Remarks of Judith Karl, UNCDF Executive Secretary, on the occasion of the No Transformation Without Localization side event

  • September 26, 2015

  • New York, USA

We are honored to have Josep Roig, Secretary General, United Cities and Local Governments (UCLG); and thanks to Emilia and her team from UCLG , and the Government of Uganda.

Distinguished Mayors, Ladies and Gentlemen,

The Millennium Development Goals rallied the world around a common agenda to tackle the indignity of poverty. Yet the job is unfinished for millions of people – we need to go the last mile on ending hunger, achieving full gender equality, and improving services. Why, despite progress, did the MDGs fall short of achieving their full goals? One reason may be that the MDG agenda required incremental but not transformational change.

The Sustainable Development Goals, on the other hand, is a transformative agenda. It will be successful if it transforms economies and societies to respond to the needs of the millions of people around the world who have helped shape it.

There is increasing acceptance that societies and economies cannot undergo that transformation – and cannot meet the SDGs - without utilizing the comparative advantage of local governments. Central government ministries alone cannot drive transformation towards resilient, sustainable, equitable growth alone.

When decisions about resources are made locally, and those resources are spent or invested locally, there is potential for an accelerator effect for inclusive growth. This drives equitable growth. Indeed research has shown two things: one, that a dollar invested locally in a lagging region has a bigger impact on growth than a dollar invested in a booming sector AND two, that growth is more likely to be inclusive in nature. A similar case can be made for investment in local public services and infrastructure where those closest to the action are most likely to understand the nuances of local need.

Yet, there is frequently a gap between ambition and reality.

Local governments, especially outside major cities, often lack the capacities, financial resources, public investments, and pipeline of bankable projects that would enable them to provide urban infrastructure and promote local economic development and services in their rapidly growing towns.

Already, 85 percent of global GDP is generated in cities. By 2050, two-thirds of the global population will live in urban areas. That figure will be just under 60 percent in Africa.

In other words, hundreds of millions of more people will be living in growing secondary cities and peri-urban areas.

While some bigger cities may be able to cope with these pressures, many secondary cities in least developed countries will find themselves on the frontlines of meeting the SDGs, but lacking the financial resources to fulfil their mandates and responsibilities. Central to local transfers are unlikely to increase sufficiently to enable the investment per capita required.

So we urgently need to close these gaps – gaps on capacity, on service delivery, on infrastructure, on integrated planning, and on finance. This requires a concerted partnership of national and local authorities, donors, UN agencies, and the private sector, all actors present here today. Above all it requires transformation rather than incremental change.

Even when government transfers are predictable, they rarely fully cover major infrastructure improvements. Even when domestic private capital is available to fund such investments, perceived risks and market failures may keep this private funding away.

The very real challenge then is to transform the financing environment to get resources flowing to these cities so that they can meet the growing demands they face for clean energy, efficient public transportation, jobs for young people, resilient infrastructure, and basic services.

The Financing for Development agenda rightly focused on ways to harness new flows and volumes of capital for development. These included foreign direct investment, private sector investment and public private partnerships. Yet once again there is a risk that this is seen as a government-to-government enterprise, or a focus on mega projects, FDI and value chains that, whilst profitable, frequently do not add value locally. There are already examples of countries with high growth levels and increasing inequality.

The challenge is the localisation of the financing for development agenda: Investing domestic public and private capital, including pension funds and bank liquidity, into local economies and local towns and cities. After all, this is the growth path that was followed by many developed countries, including the United States.

The risk otherwise is that countries face increasing inequalities and growth which is not inclusive.

Two months ago in Addis Ababa, Member States agreed to strengthen capacities of municipalities and other local authorities; to help cities and local authorities of developing countries to build resilient infrastructure; and in supporting local governments in their efforts to mobilize revenues as appropriate.

Today, we are proud to launch that Municipal Investment Financing Programme. It’s an innovative initiative, which will help local authorities take their local investment plans and turn them into viable projects that can attract a critical volume of public and private investment for local infrastructure development and service delivery.

It will support local capital investments that can have high economic and social returns, showing impact on local food security, job creation, women’s economic empowerment, renewable energy, and climate-resilience.

We hope to scale up the programme across LDCs. Already, a number of countries, including Bangladesh, and Uganda, which is represented on the panel today, are helping us pioneer this approach eventually.

I look forward to today’s discussion on how to strengthen the capacity, governance, service delivery, and financial ability of subnational authorities to meet the SDGs and help transform their countries.