National Conference on Municipal Finance

National Conference on Municipal Finance

Kathmandu, Nepal

20th December 2016

Organized By

MOFALD, MOUD and TDF

Supported By

UNCDF

and

German Development Corporation

Hotel Annapurna, Kathmandu

Background:

Nepal’s urban population of the 217 municipalities, echoing the regional scenario, has swelled from 23% (2011) to 42% (2015), showing encouraging trends of urbanization and economic development prospects in the country. The rapid urbanization has created an annual financing gap of about NPR 1 billion (draft National Financing Strategy 2016). This calls for the Fiscal space at sub national level need to be enhanced in coming years. It not only increases the resilience of economies at Sub National (province and local) level, but also mobilizes domestic resources for urban infrastructure development and increases opportunities for domestic private sector growth and competitiveness through integration of local, regional and national value chains.

Financing for Development recognizes that “expenditures and investments in sustainable development are being devolved to the sub-national level, which often lack adequate technical and technological capacity, financing and support” and calls for greater cooperation among development partners and stakeholders to strengthen capacities of municipalities. Strengthening Municipal Finance is particularly relevant in the context of realizing goals of National Urban Development Strategy of Nepal for 2030, which sets out to “make cities and human settlements inclusive, safe, resilient and sustainable” and city development plans of municipalities addressing the aspirations of citizens.

On this backdrop, this conference, jointly organized by Ministry of Federal Affairs and Local Development (MoFALD) and Town Development Fund (TDF), aims to bring together the policy makers and a gamut of experts, fore example, academics, practitioners, and regulators across the country, to discuss recent research works and good practices on municipal finance, particularly in local tax and user fees, inter-governmental fiscal transfer, sub national borrowing, municipal bond and PPP financing. This conference will include a series of key notes, oral and workshop sessions where over 135 participants will deeply engage in and discuss current issues of municipal finance and come up with way forward in the context of fiscal federalism.

The conference focuses on assessment of both capacity constraints in terms of revenue generation and management and regulatory or legislative obstacles of municipalities.

Despite skepticism, the private sector has a significant role to play in infrastructure financing in LDCs like Nepal, but central and local governments need to take strong initiative in order to attract their attention and interest in partnering and investing[i].

Increased fiscal space fundamentally hinges on two prerequisites: i) adequate, timely and predictable intergovernmental fiscal transfers and, ii) sound public financial management systems. If intergovernmental fiscal transfers are not properly designed and well in place, it will be difficult to implement a sustainable fiscal decentralization process. A sound public financial management system at the sub national level is also prerequisite for a sustainable fiscal decentralization process and to deliver on the 2030 Sustainable Development agenda locally. Starting from enhancing the four tenets of financial management (i.e. budgeting, accounting, reporting and auditing) is critical to this effect, even more for LDC LGs.

At the same time, the devolution or delegation of public service responsibilities has frequently not been supported through fiscal reforms and fiscal decentralization that would help increase domestic revenue generation by local governments.

Mobilizing resources to finance investments and improve services at the municipal level is one of the most challenging aspects of local development, especially in case of taping resources using instruments like loans and bonds. The likely scenario of central transfers are predictable and generous (which is the exception), they are rarely adequate to finance major infrastructure improvements in 217 municipalities and other emerging towns. After promulgation of constitution of Federal Republic Nepal, the devolution of public service responsibilities need to be reframed so that the devolved functions to sub national levels could be supported by revenues generated at those levels.

The national conference aims to share knowledge among stakeholders on how internal ( taxes, user fees, land value capture) and external sources (intergovernmental transfers, borrowing, bonds, PPP) can be strengthened for financing sustainable development at the urban and peri-urban areas of municipalities. The organizers will prepare a publication that incorporates all the papers presented in the conference, and summarizes major findings of panel discussions. The publication will provide substantive inputs to organizing Municipal Financing strategies and actions.

Desired Outputs of the Conference:

This national conference is organized to synchronize the pieces of theories and practices of municipal finance covering the following specific areas:

i) Strengthening Own Source Revenue of Sub-national Governments: Implementing municipal taxes, fees .

ii) Strengthening Own Source Revenue of Sub-national Governments: Implementing Integrated Property Tax (IPT).

iii) Rationalizing pricing of service fee for operational sustainability of municipal infrastructure and Services: Case study of waste management and water management in Nepal.

iv) Developing and Implementing Innovative Tools/new avenues for financing urban infrastructure: Developing and implementing Land Value Capturing tools (land development).

v) Inter Governmental Fiscal Transfers (IGFT): Develop predictable fiscal transfer system to sub national government as envisioned in constitution of Nepal.

vi) Sub National Borrowing: An Instrument for Urban Finance

vii) Developing and Implementing Innovative Tools/new avenues for financing urban infrastructure: Issue of Bonds

viii) Promote and Catalyze Private Finance for development of urban infrastructure: a) enhancing project preparation and risk mitigation to catalyze investment flows, b) promoting local capital markets and facilitating greater access to local currency finance, c) supporting local banking and other domestic finance to expand reach, d) enhancing the impact of the private sector via inclusion and sustainability, e) providing new and expanded channels to enhance private sector flows and expertise e.g. transaction advice, towards development.

