Goals of the Task
Task 8.2 aims at developing a deep understanding of the budgetary and financial system of the case cities to ensure financially feasible measures within the RP project. The understanding of the financing mechanisms is essential as basis for the development of recommendations for special activities and change.
Work done to achieve the goals
The budgeting systems of the case cities were analysed to get an overall picture of municipal revenues, expenditures as well as financial means and structures. After an analysis of the budgeting system nationwide and for the municipality including the legal basis, the responsibilities and transparency measures, the concrete budget revenues and expenditures of the latest available fiscal year were analysed to give an idea of the main sources of revenue as well as the main expenditure tasks.
Main data sources are secondary data from policies, laws, visions and reports from government bodies, research organisations and development banks. Further, the systems and results are discussed with and verified by experts and stakeholders in the respective countries.
The analyses of the budgeting systems in Germany, Rwanda and Vietnam are finalised. The analysis of the Rwandan system was discussed with and complemented by inputs of representatives of the City of Kigali as well as Agatare cell. The analysis for the Vietnamese budgeting procedures was conducted via literature and internet research. Financial experts were approached during visits in Da Nang and gave feedback and further amendments on remaining questions. The relevant data for Egypt will be collected via a questionnaire that was sent to the Focal Point for Assiut, TUB.
Financing of each addressed sector
Maintenance and upgrading of public utilities infrastructure are necessary for development and improvement of living conditions. In most cases, it is not possible to finance the entire provision of such services (operation, maintenance and capital investments) through public sector funds and user fees. Especially in Developing Countries, external support agencies play a major role in the development and funding of infrastructure projects. Also, the private sector can participate in the provision of infrastructure services in the form of funding or/ and operation. In the second part of Task 8.2, the financing of each addressed sector in each case city is conducted based on the following financing options: user fees, government subsidies, private investments, external support (aid).
The theoretical framework and regulations, cost structures and the overall investment environment are analysed via desktop research; the results will be complemented by the actual money flows figured out during research in the case cities and extracted from the master theses prepared by the IZES master students on energy, waste, water and wastewater in Kigali and Da Nang. Data collection and compilation is in progress.
Results so far
Regarding the budgeting procedure, the case cities have different systems to form and implement national and municipal budgets, although all three countries have done or are doing decentralisation reforms to empower municipal levels also in financial matters.
Rwanda focuses on citizen’s participation and its bottom-up structure. City and sector level have the implementation capacity for all kind of projects. Lower administrational levels usually ask for technical rather than financial support.
Vietnam’s state budget system consists of the central and the local budget. On local budget level, Vietnam is among the few countries that have a unique nested budget system, where the lower budgetary level is component of the upper budgetary level. The Vietnamese provinces have a high degree of spending decentralisation while lower levels of government were not empowered through the reforms.
With its federal constitution in Germany, the German Federation, the federal states and the municipalities are independent in fulfilling their government tasks including their budgeting and financial management tasks. Federal states have the legislative power of local budgeting and implement their own system of financial distribution and equalisation at municipal level.
Rwanda has the lowest overall budget, followed by Vietnam (which has a budget that is 13 times bigger than the Rwandan budget) while Germany has the biggest budget which is more than 130 times bigger than the Rwandan budget. On city level, the proportions stay almost similar and also the ratio of the city budget compared to the national budget is almost similar for all case cities (between 1-1.5%). Looking at the budget per inhabitant, the differences become even more extreme. While Kigali only had funds of 18 EUR per inhabitant in 2015, Da Nang could spend 505 EUR per inhabitant and Frankfurt had the financial means of more than 4,600 EUR per inhabitant.
More details and an overview of the systems can be found in the draft report of Deliverable 8.3 ‘Comprehensive report on the budgetary system of the case cities’. Only, data on the Egyptian budgeting system is missing and will be added as soon as input and feedback from Assiut arrives. The report for Deliverable 8.4 on the financing of each addressed sector is developing and fills with content. It is not complete yet as some data could not be verified until now and some data have not yet been accessible. A draft version of the report is available.