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September 20, 2018

Devolving insolvency


September 20, 2018

Private-housing colonies (gated communities) for the affluent have emerged in Pakistan in recent years, with top-notch roads, glittering commercial areas, parks, mosques, schools, hospitals and their own arrangements for security, waste management and electricity.

The ambience and efficiency in these communities are evocative of Dubai and suburban America. No government presence is visible in these privately-managed towns, which exist by virtue of special arrangements that allow developers and residents to reduce their dependence

on the state.

A 2013 Newsweek article referred to this model as “a town without a mayor. The development company … sells the land, builds the houses, hospitals, schools, and runs the security, electricity, water, sewage, all in return for a local ‘tax’”. A Los Angeles Times article in 2011 called this development “a kind of functioning state within a non-functioning one. And all [services] supplied without the bribes you would pay on the outside”. These are telling comparisons with ineffective service providers, including entities controlled by the provincial governments in one way or another.

Now, consider the Orangi area in Karachi, a mainly low-income, multi-ethnic urban centre with an estimated population of 2.5 million spread over 13 union councils. It emerged as a squatter settlement in the informal sector. It suffers from all the problems of neglect and corruption that residents of gated communities manage to avoid. The reason is not the low-income levels of those who live there. As shown by the Orangi Pilot Project, which has assisted the community since 1980, those who live here can do a great deal on a self-help basis.

The same is true for many urban and rural settlements across the country, including the affluent and the poor. They are prepared to manage services with their own resources, knowing full well that there is no alternative: neither the state nor private developers are interested in them. Even in squatter settlements and poor communities, residents are paying formal and informal sector service-providers for basic services. There is widespread willingness to pay. There are also businesses and property-holders in most settlements who can afford to pay additional taxes. However, taxpayers and service-users are unwilling to pay more to centralised provincial bureaucracies that don’t deliver as expected. The refrain at the local level is that what residents pay should remain in the settlement to address their needs, and not disappear into the provincial treasury.

At present, however, there is no legal provision for willing settlements to mobilise resources formally and incorporate as special-purpose local governments to manage schools, healthcare facilities, solid waste management, community spaces, and so on.

Both the state and the people lose in this situation, the people by not obtaining basic services and the state by foregoing what the people can contribute. This is happening because the law is rigid. Only provincial governments are allowed to create local governments – and that too, within pre-determined boundaries called districts, tehsils, union councils, cities and towns. A settlement within or across these boundaries cannot apply to the province to incorporate its own local government, regardless of its willingness and capacity to manage certain services.

Therefore, settlements cannot impose the kind of charges and taxes that private developers and the state levy for providing services. While many settlements have voluntary welfare organisations, these often suffer from the free-rider problem – people enjoying benefits while refusing to contribute their share. Moreover, settlements willing to share costs and responsibilities with neighbouring or higher-tier local governments, such as rural and urban councils, have no legal standing to enter into contracts with the latter.

For example, in many settlements – including the poorest – residents can pay for the garbage to be collected from streets and houses, and they can also pay the council for its removal, but there is nothing they can do if the council ignores them, which is often the case. They can contemplate litigation. However, this is another problem, given the court system, and is certainly not a systemic solution.

It is time to consider an expanded state structure that provides services at the lowest feasible levels of local government, created within or across existing administrative boundaries. Provincial governments should allow the incorporation of special-purpose local governments (call them abadis, if that is more palatable) under provincial laws. They should allow these local governments to retain what they collect because people don’t trust higher-level governments and don’t want their money to disappear into the provincial treasury.

With that, and no other change, a range of services in many settlements could be provided in an affordable and reliable manner, with direct accountability to service users. This is an opportunity for provincial and local governments to devolve insolvency, improve service delivery, and gain credibility in the process; and they have nothing to lose.

The writer is an international development consultant with 37 years of experience in Pakistan and 20 other countries.

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