Proposed Paper from International level

ix) Global Trend in Emerging Options for Municipalities

x) Sub National Borrowing: Bond Issues Experience in Bangladesh

xi) Sub National Borrowing: Experience of Credit Rating

The national conference will contribute to the growing national endeavor of building knowledge about municipal finance for sustainable urban development as a vehicle for economic growth and poverty alleviation. The conference will bring together policy, practices or experiences and theoretically informed discussion on the need for municipal finance to be focused on improved urban services in terms of quality and equity. The conference will strengthen and build the network among policy makers, academics and practitioners, across the country by bringing together institutional and individual partners. This conference deliberations will be published, which will be shared nationally and internationally. Moreover, this National Conference on Municipal Finance will support in implementation of the fiscal federalism in the context of new federal structure of country. Hopefully, this background and theme of the conference will be helpful for authors to focus their contribution. Besides this background information about conference, authors are encouraged to interact with organizers while writing the papers.

Rationale of National Conference:

The draft "Municipal Finance Framework 2016" has highly emphasized on strengthening Municipal Finance in Nepal.National policies have duly recognized the need to the empower the local governments -Municipalities to finance their local development objectives. However, the ability of municipal governments to provide essential services has often been weak. Sound local governments and institutions are crucial for meeting local and National development goals. This conference focuses on assessment of both capacity constraints in terms of revenue generation and management and regulatory or legislative obstacles of municipalities.

Despite skepticism, the private sector has a significant role to play in infrastructure financing even in LDCs like Nepal, but central and local governments need to take strong initiative in order to attract their attention and interest in partnering and investing[ii].

Increased fiscal space fundamentally hinges on two prerequisites: i) adequate, timely and predictable intergovernmental fiscal transfers and, ii) sound public financial management systems. If intergovernmental fiscal transfers are not properly designed and well in place, it will be difficult to implement a sustainable fiscal decentralization process. A sound public financial management system at the local level is also prerequisite for a sustainable fiscal decentralization process and to deliver on the 2030 Sustainable Development agenda locally. Starting from enhancing the four tenets of financial management (i.e. budgeting, accounting, reporting and auditing) is critical to this effect, even more for LDC LGs.

Mobilizing resources to finance investments and improve services at the municipal level is one of the most challenging aspects of local development, especially in case of taping resources from loans or bonds. The likely scenario of central transfers are predictable and generous (which is the exception), they are rarely adequate to finance major infrastructure improvements in growing cities. After promulgation of constitution of Federal Nepal, the devolution of public service responsibilities need to be reframed so that the devolved functions to sub national levels could be supported by revenues generated as those levels.

This national conference aims to share knowledge among stakeholders on how internal ( taxes, user fees, land value capture) and external sources (intergovernmental transfers, borrowing, bonds, PPP) can be strengthened for financing sustainable development at the urban and peri-urban areas of municipalities. The organizers will prepare a publication that incorporates all the papers presented in the conference, and summarizes major findings of panel discussions. The publication will provide substantive inputs to organizing Municipal Financing strategies and actions.

Participants: Participants will be executive officers and revenue officers of selected municipalities, independent experts, academicians, MoF officials, MoFALD officials, MoUD officials, TDF officials, LBFC officials, NPC officials and media.

National Conference on Municipal Finance

Kathmandu Nepal

20 December 2016 (Paush, 05, 2073)

Conference Program

Plenary & Hall I (Arch Room)

