Funding for human settlements projects from development assistance agencies comes from three principal sources. The first (and much the largest) is from multilateral agencies, especially development banks with the World Bank Group being much the largest single source. The second is from the bilateral agencies of donor governments - for instance the bilateral agencies of the U.S., German, Japanese, French and British governments. The third is from the enormous number and range of international private voluntary organizations such as MISEREOR (Germany), CEBEMO (Netherlands), CARE (the United States), Christian Aid (UK) - and the different Save the Children and OXFAM organizations that exist in different OECD countries. Although total funding flows from these are much smaller than those from the first two sources, the priority they give to basic services makes them significant in total funding for such services. Arab funded bilateral and multilateral agencies are also important in total development assistance but less so in funding for human settlements projects.

Before describing the scale and nature of these funding flows, two points should be noted: first, how in most international agencies, funding for human settlements lacks any coherent framework and secondly how low a priority funding for human settlements receives. In most agencies, there is no department that provides a coherent framework for funding for human settlements projects, although in some agencies, initiatives are underway to develop these. Few agencies have a special section for "human settlements" or for "urban." For official projects (that need the approval of the recipient government), funding for human settlements is simply the aggregate of a great range of projects initiated by different ministries or agencies in the recipient government and different sectors or country offices in the donor agencies. However, most fall within two broad categories:

Funding for the basic infrastructure and services that is central to adequate housing and living conditions and health - water supply, sanitation, drainage, health care and, where needed, solid waste collection. These are justified in terms of improving housing and living conditions and reducing ill health and premature death.

Funding for large urban infrastructure projects such as ports, airports, underground or light rail city transit systems, highways and city electrification or urban services such as hospitals and centres of higher education in recognition of the importance of urban infrastructure for economic growth.

This overview of funding flows to housing, infrastructure and services to both rural and urban areas from multilateral banks, bilateral agencies and international Private Voluntary Agencies is organized in four sections. The first looks at funding to shelter projects and how the scale and nature of this funding has changed since 1980. The second considers funding flows to the infrastructure and services associated with residential areas; short sub-sections also consider funding flows to social funds and to "women in development" projects. The third is funding flows to urban infrastructure and services. The final section considers what constrains a greater flow of funding to projects that reach lower income groups with improved housing and basic services.

In recent years, shelter projects and housing finance combined have attracted less than 3 per cent of the commitments of most development assistance agencies. Table 11.1 gives figures for selected multilateral and bilateral agencies. The largest sources of donor funding for shelter have come from the World Bank Group, the Inter-American Development Bank and U.S. AID's Housing Guaranty Programme. Some bilateral agencies fund projects that seek to reach low-income groups with improved housing conditions but in general, these receive a very low priority. An OECD estimate suggested that the total commitment to urban housing projects of all the bilateral aid programmes of OECD countries averaged less than $90 million a year between 1986 and 1990; this represents less than an eighth of the annual average commitments of the World Bank to housing projects and housing finance during these same years. Overall, the proportion of funds allocated to shelter from multilateral and bilateral agencies is declining.

Table 11.1: The proportion of aid and non concessional loan commitments to shelter projects and housing finance, 1980-93

Total Proportion of Proportion of total

funding commitments to commitments to shelter

AGENCY (US$ SHELTER HOUSING projects & housing finance

billion) PROJECTS FINANCE

1980-93 1990-91 1992-93

International Development Association

** Africa 27.9 1.2 0.0 1.2 1.4 1.1

** Asia 38.6 1.3 0.0 1.3 0.1 0.0

** Latin America & Caribbean 1.9 1.4 0.0 1.4 0.0 0.0

African Development Bank 10.2 0.4 0.0 0.4 0.0 0.0

Asian Development Fund 14.3 0.9 0.1 1.0 0.7 0.0

Inter-American Development Bank 6.5 3.4 0.0 3.4 0.0 4.4

Caribbean Development Bank 0.7 0.0 1.2 1.2 1.8 0.6

Arab Fund for Economic & Social Develt 4.7 1.2 0.0 1.2* 0.0

(1980-91)

