthe planning process and nonexistent in amonitoring/supervisory role. Measurableperformance indicators are not in place. No systemof incentives for quality work and penalties for failureto deliver exists.

RECOMMENDATIONS

1. Use the budget as a planning tool. Budgetingshould be based on detailed cost estimates.Budgeting must be zero-based and the use ofresources more organized and efficient.

2. Determine short-, medium-, and long-termneeds as well as projections for capital outlay,recurring costs, modernization, replacement,and construction of new infrastructure.

3. Review existing sources of provincial taxrevenue, such as property tax and octroi, andcarry out reforms to improve both incidence andcollection.

4. Formulate the policy for federal transfers to avoiddouble taxation on the capital value ofimmovable property.

5. Utilize user charges/service fees judiciouslywhile putting in place performance indicators,as people are reluctant to pay more withoutvisible results. Consider consumers� ability topay when determining user charges and, whereneeded, provide subsidies.

6. Discover and utilize additional and innovativefinancial sources. An example of this is pollution


36


tax/surcharge on petroleum consumption withinthe city.

7. Identify additional sources of capital funds suchas municipal bonds. Carry out necessary reformsto facilitate fundraising from the domestic andforeign capital markets.

8. Include a system of incentives and penalties inthe terms and conditions of service to ensureefficient, honest, and responsible performanceof work by public sector employees.

9. Allow transparency of the budgetary process andmake relevant information available to citizensso that they will know how their money is beingused.


37

VI. PROVISION OF PUBLIC

SERVICES: PUBLIC-PRIVATE MIX

Anjum NasimProfessor of EconomicsLahore University of Management SciencesLahore, Pakistan

In most countries, particularly in the developingworld, the public sector provides services suchas education, health, water supply, sewerage,

sanitation, and solid waste collection/disposal. Thereason is that if these services are left to the market,because of externalities inherent in these services,they are unlikely to be provided at the optimal levelof quantity and quality. Moreover, unregulatedmarkets can lead to monopolies and collusivebehavior among producers.

In Pakistan, public sector involvement in solidwaste collection/disposal, water supply/sewerage, androad construction/maintenance is pervasive. Thepublic sector is also involved in infrastructureinvestment, operations and management of services,and monitoring and regulation of activitiessubcontracted to the private sector. Over the years,the limitations of public bureaucracy in deliveringthese services have become increasingly evident.Disillusionment with the quality and quantity ofservices is presently widespread. This deteriorationreflects both the lack of infrastructure investment andpoor management.

The failure of the government to provide anacceptable level of public services has led to areassessment of the roles of the public and privatesectors. The realization is growing that a role forthe private sector may exist even in these areas �

38


traditionally the domain of the public sector. Thepressure on the financial and human resources ofthe public sector would be eased if both sectorsshared infrastructure investments, as well as thedelivery and management of public services. Theresources released would help improve thefunctioning of the government. The experiences ofseveral countries suggest that private sectorinvolvement in these sectors can improve the qualityand coverage of services.

There is, however, a strong view thatprivatization is not a panacea. Privatization ofteninvolves substantial increases in tariffs, most of whichare monopoly rents. Improvement in the quality ofservice, which is associated with private provisionof services, is difficult to measure or monitor. In anycase, the regulatory capabilities of public bodies,which have the responsibility for monitoring servicesand regulating tariffs, are limited. Strengthening ofthe regulatory capabilities is a prerequisite forprivatization, but institutional weaknesses lie at theheart of the problem. If public sector institutions arestrengthened, we may be able to concentrate on theprovision of public services and not onexperimenting with private provision of theseservices. Also, given the existence of corruption inpublic bureaucracy, private sector collusion withregulatory agencies can be expected. The generalpublic may be left with, at best, a slightly improvedprovision of services, but at the expense of a muchgreater burden in tariffs and rates for services.

Through an analysis of these issues, this papertries to explain why the public sector is traditionallyresponsible for civic services and why it may benecessary to involve the private sector in theirprovision. The paper also lists some of the ways inwhich services can be delegated by the public sectorto the private, emphasizing the regulatory role ofthe public sector. Finally, the paper summarizes thediscussion and recommendations of the workshop

The experiencesof severalcountries

suggest thatprivate sectorinvolvement

can improve thequality andcoverage of

services.


39

participants. In the context of public/private provisionof civic services, three issues were presented fordiscussion.

� Is there a case for privatization of public services?If so, what criteria can we adopt for privatization?

� What are the methods of private sectorparticipation in the provision of civic services?

� What are the regulatory capabilities of the publicsector?

A series of discussions in a subgroup followedthe first workshop on these issues. Thesedeliberations resulted in a set of recommendationsfor improving solid waste collection and disposal inLahore through a mix of public/private participation.

THE RATIONALE FOR PUBLICINTERVENTION

Government intervention in the market can takeseveral forms. It can affect the production of goodsand services indirectly through taxes, subsidies, andregulation even if it is not directly involved in theproduction of goods and services. The term used byeconomists to rationalize this intervention is marketfailure.

To explain this term we must first define theconcept of efficiency. If the number of consumersand producers in a given market is large, the marketoutcome will generally be efficient. This is becauseit is not possible to make someone better off withoutmaking someone else worse off. Efficiency istherefore a desirable social goal, assuming societyis better off by some rearrangement of production/consumption. This would improve the welfare of atleast one person without an offsetting loss to someoneelse. When these welfare-improving possibilitieshave been exhausted, the situation is said to beefficient (or Pareto efficient to be precise). One of

Provision of Public Services

40


the important rationales for the �perfectly competitive�model is that it allows an efficient outcome to occur.

However, there are two problems with themodel. First, the set of conditions under which theefficiency principle holds is restrictive. Second, aPareto efficient solution is associated with each levelof income distribution. Different levels of incomedistribution will lead to different Pareto efficientoutcomes.

Market failure results when one or more ofthe conditions that ensure efficient outcome breaksdown. A monopoly is an example of market failure.It is a condition where a large number of buyers andsellers are absent. Another example is that of a purepublic good. These are goods that are non-excludable and non-rival in consumption. Non-excludability means that it is not possible to excludesomeone from consuming a good. A good is non-rival if consumption by one person does not diminishthe consumption by another. An urban road is anexample of a public good. It would be very difficultto exclude people from the use of the road, andoutside of rush hours, it is non-rival in consumption.A radio broadcast is the perfect example.

It is easy to see that in the above cases freemarket solutions could easily break down. Becauseconsumers may be unwilling to pay if they cannotbe excluded from consuming a good, and thusproducers may not be able to obtain an adequatereturn on their investment.

Sanitation is another example of a publicgood. Every household in the neighborhood benefitsif the streets are kept clean. Problems crop up inattempting to recover costs of this service bycharging households according to the value theyplace on this service. If willingness to pay is assessedby surveying consumers, it would be to eachconsumer�s interest to under-report the extent oftheir valuation of the benefit. Again, private marketsolutions break down.


41

Even where it is possible to charge consumersaccording to the amount of service consumed,private solutions may not be feasible. Water supplyand sewerage are examples. Although water meteringallows for a charge of a service according to use,the initial investment in water supply is very largeand the benefits from this investment are spread overmany years. The private sector may not havesufficient capital and their planning horizon may notextend far into the future.

The public sector is in a better position toundertake investments and recover costs whenmarket-based solutions break down. Take theexample of sanitation. Although the public sector isas constrained as the private sector from levying usercharges, its ability to levy taxes can recover the costsof this service. It does not follow, however, that thepublic sector should provide the service. While apublic sector agency like a municipal corporationmust ensure the availability of the service, itsprovision can easily be contracted out to a privatesupplier. Some considerations as to whether privateor public provision of a service is preferable are asfollows:

� the extent of financial sharing of capital andinfrastructure investment;

� the impact on tariffs;� the effect on the quality of service;� the likelihood of achieving or compromising

distributional objectives;� the regulatory capability in the public sector

(to negotiate contracts, regulate tariffs, monitorservice delivery, and ensure that the terms of thecontract with the private sector are fulfilled); and

� the nature of the adjudication process (in the eventof noncompliance with the terms of contract).

The experience of MCL is a case in point.Recently, it invited bids by private contractor for solid


42


waste collection in certain city wards. The lowestbid was approximately Rs650 per ton. In comparison,MCL�s cost estimate for collection was Rs450.Cursory calculations suggest that if the entire cost ofprivate collection were to be recovered fromhouseholds, it would amount to Rs100 per annumper household. In pre-seminar workshops, someparticipants thought this charge was too high andwould have to be subsidized by MCL or theprovincial government. Others pointed out that incertain areas of Lahore rate adjustment had not takenplace for several decades and in other areas, whilerate revision has taken place, the rates are muchlower compared to those in most countries.Therefore, an additional charge for refuse collectionwas justified.

LCCHS has successfully experimented withprivate provision of solid waste disposal. Until a fewyears ago, LCCHS undertook sanitary work and solidwaste disposal through its own sanitary staff andwaste disposal vehicles. Because the quality ofservice was below the expectations of members ofthe society, the decision was taken to privatize solidwaste collection. This resulted in reduced cost ofsolid waste collection and improvement in the qualityof service. Quality clauses were built into the contractwith the private contractor. Supervisors appointedby the society monitored quality. Today the standardof solid waste collection by LCCHS is perhaps thebest in the city.

It should be pointed out, however, that LCCHSis not representative of other areas of the city. Interms of population, it is equivalent to just one ofthe city�s 130 wards. Furthermore, LCCHS membersare some of the wealthiest people in the city andtherefore the level of education and civic sense arefar above the average. Most importantly, during theprivatization of sanitary services the army providedsecurity to LCCHS, preventing any threat from thelabor union of sanitary workers. After a few years of

The LahoreCantonmentCooperative

Housing Societyhas successfully

experimentedwith privateprovision ofsolid waste

disposal.


43

litigation, sanitary services in LCCHS were declaredessential services and the court cases were effectivelyquashed.

A caveat must be added to this apparentsuccess story. Solid waste collected at LCCHS isdisposed at unused plots or private agricultural land.These sites are not proper landfill sites and there isno treatment of solid waste. In this sense, the practiceis not very different from the waste disposalarrangement of MCL.

THE FAILURE OF THE PUBLIC SECTOR

The role of the state in the provision of goods andservices predominates in the developing countries.The underdeveloped state of markets and a limitedentrepreneurial class has obliged governments ofthese countries to assume a large role in theproduction and distribution of goods and services.Over the years, the limitations of public bureaucracyin delivering these goods and services have becomeevident. To understand why this may have happened,the following passage from Klitgaard is instructive.

For an organization to work well, presumablyits leaders and members should understand theorganization�s objectives, should be able tomeasure their success in achieving thoseobjectives, should have well defined tasks toperform that contribute to those objectives,should have means to carry out and coordinatethose tasks in a timely fashion, and should haveclear lines of authority. To reiterate, a successfulorganization is successful in f ive areas:objectives, measures, technologies, incentivesand authority.1


1Klitgaard, Robert. 1991. Adjusting to Reality: Beyond �State versus Market�in Economic Development. San Francisco: International Center for EconomicGrowth.

44


Typically, public sector institutions fail on mostof these requirements while the private sector faresbetter.

Another major reason underlying the failureof public services investment in Pakistan is the seriousfinancial crunch faced by the Government. Weargued earlier that the Government might be in abetter position than the private sector to recover costsof provision of certain types of services. Theexperience of many developing countries (includingthat of Pakistan) indicates that governments are eitherunwilling or unable to raise these revenues.Furthermore, the resources required to carry out largeinvestments in public sector projects are not easilyavailable. The lack of investments and the fiscalsqueeze has eroded the quality of public services ingeneral and municipal services in particular. Relatedto the issue of fiscal squeeze is the issue of publicsector wages, which have failed to keep up withinflation. This factor has also contributed to theerosion in the quality of management in the publicsector. Thus, while qualified people face adisincentive from entering public service, corruptand unqualified people are attracted.

While the public sector cannot be absolvedof its responsibility, workshop participants alsoidentified the lack of civic sense and the poorstandards of hygiene among the public as majorfactors contributing to the poor standard of sanitationin the city. Lack of education and civic sense areimpediments to maintaining sanitation even if certainservices are privatized.

Notwithstanding the performance of the publicsector, most participants in the workshopsemphasized the need for the presence of a publicsector entity in solid waste collection. Theyconsidered public sector presence important, as itwould be a check against monopolies. The presenceof the private sector would also enhance theproductivity of the public sector through competition.

While qualifiedpeople face a

disincentivefrom entering

public service,corrupt andunqualifiedpeople are

attracted.


45

However, it was felt that competition alone will notimprove the efficiency of the public sector, as wasdemonstrated by the example of the Punjab RoadTransport Corporation. The Corporation, despitestrong competition from the private sector, had beenrunning losses for many years and finally had to beliquidated.

PRIVATE SECTOR PARTICIPATIONMETHODS

The failure of government to provide an acceptablelevel of public services has led to a reassessment ofthe roles of the public and private sectors. There is agrowing realization that there may be a role for theprivate sector even in those areas, traditionally thedomain of the public sector. The following are someof the ways in which private sector participation ispossible.

Contracts from Public Agencies

The overall responsibility in an area may be vestedwith the public sector, but some activities, such asroad construction and maintenance, may becontracted out to the private sector. Public agenciescan provide specifications for the work and privatecontractors can be selected through a biddingprocess.

Monopoly Franchise

Economies of scale sometimes suggest that a servicecan be provided at least cost if there is a singleprovider. A public authority can appoint and give aprivate provider the franchise to provide a servicefor a certain period of time (as long as 20-30 years ifthe investment in machinery or equipment has a longlife.) Both can agree on the quality of service andtariffs. The private party undertakes the investment.


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Management Contracts

Management contract differs from monopolyfranchise. Here, the public agency undertakes theinvestment while the private sector manages it.

Self-help

Self-help is an important form of privatization. TheOrangi Pilot Project in Karachi is a case in point.Between 1980 and 1990 the project developed alow-cost sanitary system for 47,000 households atone fourth the investment cost of municipality-purchased systems. The project is self managed andused self-financed construction.

While the Orangi project, headed by AkhtarHameed Khan, is the best known example, theLahore Sanitation Programme (LSP), headed by AsifFarroki, is another success story. In cooperation witha number of NGOs, LSP supplements MCL sanitaryservices in Lahore. At the beginning of each month,LSP workers provide plastic bags to households fordepositing refuse. The bags are provided at a chargevarying from Rs25 (in low-income areas) to Rs100per month (in high-income areas). The LSP workerscollect refuse bags every other day. These bags arethen dumped in a designated plot from where theyare picked up by MCL trucks. LSP is able to provideservices where local workers can convince 1,000households to participate in the program. This levelof participation covers overheads for the collectionof refuse bags and hiring of vans to bring refuse bagsto a dumping site. The participation of localcommunity organizations is critical to the successof the program.

REGULATORY ISSUES AND CAPABILITIES

Regulation is required to maintain a balance betweenthe conflicting interests of governments, private


47

providers, and the consumers. Regulation includesensuring that:

� the quality and quantity of services satisfy theterms of the contract between the public andprivate producers,

� the benefits of lower cost and greater efficiencyare passed on to the consumer, and

� adjustments are made periodically in tariffs toaccount for inflation or contingencies.

This in turn raises questions: What are thecurrent monitoring and regulatory capabilities ofMCL and LDA? How can these capabilities bestrengthened?

Understanding the institutional limitations �whether privatization requires strengthening ofexisting institutions or setting up new regulatoryinstitutions � is crucial for the effectiveimplementation of a privatization plan. An assessmentof the existing institutions and their strengths is thesubject of another paper in this seminar.

RECOMMENDATIONS

The focus of discussions in the workshops includedsolid waste collection and disposal. The group tookinto account issues related to the collection of solidwaste, transfer of refuse from one location to another,and the development and administration of disposalsites. The public/private mix was discussed in thiscontext. The recommendations of the subgroup aregrouped under three heads.

A. Privatization of solid waste collectionB. Stages in collection and disposalC. Landfill sites


Understandinginstitutionallimitations iscrucial for theeffectiveimplementationof aprivatizationplan.

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A. Privatization

Context: The quality of sanitation service varies frombeing tolerable in the relatively affluent residentialareas to deplorable in the less affluent areas. MCLsanitary staff starts work at dawn and completes streetcleaning before business activity starts in the city. Streetcleaning is typically done once a day. MCL has over8,000 sanitary workers on its payroll. A large numberof them work only part of their eight-hour shift, whileanother significant number are frequently absent.Through better utilization of the workforce and bettermonitoring and control, the standard of cleanlinessin the city can be vastly improved.

The system of refuse collection and disposalsuffers from absenteeism, inadequate level ofmaintenance of equipment and machinery, shortageof transfer stations, and absence of proper landfillsites. Of the total number of workers officiallyassigned for refuse collection, only about half reportfor duty. The total number of vehicles for refusecollection with MCL is 133, sufficient for collectingonly 70 percent of the refuse generated in a day.There is one transfer station at Outfall Road. Threemore transfer stations are required to cope with thevolume of refuse generated. The city does not havea single landfill site.

1. MCL should continue to be responsible for streetcleaning. Since cleaning only once a day isinadequate in many parts of the city, cleaningshould be increased to twice a day. Betterattendance of workers should be enforced.

2. Privatize solid waste collection and disposal inone zone of the city on an experimental basis.The zone should have a significant presence ofboth rich and poor neighborhoods. Zonenumber six, which constitutes about 10 percentof the city�s wards, is suggested.

Privatize solidwaste collectionand disposal inone zone of the

city on anexperimental

basis.


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3. In setting terms of the privatization contract,including standards of quality, public authoritiescould be guided by the contract between LCCHSand a private firm for the collection of solidwaste. Because the LCCHS population is roughlythe size of one city ward and its area is muchlarger than a typical city ward, its contract cannotsimply be replicated. However, the contractprovides a benchmark for negotiatingprivatization contracts in the city.

4. With privatization of solid waste disposal in onezone, reducing the workforce can effectexpenditure reduction in MCL. Most workersshould be able to obtain employment in privatefirms contracted by MCL. Experience withcontracting sanitary services by the private/cooperative sector suggests the existence of anentrepreneurial class that can take up thechallenge of providing these services. If MCLdecides to privatize, it can attract theseentrepreneurs as well as firms and NGOs withexperience in this area.

5. After privatization, in Zone 6, MCL should curtailits solid waste expenditure budget by about 10percent. Although this may not be feasibleimmediately, the target should be realized in ashort period. The money saved could be usedto pay the private contractor. If the contractor istoo costly, the balance should be made up by alevy on households. Given the experience ofthe Lahore Sanitary Programme, it appears thata willingness to pay exists among households,and that scope for cross subsidization isconsiderable. NGOs, local councilors, andmembers of the community should be involvedin obtaining estimates of willingness to pay, andpersuading residents to pay for the improvedquality of service.


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6. To make private investment attractive, thecontract period should be 3-5 years. Privatecontractors should be able to lease or buyexisting equipment from MCL.

B. Stages in Collection and Disposal

Context: Solid waste collection and disposal involvesfour stages.

� Stage 1: households deposit garbage inthe refuse dump in the vicinity of thehouse.

� Stage 2: the refuse is transferred to a skip.� Stage 3: refuse is taken from a skip to a

transfer station in a truck.� Stage 4: refuse is taken from the transfer

station to a dumping site.

The household and the community caneffectively handle stages 1 and 2. The current practiceis for households to deposit their waste in a refusedump in the neighborhood, from where it is removedby MCL workers to a skip. The frequency of thiscollection, however, is irregular and unreliable.

At present, only one designated transfer stationexists in Lahore. The minimum number should befour. Transfer stations allow a faster process flow. Itallows smaller vehicles to collect city waste andtransfer it to larger trucks and trailers to be taken toa dumping/landfill site.

1. Privatization of solid waste collection shouldinvolve stages 3 and 4. Private contractorsshould be responsible for the collection fromthe skip to the transfer station and from thetransfer station to the dumping/landfill site.

2. The household and local community should beresponsible for stages 1 and 2. Households


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should be required to deposit refuse directly intothe skips. If the skips are not convenientlyplaced, the transfer from the local dump to theskip can be contracted to a private contractor.Each household can afford this with a smallcontribution. One could also privatize stages 1and 2 through a contract between MCL and theprivate provider. However, it may be moresuitable in phase one of the experiment to havea mix of community level initiatives and privateprovision. Because, if the responsibility of theprivate provider is more focused (e.g., clearingskips every 24 hours), a faster and more efficientservice may be possible. Monitoring this servicemay also be easier for MCL. The monitoring ofwaste collection at every street is much moredemanding.

3. Strengthen the supervisory role of MCL. Conducta survey to obtain a measure of consumersatisfaction in the areas where privatization isenvisaged. Carry out periodic surveys to monitorthe quality of private provision. Market researchfirms, which carry out similar surveys routinely,can be contracted to conduct such consumersatisfaction surveys. Cancel contracts if theprivate contractor falls short of some benchmark.One possible benchmark is the volume of refusecollected. If proper landfill sites are developed,monitoring of such refuse collection will becomefeasible.

C. Landfill Sites

Context: The current waste disposal practice is todump refuse at dumping sites on the outskirts of thecity, in vacant lots, on farmland (as manure, withthe consent of farmers) and at low lying areas aroundthe city. The present method of dumping isenvironmentally unsafe. Untreated hazardous waste


52


seeps into ground water with potentially seriousconsequences. A study conducted for the World Bankassessed the need for four landfill sites in the city. Afeasibility study for one landfill site at MahmoodBooti has been carried out, but its development isstill uncertain. This site is appropriate for 25 percentof the solid waste collected. Another landfill site hasbeen identified at Kahna Kacha.

1. Develop proper landfill sites. Operationalize thelandfill site at Mahmood Booti and start afeasibility study on the landfill site identified atKahna Kacha. Identify two new sites. The studyfor the World Bank (mentioned above) identifiedthese sites as West of New Bund and Babu Sabu.

2. Private firms should handle the operation,maintenance, and management of landfill sites.This recommendation is in line with the thinkingamong policy makers.


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VII. PLAN FOR SOLID WASTECOLLECTION AND DISPOSAL

M. P. AftabVice President, National Engineering Services of Pakistan

Municipal solid waste management inLahore is a responsibility shared by MCL,the Cantonment Board, the Model Town

Society, and LCCHS. The Lahore SanitationProgramme, on the other hand, was initiated by anongovernment organization.

Lahore generates approximately 3,000 tonsof solid waste every day, a total of 1 million tonsper year. This figure is expected to increase to 2.2million tons by 2020. Presently, about 7,300sweepers clean the roads and other areas and transfersolid waste generated by residential, industrial, andcommercial centers from collection bins, skips, andcontainers located at various sites throughout thecity to vehicles for further disposal. Most of thesebins are made of concrete or masonry. A total of871 mechanical skips and 198 containers are setup at selected locations. Open trucks and specialpurpose trucks take the waste from the bins eitherdirectly to the landfill sites at Charir, Kamahah, Barki,and Hudaira, or to the transfer station located atOutfall Road. It is estimated that about 70 percentof the total waste generated is collected.

