Habitat III Thematic Conference on Financing Urban Development Mexico City, 9-11 March 2016

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1 Habitat III Thematic Conference on Financing Urban Development Mexico City, 9-11 March 2016 Overview on Mexico City s Thematic Conference on Financing urban development: a key conference for a vital issue Report from FMDV as co-organizer The Thematic Meeting Financing Urban Development: The Millennium Challenge, organized by the Habitat III Secretariat together with the Government of the City of Mexico, FMDV, the Mexican Secretaries for Urban, Territorial and Agrarian Development, and for International Affairs, from 9-11 March 2016, focused on bringing to the table local, metropolitan and regional governments (LMRGs) and their networks, supra-national and central governments, multilateral international organizations, development banks, researchers, philanthropies, private sector and civil society coalitions representatives to identify strategies and discuss practical solutions on financing for urban development. During 3 days, the debates gathered a wide range of stakeholders commenting on the stakes, bottlenecks, constraints and opportunities, as well as exploring diverse options, visions, and propositions on strategies and mechanisms, already applied or at the design stage, for financing urban development following the SDGs/FfD3/COP/Sendai frameworks. The Declaration adopted on the final day of the Conference reflects the wide array of existing strategies and tools available for LMRGs to build on more autonomy, new sourcing and traditional resources mobilization, valorization and leveraging (see section below). Download the videos on streaming of the Conference: =false Summary: Key figures Key figures Comments on final Declaration Localizing Finance for Inclusive Change FMDV Perspective: An Action Agenda on Localizing Financing for Inclusive Change Other initiatives: * Launch of the Global Forum of Local Financing Institutions * Declaration of the Global Platform for the Right to the City at the initiative of UCLG s Committee on Social Inclusion, Participatory Democracy and Human Rights * Signature Agreement between UN Habitat and Lincoln Institute on a Global Municipal Database for Sustainable Urbanization More than 700 participants from 60 countries and 100 cities 66 speakers and 12 moderators mobilized for 3 plenary sessions, 9 parallel sessions (+15 side events) 32 local, metropolitan and regional governments represented (Mayors, Vice-governors, technical officials) 22 central and supra-national governments represented 11 networks and coalitions of local, metropolitan and regional governments 1

2 6 bi- and multilateral development banks 1 Declaration, 7 cross-cutting Fundamentals and 11 Drivers for Action Comments on final Declaration Localizing Finance for Inclusive Change Download the Mexico City Declaration: Called Localizing finance for inclusive change, The Mexico-City Declaration was adopted on Friday 11 March In many ways, this Declaration is an original and innovative international flagship for diversity, convergence and innovation in financing and empowering LMRGs, as well as in partnering and leveraging the orientations, programs and actions of the constituencies part of the financing chain. It primarily identifies seven cross-cutting fundamentals that echo some strong principles: - a better recognition of the key role of LMRGs in implementing and financing an equitable urban development; including social objectives, equity, justice, wealth redistribution and fight against territorial inequality, spatial segregation and gentrification; - the promotion of the Right to the City, insisting on renewed governance (co-elaboration and co-implementation, further than just participation + social and solidarity economy and finance techniques) and multi-level and multi-stakeholder partnerships in financing; - the rural-urban linkages through financing techniques; - the relocalization of finance and economy logics and tools as well as the revalorization of local wealth (and its capturing by LMRGs themselves); and the reference to the differentiated approaches between public and private finance (objectives, logics, engineering); - the importance of better linking spatial planning, financing (and budget programming) and local economic development; - the call for a stronger financing articulation and cooperation between metropolises, peripheral and secondary cities (intermunicipality, subnational pooled financing techniques); - a reminder of the necessary shift in thinking models for local financing, calling for renewed financial engineering approaches, techniques and strategies, orienting towards a fight against gentrification and speculation of territories; - the ability of the informal sector to provide solutions in relation to economic development, financing, and the social production of habitat has been recognized; and those processes are to be encouraged in their formalization, organization and professionalization. The fundamentals are formulated as: - Local economy shall primarily finance local development - Cities, small or big, are reliable partners - Innovation is to be supported at local level - The right to the city, renewed partnerships and governance are to be promoted - Better articulate macro, meso and microeconomic scales - Tailor-made and holistic approach is required for the New Urban Agenda definition, financing and implementation, - Habitat III should be a focused and action-oriented agenda, grounded with country implementation frameworks. 2