Overseas Economic Cooperation

Fund, Japan (1987-91) 36.5 0.8 0.1 0.1

International Bank for Reconstruction

and Development (IBRD)

** Africa 29.6 2.1 1.2 3.3 0.3 11.4

** Asia 90.6 1.3 0.9 2.3 1.5 0.0

** Latin America & Caribbean 68.7 1.7 2.1 3.8 3.3 4.5

African Development Bank 17.6 0.1 0.0 0.1 0.0 0.0

Asian Development Bank 30.9 1.2 0.0 1.2 0.0 0.0

Inter-American Development Bank 41.7 2.1 0.0 2.1 0.4 0.9

Caribbean Development Bank 0.5 0.0 1.0 1.0 0.0 0.5

* 1980-91

NOTES AND SOURCES: Satterthwaite, David,"The scale and nature of international donor assistance to housing, basic services and other human-settlements related projects", Paper presented at the UNU/WIDER Conference on "Human Settlements in the changing global political and economic processes", August 1995, 29 pages. Shelter projects include slum and squatter upgrading, serviced site schemes, core housing schemes and community development projects which include housing improvement. These funding flows only apply to commitments to countries in the South - for instance, they do not include World Bank commitments to East and Southern European nations. The figures are based on analyses drawn from two computer databases. The first contains each agency's total annual commitments to each nation, with total commitments converted into US$ at their 1990 value. The second database is an aid project database with details of all human settlement projects or projects with human settlements components.

During the period 1980 to 1993, a few donor agencies provided considerable sums to low-income housing projects in urban areas, most of them in large cities. Perhaps more importantly, most went to projects that differed considerably from conventional public housing. For instance, support was provided for "slum" and "squatter" upgrading schemes that sought to improve conditions within existing low-income settlements by providing or improving water supply, provision for sanitation and drainage and, often community facilities. Many such projects also provided secure tenure to the inhabitants whose house or occupation of the land (or both) had previously been considered "illegal". Although upgrading projects did improve conditions for several million urban households at a relatively low cost, there were often problems with maintaining the upgraded infrastructure and services. These programmes made up for a lack of investment in the past that should have been made on a continuous basis by local authorities and while they improved conditions considerably, rarely did they also increase the capacity of local authorities and citizen groups to maintain them.

Site and service projects provided cheaper units than public housing units by providing only a house site within a residential subdivision with roads, often electricity and some provision for water supply (and sometimes provision for sanitation). The construction of the shelter was left to the households who received the plot. The hope was that unit costs would come down to the point where these could be provided to relatively low income households who could pay their full costs. Core housing schemes included a one room "core" as well.

Donor agencies faced many difficulties with serviced site schemes. Under pressure to reduce unit costs, recipient governments often developed them on cheap land sites that were in locations too distant from employment sources to suit poorer households. And governments rarely took these up as a form of housing intervention that was implemented on a large enough scale to have much impact. While the particular projects could reduce unit costs by being exempt from zoning and land use regulations, few efforts were made to change these regulations as they affected all other sites. In addition, the fact that many serviced site projects obtained government land at below market prices also meant they were not easily replicable. The priority given to such projects by the few agencies that had funded them declined - for instance, most of the World Bank and US AID commitments to serviced site projects were made between 1975 and 1985. Both upgrading projects and serviced site projects also "projectized" city problems when more fundamental reforms were needed - for instance in changing building codes, improving the availability of housing finance and reforming city and municipal government to address all the weaknesses noted in Chapter 5.

One of the first responses by the agencies involved in supporting shelter was to channel funding to support housing finance - in recognition of how many countries lacked an efficient housing finance system. For instance, between 1980 and 1993, the World Bank Group made commitments totalling $6.5 billion to shelter: two fifths went to support housing finance with around 30 percent to slum and squatter upgrading, serviced sites and core housing projects; most of the rest went to what can be termed "integrated community development" projects that contained too many components to be classified as "shelter" or "water and sanitation." This contrasts with the period 1972-84 when housing finance received very little support and most funding for shelter was for projects i.e. for upgrading slums or squatter settlements, serviced sites or low-cost housing. The average size of loans also increased considerably, and an increasing proportion of loans went to middle income groups.

