Better urban services: finding the right incentives by William R. Dillinger

By William R. Dillinger

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It is estimated that Bank financing reaches more than 11,000 cities and towns worldwide. Moreover, the implications of reform extend not only to urban services but also to much of the rest of the Bank's portfolio: to the social sectors, to nonurban infrastructure, and to national fiscal and income distribution policy. Improvements in local government performance are essential to protecting the urban environment and meeting the needs of poor populations for such services as clean water, sanitation, health, and education.

Over the last several years and for a variety of reasons, the way governments administer delivery of urban services has been reexamined. Of the seventy-five developing countries with populations over 5 million, all but twelve have initiated some form of transfer of power to local governments. At the same time, the role of the private sector in many areas traditionally reserved for government is being reassessed. This fluidity in intergovernmental arrangements and the overall policy environment for local service delivery offer the chance to promote fundamental reforms that would not have been possible in the past.

Although the process of reform will not be simple, the potential payoffs are high. Managing and protecting the urban environment may be either very costly or simply ineffective if the capacity to deliver key urban services such as clean water, sanitation, waste collection, and efficient transport cannot be rapidly expanded in the future. Well-performing, demand-driven urban institutions are critical to this expansion. Strong institutions in urban areas and sound intergovernmental arrangements are critical to the effective management of air and water resources.

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