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Wednesday, November 21, 2012
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Set up finance commission for local government bodies

Former governor of Bangladesh Bank suggests in his presentation on urban public finance

From left, Riti Ibrahim, secretary of Statistics Division; Hasan Mahmud, environment minister; Hossain Zillur Rahman, executive chairman of Power and Participation Research Centre; Ghulam Quader, a former adviser to caretaker government; and Abu Alam Md Shahid Khan, secretary of Local Government Division, attend the opening ceremony of a workshop on urbanisation at Ruposhi Bangla Hotel in Dhaka yesterday. Photo: STAR

Bangladesh should set up a local government finance commission to help cities and municipalities become self-sufficient, former central bank governor Salehuddin Ahmed said yesterday.

"I think it is very necessary.”

“The dependence of local government bodies including the urban ones on central government for finance must be reduced. The present ad-hoc and discretionary practices of central government in allocating resources should be abandoned to achieve fiscal decentralisation,” Ahmed said.

The best way to achieve fiscal devolution is to set up a permanent local government finance commission, he said.

His comments came at a daylong workshop, "Bangladesh Urban Dynamics", organised by Power and Participation Research Centre (PPRC) at the capital's Ruposhi Bangla Hotel.

Presenting a keynote paper on urban public finance, Ahmed said the importance of tying both political and fiscal decentralisation together has to be recognised.

In order to capture the efficiency gains of local government, it would be necessary to have a significant set of expenditure responsibilities and taxing powers, he added.

The local government, especially city corporations, may also consider issuing municipal bonds for fund raising purposes, Ahmed said.

“However, this is a complex process which, among other things, requires legal reforms.”

Ahmed said drastic changes to the physical, economic and social structure in the urban areas due to rapid urbanization has been posing serious challenges to sustainable urban development in Bangladesh.

Hossain Zillur Rahman, executive chairman of PPRC, said urbanisation is a major issue for Bangladesh as the country is going to have 10 crore urban population by 2030.

"It is a national, social and economic issue," he said.

The economist also said the government would have to make urbanisation one of its key agendas for transforming Bangladesh into a middle-income nation.

"It will be a growth driver of the country. Its potential has to be maximised."

Hasan Mahmud, environment and forests minister, calls for planned urbanisation so that services could be provided in an efficient manner.

He is totally against the continued expansion of Dhaka, which has already been termed as one of the top most unliveable cities in the world.

"Although urbanisation is a reality we have to be tough on urbanisation. We have to have a long-term effective vision," Mahmud said.

Akbar Ali Khan, a former caretaker government adviser, said nobody can stop urbanisation.

"So, we have to think about it afresh. We have to be prepared."

He said it is not true that people do not want to pay for the services they get from the local governance bodies.

"In many parts of Dhaka we are seeing dwellers take private initiatives to avail the civic amenities."

ABM Mirza Azizul Islam, a former finance adviser to caretaker government, said the problems regarding urbanisation are well-known and solutions, in most cases, are also known.

"But we do not see their implementation."

He said different government agencies -- and not the local governance system -- provide services in the urban areas and they lack co-ordination among them, either in planning or in service delivery.

However, he said, there are both good and bad news for Bangladesh when it comes to urbanisation.

"The good news is: Bangladesh is still one of the least urbanised countries in the world, as only 22 percent of the country's population live in the cities. So, there is a potential for balanced growth."

"And the bad news is: Dhaka is the second most unliveable city in the world. So, there is a need for decentralisation of services, management, and administrative system."

Mahabub Hossain, executive director of BRAC, the world's largest non-governmental organisation, said it is universal true that whenever there is any economic growth there will be urbanisation.

He said the services provided by the local governance bodies could be privatised.

"The sooner we privatise them the better services the citizens will receive."

Hossain said that he does not understand why building the mass transit system is taking so much time.

"We have been hearing about this for years. We need a strong will to complete the project, which will allow us to largely avoid the greatest wastage -- people's time."

Mustafa K Mujeri, director general of Bangladesh Institute of Development Studies, described it as a collective failure as the country could not give adequate importance to the urbanisation issue on time.

"As a result, the problems have become very complex. It would be a challenge to solve them."

He said urbanisation could not be seen as a piecemeal issue; time has come to look at it from a comprehensive approach.

The former central bank chief economist said Bangladesh would see rapid urbanisation in its development process in the next one or two decades.

"We need to have urbanisation that supports growth."

Prof Jamilur Reza Choudhury, vice-chancellor of the University of Asia Pacific, supported immediate implementation of the mass road transit (MRT) project.

He said there are many low-investment solutions which can solve the city's notorious traffic system greatly, but neither the government nor the private sector pays any heed to them.

Prof Nazrul Islam, an urban specialist, said the World Bank should broaden its urbanisation strategy beyond Dhaka and Chittagong.

Abu Alam Md Shahid Khan, secretary of local government division, said the civic voice should be stronger and not bow down to any pressure in implementing the MRT project.

Tofail Ahmed, a former member of local government commission, said there is no financial discipline in the local governance bodies.

"We have to give them [the local authorities] power so that they can run on their own."

ATM Nurul Amin, a professor of North South University, said Bangladesh should construct the mass transit system on a priority basis to rid the city of congestion.

“The project should get priority over the Padma Bridge."

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