VNG International Willem van Nieuwkerk Brussels, 29 January 2011 Ghana Urban Management Pilot Programme (GUMPP) Funding modalities for local government/local.

VNG InternationalWillem van NieuwkerkBrussels, 29 January 2011

Ghana Urban Management Pilot Programme

(GUMPP)

Funding modalities for local government/local governance

Dia

gn

osis o

f the

mu

nicip

ality

Stra

teg

yo

f the

mu

nicip

ality

Priority Investments

and Maintenance

Municipal Contract CG – LGs

MunicipalAdjustment

Plan

Reciprocalcommitments

Urban Strategy

FinancialStrategy

OrganizationalStrategy

Finance, Implementation

& Monitoring

Urban

audit

Financial audit

Organisational

Audit

Pre

pa

ratio

n p

ha

se

Municipal contracting process (World Bank)

Main features of GUMPP

• A stronger accountability relation between central government (MLGRD / MoFEP) and local government (4 cities) and between each city and its citizens

• A rational selection of priority investment projects through urban, financial and organizational audits (by local audit firms)

• Increased investments (€40 loan agreement with AFD) in municipal infrastructure and services through improved city governance and (urban, financial and organizational) management

• A greater responsibility of the 4 city governments in the prioritization, implementation and (self-)financing of projects by putting its role on a contractual footing and by limited level of competition (benchmarking tool)

GUMPP status

• Programme design (2009)• Programme preparation (2009 - 2010)• Start programme implementation from 2nd Quarter 2011

A programme designed by and for the four participating cities A programme co-owned by the four participating cities Programme and projects implemented by the MMDAs (with support

from central govt & TA)

3 critical phases

April 2010: AFD Board approval

September 2010: Draft Credit Facility& Granting Agreements under approval by GoG

Next: signature of Agreements (early 2011 - depending on GoG)

September 2010 : cities’ assessments have led to identification of priority investments & support measures (indicative costing)January 2011: GUMPP overall 5 year procurement and operational plan , draft MoU for each city,

Next: - Verification MoU by each city and central GoG- Start implementation (TA, CapBuilding, INV)!

Programme preparation Programme set-up & implementation

GUMPP outputs preparatory phase

• 4 audit reports• Project selection manual• Manual of Procedures• Overall 5-yr plan

– Overall structure and features of the programme– Performance indicators and expected outputs/results– Capacity building measures– Activity chart and procurement schedule

• On-granting agreements – MoU’s– PIPs– O & M plans– Support measures– Indicators for each MMDA

• Urban infrastructure• O & M• Support measures

Institutional design / sharing of responsibilities

MoFEP

MLGRD

Steering Committee(inter-stakeholder)

GUMPP Secretariat

MMDAs

AFD’s finance counterpart, transfer of funds

Policy making, overall management & coordination of GUMPP

Supervision of GUMPP & policy directions

Strategic supervision of GUMPP activitiesOwnership and

implementation of GUMPP

Financial requests, regular reports as per MoU implementation)

Participation

Request for financial & technical

assistance

PROJECT PREPARATION

BUDGET

Technical studies , impact assess-ments & other support measures

TECHNICAL & FINANCIAL ASSISTANCE TO MLGRD AND 4 CITIES

PROJECT IMPLEMENTATION

BUDGET

Budget for permanent TA – mix of long and short-term (inter-)nationalexperts

Overall institutional structure

CENTRAL GOV. SUPERVISION= STEERING COMMITTEE AND SECRETARIAT

SECRETARIAT

Located in UDU - MLGRD (Policy Directorate)

Directs Reports

STEERING COMMITTEE

Interstakeholder: MLGRD, MoFEP, 4 MMDAs, NDPC, MoE (EPA, T&C), LGS

MANAGEMENT COMMITTEE

Chaired by MCE

MCD + heads of technical services (decentralised and line departments)

GUMPP COORDINATION TEAM

Technical departments

Leads

Supports

OWNERSHIP & IMPLEMENTATION

IN EACH CITY

CAPACITY BUILDING &TRAINING BUDGET

Including project supervisors

Financial flows - overall mechanisms

MOFEP

MLGRD

Opening of BOG bank account in Euro and cedi

Opening of MMDA bank account in cedis

Opening ofbank account in cedi

Tamale

Opening ofbank account in cedi

Sek-Takoradi

Opening ofbank account in cedi

Ho

Opening ofbank account in cedi

Kumasi

AFDHighly concessional loan + small capacity building grant

Renewable of advances

(when national competitive bidding contracts )

Works / Supplies Works / SuppliesWorks / Supplies Works / Supplies

AFD direct payments to contractors

(threshold of international competitive bidding - ICB )

Advances and replenishment

Validation of annual development plan (annual procurement plan)

City allocation

• DDF criteria– Basic component 38% (population 50%, land size 40%,

equal share 10%)– Performance component 50%– Capacity building 12%

• Performance allocation – 1-3% of investment component

• Costings:– Project investment– Project development costs– Immediate impact measures– O & M costing– Support measures

Thank you

Context of Municipal Contracts:Challenges for Local Governments

• Rapid urbanization in developing countries and increasing demand for municipal investments in infrastructure and services

• Trends in decentralization– Imbalances between responsibilities and available funds– Poor financial situation and weak technical capacities at local level– Efforts to increase local revenue base– Trend towards Performance Based Approaches (PBA) = MC!