Other than the unofficial landfills (dumpingspaces), Lahore does not have any other kind ofdisposal system. Daily, about 10 tons of hazardousand infectious wastes from 30 hospitals requireincineration. Only three hospitals incinerate theirwastes. The remaining hospitals dispose of theirwaste along with their domestic waste and garbage.

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According to the Environmental ProtectionDepartment, this practice is hazardous to health andenvironment.

OTHER ASIAN CITIES FACE SIMILARPROBLEMS

In Bangkok, solid waste is shipped to disposal sites100 kilometers or more outside the city by either themunicipal authority or private contractors. The MetroManila Development Authority is working to closeits existing open dumpsites on private land, replacingthem with three sanitary landfills outside the city.

Under the Madras Waste Management Project,the World Bank�s proposed plan recommends thatthe government should combine its resources withlocal community groups to develop an integratedand improved collection service. Collection truckswill be standardized and existing transfer stationsupgraded. Waste collection points will beconstructed in outlying areas to bring them into thesystem. A new authority is proposed to take controlof the landfills and bring them up to a standard wherethey no longer threaten the local environment.

Taking a somewhat different approach, themegacities of Shanghai, Seoul, and Calcutta havechosen to supplement existing landfill disposal withother techniques. For instance, Shanghai expects toincinerate 40 percent of its solid waste by 2000.Seoul, which is at the high end of the solid wasteproduction scale for Asian cities, is acting to reducesolid waste generation. Its solid waste reductionpolicies restrict the use of disposables andoverpackaging, reduce food waste, and offerincentives to the recycling industry. Meanwhile,Calcutta is operating two pilot plants for productionof biogas and is experimenting with the release oftrapped gas from landfills for power generation. It isalso establishing, in partnership with the privatesector, a system of composting of household waste.


55

Hong Kong�s Chemical Waste Treatment Facilityis Asia�s first state-of-the-art integrated chemical wastecollection treatment and disposal system. This is anexample of government and industry working togetherto solve the complex problem of solid waste.

COLLECTION OF SOLID WASTE

Provider�s Side

The collection process in Lahore improved after1988. The present system collects 70 percent of solidwaste (compared to 40 percent in the 1980s), whilethe rest remains scattered along roadsides and openspaces. Solid wastes are also burned in skips andbins. This practice damages the skips and generatestoxic fumes.

In 1988, the collection process wasmodernized by bringing in more scientific equipmentsuch as compactors, arm rollers, skips, containers,and bins. These replaced the manual system ofspades, baskets, open trucks, and bullock carts.Although the modernization program was useful, itwas not properly planned. The machinery washaphazardly ordered and it was either improperlyused or overmanned. It was also subjected to theft.The ratio of compactors to skips and arm rollers tocontainers is not correct, resulting in additionalinefficiency. New machinery is required and oldequipment needs maintenance.

Compaction trucks are typically designed tocompact light refuse (100-400 kilograms per cubicmeter [kg/m3] density). However, waste density inLahore is usually around 500 kg/m3. Different trucksare therefore required. Presently, there are 34compacting vehicles in Lahore.

MCL has also started collection of waste fromhouses, dividing the city into 10 zones, zones intowards, and wards into units. Households in thebetter-off residential areas pay Rs100 per month to

Plan for Solid Waste Collection and Disposal

The presentsystem collects70 percent ofsolid wastewhile the restremainsscattered alongroadsides andopen spaces.

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garbage collectors, while those in the low-incomeareas pay Rs25 per month. However, theinefficiency in the sanitation structure of MCLdestroys public confidence because sanitaryworkers do not do their jobs and no-show workersare tolerated by MCL. Checks and control over staffis loose and defective.

Consumers� Side

The role of consumers in collecting waste is notencouraging. The transfer of solid waste/garbage fromhomes to the nearby skips or bins is inefficient andunhealthy. At times, the garbage is dumped outsidesomeone else�s house and not taken to the skips atall. In other cases, the skips are not used and thegarbage is scattered around them. Garbage is notcollected in proper disposal bags.

Culturally, people concentrate on keepingtheir homes clean by throwing the garbage on thestreets. Servants who are actually dealing withcollection and transferring of solid waste on the spotare not educated by their employers. There is a needfor MCL to undertake a campaign to educate thecitizens on the need for good waste disposal practicesat the household level.

REDUCTION OF SOLID WASTE

Various studies by different agencies have beenconducted to improve solid waste management inLahore. Each of these studies recommendedimproving the existing collection and disposalsystems in a scientific manner. They also emphasizedincreased public awareness and utilization of theprivate sector to collect and dispose of wastes.Another recommendation was to introduce trainingprograms for the staff.

Based on the recommendations, MCLprepared a comprehensive proposal with a total


57

project cost of Rs808 million to deal with solid wastemanagement. The project includes the constructionof a landfill site (Rs43 million), a gas recovery system(Rs40 million), a power plant (Rs190 million),hospital waste incineration (Rs81 million), andtechnical assistance (Rs60 million). The project is tobe funded by the World Bank under a technicalassistance grant of Rs60 million and a $11 milliongrant through the Global Environment Facility. TheGovernment of Pakistan and private investors are tobear the balance of the cost.

The sanitary landfill site at Mahmood Bootiwill cover 30 hectares and have a receiving capacityof 250,000 tons/year. It is located north of Bund Road.The project is a modern earth embanked landfill,with optimized gas extraction capacity to recovergas produced by the enhanced and controlled decayof organic materials within the landfill. The recoveredgas will be utilized to provide energy for a gas-drivenpower station. The Water and DevelopmentAuthority is expected to purchase and feed theproduced electricity into the local power grid. Theresidual material in the landfill, on the other hand,will be used as soil conditioner and filling materialonce the process of biodegradation is completed.

In order to improve the prevailing solid wastecollection system, the following steps need to beincorporated in the plan.

� Revise zonal boundaries based on population andarea.

� Establish performance indicators for variouscategories.

� Encourage public participation/awareness.� Immediately review areas lacking in collection

facilities � type and quantity of equipment,transport, etc.

� Abolish the existing transfer station at Outfall Roadafter construction of the sanitary landfill atMahmood Booti.

Plan for Solid Waste Collection and Disposal

58


� Involve the private sector in collection andtransportation of solid waste.

� Tender a separate contract to build, operate, andmaintain a sanitary landfill at Mahmood Bootion priority basis.

� Initiate the process of land acquisition at othersites such as Kana Kachha, Ferozepur Road,Bedian Road, and Shahdara.

� Immediately install a hazardous waste incineratorat Mahmood Booti.

� Organize scavenging activities at the source aswell as final disposal points.

� Ensure the availability of adequate workshopfacilities for effective fleet operation.

� Immediately ban dumping of solid waste intoRiver Ravi.

� Encourage training and motivated academicresearch for solid waste management.


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VIII. AN OUTLINE ACTIONPLAN FOR MANAGEMENT OFLAHORE CITY, WITH EMPHASISON SOLID WASTE DISPOSAL

Iftikhar KhalilManaging Director, National Engineering Services of Pakistan

The proposed action plan outlines thevarious recommendations of the keystakeholders in Lahore after a series of

meetings and workshops held to examine and findsolutions to the problems besetting city managementand suggestions made during this seminar.

The paper has three parts. The first partconcentrates briefly on the problems of Lahore. Thesecond part presents the Outline Action Plan onManagement Reforms, followed by a summary ofthe main recommendations. The paper ends with aconclusion and final remarks on the entire process.

THE PROBLEMS OF LAHORE

As we are all aware, the problems of Lahore are nodifferent than the problems of any large metropolitancity. They are generic in nature and as we have beenhearing for the last two days, these are the problemsthat are also faced by all neighboring countries. Thequestion is primarily that of degree.

Broadly speaking the causes of Lahore�sproblems can be classified into three areas:

� rapid population growth,� need for improvements in the institutional

framework for city management, and

The problems ofLahore are nodifferent thanthe problems oflargemetropolitanareas in allneighboringcountries.

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� inadequate financial resources for citymanagement agencies.

The City of Lahore has a population between6 and 8 million and an annual growth rate of over4 percent. The civic bodies of Lahore such as theMCL and LDA have been unable to cope with theformidable challenges of rapid urban growth dueto limited resources and inadequate institutionalframework for city management. Some of theconcerns that city management faces are inadequatesolid waste collection and disposal, lack ofsanitation, poor stormwater drainage and sewerage,and air and water pollution. Other problems includegeneral deterioration of infrastructure facilities,increasing encroachments, traffic congestion,insufficient public transport, poor roads, inadequatewater supply, nonavailability of proper housing,inadequate attention to green areas, uncontrolledcommercialization, and growing katchi abadis(informal settlements). Ironically, this deteriorationhas apparently been accepted both by the serviceproviders and by the citizens.

OUTLINE ACTION PLAN

The various stakeholders in Lahore formulated theaction plan as a result of the deliberations. Theseare categorized into four areas: institutionalstrengthening, provision of municipal servicesthrough a public/private mix, financing of services,and handling of solid waste. These areas aredescribed below.

A. Institutional Strengthening

� Eliminate overlapping functional responsibilitiesbetween different organizations of MCL, LDA, andother agencies.

� Subdivide Lahore into separate zones for a more


61

effective system of service provision.� Hire professionals from public or private sector

as city managers with clearly defined performanceindicators and specified tenure.

� Introduce staffing policies aimed at creating aproductive and responsive workforce.

� Involve citizens in the decisionmaking process.

B. Provision of Municipal Services:Public/Private Mix

� Restore confidence of people in the civic agencieslike MCL and LDA.

� Introduce a competitive framework of public/private mix for efficient civic management.

� Develop a regulatory framework that strikes abalance between the complex set of interests ofgovernment, private providers, and consumers.

� Experiment first with pilot privatization projectsthat can be extended to other areas (e.g., solidwaste disposal in a selected zone).

� Award all private contracts in a transparentmanner.

� Ensure service costs are reasonable andaffordable.

C. Financing of Services

� Adopt a well thought out budget as the basicplanning tool. It should be zero-based withorganized and efficient use of resources.

� Determine short-, medium-, and long-term needsand make projections for capital outlay, recurringcosts, modernization, replacement, and theestablishment of new infrastructure.

� Review existing sources of local tax revenue, suchas the property tax and the octroi, and carry outreforms to improve both incidence and collection.

� Increase and judiciously utilize user charges/service fees. Performance indicators must be put

Action Plan for Management of Lahore

62


in place while considering higher user chargesfor financing of services.

D. Handling of Solid Waste

� Establish performance indicators for all levels ofmanagement so that goals and targets are set forthe solid waste management system.

� Computerize monitoring data to effectivelymanage solid waste disposal.

� Create public awareness to promote citizenparticipation in the improvement of solid wastemanagement.

� Involve the private sector in the collection andtransportation of solid wastes. It is recommendedthat initially this be applied in Zone 6.

� Acquire a suitable landfill site near Lahore. Awarda separate contract to build, operate, and maintaina sanitary landfill at Mahmood Booti.

� Immediately ban the dumping of solid waste intothe River Ravi.

CONCLUSION

In conclusion, I would like to share a few thoughts.Both in the keynote address and in this presentationof the Outline Action Plan, an attempt has beenmade to conscientiously reflect the issues andrecommendations that have been developed as aresult of a five-month long interaction with a groupof concerned and committed citizens. They havedevoted innumerable hours of their time to voicetheir concerns, to develop a better understandingof the complexity of issues and of the constraintsfaced by the government and the municipalmanagers, and to convey their desire to be an activepart of the problem-solving effort. They providedthe intellectual stimulus for this exercise, withNESPAK functioning as a facilitator.


63

As stated in the keynote address, it was realizedfrom the very start that an exercise of this nature,with its limited time frame and resource input couldnot possibly attempt to recommend a comprehensivepackage of appropriate measures for making Lahorea model city. However, it could serve as an importantstep towards a participatory evolution of suchmeasures. It is hoped that what has been achievedas a result of this exercise is the provision of essentialfeedback from citizens to the Government andmunicipal managers.

In this context, I would like to refer to acomment made by one of our distinguished foreigndelegates on the first day of the seminar. He rightlypointed out that, in assessing whether a city is wellmanaged or not, the public perception has to be thedetermining criterion. Thus, feedback from thecitizens must be an integral part of any serious effortto improve the provision of services to the citizens.

The current Government�s understanding ofthe nature and complexity of the problems facingLahore is not in question. Nor is their commitmentto the speedy resolution of these problems. However,it is important to listen to what the citizens are saying.Just like the Government, they are concerned andwilling to help to resolve these problems.

I am confident that the deliberations of thisseminar will be viewed in this context and that thefeedback from the citizens, together with the valuableinsights provided by our guests, will be given dueconsideration.

I also hope that the citizens who participatedin this exercise will sustain their enthusiasm toimprove Lahore and that the Government willestablish a mechanism to continue to receive suchfeedback.

Action Plan for Management of Lahore

Feedback fromthe citizensmust be anintegral part ofany seriouseffort toimprove theprovision ofservices to thecitizens.

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65

It has been a pleasure to be here with you todayat the Presentation of the Outline Action Planfor Lahore City. I am happy that the Asian

Development Bank has selected municipalmanagement as one of the key areas for its work ongovernance and that the underlying theme of thisseminar is to create public awareness and an enablingenvironment for a professional and customer-orientedcity government. It is also a matter of satisfaction thatthe Bank has selected the city of Lahore to pioneer itsplans for municipal management reform.

Lahore is a very old city. Its history can bereliably traced back to the first half of the eleventhcentury. It is also the second largest city in Pakistan.The population of the city at the beginning of the20th century was about 230,000. At the time ofindependence in 1947 it had increased to 770,000.Since then Lahore has continued to grow andits present population is anywhere between6 to 8 million. Unfortunately, the development ofinfrastructure and public facilities have not matchedthe population growth and we are therefore facedwith very serious urban problems.

MCL has the primary responsibility for theprovision of civic facilities to the citizens of Lahore.Like other municipal bodies, it faces serious financialconstraints. A look at the current MCL budgetindicates that its expected income in 1997/98 isRs1,183 million. Of this, Rs835 million (68.5 percent)will be spent on salaries. Only 16.2 percent of thebudget, or Rs202 million, will be available for theexecution of development projects. A small amount

IX. CONCLUDING ADDRESS

Shahid HamidGovernor of Punjab

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of Rs45.7 million, about 3.7 percent, is available forthe maintenance of roads, buildings, and offices.Keeping in view that Lahore has more than2,500 km of roads, 3,000 km of streets, and a largenumber of schools and hospitals run by MCL, it isevident that satisfactory maintenance of even a smallpart of these physical assets is impossible. Muchlarger amounts are required for development andmaintenance. If the staff strength cannot be reduced,the Corporation shall have to broaden its tax base,make its system of collecting existing taxes moreefficient, and explore new avenues to supplementits financial resources.

From Independence to 1975, the developmentof new areas in and around Lahore was the functionof the Lahore Improvement Trust. In 1975 the Trustwas converted into LDA, and WASA was establishedas a separate wing within LDA to look after the water,sewerage, and drainage problems of the entire city.

As I have been saying to the heads of MCL andLDA over the last few months, they are doing the samework in different parts of the city. LDA, for example,is maintaining roads, gardens, streetlights, andundertaking a host of activities and functions thatshould be the exclusive responsibility of MCL. I amclear that maintenance works should be looked afterby the MCL, while LDA should concentrate all itsenergies on development works and, in particular,on new housing schemes. With the possible exceptionof parts of the Shahrah-e-Quaid-e-Azam, themaintenance of roads, streetlights, traffic signals, roadjunctions, and recreational parks should revert to MCL.LDA should be reorganized on commercial lines andits main source of income should come from the saleof residential and commercial plots in the new housingschemes it has built. The profits generated from thenew housing schemes should be reinvested in othersuch schemes while part of these profits should bespent on selected projects within the inner city.Notwithstanding the fact that LDA must acquire land


67

at market rates, there is no reason why it cannotovercome this financial hurdle by announcing anattractive exemption policy for the affectedlandowners. This is the manner in which 3-4 decadesago the Trust, with very limited funds, developed thefive Gulberg schemes, the Shah Jamal Scheme, theNew Garden Town Scheme, the New Muslim TownScheme, and the Upper Mall Scheme.

Another area characterized by duplication andoverlapping of the work of MCL and LDA is theenforcement of the building code regulations. Forcertain specified areas the work done by either orboth is subject to the still further control of a high-level Design Committee constituted by the provincialgovernment. The huge number of encroachmentsall over Lahore, the unauthorized building activitythat has led to the establishment of ever more katchiabadis, and the large volume of complaints againstthe building inspectors are all testimony to the factthat the entire system needs a drastic overhaul. Inthe process of doing so I would recommend thecreation of a single Building Control Agency for thewhole of Lahore as has been created by the Sindgovernment for Karachi and by the North WestFrontier Province government for Peshawar. If thisis done, the heads of both the MCL and LDA will beable to devote much more time and attention tomunicipal and development work.

Solid waste management is a priority area forMCL. The city generates about 3,000 tons of solidwaste every day but does not have satisfactoryarrangements for its disposal. There are no properlandfill sites and solid waste is dumped in open spacesat various points in the city. Besides spreading filthand dirt, the waste poses serious problems for thehealth of the citizens.

Particularly harmful to human health is thehospital waste that has the potential of spreadinginfectious and contagious diseases. There are about30 major hospitals in the city and only three have

Concluding Address

I wouldrecommend thecreation of asingle BuildingControl Agencyfor the whole ofLahore.

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incineration facilities. The other 27 do not have anyproper disposal system for their waste material. Atpresent MCL is disposing hospital waste along withdomestic waste and garbage. MCL must learn fromthe experience of other countries, especially Asiancountries with success in solving the problem of solidwaste management. Calcutta, in India, has developedproper landfill sites and is presently operating twopilot plants for production of biogas and isexperimenting with utilization of trapped gas inlandfills for power generation. Hong Kong�sChemical Waste Treatment Facilities has verysuccessfully involved the local industries in workingout a system to control the solid waste problemcaused by the discharge of toxic waste by industry.

The citizens of Lahore are fully aware that afterLDA or MCL build a road, a few weeks or monthslater, it is dug up by either the Sui Gas Authorities,the Water and Sanitation Agency (WASA), or theTelephone Department. We must devise and put inplace an institutionalized system of coordination ofthe activities of various departments and agencies,including Sui Northern, WASA, PakistanTelecommunications, LDA, MCL, and others. Underthe LDA Act, 1975, LDA has this power but thehead of LDA probably finds it difficult to performthis essential coordination role because some ofthese bodies fall under the control of the FederalGovernment. It may be more feasible and effectiveto locate the coordinating body in the Secretariatof the Provincial Government under thechairmanship of either the Minister or the Secretaryfor Local Government.

Similarly, provision of water supply in variousparts of the city must be matched by correspondingdevelopment of sewerage disposal schemes. Atpresent many more areas have been supplied withwater than are covered by sewerage disposal works.As a result, the problem of sewerage disposal has beenaggravated, causing hygienic and health problems in


69

large areas of the city. This brings us to the relatedproblem of the treatment of sewerage water.

Presently, polluted sewerage water, whichincludes toxic industrial waste, is being dischargedinto the Ravi River. This is a disastrous practice andposes a serious threat to the health of the peoplewho use the downstream water for irrigation andother purposes. The future plans of WASA mustinclude construction of water treatment plants invarious areas to ensure that only treated water isdischarged into the river. A water treatment plantwas envisaged in the Punjab Urban DevelopmentProject supported by the World Bank, but owing toinstitutional problems and cost overruns, theconstruction of this treatment plant was abandoned.However, the feasibility study of this project wascompleted and a site of 900 acres was selected insouthwestern Lahore at Babu Sabu. It would be fittingto complete the remaining planning work for thisproject as soon as possible and to provide funds forits construction in the next financial year.

This Seminar was rightly focused on theparticipatory approach to municipal managementreform. Without the willing support of the communitywe cannot make any headway in achieving the desiredmunicipal reforms. We have to make conscious effortsto bring about a positive change in public attitudeand to motivate citizens to take part in communitywelfare projects. Public involvement is necessary toensure that the reforms are carried forward andsustained. Our educational institutions, governmentdepartments, press, and other information mediashould play their roles to ensure greater publicparticipation in community welfare projects.

I would like to thank the Asian DevelopmentBank and NESPAK for organizing this seminar. I amalso grateful to them for having afforded me anopportunity to exchange views with the experts onthe important subject of the municipal reformprogram.

Concluding Address

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The recommendations in this paper are thefindings of a study conducted in June andNovember 1997. The purpose of the study

was to identify organizational problems and tosuggest a plan for reforming the methods by whichservices are delivered by MCL.

MCL is Lahore�s urban council. Its governingbody has a membership of up to 150, and itsadministrative powers are normally vested in aChairman (Lord Mayor) and a Vice Chairman (DeputyMayor), selected from the council�s membership. Atpresent, however, an appointed Administrator servesin place of the Lord Mayor. He is assisted by theChief Corporation Officer (CCO). Twenty majordepartments and support organizations, as well aseight Zonal Secretaries, report to the Administratorthrough the CCO. This is a very large span of control.

Lahore is divided administratively into eightservice delivery areas, or zones. Each Zonal Secretarytheoretically coordinates all direct services mandatedto the MCL. In practice, officers at the zonal levelsreport directly to their superiors and ignore the ZonalSecretaries. The Secretaries are generally ofinsufficient civil service rank to command the respectand cooperation of their nominal subordinates.Secretaries are often improperly trained for their postsand lack the experience necessary to manage the

ANNEX: FINDINGS OF ADIAGNOSTIC STUDY OFTHE METROPOLITANCORPORATION OF LAHORE

Alan H. EdmondAbt Associates Inc.Cambridge, Massachusetts, USA

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complexities of the positions. In addition, some postsare left vacant for long periods of time.

MCL can be characterized as a service delivery� rather than a policymaking � organization inconstant problem-solving mode, finding and movingfunds among programs to meet the immediate needsof the city.

Salaries and related costs account for 68percent of the MCL budget. MCL supportsapproximately 20,000 positions, nearly half of whichare designated for handling solid waste. Muchabsenteeism is reported among employees in thesolid waste and food departments.

City officials report that the budget is revenuedriven, with estimated allocations determining theoverall level of expenditure in any given year, andwith no opportunity for increasing revenues throughnew sources. A single entry accounting system isused, and the budget is not arranged in cost centers.The payroll is centralized, as are other expenditurefunctions. Underlying the budget is the reality thatZonal Secretaries do not control expenditures withintheir respective zones, so the breakdown of expensesby zones is somewhat illusory.

During the study period, it was apparent thatpoor services were being provided in the areas ofsolid waste collection and disposal and streetcleaning. Employee attendance was notably poor.Internal controls governing the use of materials andrepair supplies were lacking, and interference byelected officials in the personnel administration ofMCL went unrestrained.

In the past, MCL suffered from highmanagement turnover, an ineffective set ofmanagement controls, corruption, non-accountability, unduly strong union influence, anda poorly defined image. Unsure of its role with regardto the Lahore Development Authority (LDA) andother agencies, it has not tapped new sources ofrevenue, and currently faces enormous demands on


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its resources from a growing population whose needsoutpace the revenue it contributes to the government.

