B. ODA Instruments in Europe for Expanding Urban Environmental Services and the Potential Role for Public-Private Partnerships

Adriana Allen
Development Planning Unit, University College, - London, U.K.

This paper provides an overview of current approaches and instruments available through development cooperation for improving urban environmental conditions in the South, paying particular attention to the potential role for public-private partnerships. Findings are based on a 1997 study undertaken in collaboration with Adrian Atkinson, entitled The Urban Environment in Development Cooperation: A Background Study. The study looked at the European Community's experience in development cooperation for the urban environment.

The Magnitude Of The Task

Table 2.1 highlights the strong urbanisation trends throughout the developing world. Rates of urbanisation currently range from an average of 4.4% per year in Africa, to 3.3% in Asia and 2.5% in South America. This amounts to an immense number of people who need to be accommodated in towns and cities each year, particularly in already highly populated countries.

Table 2.1: Percentage of population living in urban areas

Source: World Resources Institute, 1996, World Resources 1996-97, Oxford University Press, Oxford. * World Resources Institute estimates.

Table 2.2 illustrates the urban growth situation with a few specific examples. The challenge for urban environmental services is even more pronounced if we contrast the amount of ODA available with the scale of investments required to guarantee the sustainable integration of new urban dwellers. The gap between the two highlights the need to use available financial resources as strategically as possible. Any new approach must carefully consider how to leverage resources from additional sources, including public and private sector capital investments. The following sections examine some of the considerations to be taken into account to develop a strategic approach to the improvement of urban environmental conditions.

Table 2.2: Current Rates of Urban Growth

Approximate additional urban population per year in selected countries

Source: World Resources Institute, 1996

Articulating The 'Brown' And 'Green' Agendas

In focusing attention on urban environment issues, a distinction has recently been made between the brown agenda, concerned with local problems of water and air pollution, solid waste management and so on, and the green agenda, which is concerned with problems of sustainability related to the global environment and natural resource issues. A balanced and coherent policy on urban environmental planning and management (EPM) will have to take both agendas into account.

For instance, 'brown agenda' solutions to domestic solid waste management are concerned with waste collection and disposal, whereas an approach that incorporates the green agenda is concerned with minimising waste and ensuring reuse and recycling of waste. Both of these concerns represent an area where public-private partnerships can be utilised.

Hardware And Software Solutions In Urban Environmental Planning And Management

Prior to the recent growth in concern for urban environmental issues, urban management was largely addressed through investments in engineering works designed to reduce the incidence of pollution. Water treatment and distribution systems, sewerage systems, and systems to collect and dispose solid waste were seen as the answer to urban environmental problems. This focus on 'hardware' solutions was not inherently wrong, as after all this is how problems have been successfully minimised in the cities of the North.

Not all experiences are transferable from the North to the South, however. It is therefore a prerequisite of any intervention designed to address urban environmental problems in the South to understand and to work with existing economic and social conditions.

Urban EPM And The Provision Of Urban Services

The urban environment is relevant to many traditional aspects of urban planning, and management and new approaches to urban EPM must necessarily interact with these traditional sectors.

Looking for instance at urban infrastructure provision, many external support agencies (ESAs) often see water supply as a self-contained sector independent of a broader agenda. Failures in attempts to transfer technologies point to the need to set the development of infrastructure programmes firmly in a wider context of urban EPM systems.

Resource management is another key area for intervention in the improvement of urban environmental services. As yet, the tendency has been mainly to deal with this issue on a sectoral basis. For instance, water utilities are expected to devise water saving and recycling schemes; energy utilities are expected to implement energy conservation schemes; and waste management authorities and companies are expected to develop waste reduction and recycling schemes. Problems arise here, both in the lack of experience and incentives for these organisations to handle these responsibilities, and in a fundamental lack of consistency arising from such a sectoral approach.

Trends And Changes In Development Cooperation On The Urban Environment

Even though the general focus of external support agencies remains on rural issues, several signs indicate a structural change in their funding and policy direction, characterised by increasing attention and commitment given to the urban environment.