However, in the longer term, within the World Bank Group there was a third shift to "housing policy development" that sought to address some of the city-wide structural constraints that had limited the impact of "projects". In this third shift, the aim of loans is to improve the performance of the housing sector as a whole - see Box 11.9. It appears that the Bank, in general, is giving less priority to shelter in recent years; total commitments in 1991 and 1993 were among the lowest since 1980 and no commitment to housing finance was made in 1993. A recent sector report stated that upgrading projects will remain a critical component of Bank lending in the future.

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OBJECTIVES

1970s: Implement projects to achieve affordable land and housing for the poor; achieve cost recovery, create conditions for large-scale replicability of projects

1980s: Create self supporting financial intermediaries capable of making long-term mortgage loans to low- and moderate-income households; reduce and restructure housing subsidies

1990s: Create a well functioning housing sector that serves the needs of consumers, producers, financiers and local and central governments; and that enhances economic development, alleviates poverty and supports a sustainable environment

ROLE OF GOVERNMENT

1970s: Emphasis on direct provision by government of land, housing and finance to facilitate progressive development of housing conditions by project beneficiaries

1980s: Emphasis on provision of housing finance, mainly by public institutions, and rationalization of housing subsidies (reduction, improved targeting and shift from financial to fiscal)

1990s: Adoption by government agencies with policy making coordination and regulatory responsibilities of an enabling role, to facilitate the provision of land and housing by the private sector; and improved coordination of sector and macro-economic policy

POLICY AND LENDING INSTRUMENTS

1970s: Sites and services demonstration projects emphasising affordable housing and infrastructure standards, tenure security and internal cross-subsidies

1980s: Housing finance projects emphasising interest rate reform (to enhance resource mobilization and improve mortgage instrument design); subsidy design and improved institutional financial performance of public agencies involved in direct provision of land, infrastructure and housing

1990s: Integrated array of policy and lending instruments to stimulate demand (property rights development, housing finance, and targeted subsidies); facilitate supply (infrastructure provision, regulatory reform; and building industry organization); and mange the housing sector as a whole (institutional reform and coordination with macro-economic policy).

SOURCE: Mayo, Stephen K. and Shlomo Angel, Enabling Housing Markets to Work, A World Bank Policy Paper, The World Bank, Washington DC, 1993, 159 pages.

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This new emphasis locates support for shelter within the broader macro-economic framework and includes within it explicit goals for improving macro-economic performance as well as improving housing conditions. It couches support for housing within a broader framework of "enabling markets to work." This evolution in the World Bank's housing policies is consistent with broader changes of thinking about development within and outside the Bank.

Changes within US AID also reflect broader changes in thinking. US AID's Housing Guaranty Programme made many fewer loan commitments to shelter in the years 1989-93 compared to the period 1980-88. Loan commitments to shelter projects made between 1980 and 1993 totalled close to $1.8 billion. However, this Programme has, in recent years, given increasing importance to finance for environmental infrastructure and improved municipal management as will be described below.

The Inter-American Development Bank was the first multilateral agency to have a major programme to fund shelter projects. This dates back to the 1960s and the Alliance for Progress during which a considerable number of housing projects were funded in both rural and urban areas. During the 1980s and early 1990s, the emphasis changed away from "shelter" projects to projects to improve shelter-related infrastructure and services. During the period 1980-93, loans to shelter projects totalled some $1.1 billion, three fifths of them for integrated community development projects and most of the rest for serviced sites or upgrading. Nearly two thirds of this was committed in the years 1986, 1987 and 1989 and annual commitments since then have fallen off.

The low priority given by other multilateral agencies to shelter related projects is evident in Table 11.1. The Asian Development Bank has given a very low priority to shelter and made no commitments to shelter projects during 1992 and 1993.