REFORM MEASURES

1. Drastically reduce the overlapping functions ofMCL and LDA

Because many of the functions of MCL and LDAoverlap, citizens seeking effective service deliveryare confused. The images of both agencies, inaddition to the morale of their employees, aretherefore negatively affected. Supporting parallelorganizations with redundancies in staff and costsis deleterious to the common good.

LDA�s initially important role in developingnew sections of the city has diminished substantiallyin recent years. The legislation creating and definingLDA was broad in scope to enable the agency to beaggressive in pulling together the disparate elementsnecessary for new settlements, including utilityprovision, land aggregation, and land use planning.

The problem is that the role has changed whilethe law has not. The outcome is that LDA can takeaction concerning many aspects of land developmentand control, as well as certain maintenance activities,with impunity. LDA also holds a privileged positionin the hierarchy due to the rank of its DirectorGeneral.

Areas of overlap with MCL are welldocumented, and some proposed remedies havebeen tentatively agreed upon. It is suggested that asix-month study be undertaken, during which theduties most appropriate to each agency could bedelineated, a proper costing of these duties made,and necessary changes in legislation drafted.

Only when those tasks have been completedwill LDA and MCL be able to examine theirreconstituted revenue needs as well as their sourcesof revenue. More importantly, the decisionmakers

Findings of a Diagnostic Study

74


should by then have a clearer picture of thepossibilities of enhancing revenue that can berealized over the next several years.

The intent of the suggested study is to do thecosting and the estimation of potential revenueswithout becoming embroiled in endless strugglesover the sharing of these revenues or the turningover of developed land parcels. The short-termconflict of such a process will be more than offsetby the elimination of a perennial problem, and sucha resolution will do more for the credibility of thetwo agencies than any other single act.

2. Reduce the number of personnel in the MCL solidwaste function and use the savings to purchasenew equipment

Several study respondents urged a staff reduction ofup to 50 percent. Others were less specific, but statedthat equipment like modern sweeper trucks coulddo the work of hundreds of manual laborers if majorstreets were unobstructed. Reductions in numbersof manual laborers would also mean reducednumbers of supervisors, or at least an improvementin the worker/supervisor ratio.

An example of such a tradeoff is the reductionof 1,000 sweepers. At an average annual cost ofRs40,000 each for salary and benefits, such areduction would result in annual savings of Rs40million. Assuming Rs1 million per vehicle, this wouldenable MCL to buy 40 vehicles each year.

Additionally, any savings accrued frompersonnel reductions are recurrent, not a once-onlybenefit. In six months the attrition program that hasbegun in solid waste will take root and show results,provided a link is made between payroll savings andcapital purchases of equipment. A public awarenessprogram should accompany such a program to alertcitizens to the advantages to be derived from a radicalreduction in the workforce.

Savings accruedfrom personnelreductions are

recurrent, not aonce-only

benefit.


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Tremendous gains in efficiency can beobtained if an analysis of equipment and collectionmethods is undertaken. Variables such as trashdensity, desired frequency of pickups, the use oftrash containers, the sizes and types of vehicles,and the strategic use of transfer stations must beconsidered in any mechanization program. Someof this analysis has already taken place, and a largeequipment replacement program has receivedone-time funding.

Such efforts should be publicized, with anemphasis on the tradeoff between jobs and moreefficient use of public money. Instead of writingstories about such efforts, however, the newspapersunfortunately prefer to print stories about thedifficulties engendered by the �golden handshake�.These stories focus on the method of the reducingwork force rather than the gains to be derived fromso doing. An aggressive public relations campaignby MCL is therefore required to obtain balanced presscoverage.

3. Increase management continuity and depth bycontracting a city manager and empoweringthe Zonal Secretaries

Lahore should contract for the services of a citymanager to serve under the Administrator (or theLord Mayor). Nurturing the Zonal Secretary positionsand carrying through the interim reforms may takelonger than the tenure of the current Administrator.Based on the turnover record for the posts of ZonalSecretary and CCO, continuity of effort must beassured, and the trend toward decentralizingauthority to trusted, long-term, properly trained, andmotivated Zonal Secretaries must be rooted.Moreover, a dispassionate, professionally trained citymanagement professional, perhaps from another cityor country, would help depoliticize theadministration and lessen the amount of interference


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by elected officials and unions. These terms ofreference for the position are suggested.

� The incumbent will work on a contract for aspecified salary and for a specified period of time(two years is recommended).

� He/she will be nominated by the Administratorand appointed by the Chief Minister. Removalfrom office should only be made due to grossmalfeasance or serious misconduct, the latter tobe evidenced by conviction in a court ofcompetent jurisdiction.

� Credentials will be equivalent to those of an MCLAdministrator, including at least 12 years ofmanaging a large and complex organization ineither public or private sector.

� Duties of the position will be spelled out in a writtencontract. Those duties may either be of an advisorynature or as delegated by the Administrator andsubject to his review and approval.

In a city the size of Lahore, it is imperativethat the service delivery zones be managed with anappropriate balance of centralized control andflexible field management decisions. Optimally, theZonal Secretaries would act as �mini-mayors�,exercising broad control over staff and equipment.They would be accountable to the City Manager.

Zonal Administrators� posts have beenweakened because of improper posting and grading,single entry accounting practices, and generalweakness of MCL management. MCL administratorshave not held their own positions long enough toredefine those of the Zonal Secretaries, to train andpost them properly, and to develop a team approachto service delivery.

The Zonal Secretaries have been relegated tothe role of inspectors, looking into complaints ofinadequate service. They have no real authority tocompel workers to improve their on-the-job


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performance. Ironically, although the Secretaries arerequired to sign the payrolls for workers under theiradministration, they cannot control absenteeism.

Suggestions for Zonal Secretary duties thatcould be implemented in the short term are fourfold.

� Authorize Zonal Secretaries to withhold pay incases of absenteeism.

� Create performance standards for all workerswithin the Zone, irrespective of the MCLdepartments for which they work. The Secretarieswould convene as a committee to develop thesestandards under the chairmanship of the CityManager.

A system would be set up wherein theZonal Secretary would report compliance to theCity Manager, and each department head wouldbe held responsible to the City Manager forcompliance with those norms. Over time theSecretaries and department heads woulddevelop a workable system of discussing thesematters before submission of weekly compliancereports.

� Design and implement a complaints system. Thesystem would include a central register of allcomplaints, a method for tracking complaints, amethod for timely notification of complaintresolution, and a reward-and-punishmentmechanism for line managers assigned to resolvecomplaints.

� Prepare for budget development and projectplanning activities, anticipating that zones willeventually be defined and enabled as truebudgetary centers. The zonal approach tobudgeting would become the norm, with an eyetoward a subdivision of the city into administrativedistricts during the next decade. Zone-basedbudgeting would provide an impetus to thatprocess, especially with respect to establishingcosts and revenue needs for the zones.


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Note that the types of duties listed above donot in themselves transform the post of Zonal Secretaryinto that of a �mini-mayor�. Few line responsibilitieswill be assigned to the Zonal Secretaries as currentlyposted and trained. This recommendation calls forthe eventual classification of the Zonal Secretaryposition at a level commensurate with that ofdepartment heads. Candidates for these positionswould receive training as managers. After the initialreform effort, an analysis should be made of the skillsand training of incumbent officers, and a decisionmade as to whether they should be replaced, trained,promoted, or some combination of these alternatives.The end result is to ensure that Zonal Secretaries areequipped to be more than mere inspectors, and havethe potential to eventually assume the city managerposition.

This recommendation is made to include bothmanagement improvements � the contracting of acity manager and the strengthening of the ZonalSecretary position � in that neither can succeedwithout the support of the other. While the citymanager may not directly supervise the ZonalSecretary positions, depending on the Administrator�swishes, both types of position are necessary for thereform to have depth and sustainability.

4. Prepare for significant enhancement of localrevenues, including the drafting of an effectiveset of land use policies

Revenue enhancement is an enormous political issuein cities with service provision problems.Nonetheless, the risks of confronting unions andother interest groups may be worthwhile if recurringgains can be made.

Consider the campaign to regain financialhealth in Ahmedabad, India. Through strongmeasures the city was able to improve its financialposition quickly through the key areas of octroi and


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property tax. Octroi collections went fromRs1.3 billion in 1993/94 to Rs2.25 billion in1996/97. This was accomplished by hiringprofessionals to update the collection criteria,neutralizing the local mafia, and round-the-clockvigilance. Similarly, the property tax collectionsincreased from Rs470 million to Rs800 millionduring the same period. The two-pronged approachto effecting the increase was seizure of propertyfor unpaid bills and computerization of propertytax records. The resulting surplus was put intocapital works, and if enforcement efforts continue,similar revenue gains will recur annually.

Currently, no direct link exists between locallyraised revenues and the services provided by MCL.The major source of revenue is the consumption tax(the octroi), and not taxes on wealth. Over the yearsenormous distortions have crept into the system,causing a gross underpayment of taxes, particularlyproperty taxes. Through consumer purchases,however, everyone pays the octroi, and because theoctroi is an indirect method of collecting revenuesthere is no relationship between octroi collectionsand expectations about service levels. The averagecitizen sees no advantage in changing the currentsystem because no one assumes that giving localgovernment more resources will automatically leadto better service.

As with other large Asian cities, property-relatedrevenues are underused. For example, while onlyabout 22 percent of Lahore�s revenue is derived fromproperty-related taxes, many cities in the USA derivein excess of 80 percent of local revenues from propertytaxes, transfer taxes, and related fees. Percentages inAsian cities at the low end of the collection scale areKarachi (9.6 percent), Jakarta (9.5 percent), andShanghai (0 percent). At the high end are Seoul(72.4 percent) and Manila (60.2 percent).

Currently, a Master Plan for the city of Lahoreis under preparation that could assist in substantially


Many cities inthe USA derivein excess of 80percent of localrevenues fromproperty taxes,compared toonly 22 percentfor Lahore.

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improving MCL�s revenue base. However, for thatto be the case, several questions with regard to thisexercise are relevant.

� Will the plan be vetted by the public, developers,and others who might contribute to a morerational scheme for land regulation, growthparameters, and the maximization of openspace?

� Has thought been given to pulling together thedisparate land records and forming acomprehensive land database for use acrossagencies and meeting a variety of planning, landcontrol, and taxation needs?

� Will the geographic information system (GIS) nowbeing developed for the master plan be acomplete database available for use by all cityagencies to integrate planning for taxation,transportation, land control, and general growth?

Proper land use control and the enhancementof revenues from local sources are inextricablyrelated. In order for the tax on real estate to be auseful tool for increased revenue, the land recordsof the city must be put in good order. The recordsmust be interactive for all departments, they mustbe transparent to the public, and they must becapable of computer manipulation and modeling foroptimal usage.

Admittedly, it is impossible to put a new landrecords system into use and establish a new propertytax regime within six months. It is thereforerecommended that during the next six months astudy should be undertaken in conjunction withthe ongoing GIS work to demonstrate the potentialfor property tax revenue. Using GIS photointerpretation techniques and a small number ofstaff on the ground, a reliable sampling of propertythroughout Lahore could be accomplished. Theoutcome would be a description of the magnitude


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and composition of a property base, accompaniedby projections of the tax revenue potential undervarying assumptions. In other words, photointerpretation could yield refined estimates of thetotal area of taxable property, and a 5 percentsampling of buildings and land would yield evenbetter results. This recommendation is thereforelimited to suggesting that research and datamodeling be undertaken for:

� tax revenue projection under variousassumptions; and

� coordination of the efforts of GIS experts nowworking on the city �s master plan with theplanning and administration needs of thedepartments dealing with land use control,revenue projection, capital planning, buildingpermits, transportation planning, the general landuse planning of the city, health administration,and education.

MEDIUM-TERM MEASURES

When the reforms suggested above are substantiallyin place and accepted by a cross section of the public,many of the preconditions for deeper reforms willhave been met. At that point, bolder action requiringgreater investments of time, funds, and politicalcapital will be needed. Those are divided into fourissue areas.

Issue Area 1: MCL Budgeting

Finding 1.1

Allegations of extensive corruption, mismanagement,and non-accountability in MCL are encouragedlargely because an understandable, widelydisseminated, and rational budget does not exist.


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Recommendation 1.1

Measures should be taken immediately to establishan open system for making budgetary decisions,consulting with the general public and interestgroups, and publishing and distributing the annualbudget (proposed and final versions) in a format bothacceptable by current accounting standards andunderstandable to lay persons. This agreement canbe expedited through the early adoption of aresolution passed by the new City Council as thefirst order of business following the 1998 elections,and with the written concurrence and support of theChief Minister of Punjab Province.

It is naïve to suppose that governanceproblems will disappear upon the enactment of astatement of principle. Nevertheless, such a positiveaction by elected officials would represent a firststep toward the restoration of confidence in MCL.Such a statement, accompanied by a timetable foradopting transparent and rational budgetingprocedures, would also serve as a signal to theinternational donor community and debt financeinstitutions that Lahore is on a well-defined pathtoward fiscal reform. Equally importantly, thecitizens of Lahore would be able to reconnect withtheir local government.

Finding 1.2

MCL�s internal budgeting process, based on a loosesystem of planning and execution, is extremelyrevenue-driven.

Recommendation 1.2

Devise a budget format for internal MCL use thatprovides for decisionmaking based on the followingcriteria.

Althoughgovernance

problems willnot disappear

upon theenactment of a

statement ofprinciple, such

a positiveaction

represents a firststep toward the

restoration ofconfidence.


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� Analysis of revenue and expenditure trends byfunctional area.

� Descriptions of own source funding potential,and the effects of increases in own funds atservice levels.

� Accurate personnel cost histories and projectionsbased on ascertainable attendance records for allemployees.

� A capital spending plan that is systematic in datacollection and analysis, takes into account allfeasible financing alternatives and combinationsof sources, and is vetted in appropriate forumsby all key decisionmakers, elected officials, andthe general public.

� Unit costing information for such selected servicesas solid waste collection, using sampling tech-niques, and proper equipment like weigh bridges.

� Customer satisfaction analysis for major services,based on scientifically designed and administeredsurveys, carried out regularly at reasonableintervals.

Finding 1.3

MCL does not have reliable and enforceableperformance indicators in place for its services.

Recommendation 1.3

In order to improve its system of preparing a budget,MCL administrators should institute performanceindicators for services. The indicators should be simpleto implement and highly meaningful in budgetaryplanning. This would build on the measuresdeveloped under the above recommendation toempower the Zonal Secretaries and the City Managerto create and enforce performance measures in theshort term.

In some cases, gross indicators for majorservices are easily ascertainable, such as dividing


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the total number of students in the city school systemby the number of teachers and arriving at a student/teacher ratio. However, it is usually difficult tocompare qualities of educational services using thisindicator.

Similarly, the final disposition of solid wasteis estimated at 70 percent (for designated dumps),and 30 percent (unaccounted for). This statistic,disturbing in itself, is made even more disturbing bythe fact that mechanisms holding managersaccountable for waste are lacking.

Performance indicators should be developedthrough brainstorming sessions between serviceproviders and informed consumers. These standardsshould then be applied consistently and the managersheld accountable.

Finding 1.4

The budget process for MCL is incremental, and notrelated to a systematic analysis of program and capitalneeds over time.

Recommendation 1.4

MCL should consider using a form of zero-basebudgeting over the next two to three years to developa list and costing of all the major service needs andcapital investments considered necessary by MCLadministrators.

This process requires a top-to-bottom reviewof staffing and equipment. It also requires anunderstanding that technological upgrading is ofprime importance, and that the negative impact ofjob losses will be mitigated by forced attrition anddownsizing where possible. Also, a review shouldbe made of the equipment on hand and proposedfor purchase. A case in point is the use ofinappropriate trash compactor trucks considering thedensity of the solid waste collected in Lahore.


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Pure zero-based budgeting is usually reservedfor decisions concerning types and sizes of armedforces and is rarely applicable to municipal analyses.It is suggested, however, that zero-based analysis isapplicable in the case of Lahore because basicassumptions about staffing and equipment are beingquestioned, such as the case of the solid wasteprivatization now under tender. That is, budgetdiscussions are routinely needed to consider whethersome traditional activities of municipal departments,such as solid waste collection, can be contractedout. If these activities can be undertaken by otheragencies, several questions need to be answered.What are the opportunity costs and the expertiserequirements for supervising the contracted entityin the best interests of the public? What tradeoffsmight be envisioned in transferring street lightingfrom one jurisdiction to another?

The revenue-driven nature of MCL�s currentbudgetary planning, and the constant infightingbetween MCL and LDA for shares of the revenuepie, help foster a self-defeating situation. A demand-driven approach will not bring about every projectand service improvement deemed necessary by localleaders. It will, however, by providing a methodologyfor justifying all proposed expenditures, instill thekind of discipline in the budgetary process that thepublic can appreciate and support.

Issue Area 2: Transparency and Accountability

Finding 2.1

The public has lost its connection with localgovernment partly because elected localgovernments have been suspended, and partlybecause decisions are not made or discussed in openforums.


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Recommendation 2.1

By proactively involving the public through openmeetings and records, and by fostering ongoingsensitivity studies and focus group activities, the newCity Council will have a golden opportunity to makeitself known as a self-government advocate. Suchregulations ought to include public readings of allmajor City Council by-laws and budgets. Importantly,appropriate intervals and procedures for publiccomment should be included. An ongoing evaluationof all major services should include random samplesof consumers and potential consumers of servicesin a scientifically designed and professionallyadministered program to elicit comments aboutservice satisfaction levels and pricing.

Within existing laws, the new City Councilshould adopt rules that are as liberal as possible withregard to procedural thoroughness and openness.Decisions should be made in public, followingdiscussions that allow for digestion and reaction bythe public and the press to proposed by-laws,budgets, and programs.

Finding 2.2

Because the LDA Board does not meet as a full group,it is neither a credible public organization nor aneffective oversight body.

Recommendation 2.2

The Board should establish rules of procedurerequiring regular and open meetings. A staff shouldbe engaged to assemble agenda and provide detailedinformation in a way consistent with informeddecisionmaking. The LDA budget and other keydocuments should be made available to anyone whowants to examine or copy them. Acceptance of theserecommendations will enable the Board to start to


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become a true public body. Importantly, none of thiswill happen without the consent and activeparticipation of the Chairman (the Chief Minister).

Finding 2.3

MCL toleration of employee absenteeism isdestructive of public confidence in government.

Recommendation 2.3

The MCL Administrator should end this and similarpractices immediately.

Government should reach an accommodationwith public employee unions, even if it involves aone-time grant from the national level to buy outredundant employees and retire them. The problemis deeply ingrained and may require draconianmeasures, starting with severe penalties for managerswho certify falsified payrolls. Rotating inspectors fromdistant cities may be helpful in dealing with theproblem of kickbacks, and the use of some informalmeasures, such as publishing the names andaddresses of all solid waste workers on the payrollmay also prove useful.

Issue Area 3: Information Flow

Finding 3.1

Interaction between appointed and elected officialson a daily basis is critical to the functioning of MCLin a democratic setting, but the time currently spentin such contacts (with Members of National Assemblyand Members of Provincial Assembly) is excessive.

Recommendation 3.1

A management information system should bedeveloped where elected officials are kept informed,


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in writing and through group briefings, of programactivities, spending patterns, revenue estimates, andservice delivery efforts. Such a system should bemanaged by the chief administrators of thedepartments through the Administrator or his/herdesignee.

Lahore�s political culture requires that electedofficials have access to administrators in order tofurther the causes of constituents, issue complaintsor praise, and keep informed of programs in progress.The intent of having a management informationsystem in place is not to reduce the frequency ofsuch contacts, but to lessen the amount of time spenton each contact through ready access to relevantinformation.

Finding 3.2

MCL does not publicize its services well, and citizensdo not know what to expect concerning the use oftheir taxes or where to voice their opinions.

Recommendation 3.2

MCL should develop mission statements for itsservice delivery units and make them known to thepublic. MCL should use the media to publicize itsservices.

MCL�s low profile will be remedied only whenit develops internal performance standards and apublic relations program. The public needs to knowwhat streets MCL maintains, how often trash is pickedup, and so on. Numerous cities in other countrieshave developed such programs to promoteunderstanding between government and citizens asto the level of service provided per dollar (or poundor rupee) of tax contribution. Officials in these citiesare accountable for producing the proper numberof units of service. Perhaps Lahore need not startwith such precise agreements, but it needs to quantify

TheCorporation�s

low profile willbe remediedonly when it

developsinternal

performancestandards and apublic relations

program.


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the realistic expectations of citizens, even if theseexpectations are low at first.

MCL should also put together a more formalcitizen complaint system, preferably by empoweringthe Zonal Secretaries, but alternatively through theposting of a full-time expert on complaint resolution.A reliable telephone recording system is needed,since even in the best of systems phones jam duringemergencies. And since phones are not widelyavailable in Lahore, clerks should be available inall neighborhoods to take down complaintinformation, give a written copy to the complainer,and give him/her a time to return for an answer ifthe remedy is not a tangible one.

Whatever complaint system is developed, itshould be capable of tracking all complaints throughresolution, and categorizing them by zone, by type,and by resolving agency. Such information, appliedin readily available software, can be an invaluablemanagement tool in addition to being consumerfriendly. At budget preparation and performanceevaluation time, managers will have access todatabases on problem areas in solid waste, water,drainage, encroachments, etc. In addition to using�windshield surveys� to assess developing problems,managers can assess complaints in the resolutionprocess.

Issue Area 4: Workforce Improvements

Finding 4.1

The government reform movement in Lahore is notyet cohesive, particularly in addressing the problemsof the MCL workforce. At worst the public isalienated, at best confused, by the constant rotationof top managers. When the elected City Council takesoffice, the public will be one more step removedfrom the workforce, and public understanding of itsproblems will be further diminished.


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Recommendation 4.1

MCL should establish a commission on workforceimprovements that transcends elections andindividual administrators. It should include a crosssection of community leaders from both public andprivate sectors, and should include members of theMCL City Council itself, with LDA Board membersserving ex-officio and not voting. The commissionshould be empowered to suggest changes in hiring,promotion, training , and pay-for-performancepractices, and should be independent of civil serviceregulatory bodies.

Without assistance from an outside,dispassionate group of leaders from business,industry, and the professions, newly elected CityCouncilors may easily become immersed in routineproblems and avoid tackling the difficult issues ofpersonnel administration within the MCLbureaucracy. That group, charged with specific tasksand reporting deadlines, deliberating in publicsessions except when discussing union contracts,could do much to recommend improvements in theway in which administrators are chosen, motivated,trained, and retained.

Finding 4.2

Improper posting and rapid rotation of key staff aredetrimental to agency effectiveness.

Recommendation 4.2

The new City Council will have a unique opportunityto correct staffing inequities by making certain thatqualified staff are placed in all key posts, and thatthe vacancy rate is within acceptable bounds.