Time / Activities /
8:00-8:30 AM / Breakfast and Registration
8:30-9:15 AM / Inaugural Session, Welcome and Opening Remarks
Inauguration by the Chief Guest
Welcome Speech and Program Objective by Mr. Maniram Singh Mahat, Executive Director, TDF
Opening Remarks
§ Representative from German Development Corporation
§ UN Representative - Nepal
§ Mr. Kedar Bahadur Adhikari, Secretary, MoFALD
§ Dr. Som Lal Subedi,Chief Secretary, Government of Nepal
§ Mr. Sushil Gyewali, CEO, National Reconstruction Authority
§ Address by the Chief Guest
§ Closing of Inaugural Session by Mr. Deependra Nath Sharma, Secretary of MoUD
9:15-9:30 AM / Tea Break
Session I
9:30: 10:30 AM / Session Topic:
Strengthening Own Source Revenue of Sub-national Governments:
a) Implementing municipal taxes, fees.
Key Questions:
I. Key issues regarding property tax, business tax, fees and other taxes?
II. How to make tax administration system capable, efficient and effective in municipalities?
Paper Presentation by: Ganga Datta Awasthi, Former Secretary, GoN
Session Chair: Dr. Som Lal Subedi, Chief Secretary, GoN
Panelists:
a) Dr. Khim Lal Devkota, Decentralization Expert
b) Mr. Bimal Wagle, Finance Specialist
Session Moderator: Mr. Mukunda Raj Prakash Ghimire
Rapporteur: Mr. Prem Raj Adhikari
Session II
10:30-11:30 AM / Session Topic:
Sub-national Borrowing: An Instrument for Urban Finance
Key Questions:
I. How to transform TDF into a strong and sustainable financial intermediary for sub national borrowing?
II. How to support municipalities in developing bankable projects?
III. How to develop institutional capacity of municipalities for potential level of sub national borrowing?
Paper Presentation by: Maniram Singh Mahat, ED, TDF & Nawa Raj Koirala, Finance Manager, TDF
Session Chair: Dr. Yuba Raj Khatiwada, Former Vice Chairperson of NPC
Panelists:
(a) Mr. Ganga Datta Awasthi, Former Secretary, Government of Nepal.
(b) Mr. Sushil Gyewali, CEO, National Reconstruction Authority
Session Moderator: Mr. Mukunda Raj Prakash Ghimire
Rapporteur: Mr. Prem Raj Adhikari
Session III
11:30 AM -12:30 PM / Session Topic:
Inter Governmental Fiscal Transfers (IGFT): a) develop predictable fiscal transfer system to sub national government as envisioned in constitution of Nepal.
Key Questions:
I. What are the elements to be considered for effective IGFT under federal structure?
II. How to make IGFT more predictable so that sub national governments could plan multi-year projects?
Paper Presentation by: Mr. Gopi Krishna Khanal, Joint Secretary, GoN / MoFALD
Session Chair :Dr. Shankar Sharma, Former Vice Chairman, NPC
Panelists :
a) Dr. Khim Lal Devkota, Decentralization Expert
b) Mr. Purusottam Nepal (Joint Secretary, Local Bodies Fiscal Commission)
Session Moderator: Mr. Mukunda Raj Prakash Ghimire
Rapporteur: Mr. Prem Raj Adhikari
12:30-1:15 PM / Lunch Break
Session IV
1:15 – 2:15 PM / Session Topic:
Global Trends in Emerging Options for Municipal Finance
Key Questions:
I. What are the global trends in emerging options for municipal finance?
II. What are the issues and opportunities of Financial Intermediary I situation like TDF for Municipal Finance?
Paper Presentation : Mr. Vito Intini, UNCDF Programme Manager, Bangladesh/
Mr. Suresh Balakrishnan, Regional Technical Advisor, UNCDF
Session Chair :Deependra Nath Sharma (Secretary, GoN MoUD)
Panelists:
(a) Mr. Kishore Thapa, Former Secretary, Government of Nepal
(b) Mr. Bhusan Tuladhar, UN HABITAT Nepal
Session Moderator: Mr. Mukunda Raj Prakash Ghimire
Rapporteur: Mr. Prem Raj Adhikari
Session V
2:15-3:15 PM / Session Topic:
Municipal Credit Rating Interventions – Regional Lessons
Paper Presentation: Mr. Dhruba Purkayastha from ICRA Management Advisory Services, India
Session Chair: Dr. Dileep Adhikari, Finance Expert
Panelists :
(a) Mr. Deepak Kafle, CEO, ICRA Nepal
(b) Mr. Bhuvan Dahal, CEO, Sanima Bank
Session Moderator: Mr. Mukunda Raj Prakash Ghimire
Rapporteur: Mr. Prem Raj Adhikari
3:15-3:30 PM / Tea Break
Session VI
3:30-4:30 PM / Session Topic:
Rationalizing service fee Pricing for operational sustainability of municipal infrastructure and Services: Case study of Solid Waste Management (to decide whether to include Water or not) and water management in Nepal
Key Questions:
I. What are the principles and good practices of pricing of solid waste management and water supply services?
II. Evaluate tariff fixing of solid waste and water supply services in Nepalese towns?
III. How the urban service is linked with service fees?
IV. What are mechanism and process of tariff collection?
Paper Presentation by: Mr. Achyut Nepal, Project Finance Expert
Session Chair: Mr. Kedar Bahadur Adhikari, Secretary, GoN/MoFALD
Panelists:
a) Mr. Hari Prasad Sharma, Former DG, DWSS
b) Mr. Salil Devkota, Solid Waste Management Expert
Session Moderator: Mr. Mukunda Raj Prakash Ghimire
Rapporteur: Mr. Prem Raj Adhikari
4:30-5:30 PM / Conference Wrap-up Session
(Combined Session in Hall I / Arch Room)
4:30-5:30 PM / Wrap-up Session by Moderators / Rapporteurs
Panelists:
a) Dr. Roy Kelly, Public Finance Expert / Duke University
b) Mr. Vito Intini, UNCDF Programme Manager, Bangladesh
c)
Moderators: Mr. Anil Chitrakar / Mr. Mukunda Raj Prakash Ghimire
Rapporteur: Mr. Prem Raj Adhikari / Mr. Ram Bahadur Chhetri
5:30-6:00 PM / Closing Session
6:00 PM onwards / Dinner Reception