Among other bilateral programmes, many examples can be cited of shelter projects that received bilateral support, especially where official bilateral aid was channelled through international private voluntary organizations such as SELAVIP, MISEREOR and Homeless International. However, shelter has never been a priority of any bilateral agency except the US AID Housing Guaranty Programme. This is borne out by an analysis of who co-financed projects with the World Bank and the regional development banks which found less interest among bilateral agencies on cofinancing shelter projects than cofinancing urban infrastructure and services. The shelter programme of the Swedish International Development Authority in Latin America, and the United Kingdom Overseas Development Administration's expanded support to India for slum and squatter improvement programmes are two examples of shelter projects that received direct bilateral support. Among other bilateral agencies, the German technical cooperation agency GTZ has a long established and varied programme of support for shelter projects, targeted at poorer groups. Swiss Development Cooperation has also supported some urban shelter projects including squatter upgrading in Douala and social housing in Bujumbura. FINNIDA has provided support for the preparation of national shelter strategies in six countries, in cooperation with UNCHS.

Many international Private Voluntary Organizations allocate a higher priority to shelter projects or community based housing finance schemes than official agencies. Although their contribution within total aid flows is not very large - an estimate for 1991 suggested a total aid flow of US$5.2 billion compared to official development assistance of $55.8 billion - they have financed many innovative projects and have also developed new ways of reaching low-income groups and working in partnership with local community organizations and NGOs.

When analysing international donor flows to infrastructure and services for shelter, the decision was made to include not only funding to water supply, sanitation and drainage but also to two other kinds of project that are not normally associated with housing: primary health care centres including dispensaries, health centres and initiatives to control infectious or parasitic diseases; and primary schools and other educational programmes aimed at literacy or primary education. Although health care and education investments are not under the control of housing or public works ministries or agencies - and in many countries, these are the direct responsibility of ministries of health and education - these are among the most important interventions to improve living conditions and among the most important in reducing disease, disablement and premature death within shelters and the residential areas in which they are located. Primary health care centres and literacy are central to improving health and controlling disease within villages and urban residential areas.

The infrastructure and services associated with housing and residential areas receive a higher priority from both multilateral and bilateral agencies than housing itself or housing finance. In some agencies, these do receive a high priority (see Table 11.2). This table also shows the noticeable increase in the priority given to such infrastructure and services in the early 1990s.

* 1987-91

The World Bank is much the largest donor for this group of projects both in terms of aid (through its concessional loans) and in terms of non-concessional loans. Around $22 billion was committed to the infrastructure and services associated with shelter between 1980 and 1993, most of it to urban areas. Close to half went to water supply, sanitation and drainage with around a quarter to primary health care and just over a fifth to basic education and literacy. Virtually all the rest went to social funds or social employment schemes that are described in a later section. For the non-concessional loans, three fifths of commitments during these fourteen years were for water and sanitation with close to a fifth for primary health care and for primary or basic education. Thus, while the scale of the World Bank's commitments specifically to shelter have declined, the scale of the commitments to interventions that are central to improving housing and living conditions and providing services that every village or urban settlement needs (primary health care and schools) has increased considerably.

Among the other multilateral agencies, the Inter-American Development Bank with loan commitments of $4.4 billion in these 14 years is the largest donor; Table 11.2 also shows the high priority that this Bank gave to shelter-related infrastructure and services in recent years. The Asian Development Bank generally gives a low priority to these kinds of projects although as Table 11.2 shows, these received an unusually high proportion of total commitments for soft loans for 1992 and 1993. Just over half were for water supply and sanitation. The African Development Bank Group has, historically, given a relatively high priority to water supply and sanitation and it continues to do so. This bank allocated close to $4 billion to shelter-related infrastructure and services with most going to water and sanitation. However, in recent years, primary health care, primary or basic education and social funds have received more support and the proportion to water and sanitation has declined. The priority given to basic education has also increased in recent years.

UNICEF disbursements to shelter related infrastructure and services totalled over $4.5 billion during these fourteen years, three fifths of the support going to primary/basic health care services (including support for child health and nutrition and for community or family basic health services). This makes it the second largest multilateral aid programme to projects in this category, despite the fact that UNICEF's total annual funding commitments appear small relative to most multilateral and bilateral agencies.