The new Lord Mayor will be charged withthe effective administration of human resourceswithin MCL, and it will be in his/her best interest


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to declare a �hands-off � policy for other CityCouncilors as to hiring, promotions, and transfersfor at least the key positions, such as ZonalSecretaries. Little room exists for illusions about theneed for elected officials to have a hand in suchmatters, but it is hoped that the new Lord Mayorwill be sufficiently skilled in politics to achievecompromises in other areas so as to make theposting routines as �pure� as possible.

Finding 4.3

Despite the growing acceptance of the practice ofcontracting in other Pakistani jurisdictions, MCLmakes little use of this practice for recruitingprofessional staff.

Recommendation 4.3

In addition to contracting for a city manager to assistthe Administrator (later the Lord Mayor), MCL shouldseek all necessary means to establish a system ofcontracting for short- and mid-term (up to three years)personal services for postings at the equivalent ofGrade 16 or higher. There should be an option ofcontracting for Zonal Secretary positions and for highstaff positions in the area of quality control, personneladministration, and public relations. MCL shouldestablish and staff a public relations and internalinformation dissemination office in the Lord Mayor�soffice.

It is common practice in professionallymanaged cities to hire managers for fixed periods oftime on renewable contracts. These managers areinsulated from political interference by virtue of theirindependence from the elected Council. Under thisarrangement they need not worry about beinginvoluntarily transferred at the first sign of controversy.The suggested city management orientation differsdramatically from the traditional arrangement in MCL,


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where the tenure of officials is governed by how littlethey try to change the status quo.

Table 1 is a summary of the staffing levels andappointment process for top managers in the variouslocal agencies. Greater consistency in grade level asit relates to level of responsibility would be a featureof a more standardized city management system.

Table 1: Grade Levels and Methods of Appointment

Organization Title Grade Appointed from

MCL Chief Operating Officer 20 ProvinceMCL Zonal Secretary 1 8 (often 16) LC SMCL local employees up to 18 LCSMCL Solid Waste Director 20 ProvinceMCL Chief Engineer 20 ProvinceMCL Engineers 18-20 LCS and ProvinceLDA Director General 20 ProvinceLDA Water and Sanitation

Agency Director 20 ProvinceLDA Engineers 18-20 ProvinceMTS Administrator 20 ProvinceMTS Secretary 17 ProvinceMTS Senior Engineer 17 LCS

MCL = Metropolitan Commission of Lahore; LCS = Local Council Service; LDA = Lahore Development Authority; MTS = Model Town Society.

Issue Area 5: Structural and MissionChanges

Finding 5.1

It is not illogical or detrimental to governance to havetwo large organizations of local government workingconcurrently in the same geographical jurisdiction.LDA and MCL do have some similar functions, butare fundamentally dissimilar in their organizationaltypes and working cultures.


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Recommendation 5.1

Strong consideration should be given to breakingLDA into smaller organizations and revising theirmissions, and to removing solid waste collection anddisposal from both organizations, to be vested in anew solid waste district organization withindependent governance and rate-setting powers.The metropolitan land use planning and controlfunctions should stand alone and be accountabledirectly to an elected body. Water and SanitationAgency (WASA) should stand alone and depend onuser fees and debt for major activities, principallywater and sewerage construction and operations andmaintenance.

Some components of LDA, such as WASA, canstand alone for financial reasons (self funding andpartial cost recovery). Other components, such as theplanning and land use control functions, should alsostand alone to meet the challenges of growth presentlyovertaking the metro area. The solid waste problemmust be solved by setting up an organization as freeas possible from political influence, union control,and dependence on the revenues of local governmentor distributions from other levels of government.

Specific Recommendations for PriorityConsideration

1. Designate WASA as a stand-alone agency

Water and sewerage construction and operations aretypically treated as subject areas of special districtorganizations. Often water and sewerage areorganized as separate enterprises, with watercommonly managed as a private company. LDA issimply too large and complex to be treated as singleunit of government.

Having WASA as a stand-alone organizationwould be advantageous for several reasons. Primarily,


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WASA would separate itself from the non-revenueproducing offices of LDA and act as a cost centerwith strong self-financing powers. This would greatlyassist WASA�s long-term financing schemes in thebond market or the donor loan market.

WASA would thus be better equipped topursue cost recovery through user fees and debtfinance. It would also be more accountable forconstruction schemes and levels of service provision.The public would be better able to assess theconnection between fees paid and services provided.At present, fees and assessments tend to disappearinto the large LDA treasury and lose theiridentification with specific services, a conditionmade worse by the treatment of the LDA budget asa private document. Transparency of WASAbudgeting would help the agency establish itself asa proactive, progressive, and responsive agency.

2. Establish a new Land Use and Planning Office

The Land Use and Planning Office should have itsown elected Board of Directors with the authorityto adopt master plans and self-funding programs foroperations and maintenance. For the time being,capital construction funds will continue to beobtained from higher governments.

The importance of land use planning andcontrol, and the creation and maintenance of arational, computerized land and utilities database,cannot be overstressed. Strengthening these activitiesis a prerequisite for rationalization of themetropolitan area. Development of a database thatincludes overlays of utilities, transportation, soil andwater conditions, and other factors is as necessaryfor municipal development as are blueprints forconstructing a large building. And having that processcontrolled by an elected body is essential to theconcept of democratic governance.


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3. Establish a new authority for solid wastecollection and disposal

A new authority is needed for solid waste collectionand disposal with rate setting and collection powers.Any or all activities can be put out to competitivebid, and MCL could bid on any of those. Bids arenow under way for all collection and disposal butwith no change in MCL status. Potential bidders haveexpressed concern that the winning firm mustdetermine how best to use MCL staff, and to makearrangements as to the size and composition of thework force.

One radical but potentially beneficial optionis to exempt the new authority from civil servicehiring for five years and to be a non-union agency.

An authority with broad powers would providethe option of unbundling solid waste activities, whileretaining supervision of activities for which it has acomparative advantage. Other areas could betendered out for bid. For example, regional landfillscould benefit from an approach involving the privatesector in building, operating, owning, and/ortransferring the new facilities to the authority.

4. Increase LDA accountability

At present the LDA Board is not directly accountableto a single elected body. It does not meet with aquorum and has no rules of accountability. Its valueconsists principally as an advisory group to provincialadministrators. To make it an effective andaccountable institution the LDA Board should beelected, it should meet regularly, and its recordsshould be open to the public.


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5. Improve MCL�s performance as a serviceprovider and LDA�s as a construction andproperty management organization

Start with recodifying the law to allow the breakupof LDA and to eliminate all overlaps with MCL. Setstrict provisions for LDA to turn over roads andprojects on completion to MCL for operations andmaintenance. There is nothing inherently wrong withhaving two major agencies as long as they do notsignificantly overlap.

6. Enable rational land use planning and controlby conducting a census of the city

The census should include information about livingconditions and dimensions of structures. It shouldalso be tied to GIS. A property tax cadastre shouldbe established for possible implementation of an advalorem tax, the proceeds of which could be sharedbetween city and province and administered by localgovernment.

SUMMARY

The report recommends that local and provincialofficials take a hard look at not just the symptoms,but the root causes of the problems. It is alsorecommended that the elected city officials, togetherwith senior Punjab Province administrators, form aworking partnership with the local leaders and citizensto improve the functioning of MCL and LDA. Also,customer satisfaction analyses for major services basedon scientifically designed and administered surveysshould be conducted at reasonable intervals.

The recommendations can be grouped intothe following five broad areas.

There is nothinginherently

wrong withhaving two

major agenciesas long as they

do notsignificantly

overlap.


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1. Eliminate overlap/duplication between MCLand LDA

� Make MCL a better service provision organizationand LDA a better construction management andproperty management organization. Start withrecodifying the law to allow the break-up of LDAand eliminate overlap with MCL.

� Break LDA into smaller organizations, revise MCLand LDA missions, and remove solid wastecollection and disposal from both organizations.These activities should be vested in a new solidwaste district organization with independentgovernance and rate-setting powers.

� WASA should stand alone and position itself toincrease its dependence on user fees and debtfor major activities, principally water andsewerage construction and operation andmaintenance.

� The metropolitan land use planning and controlfunctions should stand alone and be accountabledirectly to an elected body. The new office shouldhave the authority to adopt master plans and funditself.

2. Make MCL and LDA more transparent

� The LDA Board should be elected. It shouldestablish rules of procedures requiring regular andopen meetings. It should engage a staff toassemble agenda and provide detailedinformation. The LDA budget and other keydocuments should be made available to anyonewho wants to examine or copy them.

� MCL should proactively involve the publicthrough established procedural rules that includeopen meetings and records, public hearings andreview periods, sensitivity studies, and groupactivities. Such regulations should include severalpublic readings of city council by-laws and


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budgets, and appropriate opportunities for publiccomment should be made available. An ongoingevaluation of all major services should includerandom sample surveys of consumers in ascientifically designed and professionallyadministered program to elicit comments aboutservice satisfaction and pricing.

� Feedback from citizens should be promoted anddeveloped through the use of sounding boardsand complaints/suggestions boxes.

3. Empower the Zonal Secretaries

� Develop job descriptions giving the ZonalSecretaries genuine administrative powers.Determine qualifications and grade levels forsuch positions and work with local publicadministration and business schools to beginpreparing Zonal Secretaries for their futureresponsibilities.

� Classify the Zonal Secretary position at a levelcommensurate with department head status, andtrain candidates for these positions inadministration. Afterwards, analyze the skills andtraining of the incumbents, and decide whetherto replace them with municipal managers of ahigher grade, train and promote the incumbents,or some combination of these approaches. Suchaction will ensure that the Zonal Secretarypositions are staffed by men and women equippedto be more than mere inspectors, and who havethe potential to move up to the city managerposition.

� Make the Zonal Secretaries accountable for theresolution of all service complaints brought withineach Zone. The Secretaries would be responsiblefor designing and implementing a complaintssystem featuring a central register of all complaints(both internal complaints and complaints passedon to other agencies), a method for timely


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notification of the resolution of complaints, anda method for rewarding or punishing linemanagers assigned to resolve complaints.

� Make the Zonal Secretaries responsible forpreparing development budgets and projectplanning activities, in anticipation that zones willeventually be defined and enabled as truebudgetary centers. The zonal approach tobudgeting would become the norm, with an eyetoward a subdivision of the city into separatemunicipalities or administrative districts duringthe next decade.

4. Contract for the services of professional staff

� Contract for the services of a city manager to serveunder the Mayor. A professionally trained citymanagement professional, perhaps from the privatesector, would help depoliticize the MCLadministration and lessen the amount ofinterference by elected officials and unions. Theincumbent should work on a contract for aspecified salary for an optimal period of two years.He/she should be appointed by the Chief Ministerupon nomination by the Mayor. Credentials shouldbe equivalent to those of an MCL Administrator,including at least 12 years of managing a largeand complex organization in either the public orthe private sector. Duties of the position shouldbe spelled out in a written contract.

� MCL should seek all necessary means to establisha system of contracting for short- and medium-term (up to three years) professional services forjobs at the equivalent of Grade 16 or higher.

� Options should be made available for contractingZonal Secretary and senior staff positions in the


A citymanagementprofessionalfrom the privatesector wouldhelpdepoliticize theMCLadministrationand lessen theamount ofinterference byelected officialsand unions.

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areas of quality control, personnel administration,and public relations.

5. Improve budgeting/financial management inMCL

� Establish an open system for arriving at budgetarydecisions, consulting with the general public andinterest groups, and publishing and distributingthe annual budget in a format acceptable bycurrent accounting standards and understandableto lay persons.

� Devise a budget format for internal MCL use thatprovides for decisionmaking. The format shouldbe based on analyses of revenue and expendituretrends and descriptions of self-funding potential.It should also reflect the effects of increases inself-funding on service levels, accurate personnelcost histories and projections, a systematic capitalspending plan, customer satisfaction analysis formajor services, and consideration of all relevantprovisions of the Lahore Master Plan.

� Institute a system of performance indicators forservices that are simple to implement andmeaningful in terms of year-to-year budgetaryplanning.


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Findings of a Diagnostic Survey

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Urban Governance in Sri Lanka and the Colombo Region

Part B

URBAN GOVERNANCEIN OTHERSOUTH ASIANCOUNTRIES

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X. URBAN GOVERNANCE INSRI LANKA AND THECOLOMBO REGION

Padma D. JayaweeraActing SecretaryMinistry of Provincial Councils and Local GovernmentOmar Z. KamilDeputy Mayor, Colombo Municipal CouncilV. K. NanayakkaraSecretaryMinistry of Housing and Urban Development

Sri Lanka is an island nation consisting of65,610 square km and a population ofabout 18 million. About 70 percent of the

total population is rural and 30 percent urban. Atpresent, Sri Lanka faces an explosion in its urbanpopulation, placing an enormous strain onmetropolitan services. Meanwhile, the infrastructurein the countryside remains inadequate. The countryis also confronted with an ethnic conflict thatswallows much of its physical and human resources.In order to guarantee ethnic harmony and socialstability, the Government is endeavoring to bringabout peace through devolution of power.

This paper briefly discusses the backgroundof Sri Lanka�s local government system; it describesthe various issues, problems, and constraints thatconfront its biggest province � the ColomboMetropolitan Region (CMR) � in urbaninfrastructure management; and outlines some ofthe steps undertaken by the Colombo municipalcouncil to address these issues.

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AN OVERVIEW OF LOCAL GOVERNMENTSTRUCTURE IN SRI LANKA

After Sri Lankan independence in 1948, varioussystems of local administration were tried with varyingsuccess. In this context, the 13th Amendment to theConstitution in 1987 was a revolutionary measure thatdevolved much of the power vested with the CentralGovernment. Consequently, Provincial Councilsemerged as sub-national authorities with power toundertake devolved functions of the Government asdefined by the Constitution. It was a turning point inthe process of decentralization of authority becausethe Provincial Councils enjoy legislative, executive,and judicial powers within the defined limits.

Local government was devolved to theProvincial Councils with the constitutionalsafeguards provided by the 13th Amendment.People�s participation in administration is a mainfeature in the local government system in Sri Lanka.In this context, the Pradeshiya Sabha Law isconsidered an innovative piece of legislation.Further strengthening the democratic nature of localrule, recent legislation included 40 percent youthrepresentation (18-35 age group) in local elections.

Although the Pradeshiya Sabha Law hasprovided more opportunities for participationthrough the committee in the areas of finance andpolicymaking, housing and communitydevelopment, technical services, and environmentand amenities, experience has shown unsatisfactoryimplementation.

Today there are eight Provincial Councilsfunctioning throughout the island. In the provinces,there are three types of local authorities: 14Municipal Councils and 37 Urban Councils for urbanareas, and 258 Pradeshiya Sabhas for rural areas.

Box 1 depicts the present administrativestructure at the national, provincial, and local levels,while Box 2 shows the administrative links between

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Box 1: Sri Lankan Administrative Structure

Level Democratic Institution Bureaucratic Institutions

National Executive President Presidential SecretariatPrime Minister Line Ministers (answerableParliament to Parliament)

Provincial Governor (appointed by Five Sector Ministriesthe President) (answerable to the ProvincialChief Ministers of four subject Council)MinistriesProvincial Council

Local Municipal Councils Divisional SecretariatUrban Councils (translates national andPradeshiya Sabhas (answerable provincial policy into action)to the rate payers) l Revenue

l Servicesl Planningl Coordination of developmentfunctions

Box 2: Administrative Links

National Level Ministry of Provincial Councils and Local Governmentl National level policy makingl Dissolution of local authorities and holding electionsl Role of coordinating and facilitating local authorities throughl Provincial Councils

Provincial Subject Ministry of the Provincial CouncilCouncils (Minister, Secretary, Local Government Commissioner)

l Supervision and monitoringl Administrative and financial support

the local authorities and the government�sadministrative machinery at the provincial andnational levels.

In addition to these administrative bodies, theMinistry of Housing and Urban Development,

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through the Urban Development Authority, plays akey role in urban development. Its objective is topromote integrated planning and implementationof economic, social, and physical development inurban areas. According to the Urban DevelopmentAuthority Law (1978), the Minister can declare anyarea considered suitable for development as anUrban Development Area. About 95 percent of theurban areas of the country fall within the jurisdictionof the Urban Development Authority. Localauthorities therefore need to deal with large numbersof government organizations at both provincial andnational levels.

The present Government has taken severalimportant steps to resuscitate the local governmentsector. One of these measures is the establishmentof a separate Ministry for Provincial Councils andLocal Government. Another is the appointment of aLocal Government Reform Commission to makesuitable recommendations to reform localgovernment law. Also significant is the creation ofan organizational structure to keep pace with currentdevelopment needs and to promote human resourcedevelopment.

THE COLOMBO METROPOLITAN REGION

Sri Lanka is divided administratively into eightprovinces. Of these, the Western Province is the mostdeveloped and densely populated, with an area of3,658 square km, or 5.5 percent of Sri Lanka�s totalland area. CMR, which essentially constitutes theWestern Province, comprises the Districts ofColombo, Kalutara, and Gampaha. It is a functionalregion large enough to make investment decisionsfor planned development.

Colombo, the commercial hub of the island,is situated on the southwestern coast. During thelast few decades, the city has expanded over a largearea, swallowing a number of suburbs. Colombo City

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Because theport ofColombo is fastemerging as ahub of regionalshipping andcommerce, thesupportfacilities itrequiresdominate urbandevelopment.

dominates the commercial, trade, and financialinterests of the metropolitan region, while SriJayawardenapura Kotte, the new capital, dominatesthe administrative functions. The shifting of theadministrative functions to Sri Jayawardenepura Kotteand the development of industries has brought abouta slight decline in the employment opportunities forthe administrative and industrial sectors.

CMR provides services for the rest of the countryand the provincial centers located within shortdistances from Colombo. As the center of economicand commercial functions, Colombo is unrivaled inimportance as an urban center. Because the port ofColombo is fast emerging as a hub of regional shippingand commerce, the support facilities it requiresdominate urban development in CMR.

Several Investment Promotion Zones arelocated in CMR, including Katunayake, Biyagama,and Sithawaka. The infrastructure, supportsettlements, planning, and transportationrequirements in the urban development plan musttake into account the current and future needs ofthese new industrial centers.

A major constraint for growth of CMR is thescarcity of available land for regional development.Land prices have risen exponentially. Another visibleand disturbing characteristic of CMR is the decline ofits infrastructure base. Public infrastructure depreciatesas new infrastructure is not developed and existinginfrastructure is poorly maintained. The situation withregard to some of the more important municipalservices and related infrastructure is discussed below.

1. Storm Water and Flood Control

CMR receives over 2,500 mm of rainfall annually.With the increasing density of development and asmore land area is covered with buildings and pavedroads, rainwater percolation is reduced and surfacerunoff is increased. This situation means frequent

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incidence of flooding. CMR comprises low-lyingareas with high rainfall, exacerbating the problem.

Urban growth exacerbates the problem asmarshy land is filled and developed in an unplannedmanner. During periods of heavy rainfall, many partsof the city are flooded. Roads become impassableand are damaged. In addition to the disruption ofeconomic activity, public health is endangeredbecause the runoff is generally contaminated.Generally, the means of separating storm water fromwastewater is unavailable.

2. Water Supply

The existing greater Colombo water system suppliesa population of 1.6 million within an area of about730 square km. Present total capacity is estimatedat 600,000 cubic meters per day. The National WaterSupply and Drainage Board (NWS&DB), whichmanages the greater Colombo water supply system,faces constant public demand to improve and expandthe existing water supply. NWS&DB has initiated asystematic improvement program to meet this needby obtaining Government grants and donorassistance from sources such as ADB, the WorldBank, and the Overseas Economic CooperationFund. However, it appears that additional funds willbe needed, since as a result of the planned expansionprojects, the percentage of served population willonly increase from 50 in 1995 to 62 in 2010.

The demand for water in CMR needs specialattention. According to a demand forecast, a watershortage is expected after 2002. Also, it is estimatedthat currently non-revenue water in CMR is morethan 50 percent of total production.

3. Sewerage

In 1992, it was estimated that piped sewers coveredabout 19 percent of the population in CMR, while

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on-site facilities covered 59 percent. The remaining22 percent had either inadequate sewerage facilitiesor none at all.

Presently, the Colombo Municipal Council(CMC) system is the only large conventional seweragesystem in CMR. The main components of the systemare 250 gravity main sewers, 20 force mains, 13pumping stations, and two sea outfalls. This systemextends throughout 80 percent of the CMC area,serving a population of about 550,000. Sewage iscollected from a large number of residential,commercial, and industrial properties. This is anold system. Its major parts were built between 1906and 1916. Some rehabilitation and new constructionwere undertaken between 1982 and 1987.

From field observations, it has been recordedthat approximately 60 percent of the sewers are eitherfull or overflowing. The quantity of silt entering thesewer network is also very large due to the highinflow of stormwater and unauthorized connections.Moreover, a massive quantity of rainwater enters thesewerage system through the overflows and illegalstormwater connections.

Most of the sewers in the CMC system aredilapidated and have deposits of debris and sand.Certain components of the plant and machinery inthe system are out of order or malfunctioning due tothe persistence of technical problems. This situationis further exacerbated by the nonavailability ofnecessary equipment and maintenanceinfrastructure. Although sewer capacity is inadequatefor coping with the present flow in some areas,proposals have been made to expand the existingsystem to serve adjacent areas. Consumers are notdirectly charged for the pipe sewerage schemes. Theydo not bear the operation and maintenance costsfor effective operation of the system.

On-site systems are self-contained andinclude various types of pit latrines (dry and waterseal types), cesspits, septic tanks, twin pits soak

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systems, and an aerobic filter. Overloading and highrainfall cause the on-site systems to malfunction,either through reduction in seepage or structuralfailure. To avoid sanitation or pollution problems,users desperately seek vacuum trucks or tanker/trailer service to remove their domestic sewerage.They also look for wastewater trucks to empty septictanks. Others use tanker trailers with pumps usingmanual emptying methods. CMC has a fleet ofvacuum trucks to provide service for needy people.

4. Solid Waste Management

The solid waste management practices in the variouslocal authority areas in the CMR differ greatly. Aregular solid waste collection system exists in theDehiwela-Mt. Lavinia, Moratuwa, and Kotte areas.However, in some of the smaller jurisdictions, solidwaste collection systems are virtually nonexistent.Solid waste is presently collected at the rate of about1,100 tons per day. The ratio of waste collected towaste generated ranges from approximately 93percent in CMC to as little as 5 percent in some ofthe smaller urban areas.

The municipal solid waste generated withinCMR is currently disposed at landfill sites and at anumber of small, uncontrolled open dumping sites.Out of 59 disposal sites identified, 38 are open sitesand 21 are landfills. Until recently, the majority ofthe municipal solid waste was deposited at the 12-hectare landfill site at Wellampitiya. The operationof this landfill has been terminated, however, whenit reached its saturation point. Considerable difficultyhas been experienced in identifying and reachingagreement on the location of a landfill site to satisfythe disposal needs of CMR.