New approaches in development cooperation for environmental planning and management place a particular emphasis on a broad set of actors, with the aim of inter-linking their activities and resources. This is reflected in the development of North-South networks and multi-partnerships aimed at promoting joint action for sustainable development.

The main trends and changes taking place in the 1990s can be summarised as follows:

• Introduction of new approaches to development aid, with an emphasis on decentralised cooperation;
• Geographic relocation of aid, shifting the traditional focus from low income countries to low and middle income countries;
• Re-alignment of development aid policy within international economic, trade and political relations;
• Emphasis on making the development cooperation system more consistent, efficient, effective and responsive to economic and political challenges through the incorporation of new organisational arrangements and more flexible instruments and management procedures;
• Shift from the traditional focus on poverty alleviation through economic growth and strong rural bias of development aid, to a greater recognition of the links between poverty, environment and development processes and the role of urban systems in sustainable development.
• Increasing cooperation with third parties through a broader spectrum of partners, including NGOs, local authorities, and the private sector.

Actors Engaged In Urban EPM Development Cooperation

In the past, development cooperation was understood to be an exclusive activity undertaken by international and bilateral agencies in collaboration with national governments in recipient countries. In the 1990s, not only is the orientation changing to one where agencies and recipients are understood to be equal partners, but there has also been a substantial expansion in the kinds of actors engaged in development cooperation. Besides traditional external support agencies (the United Nations, multilateral development banks, and bilateral aid agencies, for example), NGOs, and most recently, municipalities and municipal associations are now expending their own resources on development cooperation programmes. Central governments are no longer the only entities that receive exclusive assistance. Local authorities, training institutions, NGOs, CBOs and the private sector are all now involved as cooperating partners.

The Role Of The Private Sector

Traditionally, the participation of the private sector in external cooperation has been tied to economic purposes, primarily opening-up southern markets for northern products and the sale of technologies and services. In addition, the capacity of the local private sector to contribute towards the improvement of the urban environment is often poorly developed in the countries of the South.

Although the engagement of the private sector towards sustainable urban EPM is still low, there are a number of initiatives to devise a new role to leverage the impact of multilateral and bilateral agencies. This can be done both by including the private sector more closely in the local decision-making process, and by encouraging collaboration between companies of the North and the South.

In this respect, the EU-funded Regional Institute for Environmental Technology (RIET) in Singapore and the UNEP-funded International Environmental Technical Centre (ITEC) in Osaka, Japan follow the idea of opening 'technological windows,' mainstreaming environmental considerations in the development of not only appropriate technologies, but also markets and institutional capacities in the South.

Several European bilateral agencies have also promoted initiatives to incorporate the private sector. For instance, the Dutch and the French cooperation systems provide support for environmental activities of national companies to operate abroad and have funded several decentralised twinning arrangements between North and South.

The Urban Environment In Development Cooperation: An Overview Of European Union (EU) Activities.

Charts 1 and 2 show the distribution of funds and projects committed by the EU to the urban environment. Between 1990 and 1995, the EU funded 179 projects related to the urban environment, with a total value of 176 million ECU. This represents only a little more than 1% of the total amount of funding committed to external assistance over the period, but almost 19% of the funding committed by relevant budget lines to all environmental themes.

Hardware projects, including water supply, sanitation and drainage projects and solid and special waste management, accounted for almost 70% of funding over the study period. This represents 43% of the total number of projects. On the other side, software projects concerned with various aspects of urban EPM represented over 30% of the funding but 57% of the projects focused on improving urban environmental conditions.

Theme	Funding (million ECU)	Number of projects
Water supply, sanitation & drainage (WSD)	94.00	38
Solid & special waste (SSW)	27.00	39
Natural resources management (NRM)	6.00	6
Pollution control (PC)	6.00	12
Urban environmental planning & management (EPM)	33.00	53
Other	5.00	14
Institution strengthening (IS)	5.00	17
Total	176.00	179

Source: The Urban Environment in Development Cooperation by A. Allen and A. Atkinson. EC: 1999

The study, carried out for the EU, revealed that while the urban environment is still a marginal part of EU development cooperation activities, there are a variety of project types and approaches being pursued. On the one hand, a majority of funds still appear to focus on what might be referred to as a 'traditional' approach that is sectoral and hardware oriented. On the other hand, there has been a proliferation of more experimental approaches to development cooperation in the area of the urban environment, involving emphasis on software development and a wider variety of actors and arrangements.