• Aid effectiveness debate– Involve LG in national policy dialogue (micro-macro gaps)– Apply ‘ Paris’ AE-principles at local level (ownership, alignment,

harmonization, MfDR, mutual accountability)

Municipal Contracts defined

A consensual and binding, performance-based, agreement between a municipality (or its representative) and the central government for a 4-5 year period, including a:

1. Priority Investment Plan (PIP) Investments

2. Municipal Maintenance Plan (MMP) Maintenance

3. Municipal Adjustment Program (MAP) Org & Fin. Reform

• Donor funds (loans) are channeled to CG• Funding to municipalities by CG on the basis of the MC• MCs can be signed by LG on a voluntary basis but are

conditional on acceptation of the reform component (MAP) and approval by municipal assemblies

Objectives of Municipal Contracts

• Integrated urban and local development through increased investments in infrastructure and services through improved municipal governance and (urban, financial and organizational) management

• A greater responsibility and capacity of local governments in the prioritization, implementation and (self-)financing of projects by putting its role on a contractual footing

• A more reasoned and rational selection of priority investment projects through extensive urban, financial and organizational audits and participation of the population

• A stronger commitment and accountability relation between central government and local government and between the municipality and its citizens

Municipal Contracts:Some facts and figures

• Late 1990s: coming over from Europe to (Francophone) Africa, now mainstreaming elsewhere (Anglophone SSA, Asia and LA)

• MC projects in 15 countries involving nearly 170 municipalities, investments worth USD 900 million (of which 90% physical investments)

• Main active donors: WB (IDA) and AFD (grants and concessional loans), incidental KfW/GTZ, other bilateral donors (Cida, AfDB, Ndf)

• Reform component (through capacity building and co financing) important component of project, VNG-I currently provides TA in Ghana and Cameroon

Municipal Contracts in Sub-Saharan Africa

Country Main donors Period FundingUSD millions

Cofin.% of total

Municipalities

Senegal (2) WB, AFD 2006-2010 157 19 67 + Dakar

Mali WB, AFD, Cida, KfW 1997-2005 137 13 9

Senegal (1) WB, AFD 1998-2005 114 20 67

Mauritania (2) WB, AfDB, AFD 2002-2011 99 20 2

Cameroon WB, GPOBA 2007-2012 92 2 5

Ghana AFD 2010-2014 60 9 4 (not Accra)

Benin WB 2005-2010 50 7 11

Cote d’ Ivoire WB 1996-2004 42 20 n.a.

Niger (2) WB 2008-2012 30 0 3

Rwanda WB, NDF 2006-2009 27 3 6

Mauritania (1) WB, KfW, Cida 1996-2001 24 15 11

Niger (1) WB, AFD 1997-2003 24 6 11

Guinea (1) WB 1999-2005 20 2 6

Guinea (2) WB 2007-2011 16 6 8

Burkina Faso WB 2007-2013 10 4 6

Overall results

Results with MC projects are on average positive, but mixedPositive: Senegal, Niger and GuineaNegative: Mali

• MCs have shown to be an effective and accepted instrument to improve the performance of local governments

• Financial capacity and investments in municipal infrastructure and services increased

• Increases in local resource mobilization (local tax reforms)• More attention (and financial means) for maintenance• Increased focus on urban economic development (but equity?)• Ownership by central and local governments varies• Impact on institutional reform and capacity building is mixed• Effects on local accountability are not clear/weak• MC can provide a common platform for other donors to invest

Senegal (UDDP/PAC): Lessons learned

• Targeting a large number of municipalities is possible• Clear implementation arrangements and well defined

contractual distribution of roles• Capacity building works better if it is integrated in a

contractual arrangement and linked to investments• Seeking harmonization of financing windows is a

challenge• Improvements in the area of aligning to national budgets

are necessary in the future• Participatory process was weak which resulted in supply-

driven approaches and standard proposals by MDA

Ghana (preparatory phase of GUMPP)

Three success factors:

• The quality and ownership of the preparatory phase (including the audits) and sustainable and strategic capacity building

• Harmonization, coordination and alignment to national policies and local legislation

• Ownership and coordination at central and local level

Success factors (or failure), 1/2

• Timing and political commitment• Ownership (central and local level, e.g. through co-funding)• Quality of urban and local government policies and

coordination of projects/donors at central and local level• Participatory process at local level (domestic accountability)• Alignment with national AND local legislation, policies and

budgets• Harmonization, coordination and mutual trust between

donors–Urban and local development policies (decentralization)– (Performance based) incentive structures

• Continuity and donor predictability

Success factors (or failure), 2/2

• Quality of the MC process itself– Understanding of the concept of MC among

beneficiaries and donors– Proper and timely sequencing of the various MC stages– Audits and project materials (manuals, training)– Clear rules of the game (incl. the MC)– Technical support during implementation– Reality checks!– Monitoring of the MC– Capacity building of local governments for achieving

sustainable results (urban planning, municipal financial management / local resource mobilization, organizational management)

Conclusion

• MCs are an innovative, increasingly popular and relatively successful ‘aid modality’ for strengthening of local governments but its success strongly depends on:

–Quality of the MC process (including capacity building)

–Context in which MCs are signed: in particular political and institutional environment, ownership (central and local governments), donor behavior in the areas of harmonization, coordination and alignment