Among all the largest multilateral banks (the World Bank, the African, Asian and Inter-American Development Bank), non-concessional loans represent a larger source of funding for shelter related infrastructure and services and most of these loan commitments are with countries with relatively high per capita incomes and most such support goes to urban projects.

When viewing trends in the support given to these kinds of projects by the different agencies listed in Table 11.2, in general, they received a higher priority when comparing the years 1990-1991 and 1992-1993 to the average for 1980-1993. This is the case for the World Bank for all three regions (Africa, Asia, Latin America and the Caribbean) and for the Inter-American and African Development Banks.

There were also some notable changes in priority among the different kinds of project within this category. Within the World Bank, the most noticeable change is the higher priority given to primary health care and to primary or basic education. The World Bank had become the single most important source of funding for primary health care worldwide. The increased funding to primary health care was particularly noticeable in Asia. The change in priority to primary and basic education is comparable with total commitments being especially high for the years 1988-1993; for each year from 1991 to 1993, annual commitments exceeded $650 million. The increased priority to primary and basic education was particularly noticeable in Latin America.

It is much more difficult to provide a comprehensive overview of the commitment of bilateral agencies to human settlements projects. Unlike the multilateral agencies, few publish details of all the projects they fund with enough detail to allow an analysis comparable to that provided above for the agencies listed in Table 11.2. The most up-to-date figures available for the bilateral agencies' priorities in this area are shown in Table 11.3.( not available). They are reported under a category termed "social and administrative infrastructure" under which health and population, education, planning and public administration and water supply and "other" fall. This is the category used by the OECD Development Assistance Committee to report on funding flows from the bilateral aid programmes of OECD countries and no more detailed statistics are available that allow comparisons between these bilateral agencies. These statistics show a low priority to water and sanitation, and to health and population. Water supply did not receive much more; the average for water supply and "other" was 4.9 percent with 10 of the 19 bilateral programmes giving less than 5 percent. Education receives a higher priority but in most bilateral programmes, this does not reflect a priority to basic education since most bilateral assistance to education goes to support scholarships for students from the South to study in the higher education institutions in the donor country. As such, most of the donor assistance to education remains in the donor country.

In recent years, several bilateral and multilateral agencies have shown a greater interest in urban poverty, even if this had not yet become apparent in the latest statistics showing their sectoral priorities. For instance, the Dutch Government's bilateral aid programme has a new programme on urban poverty while the United Nations Development Program launched a new funding initiative in 1992 to support local initiatives to improve the urban environment - see Box 11.10.

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THE URBAN POVERTY PROGRAMME (Netherlands): In 1990, a special unit, the Spearhead Program to Combat Urban Poverty, was set up in the Netherlands Ministry of Foreign Affairs and Development Cooperation, along with three other special programmes - on women in development, on research and on environment. This will promote greater attention to employment and income generation programmes for poorer groups in urban areas, empowerment strategies for community based organizations and programmes directing support to poorer sections of the urban population, including those to help improve housing and living conditions. As from 1992, all projects are being screened to check their likely impact on poverty, environment and women.

LOCAL INITIATIVE FACILITY FOR URBAN ENVIRONMENT (LIFE): This is a programme set up by the United Nations Development Programme in 1992 to promote and fund local initiatives to improve the quality of the urban environment. Most of the support goes to funding community based actions to address such problems as inadequate provision of water supply and sanitation or of services to collect and manage solid and liquid wastes, poor environmental health or lack of environmental education. The programme was initiated in eight countries. In each, a participatory consultation was held, bringing together NGOs, community based organizations, local authorities and the private sector to establish priorities and guidelines for the selection of local projects to receive support. Selection committees have been formed to review and consider applications for funding. The programme is now to extend its activities to more countries. A particular focus is now being given to "local-local dialogue", the bringing together of all stakeholders to identify and consider further the policy implications.

SOURCES: Milbert, Isabelle, Cooperation and Urban Development; Urban Policies of Bilateral and Multilateral Cooperation Agencies Second edition (draft), IUED/SDC, Geneva, 1992, 197 pages; and UNDP, "Brief on the Local Initiative Facility for Urban Environment (LIFE)" New York, 1992, 5 pages.