The industrial wastes generated in Katunayakeand Biyagama Free Trade Zones are currentlydisposed at open dumps located within each zone.The Katunayake site is regularly set afire, presenting

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a serious health and safety risk. Although Katunayakehas two primitive incinerators at the dumpsite, theearth moving vehicles have insufficient capacity tohandle all the incoming waste and they arefrequently out of operation. Consequently, most ofthe waste is simply dumped on the site.

Hospital waste is generally combined withmunicipal waste without employing specialprecautions or methods for safety. There are nospecially designed areas for hospital waste disposalat the dumping sites. Very few hospitals in CMR useincinerators. An incinerator was constructed at theSri Jayawardenepura General Hospital, but it is neitheradequately designed nor effectively operated. Thishas resulted in incomplete combustion of waste,which generates a continuous plume of black smokefrom the incinerator stack.

5. Future Directions

The urban sprawl in CMR is not matched with theprovision of adequate infrastructure and socialservices. Local authorities are unable to mobilizeresources to respond to infrastructure requirements.Given the limited pool of financial and humanresources, a serious backlog in the development ofinfrastructure exists. The Ministry of Housing andUrban Development, through Governmentfinancing , assists subsectors like water supply,sewerage, flood control and drainage, solid wastemanagement, and public housing. The sectoralapproach to the provision of infrastructure meansthat cash collection is planned and implementedindividually with the attendant limitations of afragmented approach.

THE COLOMBO MUNICIPAL COUNCIL

CMC is the largest local authority in Sri Lanka andone of the oldest in Southeast Asia. It caters to the

Hospital wasteis generallycombined withmunicipalwaste withoutemployingspecialprecautions ormethods forsafety.

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needs of approximately 800,000 residents plus afloating population of approximately 400,000. It has53 elected members. CMC falls directly under theWestern Provincial Council, set up under the 13thAmendment to the Constitution. The ProvincialCouncil has important powers with respect to staffingand human resources management.

The Mayor (as Chief Executive) and theMunicipal Commissioner (as Chief Administrator)administer CMC. The Commissioner is responsibleto the Mayor for the performance of the Council(Figure 1). The Mayor is in turn responsible to theelectorate at large and to the Government for theoverall performance of Council services. Councilmembers are elected every four years.

1. Administration Mechanism

CMC, the highest policy and decisionmaking bodyin the municipality, has produced a list of operatingpractices. This includes the Municipal Council�sordinance, its regulations and by-laws, and thevarious acts and ordinances that govern theoperations of different departments. These generallyinvolve delegation of powers.

CMC receives reports and recommendationsfrom the standing and special committees, and therules of procedure are contained in the standingorders. The Chairpersons of these standingcommittees form the Inner Cabinet. Notably, five ofthe chairpersons represent opposition parties. Thisarrangement was introduced to abate wastefulinterparty conflict resulting in reduced quality serviceto the citizens.

The Mayor also appoints special AdvisoryCommittees. Their main role is to advise on long-term improvement of the Council�s services and tointroduce international developments. The membersare citizens noted for their expertise, experience, andreputation.

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¤ ¤

Figure 1: Colombo Municipal Council Organization Structure

Mayorand the Council

1. Municipal Treasurer�s Dept.

2. Municipal Secretary�s Dept.

3. Municipal Engineer�s Dept.

4. Municipal Veterinary Dept.

5. Public Health Dept.

6. Health Curative Dept.

7. Indigenous Medicine Dept.

8. Public Library Department

9. Public Assistance Dept.

10. Legal Department

11. Sports & Recreation Dept.

12. Training & Development Dept.

13. Municipal Assessor�s Dept.

DeputyMayor

StandingCommittee

DeputyMunicipal

Commissioner

InstitutionalDevelopment

Team

MunicipalCommissioner

¤ ¤

¤

¤

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The heads of 13 CMC departments report tothe Municipal Commissioner concerning their day-to-day activities. The department plan providesservices within the resource allocations and prioritieslaid down by CMC.

2. Financial Arrangements

CMC operates within the framework of theGovernment�s financial regulations, but these havebecome inadequate. CMC�s annual plan is presentedin the annual budget. The plan covers costs,corporate strategy, and departmental managementplans. The source of regular income includes receiptsfrom taxes, charges, rents, sales, and interest. Othersources include Government reimbursements (mostlyfor specific purposes such as salaries, pensions, androads) and overseas assistance.

3. People�s Participation

CMC has had extensive experience in working withthe community to improve the environment andsanitary facilities of the nearly 40 percent of thepopulation of Colombo who are presentlyunderserved. A significant feature of these programsis the formation of Community Development Councilsto enhance community participation and safeguardthe amenities provided. Today over 600 councilsoperate in the city.

4. Programs and Problems

With the election of the new council in April 1997,short-term and long-term programs were initiated. Theshort-term (100-day) programs were designed to makean impact on the community with emphasis onproviding better amenities to low-income people. Theprograms also included renovation of public buildings.They were designed to involve the private sector in

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some CMC activities and to create public awarenessto encourage people to join hands with the Councilin providing effective service.

During this period, the private sector andNGOs were involved in maintaining many facilitiesin the city. These included 90 percent of the 26dispensaries, nearly 100 percent of the 70roundabouts, large areas of trunk roads, street nameboards, billboards, community centers, playgrounds,and a home for the elderly. Another relevantmilestone was the support to CMC from theinternational community through their embassiesand from international NGOs in making Colomboa cleaner, healthier city.

The long-term program is faced with severalmajor issues.

� Solid waste disposal and management� Provision of better housing and amenities to the

underserved population� Improvement of rainwater disposal facilities� Development of the infrastructure, particularly

transport, drainage, and water systems

Finding solutions to these problems is no easytask. CMC does not have sufficient financialresources and is highly dependent on donoragencies. The Japanese Government donated a largenumber of solid waste collection vehicles andequipment. The World Bank is presently involvedin a program to assist the greater Colombo area insolid waste disposal. The World Bank is alsoassociated with the clean settlement program, whichprovides better housing facilities to the poor.Negotiations with other donor agencies are ongoingregarding assistance in rainwater disposal facilitiesand development of infrastructure.

CMC has been responsible for providing waterfacilities to citizens for over 100 years. Recently,under an aid program this responsibility has been

The privatesector andNGOs wereinvolved inmaintainingdispensaries,roundabouts,trunk roads,communitycenters,playgrounds,and a home forthe elderly.

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handed over to a separate agency called the Waterand Drainage Board. However, Colombo citizensstill look to the Council to solve their day to dayneeds. This has put CMC and its elected membersin an embarrassing position because they arecompelled to find solutions to these problems. Abetter solution must be found.

CONCLUSION

Urbanization is inevitable and irreversible. Thechallenge is to devise strategies for more efficientand effective management. Enabling approaches forenvironmental management, urban landmanagement, urban poverty alleviation, and shelterdevelopment can provide the basic physical andsocial services in a cost-effective and sustainablemanner. It is only through a meaningful partnershipbetween Government and citizens that urban areascan become more responsive to the needs and rightsof all inhabitants. These efforts need political willand new forms of demarcation and participatorygovernance.

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XI. ISSUES AND PROBLEMSCONFRONTING MANAGERS INDHAKA CITY

Md. Shahidullah MiahSecretary, Dhaka City Corporation, Bangladesh

Dhaka, the capital of Bangladesh, has aprofound history and a rich culture. Thefeatures of the city are characterized by

Mughal and Muslim architecture. The DistrictMunicipal Improvement Act of 1 August 1864formally established the Dhaka MunicipalCommittee. The Act provided that the Chairman,Vice-Chairman, and two thirds of the Commissionersbe chosen through popular election. After itsestablishment, Dhaka Municipality was entrustedwith all the public works of civic amenities, includingwater supply, lighting , conservation, publicinstruction, as well as construction of roads,drainage, markets, parks, playgrounds, communitycenters, bus terminals, and burial grounds.

The municipal area and its population haveincreased remarkably. Town areas increased from6.15 square km in 1906 to 35.5 square km in 1961,when the population stood at about 580,000. Themunicipality was awarded the status of a corporationin 1978. Two adjacent municipalities, Mirpur andGulshan, were merged in 1982. The corporationwas statuted in 1983 with the introduction of DhakaMunicipal Corporation Ordinance. Finally, it wasrenamed the Dhaka City Corporation (DCC) in 1990.

By 1997, DCC�s area of responsibility hadexpanded to 160 square km with a population ofabout 6 million. DCC�s area is divided into10 administrative zones. Each zone is represented

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by a ward commissioner, whose job it is to ensurepeople�s participation in development activities.

With the rapid and haphazard growth ofDhaka City, DCC is faced with a great deal ofpressure. This paper presents some of the basic issuesand problems besetting the city.

POPULATION GROWTH

Dhaka has experienced rapid population growth sinceindependence in 1971. The recorded populationgrowth from 1951 to 1997 is shown in Table 1. Thehigh growth rate between 1961 and 1974 was partlythe result of the sudden influx of population to thecity following Bangladesh�s independence in 1971.The high growth rate between 1974 and 1990 maybe attributed to the inclusion of new areas in the cityand urban migration.

Table 1: Dhaka Population Growth, 1951-97

Year Population Growth rate(million) (%)

1951 0.36 1.31961 0.56 5.21974 1.77 9.31980 3.45 9.91990 7.35 7.11997 9.30 6.0

Source: Bangladesh Institute of Planner�s Journal, 1994.

In addressing this problem, the presentGovernment is implementing the Secondary TownInfrastructure Development Program, financed by theAsian Development Bank and the World Bankthrough the Local Government EngineeringDepartment. This program develops rural

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infrastructure facilities to stop the people living insmall towns from migrating to the cities in searchfor better services and facilities. The Department isalso implementing an Intensive Rural DevelopmentProgram, which provides job opportunities in smalltowns through the help of both national and foreigndonors.

POVERTY

Dhaka is overwhelmed by its massive populationof poor people � at least 5 of the city�s 9.3 millionpeople live below the poverty line. It is perhaps thepoorest megacity in the world, with a per capitaannual income of only $500 in 1997. However, thisis much improved compared to 1980/81 when thefigure was only $100, an indication that economicconditions of most people in Dhaka have improvedduring recent years.

In the Dhaka metropolitan area, about50 percent of the population aged 10 years and overare engaged in gainful employment. Of these,3.3 percent are in agriculture, 4.2 percent in industry,and 5.3 percent in transport and utilities. Othersare in service (1.7 percent), business or trade(10.4 percent), and various administrative servicesand informal activities (23.8 percent). Of the rest,27.5 percent, mostly women, are engaged inhousehold work. Another 22.1 percent areunemployed.

TRANSPORT SYSTEM

Development of Dhaka�s transport infrastructure hasnot been able to keep pace with the demands of itsgrowing population and area. Only 1,100 buses, thecity�s only mode of mass transit, ply the city�s roads.Consequently, about 60 percent of the citizens travelby foot. It is estimated that about 4,000 buses areneeded to meet the traffic demand.

Issues and Problems Confronting Managers in Dhaka City

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Dhaka�s transportation system is served by aroad network consisting of 200 km of primary roads,110 km of secondary roads, 152 km of collectorroads, and 2,540 km of narrow roads. Aside from afew primary roads, almost all roads consist of a singlelane. These narrow roads are a major headache fortraffic management. Due to lack of planning andenforcement of the Building Control Act, the roadscause serious traffic congestion and cannotaccommodate both motorized and non-motorizedtraffic. According to a Dhaka Urban Transport Projectstudy in 1996, about 60 percent of all passenger tripsare pedestrian, 20 percent by rickshaw, and 19percent by bus. This heavy reliance on non-motorized transport is the root of the problem.

The United Nations Development Programmesupported the Greater Dhaka Integrated TransportStudy in 1994. Based on the recommendations ofthis study, the Dhaka Urban Transport Project wasinitiated in 1995 and will be completed in 1998. Thisstudy is a coordinating effort of all government andnongovernment agencies involved in city �stransportation system. Supported by World Bankfinancing, it is expected to construct 20 intersections,three flyovers (Sonargao, Jatrabari, and Mahakhali),and several bypass and link roads.

DCC has undertaken and completed two pilotprojects with the help of the Government ofBangladesh. Under the First Crash Program, fivesteel footbridges were constructed in differentcongested places of Dhaka. Under the Second CrashProgram, eight steel footbridges and threeunderpasses were constructed. The proposed ThirdCrash Program, to be implemented in 1998,includes one truck terminal and 22 steel footbridges.To ensure safety of pedestrians, footpaths will beimproved and grills installed on road medians inkey areas of the city.

On 12 January 1997, air-conditioned PremiumBus Services began operating on the Uttara-Motijheel

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route with 50 buses. Another 50 buses are plyingthe Mirpur-Panthapath-Nagar Bhaban route. Theseservices will ultimately restrict the number of carsand mini-taxis and help promote private sectorinvolvement in transportation management.

Almost 80,000 licensed rickshaws presentlyply the streets of Dhaka. Various sources estimatethat an additional 2 million unlicensed rickshawsexist. In 1996, DCC issued new laminated licensesto all licensed rickshaw owners. This will make iteasier for law enforcement agencies to detectunlicensed rickshaws. Additionally, the Governmentdecided to restrict 150-200 km of primary roads tomotorized transport.

HOUSING, SLUMS, AND SQUATTERS

Dhaka is experiencing continuous deterioration ofits services. At present about 50,000 additionalhousing units are required annually. Because housingcannot keep pace with the population increase, theproblems of shortage of accommodation and growthof squatter and slum settlements are acute. Dhaka�sland ownership pattern is highly skewed. About 80percent of residential land is occupied by 30 percentof the population, whereas the poorer 70 percenthave access to only 20 percent of the land.

According to a 1997 ADB study, 30 percentof Dhaka�s population lives in over 3,000 slum areas.These slums are located in and around the city, nearroadsides, on government and private land, alongrailway lines, and in urban fringe areas. Average floorspace per person is about 1.2-1.5 square meters. Inaddition, more than 20 percent of city dwellers haveno permanent shelter. Slum and squatter settlementsmostly consist of densely constructed huts, oftencontaining multiple families. Only 5 percent ofDhaka�s urban poor live in permanent housing. Thesepeople have minimal access to basic services andmany of those services are obtained through


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informal channels, resulting in high unit cost andenvironmental degradation.

HEALTH CARE SERVICES

The majority of the population of Dhaka suffers frompoor health facilities due to population growth. A 1991study showed a countrywide infant mortality rate of90 deaths per 1000 live births. The correspondingrate for the urban slums of Dhaka was 142, or58 percent higher. The higher mortality rates amongslum dwellers are caused by the poor performanceof public health programs. At present, one generalhospital, one child hospital, one maternity center, 21charitable dispensaries, and 69 immunization centerswithin DCC provide health care services. Obviously,these are inadequate to serve the actual demands ofthe city dwellers.

In response to the pressing need of primaryhealth care of the urban poor, the Government ofBangladesh and the Bank have agreed to implementthe Urban Primary Health Care Project at a cost of$63 million. About 90 two-storied communityhospitals will be constructed within five years of theproject�s life. The project aims to:

� ensure that poor people in four large cities(Chittagong, Dhaka, Khulna, and Rajshahi), haveeasy access to a package of basic health servicessuch as immunization, family planning, maternalcare, micronutrient supplementation, healtheducation, and basic curative services;

� test innovative approaches to the organizationof primary health care such as contracting outservices to NGOs and the private sector; and

� strengthen the capacity of DCC�s HealthDepartment to effectively coordinate thepopulation, health, and nutrition activitiesundertaken by NGOs, the Ministry of Health andFamily Welfare, and the corporations themselves.

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SOLID WASTE MANAGEMENT

Significant improvements in solid wastemanagement in Dhaka haven taken place. Thebullock carts previously used for collection andtransportation of solid wastes were abolished in1982 and replaced by open trucks. In 1989, thenight collection system was introduced in the oldcity. And recently, DCC has introduced dumpertechnology using demountable containers tomodernize the transportation of solid wastes.However, DCC�s collection capability is sti l linsufficient to meet the requirements of the rapidlygrowing population.

DCC has acquired about 100 hectares atMatuail (outside the city area) to be used for sanitaryland filling. This will be the first time this techniqueis used in Bangladesh. DCC is also negotiating withother donor agencies for assistance to procuregarbage trucks and mechanical equipment foreffective solid waste management.

DCC�s pilot project on biogas generation fromgarbage in slum areas is progressing well. The projectis expected to encourage recycling of solid waste.DCC is also negotiating with a foreign consultant tointroduce a �Waste to Electricity � project usingavailable solid waste.

MOSQUITO CONTROL

Dhaka has a serious problem with mosquitoes, theseverity of which varies according to season. Themosquito season in Dhaka lasts from October toApril, with the highest number of mosquitoes duringJanuary and February.

The physical conditions of Dhaka are idealfor mosquito breeding. Within the city are vast areasof lowlands characterized by stagnant and pollutedwater. There are also innumerable ditches, derelictponds, and unused housing plots scattered all over


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the city. Stagnant drains in the city are also a majorsource of mosquito breeding.

Mosquito control in Dhaka is a tremendouslogistic, technical, and management challenge. DCChas limited resources and inadequate equipment fortackling this immense problem.

WATER SUPPLY AND SEWERAGE

A formal water supply system employing watertreatment and a piped distribution system came intooperation in 1978. Dhaka Water and SewerageAuthority (DWASA) is responsible for supplying waterto meet the needs of the urban areas. In 1990, thewater supply and sewerage system of the Narayanganjurban area was added to DWASA�s jurisdiction. Theservice area consists of 344 square km. The city hasan extensive piped water distribution network.

At present, DWASA can only supply about 660million liters of water daily against a daily demandof 1,260 liters. The city�s major water source comesfrom deep tubewells scattered around the city. Atpresent, 52 of tubewells are located around the urbanareas, and 8-10 more are drilled each year. DWASA�snew water treatment plant at Saidabad will help solvethe water demand problem during 1999.

DWASA took control of the sewerage systemfrom Dhaka Municipality in 1964. The facilities weresix sewerage lifts stations, 69 km of pipelines, severalsewerage treatment plants, and 3,445 sewer serviceconnections. The installation of piped sewers to newareas is progressing slowly. The number of sewerageconnections has increased in recent years. A DWASAanalysis shows that sewer connection has beenincreased by 90 percent since 1984.

STREET LIGHTING

At present, there are about 60,000 fluorescent tubesin DCC areas. To cope with the growing demand,

Mosquitocontrol in

Dhaka is atremendous

logistic,technical, and

managementchallenge.

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DCC replaced fluorescent tubes with sodium lights,which are more convenient and acceptable topeople. Nevertheless, the existing street light facilitiesin Dhaka City are inadequate for the growingdemand of city dwellers.

ENVIRONMENTAL POLLUTION

Dhaka, particularly its oldest neighborhoods, ispolluted by black smoke caused by improper vehiclemaintenance and the operation of outdated vehicles.Chemically, the smoke is a combination of carbonmonoxide, sulfur, and lead � all of which arehazardous to health.

Other sources of environmental pollution arethe haphazard growth of industry adjacent toresidential zones, the growing numbers of slums andsquatters, a poor drainage system, and the lack ofawareness of city dwellers.

PLANNING AND COORDINATION

The first master plan for Dhaka City, prepared in1959, is now outdated. In 1996, the DhakaMetropolitan Development Plan was prepared withfinancial help from UNDP. In 1997, the Governmentapproved the plan, which covers an area of about1500 square km. The new master plan has threemajor components: a structure plan, an urban areaplan, and a detailed area plan. The structure planprovides a long-term strategy to 2015 for themetropolitan area, identifying the scale of growthand recommending spatial and sectoral policies overthe long run. The urban area plan provides amedium-term strategy to 2005 for the developmentof the existing urban area and the area likely tobecome urban over the next five years.

DCC has established its own town planningdepartment. Multidisciplinary professionals such astown planners, architects, economists, sociologists,


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geographers, computer programmers, and researchofficers were recruited. The department will alsocomputerize the Taxation, Revenue and AccountsDepartments to increase revenue collection.

The present structure of metropolitangovernance of Dhaka, which includes 51 agencies,is inefficient because of lack of coordination. Theseagencies themselves generate many sociophysicalproblems due to uncontrolled development. It isessential to either reorganize the existing structureor create a new one capable of implementing thenew plan.

The Government has established aCoordination Committee headed by the Minister ofLocal Government and the Mayor of Dhaka City.This committee is responsible for coordinatingdifferent line departments/agencies. It is nowfunctioning well with regard to traffic congestion,water supply, drainage, health, and other problems.This is the first step in establishing the proposedmetropolitan government in the city.

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XII. MANAGING A MEGACITY:SOME LESSONS FROM CALCUTTA

Asim BarmanMunicipal Commissioner, Calcutta, India

Calcutta is the primary urban center ineastern India and the main seat of trade,commerce, higher education, health

facilities, and employment. Consequently, it has hadto absorb massive local immigration, resulting instress on infrastructure services. The problem wasaggravated by the influx of large numbers ofdisplaced persons from Bangladesh in 1971.

Greater Calcutta is the second largest urbanagglomeration in India with three municipalcorporations, 38 municipalities, a host of urban andrural units, and over 12 million people. It is the world�s10th largest metropolis. Calcutta City proper has anarea of 187.33 square km. The city was establishedmore than 300 years ago and its infrastructure issuitable for only 2 million people, but it now has 4.38million residents, and a floating daily population of 2million. More than one third of the current populationlives in squalid conditions in slums and squattersettlements. Hazardous small industries exist side byside within settlements because insufficient land isavailable for relocation in the peripheral areas.

Thus, overcrowding, poor drainage, inadequatesolid waste management, uncontrolled development,encroachment, economic and industrial recession,water and air pollution, insufficient water supply, andinadequate housing are some of the problemsconfronting the city.

The basic issues that confronted developmentauthority, municipal corporations, and the stategovernment were not only these enormous problems

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but multidimensional problems as well. Theseincluded untimely and inadequate cash flow,nonavailability of serviced land, lack of renovationand maintenance of century-old water supply andsewerage systems, low or no pricing of services, aninadequate database, and insufficient enforcementof regulatory measures.

The government was faced with the problemof managing service delivery, motivating andmanaging a very large work force, and providingminimum basic services to the slum dwellers withno paying capacity. At the same time, local self-government units were fragmented. Very often theyheld different political ideologies and were notfinancially, managerially, or institutionally capableof providing service to the people. In addition, largenumbers of development authorities, politicalorganizations, and pressure groups with overlappingjurisdictions and conflicting goals and interestsexisted at both the city and state levels.

With continued deterioration of civic facilities,Calcutta was declared a dying city and deridedinternationally as a terminal case of urbandegeneration. The outlook appeared gloomy indeed.

REFORMING THE CITY

When all appeared to be lost, the citizens and thestate government decided to fight back. Politicalinstitutions offered active support. Action plans weredrawn up. Political will to win over the situationwas announced and publicized. It was agreed thatthe Calcutta Corporation administration shouldspearhead the war to save the city. Objectives andpriorities were clearly defined.

STRUCTURAL REFORMS

According to the Town and Country Planning Act,the Calcutta Metropolitan Development Authority

Calcutta wasdeclared a

dying city andderided

internationallyas a terminal

case of urbandegeneration.

