1. Financing regional and local economic development
Arl820s/arl821s: advanced regional and local economic development

2. outline
Financing regional and local economic development: revenue sources, challenges and solutions

3. objectives
To examine the dynamics associated with financing regional and local economic development
To engage students and assess their understanding through interactive discussions

4. introduction
Important role of local authorities in the delivery of basic public services
Local authorities in developing countries are confronted with major challenges: rapid urbanization, global financial and economic crises

5. Financing regional and local economic development
Widening gap between availability of financial resources and municipal spending needs: rapid population growth

6. Financing regional and local economic development in developing countries
Reliance on central government revenue transfers
Lesser revenues from property taxation and service charges
Central government control over revenue sources: income taxes, sales taxes and business taxes
Vertical fiscal imbalances at the subnational level

7. Understanding revenue sources
Need for cities to make good use of tax and non-tax revenue sources
Sufficiency of locally-generated revenues: improved service delivery, better public accountability

8. Understanding revenue sources (cont’d)
Need to complement locally-generated revenues with inter-governmental transfers
Alternative funding sources: municipal bonds, bank loans, municipal development funds, funds form institutional investors, corporate bonds, equity markets and public-private partnerships

9. Capital markets
An alternative way to mobilise resources for regional and local economic development
Localities must demonstrate credit-worthiness
Influencing factors: sufficiency of own resources, reliability of intergovernmental transfers

10. Challenges with reforming municipal finance
Lack of capacity and political will
Low political support
Lack of financial autonomy

11. Challenges facing large municipalities and towns
Rapid population growth and the need for expanded service delivery
Differences in the level and quality of services provided

12. Fiscal decentralisation and revenue autonomy
Wealthy sub-national governments should finance most of their expenditures with their own revenues
Benefit principle: those who use services should pay for them

13. What form of tax autonomy is desirable?
Need to partially limit ability of subnational governments to introduce taxes and levies
Power to change the structure of tax bases and rates
Level of government charged with administering taxes

14. Desirable characteristics of subnational taxes
Sustainable
Equitable
Efficient
Low administration and compliance costs
Politically acceptable

15. Selecting specific tax instruments
Charges and fees
Property taxes
Vehicle and transportation taxes
Local business taxes
Excise and sales taxes

16. Bad choices for subnational taxes
Progressive individual income tax
Corporate income tax
Profit tax

17. Addressing imbalances in intergovernmental transfers
Tax sharing
Unconditional equalization grants
Conditional grants
Capital grants

18. Innovative approaches to financing local infrastructure
Tax increment financing
Development impact fees
Betterment levies
Developer exactions

19. Financing Local economic development in namibia
Crucial role of central government funding
Inter-governmental transfers: national, regional and local authorities
Early donors: Friedrich Ebert Stiftung and Ford Foundation
Current donors: GTZ, HIVOS, Finish

20. Discussion questions
Assess the nature of local government financing in developing countries.
Examine the revenue sources for local government financing.
What are the challenges associated with reforming municipal finance?
Discuss fiscal decentralisation and the form of tax autonomy desirable for local governments.
What are some desirable characteristics of subnational taxes?
Outline some specific tax instruments for local government financing.
How can imbalances in inter-governmental transfers be addressed?
Discuss some innovative approaches for financing local infrastructure.
Assess the financing of local economic development in Namibia.

21. Open debate and discussion
The financing of local economic development is the primary responsibility of the central government, rather than local governments.

22. Case study discussion: sustainable financing plan for namibia’s protected area system
Why are Namibia’s protected areas important for local economic development?
What is the vision of the Namibia protected area system?
What is the economic value and cost of managing protected areas?
Discuss the financing gap associated with improved management of Namibia’s protected area system.
Examine the options for securing sustainable funding for an improved park area system.

23. References
Republic of Namibia: Ministry of Environment and Tourism. (2010). Sustainable financing plan for Namibia’s protected area system.
UN-Habitat. (2015). The challenge of local government financing in developing countries.