This includes demonstration projects that try to apply innovative approaches to solving problems that combine technical and organisational measures and decentralised cooperation projects and focus on animating different actors at the local level, raising awareness, and building capacity.

The Potential Role For Public-Private Partnerships: Challenges And Strategies

Interest in improving the urban environment in the cities of the South has increased significantly in recent years amongst the community of external support agencies. The main features of this process can be characterised as follows:

• Development cooperation in general and specifically regarding the urban environment has been extremely innovative in the last few years, devising new mechanisms. The initiatives underway have been fertile to implement decentralisation programmes, new multi-sectoral partnerships and a cross-sectoral approach fostering new interfaces between the private and the public sectors.
• While interest in cooperation on the urban environment has been increasing amongst EU bilateral development agencies, the size of these initiatives and the funding available is as yet in no way commensurate with the scale of the environmental problems emerging in the cities of the South. The proportion of ODA going to urban programmes and projects varies between agencies from 1-10% and averages less than 5%.
• Although certain urban environmental programmes administered by international external support agencies such as the Sustainable Cities Programme and the UNDP LIFE Programme have gained a high profile in recent years, the actual amounts of money being spent by these programmes is extremely small in relation to the total development cooperation budget.
• The recent entry of NGOs and municipalities and their associations into the development process with respect to urban development in the South has certainly introduced a valuable dimension and added technical expertise to the development process, though they bring little by way of financial resources.
• By contrast, multilateral development banks have been lending very substantial amounts for the development of urban environmental infrastructure in some cities of the South. While this is certainly making an impact on the supply of water to cities, for instance, in other 'brown agenda' areas investment falls well short of mastering the problems. Furthermore, the banks are not generally funding initiatives concerning 'green agenda' problems in urban areas and regions.
• While increases in funding dedicated to urban environment on the part of the ESAs would certainly be beneficial, a more focused approach and greater cooperation and coordination of effort regarding these initiatives would greatly improve their effectiveness.
• Integrating the various types of urban environmental projects and programmes currently in place could also significantly increase the impact of these initiatives. A distinction was made earlier between decentralised cooperation projects, demonstration projects and large-scale or more traditional and sectoral infrastructure projects. Large-scale infrastructure projects still have an important place in development cooperation, despite their many failures. It is necessary however to ensure that the ground is prepared for different actors at the local level to accept the responsibility and have the expertise to run such systems effectively. Scaling-up pilot projects is often a good way to do this.
• Finally, tapping into other actors that have or could have a positive impact on urban environmental management in the South - especially the private sector - now appears to be an added means of increasing the resources available for improving urban EPM in the South with no further cost to the external support agencies.

The widespread privatisation of urban services has encouraged northern enterprises to engage themselves in important direct investments. The growing participation of European companies in the privatisation of public utilities in developing countries is not always accompanied by environmentally sound and socially equitable interventions, however.

The incorporation of the private sector into urban environmental cooperation activities requires specific strategies and trigger mechanisms addressing the following objectives:

• Facilitating market-based approaches to environmental protection, with emphasis on pollution prevention and reduction and the sustainable use of natural resources;
• Developing North-South research and development networks sensitive to context specific solutions in areas of mutual interest; and
• Increasing the urban environmental policy and management capacity of southern partners in the development and use of environmental technologies and services.

Following these objectives, several external support agencies are now actively engaged in developing a new approach to environmental cooperation, which provides comprehensive and innovative mechanisms to mobilise the private sector towards long-lasting and environmentally sound investments. Potentially, private business has much to contribute to improved urban development and environmental management, by bringing their methods and expertise to bear in urban services provision via privatisation and partnership approaches, and by developing technologies to solve urban environmental problems that are appropriate to the context-specific circumstances of cities of the South.

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