Urban Poverty and Local Governance: Institutional and Financial Implications

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1 Urban Poverty and Local Governance: Institutional and Financial Implications Yasuhiko Matsuda, Sr. Public Sector Specialist Social Protection & Labor Global Practice, South Asia

2 T I T U F R A M E W O R K F O R D E L I V E R Y S Y S T E M S F O R S O C I A L S A F E T Y N E T S Monitoring Of Case Outcomes On-Going Program Case Management Service Transaction / Payment D E L I V E R Y P R O C E S S E S Determination of Benefits / Service Strategy CITIZEN CITIZENS INTERFACE Enrolment Decision Intake & Registration Assessment of needs & conditions For Eligibility A N D

3 Features of urban poverty that may require specific institutional & financial responses Urban poverty is dynamic and the urban poor move in/out of locality and/or into/out of poverty Social/beneficiary registries need to be dynamic (i.e., updated frequently) Need to be able to track these movements and make benefits portable -> require inter-jurisdictional coordination The poor are often concentrated in slums, sometimes straddling municipal jurisdictions) Possible mismatch of needs and resource endowments for individual local government -> poorer localities tend to be poorly resourced municipalities too Better-resourced localities can be burdened from spillover typical in health Urban poor face multiple challenges of poverty Higher cost of living; exposure to crime & violence; multiple (precarious) employment, etc. Need for better inter-sectoral/inter-program coordination Social capital/community ties tend to be weaker in urban space Influx of migrants vs. NGOs, private philanthropies (perhaps?) Less reliance on community-based arrangements but taking adv of greater opportunities for institutional partnerships?

4 Effective SSN service delivery requires efficient intergovernmental relations 17 November 2015

5 Roles, capacity and incentives of local governments in social safety nets Central government typically leads in policy-setting and financing SSN is often not a high priority for subnational governments (vs. health, education) Local governments are often called on to fulfill specific functions (e.g., outreach, beneficiary identification, enrollment) because of their comparative advantages Detailed knowledge of local realities Ground presence for face-to-face contacts Relative ease of spatial/inter-sectoral coordination But vertical coordination can be complicated Lack of clarity in assigned roles and responsibilities Mismatch in roles and resources Absence of common information for beneficiary identification Political discord And local government capacities vary significantly Across countries (Brazil vs. Philippines vs. Pakistan) Within countries (large capital cities vs. small towns)

6 Dark Colors = National Gov t % of GDP Light Colors = Sub-National Gov t Public Expenditure & Revenue by Level of Government 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% EXP REV EXP REV EXP REV EXP REV EXP REV EXP REV EXP REV EXP REV EXP REV CAN US BRA ARG AUS IND SA MEX PAK Consolidated 40.0% 31.4% 39.4% 30.8% 38.9% 35.3% 33.9% 30.2% 33.9% 27.3% 27.2% 20.3% 26.6% 27.0% 24.7% 19.6% 19.8% 13.2% Sub-National 24.9% 15.3% 18.6% 9.1% 11.5% 10.6% 17.9% 5.9% 15.9% 5.1% 13.2% 5.2% 14.1% 0.4% 10.8% 0.8% 6.6% 1.0% National 15.1% 16.1% 20.8% 21.7% 27.4% 24.7% 16.0% 24.3% 18.0% 22.2% 14.0% 15.1% 12.5% 26.6% 13.9% 18.8% 13.2% 12.2% Source: International Monetary Fund World Economic Outlook; OECD Fiscal Decentralization Database. All data from 2012/13 except Canada (2009) and Brazil (2011)

7 UNITED STATES Sub-National Expenditure by Function INDIA Other and Unallocable Interest on 8% General Debt 2% Police 1% Government Administration 3% Health 3% Hospitals 4% Highways 6% Insurance Trust 15% AUSTRALIA Education 30% Public Welfare (Income Security) 25% Transport & Communication s 5% Social security & welfare 5% Medical, public health, sanitation & water supply 6% Administrative services 7% Education, 18% Agriculture 8% Interest Payments 10% SOUTH AFRICA* Pension & Retirement Benefits 9% Power, Irrigation & Flood Control 9% Public debt 3% Interest on superannuation 1% Health 27% Agriculture & Environment 7% Social Development 2% Education 37% Education 25% Human Settlements 9% General public services 3% Housing & community amenities 5% Social security & welfare 7% Public order 10% Transport & communications 11% Housing & Community Amenities 4% Transport 8% Health 29% *data from KwaZulu-Natal Province

8 % of GDP % of GDP % of GDP Social Protection Expenditure per Level of Government 12.0% 10.0% CANADA (FY 2009) These 3 countries with significant decentralization depict very different Social Protection Systems: 8.0% 6.0% 4.0% 2.0% 0.0% Social Assistance Social Insurance CAN Sub-national 1.8% 1.1% CAN National 4.4% 3.1% - Both in Brazil and Canada, subnational roles in SP are much smaller than the federal roles. - In South Africa the national government fully centralized social assistance functions in 2004 (and also created a single payment agency). 12.0% BRAZIL (FY 2012) SOUTH AFRICA (FY 2013) 12.0% 10.0% 10.0% 8.0% 8.0% 6.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% Social Assistance Social Insurance BRA Sub-national 0.4% 2.5% BRA National 1.3% 9.1% 0.0% Social Assistance Social Insurance SA Sub-national No data available / Negligible SA National 4.8% 0.9%

9 Uneven revenue & expenditure assignments: Philippines 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Provinces Cities Municipalities Barangays % IRA Share % Share of Devolved Functions post-lgc

10 Philippine Pesos Differential fiscal capacities of sub-national governments: Philippines 700 Chart Title Visayas Luzon Visayas Luzon Visayas B Luzon PROVINCES CITIES MUNICIPALITIES #REF! IRA & Other Transfers Own-source Revenues - Tax revenues - Non-tax revenues