3 In addition to those fundamental pillars of action for local financing, the eleven Drivers for Action listed in the Declaration integrate key references, principles and recommendations to be integrated in the Draft Zero of the New Urban Agenda, in its partnerships, financing and capacity building/empowerment chapters. As such, the Declaration reasserts: - the importance of fiscal decentralization prerequisites (performance of vertical integration, predictability of transfers, performance-based and adequate incentives, renewal and diversification of taxing systems opening to piggybacking on economic taxation, etc.) - the relevance of better mobilizing endogenous resources in order to ensure strong basis for other funding sources like banking and capital markets (relocalization of economy and finance techniques, recreation of local value chains, land-value capturing, ensuring public and citizen control and management over land and real-estate markets, paying attention to speculation and gentrification risks) - the need for direct or intermediated access to banking and capital markets (including adapted rules and regulations allowing for debt finance possibilities for LMRGs, incentives for investors, technical assistance, credit enhancement, the wide array of guarantees and de-risking facilities, the setting and strengthening of LMRGs financing institutions, etc.) - the promotion of new alliances and private sector investments (enabling environments for private investment and capacity building for LMRGs to launch balanced PPPs, including with local SMEs, informal operators and adopting semi-public company s models; promoting public procurement with local economic development criteria and focus; use remittances and diasporas support; creating funding convergences between stakeholders of the financing chain) - the requirement for financial empowerment, transparency and accountability (capacity building and training for local teams; strengthening abilities for planning and delivering project pipelines; build new indicators of wealth and integrate externalities in order to shift the logics of financing, better use of NTICs for accountability and efficiency) - the recognition of financing specificities for Metropolises, Peripheral and Secondary cities (specific institutions and skills, intermunicipality cooperation mechanisms and laws, subnational pooled financing techniques allowing secondary and peripheral cities to access capital market together with metropolises with reduced transaction costs and greater bargaining power) - the innovative focus on social and solidarity economy and finance (SSEF) by considering its specific role and relevance as equally important as other and more mainstream sources of financing. (SSEF as an acknowledged source of resilience and powerful tool to bring about a change of paradigm in the way urban development financing is carried out, listing of several SSEF techniques and systems bringing a renewal in financing engineering) - the recognition of informal economy and new patterns of consumption and production (connecting efficiency and sustainability in financing and expenditure with renewing consumption and production patterns in the urban development stream, rethinking economy and finance patterns and references, center stage role of informal economy and its manifestations and connection to relocalization of economy and finance and revalorization of local wealth) - a specific driver on climate and resilience finance (recognizing the Cities Climate Finance Leadership Alliance-CCFLA as a major step forward in better connecting supply and demand, and bringing innovation in subnational financing, importance of innovation labs, project preparation facilities, direct or intermediated access of LMRGs to climate finance, specific references to new green taxation s well as to adaptation financing) 3

4 - the recognition of the social production of habitat and the right to adequate housing for all (reminder of regulation on land market, emergency of housing policies and specific financing, recognition of social production of habitat as major financing tool needing to be scaled up) - the recognition of local and regional governments as world actors (institutional and legal frameworks for city-to-city cooperation, stronger convergence and partnerships with ODA operators/call for a stronger focus on subnationals, reference to the paragraph 34 of the Addis Ababa Action Agenda, creation of a Global observatory on local finance, need for a LMRGs seat at the global table). FMDV Perspective post Mexico City Conference and Declaration: An Action Agenda on Localizing Financing for Inclusive Change For FMDV, the Conference represented a major step in its general strategy and action plan, as it coincided with the completion of its Habitat III Global Campaign REsolutions to Fund Cities, a cycle of bottom-up approach and activities carried out by the organization since 2013 on three continents (Africa, Latin America, Europe), and aiming at identifying priorities and replicable subnational financing strategies and tools implemented by LMRGs themselves or in partnership with key-partners (DFIs, public institutions, private and informal sector, or organized civil society movements). During the opening ceremony, the City of Joburg, as co-president of FMDV, and represented by its Executive Mayor, Parks Tau, called for an Action Agenda on Localizing Finance for Inclusive Change. With this call for specific action in financing the subnational development agenda, FMDV launches a call for convergence and mobilization of the whole array of stakeholders in the financing chain, in order to join the proper vision and propositions made by LMRGs and their international networks. In view of the final negotiation process phases, the Habitat III momentum and implementation phase of the New Urban Agenda (in relation with the COP/Ffd3/SDG and Sendai frameworks and agendas), FMDV, according to its specific mandate on financing and local economic development, will be working in the coming weeks in creating stronger convergence between voluntary multi-stakeholder partners and initiatives, in a stream of a Global Partnership for Localizing Finance for Inclusive Change based on three pillars: - local data production, valorization and exploitation and LMRGs financial engineering empowerment, - strengthening, mobilizing and capturing endogenous resources, - developing of debt market for LMRGs in view of bridging the local infrastructure financing gap. Pilot countries are being targeted for first demonstration of vertical integration in financing and local economic development, and scalable adapted strategies and tools, including climate finance work stream. Based on the Mexico City Conference and Declaration processes and discussions with key partners, FMDV and interested stakeholders will be contributing to the implementation agenda post-habitat III through this umbrella operational proposition. The members of the Global Task Force of Local and Regional Governments, in particular, will be approached in order to create bridges between specific initiatives in order to reinforce their delivering strategy and financing joint opportunities. This will constitute the major contribution of FMDV to the Global Task Force work stream after the co-hosting of the Mexico City Conference and Declaration. Documents: Ø FMDV Policy Paper on Subnational Pooled Financing Mechanisms for FfD, inpartnership with the French Development Agency (AFD) 4

