Experts explore the building of a local finance framework at Urban Finance Seminar

The Urban Finance Seminar, titled "Towards a Local Finance Framework," was part of the agenda at the third SDG Cities Global Conference. It was held on October 29, 2023.

Xie En, from the School of Economics and Management at Tongji University (Tongji SEM), was among the speakers.

Xie emphasized the influential role cities play in social transformation and their potential as accelerators for achieving all sustainable development goals (SDGs). According to Xie, city administrators must strategize urban policies and local financial frameworks, use funds from both public and private sectors, and innovate existing policy tools. This way, they can direct funds to areas that will have the most significant impact and allocate resources more efficiently to crucial areas and the weaker links of urban development.

Xie also noted the importance of exploiting local financing potential and the necessity for cross-regional and global cooperation, especially for low-income cities. Comprehensive, innovative urban development investment projects require pooling the expertise and resources of partners, stakeholders, enterprises and governments at all levels. This pooling will enhance urban governance and promote the sustainable agendas of cities.

Dyfed Aubrey, lead of SDG Cities, stated that the SDG agenda encourages cities to attain financial stability and amass sufficient financial assets to boost further development. Cities require specific frameworks to identify their needs and methodically acquire more financial assets.

Lennart Fleck, an expert in the financial framework, suggested that cities need to prioritize tasks while upgrading their economic and financial systems. He said that projects with sufficient revenue potential could use the public-private partnerships (PPP) model. However, if a city has good creditworthiness but a project's profit is insufficient, applying for a loan is the better option.

Establishing financial frameworks should involve analyzing the pros and cons and using them reasonably and successfully, according to Fleck. The viability of a financial framework depends on the city's creditworthiness and the extent to which its revenue aligns with the framework.

A roundtable discussion on PPP included experts such as Fakri Karim from the United Nations Capital Development Fund (UNCDF); Fred Amonya, honorary senior fellow at the University of Birmingham; Gladys Wanga, governor of Homa Bay, Kenya; George Ofori-Atta, director of the non-tax policy department of the Ministry of Finance and Planning of Ghana; Julio Roberto Vargas Malagon, mayor of Cajamarca, Colombia; Solomon Obiero, County Executive Committee Member for Finance and Economic Planning of Homa Bay; Zhong Ninghua, vice dean of Tongji University SEM; and James Donovan, CEO of ADEC Innovations.  

The experts discussed experiences and lessons learned from the failure and success of PPP projects, and identified issues that need to be addressed before launching PPP projects.

The experts agreed that the lack of understanding, expertise and data is among the reasons for the failure of PPP projects. They emphasized that the values, potential risks and cost of PPP should be transparent to consumers.

George Ofori-Atta, principal economist of Ghana, called for laws and regulations to guide PPP projects towards success and economic viability.

All the experts agreed on the importance of city creditworthiness for the successful implementation of PPP projects. They stressed that if public sectors are not highly creditworthy, the implementation of a PPP project is likely to fail.

The panel concluded that a local finance framework requires integrated actions, participation of international partners and consideration of local conditions.