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is the designated planning authority and remainsresponsible for major developmental work. CalcuttaMunicipal Corporation (CMC) and other localbodies have the municipal cabinet system of citygovernment. The Mayor-in-Council remainscollectively responsible to the Corporation andexercises all executive powers. CMC has 141 wards,each administered by a popularly elected councilor.Contiguous wards are grouped into 15 boroughs,which discharge specific functions of civil servicesunder the general supervision of the Mayor-in-Council. A Commissioner acts as the principalexecutive officer while the Mayor acts as a chiefexecutive officer.

Several steps have been taken to bring aboutstructural and financial reforms. These includeestablishing the Central Valuation Board and theInstitute of Local Government and Urban Studies,amending municipal acts, enacting the Town andCountry Planning Act, and constituting theMunicipal Finance Commissions.

IMPROVED LAND USE PLANNING

The land use pattern in the Calcutta metropolis hasbeen greatly influenced by topographicalcharacteristics. The development pattern indicatesa compact central core, a less compact surroundingarea, and settlements gradually merging with ruralareas. Within a short distance from River Hooghly(scarcely more than 3 km at any place) the level fallsquickly and poses great difficulty for large-scaleurban development. These areas are perennialmarshlands and susceptible to annual inundation.The enactment of the Thika Tenancy Act has vestedthe ownership of all land occupied by slum dwellerswith the state government. No legislative constraintcan stand in the way of any development work inthe slums. The land use plan suggests that lands beapportioned predominantly for residential areas

Managing a Megacity: Some Lessons from Calcutta

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(45 percent), with another 33 percent for wetlands,agriculture, and other uses. The remaining areas arefor industry, commerce, and transport (20 percent),and open spaces (2 percent).

During the last decade, the planning andimplementation of land use regulation have beendecentralized. A constitutional amendment (the 74th)accelerated the process of organizing, planning, andmonitoring committees at the metropolitan and wardlevels, increased transparency in the programs andprojects, and promoted community support. Itensured proper prioritization, adoption ofappropriate technology, and made implementationand maintenance smoother.

The Corporation prepared a suitable databasethrough remote sensing and GIS, land use control,and regulatory plans. These included regulation ofthe development process, preservation of naturallakes and wetlands, and freezing of developmentactivities to maintain proper balance.

COMPUTERIZATION

A massive computerization program was introducedto obtain a better information management system.Although the employees initially resisted the programbecause of the fear of retrenchment, continuousdialogue and interaction between management andemployees did much to allay their anxieties. The keyareas in which computerization led to increasedefficiency for the administration are listed in Table 1.

RESOURCE MOBILIZATION

Aside from the financial grants provided by federalgovernments to CMC, the Corporation itself initiateda number of steps to enhance resource mobilization.It introduced a revised grant structure that resultedin better discipline and better revenue incomethrough the spirit of competition. Steps have been

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Urban Governance in Sri Lanka and the Colombo RegionManaging a Megacity: Some Lessons from Calcutta

Table 1: Key Areas for Computerization

Sector Computer Application

Accounts Integrated finance and accountsRevenue Revenue mobilizationPersonnel Better management of human resourcesMunicipal services Conservation (solid waste management),

water supply, birth/death certificate issuanceLand utilization & control Smart�s map (basic survey) digitization

taken to pursue surplus-generating commercialpropositions. Another initiative was to lease out parksand road intersections to businesses for advertising.The Valuation Board revalued property to improvetax collection. Bold steps were taken for imposingrational water rates and user charges for expressways,and there is serious thinking about collection of asewer cess, particularly from industries.

INFRASTRUCTURE DEVELOPMENT

The Corporation recognized that for industrialdevelopment to keep pace with economic growth,many factors would have to be taken intoconsideration. These factors included improved waterand sanitation services, better traffic circulation,accommodation for workers, better power generation,development of skilled human resources, and aboveall a congenial policy environment. A judicious mixof surplus-generating and self-sustaining servicesschemes was selected to strengthen the existinginfrastructure, services, and facilities to effectivelysupport the existing population and activities in theurban center. Additional infrastructure and facilitieswere also provided for future growth, and to disperseactivities from the metro core, thus reducing people�sdependence on the inner city.

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About 34 percent of Calcutta�s metropolitanpopulation live below the poverty line. Poor peopleare increasingly concentrated in city centers wherethey have little choice but to overexploit the alreadyfragile conditions, depleting the resource base stillfurther.

Calcutta slums have a peculiar three-tier tenuresystem that includes the landlord, the leaseholder(a middleman), and tenants. In view of the legalcomplications and huge costs involved, slumrelocation has not been attempted on a large scale.Instead, the Calcutta planning model has focusedon environmental improvement with on-site and off-site sanitation to bring about a change in the qualityof life. The idea was to provide adequate and safedrinking water, drainage and sanitation, appropriatelighting, and paved roads. In addition, dry latrineswere to be replaced by septic tanks or connected tosewers.

A number of steps have also been taken toprevent pollution of water sources, such as diversionof sludge from water sources, proper treatment andbetter waste management, and planning forconservation of urban water bodies. Major industriesfrom within city centers have been relocated and astatutory provision for regular emission tests forpublic and private transport has become policy.

Providing preventive and curative healthservices and nutritional support to expectant andlactating mothers, establishing primary schools andcommunity centers and providing loans throughnationalized banks to small-scale entrepreneurs alsoreinforced the program. All these initiatives haveresulted in an appreciable reduction in childmortality and morbidity rates. Above all, a sense ofbelonging has been nurtured among slum people.

In Calcutta, coexistence of both fast- and slow-moving vehicles within limited road space aggravatestraffic congestion. It is difficult to do away with slow-moving vehicles like rickshaws, vans, and carts. They

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are effective for short distance movement in thenarrow winding lanes of the old city, and they alsoprovide important means of employment. Bettertraffic management and enforcement of traffic ruleshave done much to alleviate the problem. Otherimportant factors are the newly constructed metrorailway, circular railway, flyovers, bridges, andexpressways. The end result is that the traffic problemis far less critical than just few years ago.

The removal of hawkers from 21 majorcorridors was another important reason behind thesmoother flow of traffic. This was possible due tosupport from the media and citizens as well as thestate government. Although the judiciarypronounced the authorities under no legal obligationto rehabilitate persons illegally occupying publicareas, the government decided to relocate as manyevicted hawkers as possible in market complexesnow under construction on a cost-recovery basis. Inreturn, hawker unions are actively cooperating withthe government. This exemplary operation showsthat, given the political will and support of thepeople, much can be achieved.

PRIVATE SECTOR AND NGOPARTICIPATION

A number of public-private participation programshave started, particularly on solid wastemanagement and the restoration of heritage sites,parks, cremation grounds, and markets. Privateentrepreneurs have been leased lands for producingcompost and power from garbage against royalties.Private transport has been employed along with thecorporation fleets to minimize pressure on garagesand workshops as well as to encourage a sense ofcompetition among Corporation employees.Businesses and chambers of commerce have beeninvolved in maintaining and renovating heritagebuildings, crematories, parks, and traffic signals.


A number ofpublic-privateparticipationprograms havestarted on solidwastemanagementand therestoration ofheritage sites,parks,cremationgrounds, andmarkets.

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With joint ventures, markets are now beingredeveloped. Parks and green areas have beenconstructed in places that previously were nothingbut hillocks of dumped garbage.

Substantial support has been mobilized fromNGOs in the urban areas. One of the very sensitiveareas in which NGO support has been particularlysuccessful is the vexing issue of stray dogs. Killingof stray dogs by municipal authorities invariablygenerates an emotional outcry by animal lovers andby the public at large. NGOs were authorized toissue licenses for pet dogs and to undertakesterilization of street dogs. Over time, the populationof stray dogs was reduced and incidence of canineattack dropped significantly. NGOs have also beensupportive of solid waste management operationsand in the removal of unsightly billboards andbanners.

EXTERNAL SUPPORT FROM DONORS

During the last two decades, a number ofdevelopment programs in various fields have beenimplemented with World Bank assistance. Most ofthose programs ended by 1992. Presently, with WorldBank support, the Indian Population Programme VIIIis being implemented among 3.5 millioneconomically and socially deprived groups for bettermother and child health care, population control,and social awareness. With assistance from the UK�sDepartment for International Development, selectedslums of Calcutta and its suburbs are being improved.The improvement program places special emphasison community participation, non-formal primaryeducation, and health education. Interaction withADB for renovating Calcutta�s antiquated sewerageand drainage systems is ongoing. Japan�s OverseasEconomic Cooperation Fund is also being tappedfor large-scale water treatment plants for replacingground water as source for drinking water.

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MORE CHALLENGES AHEAD

In the years ahead, Calcutta�s population willincrease, as will its industries and wastes. But withthe current trend toward balanced growth withecofriendly and low waste-producing programs, thecity will continue to stave off the seemingly inevitabledoomsday.


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Urban India reflects the developing world�surbanization processes in that it is a mix ofeconomic reform, liberalization, and

globalization. It is also characterized by the problemsof growing population, high density, shortage of civicamenities, traffic congestion, environmentaldegradation, and slums.

The urban population of India is presentlyabout 262 million, 27.3 percent of the estimated totalof 962 million. It is likely to increase to 549 million,a percentage of 41 percent, by 2021. Urban India�scontribution to gross domestic product rose from29 percent in 1950/51 to 47 percent in 1980/81,and is expected to be over 60 percent by 2001. Thespread of 3,697 urban agglomerations, accordingto the 1991 census, is shown in Table 1.

XIII. FINANCIAL INNOVATIONSAND MUNICIPAL MANAGEMENTIN AHMEDABAD

B. K. SinhaMunicipal Commissioner, Ahmedabad, India

Table 1: Population Spread

Size Number % of total

> 1 million 23 32.5100,000-1 million 277 32.450,000-100,000 345 10.9

< 50,000 3,052 24.2

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Historically, in Gujarat the state governmenthas been the source of legislation and control overall municipal activities. Built-in provisions empowerthe state to watch, guide, direct, and controlactivities. With the enactment of the 74thAmendment to the Constitution of India, the stategovernment is in the process of changing its rolefrom that of a centralized controller to a facilitatorleading the way to formation of effective institutionsof local self-government. This amendment also laysdown a financial framework of effective devolutionof resources from the state to urban local bodies(ULBs) and a background for participatory planning.

Municipal authorities are required to providea range of infrastructure services. These are typicallyaddressed as obligatory and discretionary functions.Although funding may not be sufficient at present,it is imperative for municipal administration toanticipate the need of infrastructure and serviceprovision. Because of the constraints of a legalframework with weak institutional capacity and lackof proper fiscal management systems, the provisionof infrastructure services has not kept pace withurbanization and economic growth. Exacerbatingthe problem, the lack of ULB credibility in themarket makes it almost impossible to generatecapital either from constituents or from otherfinancial sources.

Traditional ways of financing capital costs andrecovering current costs are not adequate to meetinfrastructure needs. To keep pace with economicgrowth and upgrade or augment infrastructure, it isnecessary for ULBs to enhance not only theirrevenues but their institutional capacities. In orderto enhance revenue, the possibilities of enlargingand diversifying the resource base must be explored.

Because the government is faced with agrowing disenchantment with public monopoly andfiscal constraints, a case exists for commercialization,including mobilizing a larger volume of funds and

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non-guaranteed finance from the market. This in turnrequires providing an attractive investment climatewithin the ULBs through lower costs and betterquality of infrastructure services.

Ahmedabad, with a population of 3.3 million,is the largest city in Gujarat and the seventh largestin India. It has an area of about 190 square km, morethan some larger cities such as Calcutta. TheAhmedabad Municipal Corporation (AMC) isresponsible for water supply, sewerage and drainage,roads, street lighting, primary education, medicalservices, solid waste management and conservation,fire services, public transport, and parks and gardens.

REVENUE COLLECTION

Like most other local bodies, until recently AMC wasin dire financial straits. In the absence of an electedbody, the Administrator took certain measures toimprove Corporation finances. Very serious andconcerted efforts were made to plug leakage andevasion of octroi duty. Recovery of property tax wasalso stepped up through enforcement measures, whichchanged the financial health of the Corporationdramatically. The steps taken to improve revenuecollection included the following measures.

For octroi:

� Development of a market research cell in theOctroi Department for preparation of valuationbooks on the basis of prevailing market rate tostop underinvoicing by importers.

� Creation and updating of valuation with the helpof chartered accountants and cost accountants.

� With the help of the Police Department, manyantisocial elements permitting octroi evasion werearrested, thereby boosting the morale ofCorporation employees and officials.

� Introduction of a system of random checking of

Financial Innovations and Municipal Management in Ahmedabad

140


trucks to ensure that bogus or underinvoiced billswere not produced.

� Introduction of additional round-the-clockvigilance squads to intercept vehicles enteringthe city.

� Induction of cost accountants and charteredaccountants into the Corporation for correctcalculation of goods entering in the city frommajor octroi posts.

� All octroi checkposts were equipped with wirelesssystems for rapid communication.

For property tax and other charges:

� A series of cohesive measures were taken againsttax defaulters.

� The Supreme Court settled litigation in favor ofAMC.

� Water supply and drainage services of defaultingproperties were disconnected.

� Warrants were issued for confiscation of movableproperties and attachment of immovableproperties.

� Properties were put on auction for tax recovery.

Only one week of effort in this directionchanged the scenario and octroi income beganflowing in. Sustained efforts resulted in steady incomefrom the octroi duty. The recovery of property taxalso increased substantially. As a result, betweenNovember 1994 and March 1995, AMC wiped outits accumulated cash loss of over Rs350 million anda bank overdraft of over Rs220 million and becamefinancially sound.

FINANCIAL MANAGEMENT

Despite the surplus generated, AMC appreciated thatCorporation�s income alone would not be sufficientto finance the infrastructure development of the city.

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It realized that a large volume of funds from privatesources could be mobilized for infrastructure projectsby structuring them to meet the requirement of theprivate investors. Further, private financing could beaccompanied by private management, which couldprobably deliver better service performance in termsof speed and innovation. It also realized that accessto domestic and international capital markets is thecrucial missing link for infrastructure financing.

In short, traditional ways of financing wouldhave to be supplemented through development ofpublic-private partnerships, enhancing user chargesand property taxes, creating other internal sourcesof revenue, and enabling access of local governmentsto financial institutions and markets. Theparticipation from non-AMC sources in financialmanagement was also sought.

Participatory financial management had to belinked to areas of infrastructure provision anddevelopment such as roads, bridges, water supply,waste water treatment plants, urban transport, solidwaste management, and slum upgrading. A newmethodology in the form of joint ventures, build-own-operate and build-own-operate-transferconcepts, and privatization needed to be adopted.

CORPORATE PLANNING

With the improvement in the financial status of AMC,improvement of the city infrastructure became areality. AMC prepared a comprehensive CorporatePlan to rapidly upgrade the level and coverage ofservices in the city. Simultaneously, a strategy tofinance this infrastructure plan was developed.Realizing the need for additional resources, AMCexamined the possibility of accessing the capitalmarket.

To establish credibility in the market and withthe financial institutions, AMC appointed a leadingcredit rating agency to assess the inherent strength


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of the institution and its financial position. AMCobtained an �A+� credit rating in 1995/96, whichsubsequently improved to an �AA�. This ratingsignifies reliability for timely payment of interest andprincipal for raising resources from the capitalmarket.

In preparation for the future infrastructurerequirements of the city, major projects are beingdeveloped such as water supply, installation ofdistribution lines, construction of underground tanks,and laying of sewers. The Sabarmati River is beingcleaned up under the National River ConservationProject with the help of Government of India.Construction and improvement of roads, bridges, andflyovers, as well as the modernization of solid wastemanagement practices, are also under way. A majorslum networking project is being implemented forimproving the quality of life of urban poor with theparticipation of the community, industry, and NGOs.

ORGANIZATIONAL CHANGES

Since 1994, not only has AMC achieved a substantivefinancial turnaround, but it has also embarked onsystematic professionalization of both its humanresources and the entire development process. It tookstern measures to discipline the recalcitrant unions,increase productivity, and build corporateperspectives. It reviewed personnel policies andadopted a new merit-based system of recruitment.The qualifications required for recruitment at almostall stages/levels of municipal bureaucracy have beenchanged to suit the present needs of the Corporation.Further provisions have been made for induction ofdirect recruits at almost all levels, with the ratio ofdirect recruits to that of promotion ranging from40:60 to 60:40. For the first time a professionalmanagerial cadre has been created by inductingMBAs and chartered accountants at middle levels(designated as Assistant Managers to the AMC). Staff

TheCorporation

reviewedpersonnel

policies andadopted a new

merit-basedsystem of

recruitment.

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at this level are being groomed to assume seniorpositions.

The organizational structure of the Corporationhas undergone a series of decentralization processes.Five zones have been created, and to add strengthto zones, ward-level responsibilities have beenchalked out. Ward officers have been designated andassigned the twofold duties of supervising the day-to-day administration of their wards and takingcharge of the redress of public grievances.

AMC has considered creating a special projectcell to monitor and supervise the timely completionand quality control of various capital projects. Theplan calls for appointing program managers to plan,design, monitor, supervise, execute, and commissionits various projects with the help of experiencedconsultancy agencies. This would help not only inbuilding in-house capacities within the Corporation,but also ensure the prevention of cost overruns bygood management.

FORGING URBAN PARTNERSHIPS

AMC is forging partnerships with private sectorcompanies, institutions, and NGOs in strategic areasof urban development. Instead of remaining the soleprovider, AMC took the option of becoming a keyplayer and facilitator in improving the quality of lifein the city through these partnerships. To create anenvironment for making this possible, AMC increasedits financial and management credibility by diligentlyenforcing the rule of law, and by rejuvenating therevenue recovery systems. Induction of moreprofessionals from various disciplines hasstrengthened the administration. These measuresenabled the AMC to develop effective linkages withits partners. Some of the notable projects undertakenthrough this strategy are listed below.


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1. Streets

AMC has initiated public-private partnerships aimedat improving the streets of Ahmedabad to make themefficient and safe. Under this project, streets aredesigned and constructed to ensure smooth flow oftraffic while ensuring pedestrian safety, reducingpollution, and beautifying the city landscape. C.G.Road, the prime business and commercial artery ofAhmedabad, has been redeveloped as a pilot project.This has been taken up by AMC in partnership withArvind Mills Limited, which contributed Rs35million. The company will recover this contributionfrom advertising and parking revenues. Followingrecovery of capital investment, revenues will flowto AMC. A committee composed of representativesof the Corporation and private agencies coordinatesthe project, which was designed and managed byprivate firms. Similar partnership projects are nowbeing proposed on Drive-in Road, Satellite Road,and other major roads.

2. Urban Forestry

Through this project, AMC seeks to undertake urbanforestry in its vacant plots in partnership withcommunity-based organizations (CBOs) in amutually beneficial manner. AMC provides the landand water supply and pays for fencing, treeplantation, and tending. The administrative andmanagement expenses are borne by the CBOs (or,in cases where the CBO does not have the requisiteexperience, a supporting NGO). The community isallowed to undertake agroforestry as well as otherremunerative activities at the site. Twenty-seven plotshave been assigned to 13 CBOs/NGOs. The processwas facilitated by United States Agency forInternational Development.

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3. Slums

AMC forged partnerships with the slum communities,NGOs, and private agencies to transform the qualityof life in slums. This is achieved primarily throughimproving the physical and social infrastructure ofthe slum. Though the major emphasis is on physicalinfrastructure, it also focuses on environmentalupgradation, sanitation, housing, health, education,and income generation. The project will cover300,000 families over seven years at an estimatedcost of Rs3.25 billion. A pilot project of the SlumImprovement Partnership has been successfullyimplemented at Sanjaynagar in Potalia ward. Thelessons learned from this experience will be used toscale up the project to city level.

4. Solid Waste Management

AMC embarked on a multi-pronged effort to tacklethe problem of solid waste management to improvecivic health and hygiene. It spruced up its own systemby acquiring the latest equipment and improving thelogistics of collection and disposal. It also pioneereda participatory approach involving the community,NGOs, and private companies to improve hygieneand sanitation by reorganizing the solid wastecollection and disposal system. This project has twocomponents � neighborhood level collection anddisposal.

A pilot project of the first component has beenimplemented at Ambawadi area in partnership withSEWA (an NGO), Clean Green Abhiyan (an initiativesupported by the Parathana Group of Industries), theState Bank of India, and the Centre for EnvironmentEducation. The latter organization conductedawareness programs with residents of the area topromote segregation of wet and dry garbage at thehousehold level. SEWA organized women ragpickers,a decidedly disadvantaged group, to collect the


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segregated garbage. Through the NGOs, thehousehold pays them a monthly salary. In addition,they earn by selling the recyclable dry waste. TheAbhiyan supported the whole process.

In the second component, disposal of garbagethrough landfill is being replaced by recycling it intofertilizer. AMC, in collaboration with a privatecompany, set up a plant in the outskirts of the city.This will eventually save the AMC 2,500 cubicmeters/day of landfill space.

5. City Planning

AMC collaborates with planning institutions,nonprofit companies, international lending agencies,and other independent planning firms to enhanceprofessionalism in its city planning activities. Thiswill help build the capacities of both AMC and localresources.

AMC has had a long association with theCentre for Environmental Planning and Technology.Notable efforts produced by this partnership include:

� comparative health risk assessment,� redevelopment of Kankaria Lake,� development of Ashram Road, and� river front development.

AMC is exploring avenues for establishingAhmedabad as a prominent finance and trade centerin the country with the Vastu Shilpa Foundation, alocal research organization. The outcome is afeasibility study for an International Finance andTrade Centre at Pirana.

THE MUNICIPAL BOND

AMC was the first municipal entity in India to planto access the local debt capital market with amunicipal bond issue (Box 1). This current debt-

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raising exercise aims to create a sound basis forsustained fundraising by the Corporation oncommercial basis. This initiative will facilitate furtherborrowings by the AMC for the implementation ofspecific projects. It also seeks to structure suitablefinancial instruments for mobilization of up to Rs1billion from the debt markets. In the process of raisingcommercial resources, AMC also intends to moreclearly map the raising of resources with itsdeployment and repayment obligations.


Box 1: The AMC Bond Issue

Ø Credit rating � AA

Ø External guarantees � None

Ø Issue amount � Rs1 billion($27.8 million)

Ø Cost of Funds � 15.5%

Ø Maturity � 7 years

The proposal of issuing an AMC bond on thebasis of a Credit Rating Information Service of IndiaLimited (CRISIL) rating, is a unique exercise. So far,no other Indian municipality has undertaken a ratingexercise or positioned itself for raising commercialresources. Similarly, few Indian commercialinstitutions have any depth of understanding ofmunicipalities. This lack of awareness is singularlyresponsible for the perception that municipalities arenoncommercial counterparts. While the CRISIL ratingwould facilitate the overcoming of such concernsto some extent, it would nevertheless be necessaryto provide potential institutional investors with a

The proposal ofissuing amunicipal bondon the basis of aprofessionalrating servicewas a uniqueexercise.

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greater degree of comfort than would typically benecessary for more conventional transactions.

