0w2010 01 RESUM EJECUTIVO 03 DEFcarta ang
26/10/10
19:49
PĂĄgina 58
EXECUTIVE SUMMARY 58
United Cities and Local Governments
the central government. Whereas, decentralized units (generally municipalities) perform limited number of functions such as street paving and maintenance, construction of local roads, street lighting, garbage collection, library and park services, and issuing permits for construction. A related issue is disparity in public expenditures across regions within MEWA countries. While some expenditure functions are delegated to local governments, provinces, and municipalities, particularly in poorer regions, have difficulty meeting their expenditure responsibilities due to lack of proper revenue assignment and/or inadequate intergovernmental transfers and borrowing. This is an important issue as such disparities may lead to deterioration in welfare in those regions. MEWA countries have largely ad hoc intergovernmental transfer systems where most countries in the region do not use transfer formulas. There is also often significant difference between de-jure and de-facto practices. Lebanon is an example where 75 percent of the Autonomous Municipal Fund (AMF) is invested in large scale development projects by the central government through the Council of Development and Reconstruction (CDR), and other development institutions, and hence not transferred to municipalities. The majority of local governments in Lebanon do not have sufficient resources to meet their needs. This has led in some cases to unsustainable borrowing. Local borrowing practices are also largely ad hoc. An important problem is lack of transparency in local borrowing which could lead to serious indebtedness and financial crisis. Faced in many cases by an imbalance between responsibilities and revenues, along with unpredictable or reduced transfers, the environment is ripe for unsustainable debt. Local administrations in Jordan and Turkey have engaged in significant borrowing to meet their rising investment needs. In Jordan, there has been a substantial growth in capital expenditures as the share of these rose
from 41 percent of total expenditures in 2003 to about 58 percent in 2008, reaching a share as high as 65 percent in 2007. Along with this increase, Jordan municipalities have run fiscal deficits recently with an average deficit of 0.33 percent of GDP. In Turkey, total outstanding debt, excluding deferred payments, of Turkish local administrations was 2.8 percent of GDP in 2008. An important issue is that municipalities are not required to have balanced budgets and thereby rely on central government to finance their debt in the case of insufficient resources. The cases of Turkey and Jordan show that these countries are suffering from fiscal deficits and indebtedness at the local level which is at least partially driven by ad hoc local borrowing practices and soft budget constraints. Conflicts have particular relevance to the Middle East and Western Asia region as it’s one of the most conflict-ridden regions in the world. Studies show evidence of strong negative spillovers from conflicts and point to external conflicts as a significant obstacle to a decentralized government structure in the region. The special circumstance of Palestine is featured in the chapter to show the unique form of government structure in Palestine in the face of a persistent conflict environment. Local government officials across the region generally express their need for more data and information. However, they tend to employ insufficiently trained staff and therefore do not have the capacity to work at a policy level and use local financial data. They simply do not have enough resources. Better informed and trained decision makers at the local government level would be an important element in implementing a decentralization strategy. In Lebanon for example, local tax collection is hampered by a slow tax evaluation process, non-computerized accounting practice, and a lack of tax collectors. Similar problems are found, at least to some extent, across the countries surveyed. There are also good practices in the region, particularly regarding training of local officials and