5 Ø REsolutions To Fund Cities Publication in Europe and Latin America Ø Report on Strengthening Local Taxation to Face African Urbanization Challenges (Case studies in French) Other initiatives launched in Mexico City * A Global Forum for Local, Metropolitan and Regional Governments Financing Institutions FMDV actively participated in the Addis Ababa, New-York and Paris Summits in 2015 and materialized its commitment through concrete proposals for action, and the announcement at the Mexico City Conference of the launch of a Global Forum for Local, Metropolitan and Regional Governments Financing Institutions, together with 14 institutions from 13 countries of Latin America, Africa and Asia, constitutes another example. FMDV took the opportunity of the Mexico-City Conference to convene a meeting between local and regional governments financing institutions in order to position themselves in the international debate, give an updated picture of the state of the art of these decentralization structures, share experiences, and reflect on the relevance of building a fluid and constant dialogue to improve and diversify their practices and tools in a mutual learning approach (peer-to-peer reviews, mentoring, cooperation). An international platform was defined as key to open a space for dialogue to better negotiate with international donors and provide greater diversity and approaches in their strategies and funding sources. Gradually, the platform launched in Mexico City will provide its members with the opportunity to identify and develop joint financing opportunities. The first meeting of this forum took place in Mexico-City on Tuesday 8 March 2016 and gathered 14 of specialized institutions from 3 continents as well as Development and Financial Institutions (AFD, KFW, GIZ, USAID, CAF, UNCDF). *A policy paper for Habitat III on the specific role of local financing institutions towards the implementation of the 2030 Agenda will be produced in the coming month and released in Quito. It will echo the policy paper on Subnational Pooled Financing Mechanisms already produced by FMDV for FfD3. Download the Concept Note of the Mexico City Meeting *Adoption of the parallel declaration of the Global Platform for the Right to the City Convinced that the issue of the sharing of wealth through taxation and the control of land and real estate by both public authorities and citizens are the only way to ensure the right to the city, the Committee on Social Inclusion, Participatory Democracy and Human Rights of UCLG, on behalf of the Global Platform for the Right to the City and in the context of the Habitat III Thematic Conference in Mexico-City on urban development financing, adopted the declaration "Financing the right to the city for all". The declaration adopted by the Global Platform for the Right to the City includes recommendations regarding: - An actual redistribution of wealth - A real decentralization with effectively available resources - A participatory and transparent management of local resources - The acknowledgment of local governments role in promoting public policies for a fair and responsible economic development that generates local wealth for the benefit of their inhabitants - Water and energy for all - Public, citizen and sustainable control of public space through better urban planning - Redistributive mechanisms aiming at fixing urban and metropolitan inequalities Download the Declaration: 5

6 *UN-Habitat and Lincoln Institute pilot a Global Municipal Database for Sustainable Urbanization Top officials from UN-Habitat and the Lincoln Institute of Land Policy signed an agreement in Mexico City during the thematic Conference on Financing to create a pilot for a global municipal fiscal database that will result in the reporting of fiscal data for select cities in Asia, Latin America and Africa. The signing ceremony was attended by Dr. Joan Clos, Executive Director of UN-Habitat, and George W. McCarthy, president of the Lincoln Institute, and Marco Kamiya, acting coordinator, Urban Economy and Finance Branch of UN-Habitat. More information: 6