Indian investors and investment institutions areunfamiliar with the concept of municipal bonds anddo not have policies and norms in place for suchinvestments. The placement process would thereforenecessarily involve close interaction with all majorinvestors to develop an acceptable structure formunicipal bonds. It would also establish a precedentfor municipal borrowing on a stand-alone basis. Ithas been necessary to devise suitable securitystructures in the context of the AMC being a localgovernment agency (as opposed to a corporateentity). The legal implications of security and debtservicing also require careful examination.

CONCLUSION

The opening of the economy has opened up newvistas in the delivery of civic services. The ability ofmunicipalities to take advantage of theseopportunities depends on their ability to gearthemselves up operationally with respect to bothrevenue and cost.

The creation of a municipal bond market,networking, and forging of urban partnerships couldbecome the catalyst for forging a new frameworkfor delivery of civic services. But on a stand-alonebasis, financial innovations cannot succeed withoutefficient municipal governance. Institutionalstrengthening efforts must go hand in hand withfinancial management, discipline, and innovationsto enable sustainable development of urbangovernance.

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Several developing countries have embarkedon various forms of transfer of politicalpower to their local government units. Dillinger

(1994) reports that decentralization programs areunder way in 63 of the 75 developing and transitionaleconomies, with an aggregate population of over 5million. These programs include:

� rationalization of the distribution ofresponsibilities and resource-raising powersbetween various tiers of government,

� transfer of decisionmaking from central ministriesto regional and local offices,

� enhanced revenue sharing and other forms ofintergovernmental transfers to local authorities,

� commercialization and privatization initiatives,� greater cooperation with voluntary agencies and

community-based organizations, and� empowerment of democratic self-government

institutions.

Intercountry experiences reveal that the surgeof decentralization in the developing countries isnot necessarily driven by a concern to improve thedelivery of local public services. In many cases, itsorigin can be traced to political factors specific tothe countries concerned. Sometimes the efforts todecentralize are a reflection of the failure of bankruptcentral governments to continue financing localservices at accustomed levels.

XIV.DECENTRALIZATIONREFORMS AND INNOVATIONS INMUNICIPAL MANAGEMENT IN INDIA

P. K. MohantyDirector, Ministry of Urban Affairs and Employment, New Delhi, India

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In some countries, decentralization appearsto be linked to a series of concessions by centralgovernments attempting to maintain politicalstability. Decentralization initiatives in developingcountries are often characterized as politicalstrategies by ruling elites to retain most of their powerby relinquishing some of it.

Regardless of the form and rationale ofdecentralization in a given country, the process hasenjoyed a great deal of popular support. This isprimarily due to dissatisfaction with centralizedplanning and concern for more dispersed andequitable development. The countries that haveembarked on decentralization are realizing theimportance of participatory approaches to planning,management, and provision of services. A highdegree of fluidity has been generated in the structureof intergovernmental relations. This has providedscope for fundamental reform in the institutionalframework for local public service delivery. Thecentralized state, which encouraged politicians toact as independent brokers of information, patronage,and services between the electors and government,failed to ensure the effective delivery of publicservices to communities.

BENEFITS OF DECENTRALIZATION

Empirical evidence suggests that the public valuesits role in electing local officials and in participatingin the decisionmaking process. Decentralizedregimes improve the level and quality of communityparticipation, paving the way for enhanced efficiencyin the provision of public services. Local governmentsare more likely to be sensitive to people�s problemsthan state or national governments.

Decentralization, if pursued properly, is likelyto yield various benefits, including:

� reduction in the burden on central government

Localgovernments

are more likelyto be sensitive

to people�sproblems than

state or nationalgovernments.

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finances and freeing of central resources formacroeconomic concerns such as stabilization,structural adjustment, and poverty alleviation;

� cost-effective collection of information and itsuse for planning and priority-setting;

� better exploitation of local resources with intensiveknowledge of the tax base, impact and incidenceof taxes, and more rational expenditures;

� location of the decisionmaking process close towhere the action is, thus ensuring greatercommunity participation in the financing andimplementation of programs;

� expeditious decisionmaking with regard toresource allocation and provision of services;

� improved service delivery through greaterparticipation of beneficiaries in the design ofprograms and a better matching of expendituresand local preferences;

� promotion of greater accountability in servicedelivery through a clearer and closer linking ofbenefits and costs of local public services;

� promotion of responsiveness on part of the serviceproviders and vigilance on the part of the societydue to the proximity of government to taxpayers;

� strong commitment from local officials in the useof local resources;

� practical application based on knowledge ofproblems faced by local staff in different regionsand localities;

� strengthened public service management anddelivery through targeted capacity-buildingprograms at the local level; and

� grass roots democracy and popular consent togovernment.

Decentralization Reforms and Innovations in India

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KEY SUCCESS FACTORS INDECENTRALIZATION EFFORTS

Empirical evidence indicates the following directionsfor successful decentralization and municipalgovernment reforms.

� A clear consensus should exist between the higherlevels of government that intend to decentralizeand the receiving level of that decentralization.Joint ownership of reform is critically important.

� Although the promotion of decentralization needsa holistic approach and a long-term strategicoverview of intergovernmental relations, propersequencing of reforms and a phased approachare desirable to allow adequate time for buildinglocal capacities.

� To avoid overlapping , the functionalresponsibilities of various levels of governmentshould be clearly defined with respect topolicymaking, planning, financing,implementation, regulation, and monitoring.

� Economic/financial resources commensuratewith the requirement for efficient discharge ofthe decentralized functions should be effectivelytransferred from central to local authorities

� The receiving level should have proper access tonecessary data and information so as to be ableto perform the assigned functions properly.

� Service providers and other stakeholders shouldhave the requisite expertise and an appropriatesystem of incentives should be in place to ensuretheir responsiveness and accountability.

� The active participation of the people should befostered to establish a close relationship betweenthe service providers and the clients. The peopleshould perceive decentralization as beneficial andalso as an entitlement.

� Vested social or economic power groups must beprevented from capturing the receiving level of

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government, thereby excluding the legitimatebeneficiaries of the decentralization process.

� The central and state governments should play apositive and catalytic role in municipaldecentralization, fostering civic values andpromoting participation of the people, theultimate custodians of all political power in ademocracy.

ASSIGNMENT OF FUNCTIONS

The first major step for municipal government reformis the clear assignment of functional responsibilitiesbetween various tiers of government, including themunicipalities. International patterns on theassignment of functions to urban local bodies pointto some broad regularities explained in terms of thetheory of fiscal federalism. This theory advocates the�subsidiary principle�, which suggests that eachpublic service should be provided by the jurisdictionwith control over the minimum geographic area thatcould internalize benefits and costs of public servicesand the efficient allocation of public resources. Birdlists the following necessary conditions fordecentralization to improve the level and quality ofmunicipal services.1

� Everyone affected by public action gets an equalopportunity to influence the decision.

� The benefits of decisions do not spill overjurisdictional boundaries to any significant extent.

� The costs of decisions are fully borne by theresidents. This means there are no tax-exportingor soft budget constraints in the form of negotiatedtransfers from the higher levels of government.


1Bird, R.M. 1994. Decentralizing Infrastructure: For Good or Ill? Washington,DC: World Bank.

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In terms of the theory of fiscal federalism, thehigher levels of government must participate infunctions such as regional planning, provision ofinfrastructure, and poverty alleviation.

ASSIGNMENT OF REVENUES

Once clarity in the distribution of functionalresponsibilities between various levels of governmentis achieved, the municipalities must be endowed withresources commensurate with their assignedfunctions. The following broad principles of taxassignment between the tiers of government in afederal structure have been suggested.1

� Taxes suitable for economic stabilization shouldbe central.

� Progressive redistributive taxes should be assignedto central governments.

� Tax bases distributed unequally betweenjurisdictions should be centralized.

� Taxes on mobile factors of production are besthandled centrally.

� Residence-based taxes such as sales ofconsumption goods to consumers or excises aresuited to state jurisdiction.

� Taxes on completely immobile factors ofproduction are best suited for local levels.

� Taxes of lower levels of government should becyclically stable.

� Benefit taxes and user charges should be usedappropriately at all levels.

� Resource taxes and value-added taxes areappropriate for sharing between governments.

1Musgrave, R.A. and P.B. Musgrave. 1984. Public Finance in Theory andPractice, 4th ed. New York: McGraw Hill.

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The congruence principle suggests that theless mobile a tax base and the stronger the spatialconcentration of the tax base and ownership, thelower the level of governments to which those taxesshould be assigned.

DECENTRALIZATION IN INDIA:THE CONSTITUTION(74TH AMENDMENT) ACT

The 73rd and 74th Amendment Acts signified twoof the most fundamental initiatives of the IndianParliament since independence. The amendmentsaimed at conferring a constitutional status to the localbodies � panchayats in rural areas and municipalitiesin urban areas � as the third tier of government.Under the Constitution, India is a union of statesand the municipalities are constituted under statelaws. The 74th Amendment takes note of this whileprescribing measures for municipal decentralization.

Prior to the enactment of the 74th Amendment,there was no specific mention regardingmunicipalities in the Constitution. The subject oflocal self-government was simply assigned to thestates. Due to elaborate constitutional provisions,the Parliament and the state legislatures haveflourished as democratic institutions. However, thishas not been the case with the urban local bodies,even though some of them came into existence priorto the formation of states. Elected municipalities werefrequently suspended and superseded by the stategovernments due to the lack of constitutionalprotection. These suspensions and supersessionsstretched to periods exceeding a decade in somecases, which quickly eroded the very basis of localself-government. Over the years, there was a steadyencroachment on the traditional functions of urbanlocal bodies by state government agencies. Themunicipalities became weak and were unable tomeet the aspirations of the people.


Theamendmentsaimed atconferring aconstitutionalstatus to thelocal bodies asthe third tier ofgovernment.

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The Act introduces certain uniformity in thestructure and mandate of the urban local bodies inthe country. It emphasizes the participation of directlyelected representatives of people in planning,management, and delivery of civic services. It is builtupon the premise that all power in a democracyrightfully belongs to the people. It prescribes thatthe municipality serves a term of five years from thedate appointed for its meeting. However, if the stategovernment dissolves a municipality, election to thesame must be held within six months. The Act alsomakes it mandatory for the state governments toconstitute District and Metropolitan PlanningCommittees with representation given to the electedmembers of the urban and rural local bodies. It alsoallows for the reservation of seats for women,scheduled castes, and tribes to give them a voice inmunicipal affairs.

The Act envisaged a systemic change in thepattern of municipal government in the country. Itprescribed an institutional framework for the efficientdelivery of urban public services. This frameworkconsists of a number of statutory institutions listed bythe Constitution of India. The state governments areresponsible for the creation of the legal frameworkfor establishing these institutions, seven of which aredescribed below.

1. The State Election Commission

The Commission is mandated to supervise, direct,and control the preparation of electoral rolls, and toconduct all elections to both rural and urban localbodies. A State Election Commissioner, appointedby the Governor, administers the Commission.

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2. Municipalities: Municipal Corporations,Municipal Councils, and Nagar Panchayats

Municipalities are endowed with such powers andauthority as may be necessary to enable them tofunction as institutions of self government. Theyprepare plans for economic development and socialjustice, perform functions, and implement schemesentrusted to them by the state government, includingthose relating to the Twelfth Schedule (Box 1).


Box 1: The Twelfth Schedule

The 74th Amendment Act adds the Twelfth Schedule to Part IX of the Constitutionof India. This Schedule lists the following functions of the municipalities.

Ø Urban planning (including town planningØ Regulation of land use and construction of buildingsØ Planning for economic and social developmentØ Roads and bridgesØ Water supply for domestic, industrial, and commercial purposesØ Public health, sanitation, conservation, and solid waste managementØ Fire ServicesØ Urban forestry, protection of the environment, and promotion of ecologyØ Protection of the interests of weaker sections of society, including the

handicapped and mentally retardedØ Slum improvementØ Urban poverty alleviationØ Provision of urban amenities and facilities such as parks,gardens, and

playgroundsØ Promotion of cultural, educational, and aesthetic programsØ Burials and burial grounds, cremations, cremation grounds, and electric

crematoriaØ Cattle pounds, prevention of cruelty to animalsØ Vital statistics, including registration of births and deathsØ Public amenities, including street lighting, parking lots, bus stops, and

public conveniencesØ Regulation of slaughterhouses and tanneries

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3. Ward Committees and Other SpecialCommittees

Ward Committees are constituted to take municipalgovernment closer to the people and undertake theresponsibilities conferred on them, including thoserelating to the Twelfth Schedule.

4. The State Finance Commission

This institution�s function is to review the financialposition of rural and urban local bodies, and to makerecommendations concerning the principles ofdevolution of resources from the state to the localbodies and the measures needed to improve theirfinances and functioning. Prior to the Act, municipalfinances were entirely at the discretion of the Statelegislatures (Box 2).

Box 2: Municipal Finance

Article 343 of the Constitution stipulates that a state legislature may:

Ø authorize a municipality to levy, collect, and appropriate such taxes, duties,tolls, and fees in accordance with such procedure and subject to such limits;

Ø assign to a municipality such taxes, duties, tools, and fees levied and collectedby the state government for such purposes and subject to such conditions andlimits;

Ø provide for making such grants-in-aid to the municipalities from the consolidatedfund of the state; and

Ø provide for the constitution of such funds for crediting all moneys received,respectively, by or on behalf of the municipalities and also for the withdrawalof such monies therefrom.

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Urban Governance in Sri Lanka and the Colombo RegionDecentralization Reforms and Innovations in India

5. District Planning Committee

This Committee is established to consolidate theplans prepared by the panchayats and municipalitiesin the district, and to prepare a draft developmentplan for the district as a whole. In formulating thedraft District Development Plan, the committee takesinto account matters of common interest betweenthe panchayats and the municipalities, includingspatial planning, sharing of water and other naturalresources, integrated development of infrastructure,environmental conservation, and the extent and typeof available resources, financial or otherwise.

6. The Metropolitan Planning Committee

This institution is set up to prepare a draftdevelopment plan for the metropolitan area as awhole. The Constitution provides that this committeetakes the following considerations into account:

� the plans prepared by the municipalities andpanchayats in the metropolitan area;

� matters of common interest between thepanchayats and the municipalities, includingcoordinated spatial planning of the area, sharingof water and other natural resources, theintegrated development of infrastructure, andenvironmental conservation;

� the overall objectives and priorities set by theGovernment of India and the state government;and

� the extent and nature of investments likely to bemade in the metropolitan area by the agencies ofthe Central and state government, and otheravailable resources.

It is mandatory that not less than two thirds ofthe members of a Metropolitan Planning Committeeare elected by members of the municipalities and

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chairpersons of the panchayats in the metropolitanarea, in proportion to the ratio of the population ofmunicipalities in that area.

The 74th Amendment provides forconsultation with institutions and organizationsspecified by the Governor. The prescribedcompositions of the District and MetropolitanPlanning Committees also provide scope forinduction of professional experts as committeemembers. The Constitution Act stipulates that thechairpersons of the district and metropolitancommittees forward draft development plans for theirrespective areas to the state government for approval,thus emphasizing the need for integration of bottom-up and top-down planning processes. The Districtand Metropolitan Development Plans embody theconcepts of participatory and integrateddevelopment planning. These are expected tointegrate urban and rural development plans withdue regard for the usage of regional environmentalresources, including water. They are also requiredto integrate spatial and economic development planswith emphasis on infrastructure and recognition ofthe constraints to plan implementation.

The Constitution Act provides a safeguardregarding the implementation of the recommen-dations of the State Finance Commissions. Itamended Article 280 of the Constitution, underwhich a Central Finance Commission is appointedonce every five years to assess the financial needsof the state governments and to recommend apackage of financial transfers from the CentralGovernment. It is now mandatory on the part of theCentral Finance Commission to recommend themeasures needed to augment the consolidated fundof a state to supplement the resources of themunicipalities. This provision is designed to establisha proper linkage between the finances of the localbodies, the state governments, and the CentralGovernment.

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PROGRESS IN MUNICIPAL GOVERNMENTREFORMS

The Constitution Act provides a blueprint formunicipal government reform in India. It aims atstrong grass roots democracy through effectivefunctioning of various key institutions. A study ofthe implementation of the 74th Amendment by thestate government indicated the following progressas of September 1997.

� All the state governments, where the 74thAmendment Act is applicable, had amended theirmunicipal laws to bring them in conformity withthe Constitutional provisions.

� State election commissions had been constitutedby the state and union territory governments.

� Municipal elections had been conducted in allbut two states and union territories.Approximately 60,000 representatives, one thirdof them women, had been elected.

� State Finance Commissions had been constitutedand 13 had submitted their final reports. Somestate governments had begun acting on therecommendations.

� For the first time in the history of India, the 10th(Central) Finance Commission recommended adevolution of Rs10 billion from the CentralGovernment to the states as capital grants forurban local bodies in four annual installmentsfrom 1996/97. The Government of India acceptedthis recommendation.

� District and Metropolitan Planning Committeeshad been constituted in some states. The CentralGovernment is in the midst of preparation ofguidelines for the implementation of theConstitutional provisions regarding district andmetropolitan planning.


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While considerable progress has beenachieved in the implementation of the ConstitutionAct, a comprehensive program of municipal reformsis needed to attain the goals of decentralization andmunicipal autonomy, including the modernizationof municipal and town planning. In recognition ofthis need, the Central and state governments are inthe process of developing an agenda for urban sectorreform. In the background of the economic reformsand the 74th Amendment, several efforts have beeninitiated at various levels to strengthen the deliveryof public services. These include intensivemobilization of tax resources, intergovernmental andpublic-private partnerships, leveraging of marketfunds, strengthening of management capabilities, andadoption of targeted programs.

ENHANCED TAX EFFORT

Several municipalities have initiated measures forintensive exploitation of internal resources,including reforms in the property tax. The municipalcorporations of Patna (in the state of Bihar) andRajkot (in Gujarat), and most municipalities in thestate of Andhra Pradesh have adopted a simple area-linked property tax system. Under this system, acity or town is divided into zones; buildings intotypes and nature of construction; and uses intocategories such as residential, commercial, orindustrial. Taxes are levied for different types ofbuildings and located in different zones.

Through the intensification of tax effort andplugging of tax leakages, the Municipal Corporationof Ahmedabad has been able to raise its propertytax collection by about 40 percent and octroicollection by about 20 percent over the period 1992-97. In some parts of the country, the privatization ofoctroi collection has more than doubled tax receipts.

Severalmunicipalitieshave initiatedmeasures for

intensiveexploitation of

internalresources,including

reforms in theproperty tax.

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EMPHASIS ON USER CHARGES

Because the growth needs of urban infrastructureare colossal, cost recovery to make the urbanschemes sustainable is strongly emphasized. In somestates, the municipalities and water supply/sewerageboards are now recovering the entire operation andmaintenance costs, as well as a part of the capitalcosts, of water supply projects through user charges.Mumbai, for example, levies water and sewer benefittaxes to generate resources for the repayment ofborrowed capital. The recovery of sewerage anddrainage costs is increasingly sought by linking thecharges with water supply bills. Traditionally, theproperty tax has included the components of taxeson water, drainage, lighting , scavenging , andfirefighting. Other ideas under serious considerationare decomposition of the property tax into servicetaxes and linkage of specific services to direct usercharges.

DEDICATED TAXES AND LEVIES

Recently, a major traffic and transportationimprovement project was initiated in Calcutta bylevying a motor vehicle tax. Hyderabad introducedcharges for conversion of land use and has steeplyenhanced the compounding fees for violations ofthe city master plan. Resources so mobilized arefunding an ambitious project of erecting severalflyovers. Bangalore has imposed a special cess oncity taxes to generate resources for a mass transitproject. The city also levies a cess for new watersupply and slum development projects. The HaryanaUrban Development Authority levies externaldevelopment charges on land development to meetthe costs of off-site infrastructure such as new watersource, transmission lines, and freeways. Inconnection with the financing of Delhi Mass RapidTransit Project, the following dedicated levies and


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taxes (both direct and indirect) on user and non-user beneficiaries were suggested by an expertcommittee.

� Additional excise duty/sales tax on petrol/diesel� Surcharge on motor vehicles tax� Entry fees on motor vehicles in defined areas� Passenger terminal taxes� Time-bound surcharge on property taxes in the

city� Levy of 1-2 percent of annual wage bills of large

industrial and commercial establishments locatedin the metropolitan area or within a notifieddistance from the city boundaries

� Surcharge on other Central/state/municipal taxeslevied and collected within the city

INTER-AGENCY PARTNERSHIPS

Public-private and intergovernmental partnershipsare becoming increasingly common. Severalmunicipalities in the country are experimenting withcontracting of municipal services to the private sector.The centrally sponsored scheme of infrastructuredevelopment in megacities is based on a partnershipapproach in which the Central and state governmentseach contribute 25 percent of the project cost. Theremaining 50 percent is tapped from financialinstitutions. This scheme was initiated in 1993/94and is in operation in the megacities of Mumbai,Calcutta, Chennai, Hyderabad, and Bangalore. TheGovernments of India and New Delhi areimplementing the Delhi Mass Transit Project throughjoint contribution to the equity of a company calledthe Delhi Metro Rail Corporation. Under the UrbanBasic Services for the Poor Program, a partnershipis envisaged between the municipality andneighborhood committees of women andcommunity development societies. This partnershipis being strengthened under the new urban poverty

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alleviation program launched this year to promotewage-employment and self-employment in cities andtowns.

ACCESSING MARKET FUNDS

Several municipalities in the country receive creditratings from professional credit rating agencies inthe private sector. The Ahmedabad MunicipalCorporation has planned for a Rs1 billion municipalbond issue. The Government of India iscontemplating the provision of income tax reliefand other f iscal incentives to facil i tate theemergence of a market for municipal bonds. Suchinstruments would include water supply, transport,and other bond categories. A 10-year tax holidayhas been extended to attract private investment ona build-operate-transfer basis in areas such ashighways, bridges, airports, ports, rail systems, watersupply, sanitation and sewerage, mass rapid transitsystem, light rail transit system, intra-urban/peri-urban roads, urban bypasses, flyovers, bus and truckterminals, and subways. Additional fiscal incentivesare under examination by the Government of India.

FINANCIAL INTERMEDIATION

The State of Tamil Nadu constituted a MunicipalUrban Development Fund with the help of the WorldBank under which a loan of more than Rs2.5 billionwas extended to the municipalities based on theirfinancial and operating plans. The rate of loanrecovery has been more than 90 percent. Recently,the fund has been restructured into a Trust Fund andan Asset Management Company has been set up tomanage the fund�s loan portfolio. The company hasbeen constituted with a minority share of theGovernment of Tamil Nadu and a majority share ofthree private sector partners. Asset is facilitating thedevelopment of projects on a stand-alone basis and


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designing of cost recovery instruments.Municipalities and private sector entities providingurban infrastructure are eligible for borrowing,subject to the financial viability of projects. A fundsimilar to that of Tamil Nadu is proposed in Mumbai.

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XV. VISION 2021:URBAN GOVERNANCE IN INDIA

Dinesh MehtaRegional Adviser South AsiaUNDP/UNCHS (Habitat) Urban Management ProgrammeNew Delhi, India

Urbanization is a determinant as well as aconsequence of economic development.Over the past decades, many countries in

Asia have experienced rapid economic growth. Thishas led to a rapid rise in urban population. It isestimated that by the turn of this century, nearly halfof Asia�s population will reside in urban areas.However, in spite of a significant increase in nationalwealth and personal income, the quality of life ofan average urban resident is quite poor. Urbancenters in Asia are characterized by squalor, slums,traffic congestion, and shortages of water and power.While the national governments pursue the goals ofeconomic development, it is generally left to the localgovernments to manage rapidly growing urban areas,and to provide their residents with basic services.

Because the capacity of a nation to pursue itseconomic goals is contingent on its ability to governits cities, urban governance assumes increasingimportance. This is largely due to the significantcontribution that urban centers make to the nationalincome. Cities are after all the engines of growth ofmost national economies.

Economic liberalization and decentralizationof government have been common features ofdevelopmental policies of most countries during thepast decade. The emergence of these trends has aprofound implication on urban management. In thegeneral discussion of macroeconomic policies, the

Because thecapacity of anation iscontingent onits ability togovern its cities,urbangovernanceassumesincreasingimportance.

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role of urban economies is not well recognized. Macropolicies often have an anti-urban bias and nationalgovernments frequently pursue programs restrictingthe growth of large cities, reducing urban migration,and achieving a balanced urban pattern. Only recentlyhas the role of city economies in national developmentbecome understood. In the global economy,increasing competition exists among cities to attractcross-border investments. The ability of a city to attractinvestment largely determines the extent of investmentin the nation as a whole. While national governmentsare involved in macro policy formulation, it is left tothe local government to provide for the necessaryinfrastructure and services to attract investment.

Since 1991, the Indian Government haspursued a major reform of its economic policies.The various measures include trade and tariff reform,reforms in the financial sector, deregulation ofindustries, and disinvestment of state-ownedenterprises. These policies have ushered in greaterinvestment by domestic and internationalentrepreneurs and financial institutions. The higheconomic growth observed in the past four years islargely due to these policies. Nevertheless, this highgrowth is likely to be severely constrained due toinadequacies of cities to absorb the new investments.Many local governments in India do not have therequisite technical, financial, or managerial capacityto cope with rising demands for basic urban services.These city governments are alienated from the civilsociety and are perceived as unresponsive,inefficient, and corrupt organizations. This antipathyof society and the severe limitations on the capacityof local government suggest that managing urbanareas is an arduous task.

Given the perspective of rapid economicchange, increasing urbanization, and decliningcapacities of national and local governments tomanage cities, what do we need today to provide abetter urban India for the next generation? What is

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our vision of India in 2021 and what place doesurban India have in this vision? What should be ourstrategy to ensure that the vision does not remain amirage but becomes a reality?

Developing a vision for urban India in 2021has to be undertaken through a collective process.The vision in Box 1 is the author�s perception of whaturban India should be. This paper attempts tohighlight some crucial aspects of the vision of urbanIndia in 2021 and provides an action agenda forurban management to realize this vision.

Vision 2021: Urban Governance in India

Box 1: Vision 2021

Our vision of urban India in 2021 is that in which:

Ø every urban settlement is a safe, healthy, productive, and sustainableplace;

Ø every family has adequate shelter and basic services; and

Ø every individual has a desirable quality of life, with adequate employmentand income.

The strategy to achieve this vision will be based on principles of enablementand participation. The national and local governments will establish institutional,legislative, and financial instruments to enable society to participate in achievingthis vision in an open, transparent, and efficient manner.

URBAN INDIA IN 2021

The process of globalization of economy anddevelopments in information technology will bringabout a much smaller world in 2021. The currenteconomic policies of economic liberalization,promotion of global trade, and increasedcompetitiveness will help sustain a high rate ofeconomic growth. The emerging role of the state inthis high economic growth regime will have to be

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redefined. The democratization and decentralizationprocesses initiated since 1992 through the 73rd and74th Indian Constitutional amendments will haveto be vigorously pursued to build strong localgovernments. The emerging state-society relationshipwill be a partnership between government and civilsociety. While a strong state will have a regulatoryand supervisory role, it will have to promote boththe domestic and international private sector toensure greater effectiveness and competitiveness inthe provision of basic infrastructure and services.

The 2021 vision of an India free of povertyand unemployment requires major reform ingovernment, public institutions, and civil society.More importantly, there will be a fundamental shiftin the roles of institutions and their interactions withcitizens. Open, responsive, transparent, participatory,and efficient governance are essential for theenhancement of economic productivity and theimprovement of quality of life.

The interrelationship between economicgrowth and urbanization can be depicted as a curve.In the initial phase of economic development, boththe level and pace of urbanization is low. Duringthe middle phase of a more mature economy, itsurban population is likely to grow more rapidly. Thisis because much of the growth in the economy willcome from the nonagricultural activities located inand around urban centers. The share of urban areasin national income is expected to rise from its presentlevel of about 45 percent to nearly 75 percent in2021. Urban population in India is expected to risefrom 217 million in 1991 to 659 million in 2021(Table 1). However, if the economy does not sustainits high rate of growth of 6 to 7 percent per annum,then the urban population growth will be muchlower.

The spatial patterns of urbanization will alsobe altered. Larger urban centers with betterinfrastructure will attract most of the investments in

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the economy. As both domestic and internationalinvestors seek the highest returns on their capital,urban centers with economic potential, establishedtransport, and sophisticated information technologywill become the preferred locations for investments.While a few new urban centers may emerge, mostof the urban growth will take place in and aroundthe existing urban centers. The likely pattern of sizedistribution of urban centers is shown in Table 2.

The envisaged urban pattern in 2021, with 70cities having a population of over 1 million and 500with over 100,000, presents a daunting scenario.The pattern of growth in these cities will also bequite different from the present pattern. Increasedpersonal vehicle ownership, improved masstransportation systems, and improvedcommunication facilities will lead to a greater sprawlof urban areas. Rapid technological advances ininformation technology and its widespread use willalter urban travel patterns significantly. As the work/


Table 1: Urban Population, 2001-21

Year Population (million) Urban (% of total)Total Urban

1981 683 159 23.341991 844 217 25.722001 1,006 365 36.30

(307)a (30.5)2011 1,164 530 45.5

(426) (36.5)2021 1,290 689 53.3

(591) (45.7)

a Figures in parentheses are alternate estimates of urban populationsbased on past trends and lower economic growth notes.

Source: Information until 2011: Pathak, P., and D. Metha. 1995. Recent Trends inUrbanization and Rural-Urban Migration in India: Some Explanations andProjections. Urban India 15(2). The projections for 2021 are the author�s estimates.

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home relationship changes, suburbanization willbegin to take place. Cities will be more spread outthan before. This will pose a particularly difficultchallenge for urban management, as newinstitutional structures will have to be evolved atregional scale to plan and provide for metropolitanlevel infrastructure and services.

The policy implications of the envisaged urbangrowth and pattern in 2021 are profound. Restrictingthe growth of large cities, reducing migration to urbancenters, and achieving a balanced urban pattern havebeen the preferred urban policy goals in the past.In reality, cities have continued their growthunabated as market forces have shaped the patternand level of urban growth. Public policies have, atbest, caused distortions in the market and led tomisallocation of resources.

The new urban policy to fulfill our vision 2021will have to recognize the inherent economicadvantages of urban centers and promote growth ofcities instead of restricting their development. Achange in the mind-set of policymakers is requiredto accept the reality that the present ills of urban

Table 2: Size Distribution of Urban Centers � 2021

Size Number of urban centers in1981 1991 2021

> 1 million 12 23 70> 100,000 204 273 500

50-100,000 270 341 70020-50,000 738 927 1,20010-20,000 1,053 1,135 1,5005-10,000 739 725 630< 5,000 229 185 400

Total 3,245 3,609 5,000

Source: For 1981 and 1991, Census of India, Provisional Population Totals,Paper 2, Rural-Urban Distribution.

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The present illsof urban centersare notnecessarilyrelated to thesize of the city,but rather amanifestation ofpoor urbanmanagement.


centers are not necessarily related to the size of thesettlement. Urban problems are more a manifestationof poor urban management at the local level andrestrictive policies at the state and national level. Inthe new urban policy framework, cities should beexpected to play a more productive role through localinnovations and initiatives. An enabling environmentwill have to be created in which cities, like nations,begin to compete with each other for increasing theirattractiveness for economic investments.

URBAN GOVERNANCE IN INDIA

The term governance has now begun to mean morethan government or its management. It refers to therelationship not only between governments and stateagencies, but between governments, communities,and social groups. Within this perspective, municipalgovernance subsumes the operations of localgovernments and their relationships with the societieswithin which they operate.

Municipal governments have been inexistence in India since 1687 when the MadrasMunicipal Corporation was established. Themunicipal corporations of Calcutta and Bombaywere established in 1726. In the early nineteenthcentury, municipal governments were establishedin other towns as well. The members of thesemunicipal governments were nominated by theprovincial governments. The foundation ofdemocratic forms of municipal government inBritish India was laid in 1882 with Lord Rippon�sresolution on local self government. In 1919, theGovernment of India Act incorporated the essenceof this resolution and the powers of democraticallyelected governments were laid down. Under theGovernment of India Act in 1935, the localgovernments were brought within the purview ofthe state or provincial governments and specifictaxation powers were defined.

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The urban local governments continued toderive their functional and fiscal powers from statelegislation even in the post-independence periodbecause until recently the Constitution of India didnot make any specific provisions for urban localgovernments. The state governments reduced thefunctional domain of the municipal governments byestablishing parastatal agencies. These agencies,whether for water supply and sewerage or forplanning, were deemed necessary. The municipalgovernments were perceived to lack the necessarycapacity to carry out these tasks in a rapidly growingcity and its periphery. The state governments erodedthe financial base of local governments by abolishingmany buoyant sources of revenue such as the octroitax, the professional tax, and the entertainment tax.Over and above these actions, the state governmentsoften superseded local governments and did not holdelections for many years.

Because of these actions, the functional andfinancial powers of urban local governments wereseverely eroded. Without sufficient financialcapacity to provide basic services, they becameunable to respond to the needs of the citizens. Theywere therefore forced to depend on financialtransfers from the state government. The ad hocmanner by which finances were transferred fromthe state to the local government was not sufficientto build an adequate resource base for localgovernments. Consequently, citizens� apathy towardlocal government increased.

The enactment of the Constitutional (74th)Amendment Act in 1992 ushered in a new era oflocal self government in India by providing thestructure that recognized the urban localgovernments as a third tier of government.

Despite the laudable objectives of theconstitutional amendment, the actions of the stategovernments to devolve power to the localgovernments have not been very encouraging. Most

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states have only conformed to the letter of theamendment and not to its spirit. Amendments tomunicipal legislation in various states have frequentlyonly dealt with electoral reform. While elections havetaken place in accordance with the provisions ofthe Constitution, little effort was made to enlargethe functional and financial domain of themunicipalities. Many of the state financecommissions submitted their reports to the stategovernments, but the states were largely reluctantto accept the recommendations. Further, many statesreduced the financial powers of municipalities afterthe state finance commission reports were submitted.Very few states made provisions in their legislationfor ward committees, district planning committees,or metropolitan planning committees.

STRATEGY FOR URBAN GOVERNANCE

From the present until 2021, the scale and pace ofurban growth will overwhelm the planners and thepolicymakers. Promoting and managing this urbangrowth requires a new mode of urban governance.This new mode of governance will have to be basedon four strategic objectives.

� Increase the efficiency of urban areas throughenabling regulations and procedures that promotedevelopment.

� Increase participation of the private sector andcivil society in the provision, delivery, andmaintenance of urban infrastructure and services.

� Establish innovative mechanisms for financingurban development.

� Strengthen the capacity of local governments.


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Let us examine each of these objectives.

1. Strategy of Enablement

While supportive and enabling national and statelevel policies will be required for urban development,the major responsibilities will remain with the localgovernment. The present set of rules and regulationsrelated to municipal management require majormodifications to provide an environment in whichurban efficiency can be increased.

2. Strategy of Participation

The participatory development process requires thatthe present alienation of civil society from urban localgovernment be eliminated. Corruption andinefficiency in local government have led to a lossof faith in the system. The government is seen aspursuing its own interests rather than those of society.The partnership mode of governance requires thateach stakeholder in the city has an adequate voiceand that the partnership is built on the strengths andinterests of each stakeholder � the local government,the private sector, and the community. The presentexperience of such partnerships is limited but hasprovided many important lessons.

3. Financing Strategy

Innovative models of financing urban developmentare being attempted in India. Through these models,it has become apparent that the government can nolonger continue to subsidize urban services. Theemerging financial market suggests that traditionalfinancing based on directed credits, subsidizedprices, and budgetary support will soon becomeobsolete due to inefficiency and lack ofcompetitiveness. Financing of urban developmentwill have to be integrated within a larger financial

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market. This implies that all activities related to landdevelopment and all urban infrastructure andservices will be financed through market-basedborrowing from financial institutions. Marketdiscipline will require that services be appropriatelypriced to recover the full cost of capital andoperations.

4. Capacity-building Strategy

Capacity building of local governments hastraditionally been viewed as human resourcesdevelopment activity. However, efforts to train betterurban managers are insufficient without appropriatechanges in the institutional environment. Capacitybuilding is referred to as improving the ability ofinstitutions � government, private, and community-based groups � and individuals within theseinstitutions to perform appropriate tasks and fulfilltheir roles effectively, efficiently, and sustainably.The dimensions of such a capacity-building exerciseare human resource development, organizationaldevelopment, and institutional and legal framework.

INNOVATIVE URBAN MANAGEMENTEXPERIENCES

Some observers of the Indian urbanization processhave argued that urban conditions in the country arebad and will become worse even if the generaleconomic situation in the country improves. Theseobservers base their predictions on the poor capacityof local governments to manage the presentconditions. However, given the size of the urbanpopulation, the apathy of the Central and stategovernments, and the limited capacities of the localgovernments, Indian cities have coped remarkablywell. In recent years, several cities have demonstratedthat they are able to manage their problems on theirown, given a supportive state government.


In recent years,several citieshavedemonstratedtheir ability tomanage theirproblems ontheir own, givena supportivestategovernment.

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The list of cities in Table 3 indicates the gradualtransformation of urban management in India. Manyother cities pursue similar innovative managementpractices. The list will grow as other cities begin toemulate these experiences.

Among the characteristics of innovativepractices in each of the city experiences, these fouroccur with frequency.

� Internal motivation. Each innovative urbanmanagement experience was motivated fromwithin the local government system. Notably, noexternal support agency was thus motivated.

� Local leadership. In each case, it is possible toidentify an individual who played a keynote ininitiating the changes. Such leadership wasprovided by the municipal commissioners inAhmedabad, Surat, Pune, and Calcutta and bythe mayors of Jalgaon and Anand. Only in Tirupurwas the project initiated by individuals who werenot a part of the local government.

� Institutional and legal context. Another commonfeature was that no major changes were made inthe institutional and legal frameworks. Instead,efforts were directed toward improving theefficiency of the existing administration. Thisapproach to making the system work � ratherthan tearing it down � is a first but crucial stepfor improving urban management.

� Improved credibility of local government. A majorimpact of these practices was the tremendousboost to the credibility of the municipalgovernment in the eyes of residents. The changein people�s perception of a corrupt and inefficientmunicipal government to one that �meansbusiness� has had several spillover benefits.Because they know they have earned the respect

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Urban Governance in Sri Lanka and the Colombo RegionVision 2021: Urban Governance in India

Table 3: Innovative Urban Management Experience in India

City Population Nature of innovations(million)

1. Ahmedabad 3.5

2. Tirupur 0.35

3. Surat 1.7

4. Calcutta 12.0

5. Pune 1.7

6. Jalgaon 0.25

7. Anand 0.13

l Financial revival through strictadministrative measures

l Improvements in civic informationl Public-private partnership for road

improvement projectl Slum networking through public, private, and

community partnershipl Accessing capital market through municipal

bonds

l Infrastructure improvement through privatesector initiative

l Partnership of state government, localgovernment, private industry, and a financialinstitution

l Declared as the second cleanest city in 1996only two years after plague outbreak

l Administrative decentralization and dailymonitoring of routine municipal functions

l Major investments in infrastructure throughinternal revenue surplus

l Responsive to citizen complaints

l Removal of encroachmentl Improved solid waste managementl Responsive civic administrationl Improvement in civic facilities

l Consistently good financial performance andsufficient revenue surpluses to self finance mostcapital investments

l Revenue generation from real estatedevelopment for most of city�s capital needs

l Improved civic infrastructurel Vision to become a major urban center in the

country

l Efficient municipal administration for over twodecades

l Resource generation from land

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of local residents, municipal staff morale is high.With increased compliance in payment of localtaxes and changes, municipal finances haveimproved. This is also partly due to the feeling ofthe local residents that the municipal resourcesare being used for their welfare. Access to capitalmarket is also facilitated, as the credit rating ofthese cities for potential municipal bond issueshas been quite favorable.

LESSONS FOR IMPROVED URBANMANAGEMENT

The recent experiences of a few Indian cities provideeight key lessons for improved urban governance.These lessons are summarized below.

� Credibility. Local governments must build up theircredibility with the local residents. This can bedone in a variety of ways. It may be done byimproving finances of the city and by eliminatingcorrupt practices, recovering dues, or adoptingpopular schemes. All these efforts need to beundertaken without raising taxes or user chargersin the initial stage. It is also possible to build upcredibility by ensuring that the city is kept cleanand that the roads are without potholes. Sucheffective administration is required to ensure thatall municipal employees perform the dutiesassigned them. Obtaining citizen support andparticipation of the private sector enterprise willbe possible only when the local governmentperceives itself as an effective organization.

� Positive impact on daily life. Local governmentsshould make an extra effort in some critical areasthat affect the daily lives of its residents. Efficientgarbage removal, improved streetlights,resurfacing of major roads, and removal ofunauthorized and illegal constructions are some

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activities that can send a positive signal to theresidents. This also results in tremendous supportto municipal governments by the public andprivate sector, and has helped overpower manyvested interests arising from the inefficiencies ofthe local government.

� Change from within the system. In the initialphase, the changes have to come from within thesystem. In the past, many donor agencies hadattempted to bring about improvements in citymanagement through various conditions attachedto their assistance package along with trainingprograms for municipal staff. These efforts didnot lead to any perceptible change in citymanagement. Efforts of national governments andinternational agencies for general improvementin urban management are also unlikely to succeedunless they are directed to those municipalitiesthat have demonstrated same explicit internalcapacity and willingness to change.

� Demonstration and dissemination. The�demonstration effect� is crucial to success. Afterthe high credit rating achieved by Ahmedabad,20 other Indian cities sought credit rating byprivate agencies. The Surat experience on solidwaste management draws officials from othercities to learn about what they have done and toreplicate or adapt this to their own cities. Thereis thus an urgent need to disseminate theseexperiences.

� Diminished role for state and nationalgovernment. In most cases, the state�s role in thecities has been mixed. Under existing municipallaws, the municipalities are heavily regulated bythe state government. This leads to much conflict.Jalgaon, for example, had to seek judicialintervention to counter the state government�s


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refusal to grant permission for many of itsactivities. While the municipal corporations arerelatively more independent, they also experiencehindrances from the paternal attitudes of the stategovernments. In most cases, state governmentsupport has come only after the initial efforts ofthe local governments have proved successful.Through these initial efforts, enough publicsupport is engendered so that it becomespolitically difficult for the state government tointervene. The lesson for the state and nationalgovernment is to intervene as little as possibleand to support cities that demonstrate theircapacity to move ahead.

� Politics. Understanding the relationship betweenthe administrative and legislative wings of thelocal and state governments is very important.At the local level, the elected members mustsupport and work in unison with theadministration. However, one should expect someresistance and conflict in the initial stages ofchange. It is only through the persistent (oftenviewed as rebellious) efforts of the changeleadership that will bring about results. Thepolitical fallout will of course affect electedofficials. At the state level, conflict is inevitableif the political leadership represents an oppositionparty. Nevertheless, everybody likes a winner. Aslong as there is evidence of improvement andgood local support, the political andadministrative wings at the local and state levelswill work together for urban improvement.

� Responsiveness to grievances. Formal andinformal response mechanisms for citizens wereestablished in each case cited in this paper. Suratprovides postcards to the citizens for complaints.The complaints are classified for attention andrectification within 24 or 48 hours. A

Everybody likesa winner. As

long as there isevidence of

improvement,the political and

administrativewings will work

together forurban

improvements.

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decentralized administrative system has beenestablished to deal with the complaints. Such aresponse mechanism has many advantages. Atone level, the credibility of local governmentamong citizens has increased. Even if thecomplaint is not notified within a specified time,the fact that a citizen is heard and that some actionhas begun is important for people. Such a systemis also a morale booster for staff because theygain the respect of the citizen when they respondto the complaint. The elected members also feelinvolved and gain importance in the eyes of thepeople. This mutual reinforcement of faith ofpeople in local politicians and bureaucracyprovides a basis for partnerships.

� Leadership. Most successful changes can beattributed to a particular individual. Theseindividuals have made attempts to institutionalizethough delegation of decisionmaking powers andby introducing citizen response or grievanceredress systems. However, greater efforts will beneeded to ensure that when these individuals areno longer at the helm, their efforts will besustained.


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ABBREVIATIONS

ADB Asian Development BankADBI Asian Development Bank InstituteAMC Ahmedabad Municipal CorporationCBO community-based organizationCCO Chief Corporation OfficerCMC Colombo Municipal CouncilCMR Colombo Metropolitan RegionCRISIL Credit Rating Information Service of

India LimitedDCC Dhaka City CorporationDWASA Dhaka Water and Sewerage AuthorityGIS geographic information systemLCCHS Lahore Cantonment Cooperative

Housing AuthorityLDA Lahore Development AuthoriyLCS Local Council ServiceLGED Local Government Engineering

DepartmentMCL Metropolitan Corporation of LahoreMTS Model Town SocietyMUDF Municipal Urban Development FundNESPAK National Engineering Services of

PakistanNGO non-government organizationNWS & DB National Water Supply and Drainage

BoardOECF Overseas Economic Cooperation FundTEPA Traffic Engineering and Transport

Planning AgencyWASA Water and Sanitation Agency

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TVE Township-village enterpriseUK United KingdomUN United NationsUNCTAD United Nations Conference on Trade

and DevelopmentVAT Value-added taxVER Voluntary export restraintWEFA Wharton Economic Forecast

AssociationWPI Wholesale price indexWTO World Trade Organization

Notes: References to Taipei,China are to theisland of Taiwan.

�$� as a currency notation refers toUnited States dollars unless otherwise specified.

The symbol - in tables indicatesthat the amount is negligible.

The symbol � in tables indicatesthat data are not available or not

applicable.

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Urban Governance in Sri Lanka and the Colombo RegionAbbreviations

ASIAN CITIES IN THE CENTURY - Asian Development Bank€¦ · Syed Mansoor Ali Shah Afridi, Shah and...

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