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Overall, the scale of funding that has gone into water, sanitation and health care has been well below what is needed to achieve the ambitious goals set by the International Drinking Water Supply and Sanitation Decade and the World Health Organization's "Health for All". For the Decade, the primary goal was to ensure full access to water supply and sanitation to all inhabitants of the South by 1990; Chapter 8 described how large the shortfall remains in the early 1990s. There were also important lessons learned during the 1980s about how difficult it is to improve water supply and sanitation provision where local authorities remain weak and where the institutional structure to maintain new investments is simply not there. One review of the Decade's performance suggested too much attention to the "hardware" ie the capital equipment and too little to the "software" - the institutional structure that must operate to ensure efficient operation and maintenance - whether by a public authority, a private company or a community organization. But here, perhaps the most important reason is the low priority given by governments in the South to water supply and sanitation. An analysis of who funded capital investments in water supply and sanitation based on a sample of countries found that the total contributions from international funding agencies were comparable to those of governments both for new systems and for rehabilitating existing ones and both in water supply and sanitation. Here, donor agencies' priorities to water supply and sanitation is likely to have increased, if recipient governments had given these a higher priority in their negotiations for development assistance.

Most international private voluntary organizations give a higher priority to water supply, sanitation, health care and basic education than official development assistance agencies. Most has been oriented to rural settlements although in recent years, an increasing number of these organizations have increased the scale and scope of their work in low-income urban settlements, especially illegal and informal settlements.

A new kind of project or programme became increasingly important in the last ten years at the World Bank and in certain other multilateral and bilateral agencies: social-action programmes targeted at poorer groups, most of them aimed at protecting poorer groups who would otherwise be adversely affected by structural adjustment programmes. These include donor support for Social Funds (sometimes called Social and Economic Funds) and employment programmes targeted at poorer groups. These usually seek to combine support for a wide range of social projects (for instance health care centres, schools) with employment generation. The World Bank is the single largest contributor to these funds; these only began to receive support in the second half of the 1980s but by 1990 they had become a regular and significant part of commitments; total commitments exceeded $200 million in 1991 and 1992 and exceeding $570 million in 1993. Most commitments have been to African countries although in 1993, three Latin American countries also received loan commitments for this (Guatemala, Nicaragua and Bolivia). Commitments from the Inter-American Development Bank to social funds totalled over $300 million; most were non-concessional loans and also made in recent years.

Another important innovation in many bilateral and some multilateral programmes is a greater attention to the needs and priorities of women in development. A greater understanding of women"s needs may be one reason for the increased priority given by several agencies to primary health care since in societies where most or the responsibility for child-rearing and caring for the sick falls to women, effective, easily accessible health care is one of women's most immediate practical needs.

Certain agencies also seek to better meet women's strategic needs ie to lessen the discrimination against women in terms of access to employment, credit and land ownership. One example is employment and credit programmes targeted at women to increase their income earning opportunities. In some social fund and emergency employment programmes, special attempts are made to ensure that women's practical and strategic needs are met. However, the strength of donor agencies' commitment to women in development cannot be measured by the proportion of funding allocated to women"s programmes. A more fundamental re-alignment is to ensure that all projects consider whether they make sufficient provision for women's needs - as is now done in the Netherlands aid programme. The Swedish International Development Authority has sought to ensure that women's practical and strategic needs are met in all its aid projects, with both its staff and the staff of agencies who work with them undergoing training in gender awareness and with gender programme officers now working in SIDA's development cooperation offices.

NORAD and the UK Overseas Development Administration are also among the bilateral agencies which seek to give due attention to women"s practical and strategic needs in their aid programmes and both have supported training in gender awareness for their staff. In 1991, an estimated 12 percent of Norway"s total bilateral development assistance went to measures "where women were defined as a target group and where women participated actively in the planning of projects." However, a recent paper which discussed how to integrate the gender variable into urban development noted the need not only for more gender awareness from professionals but also for more consultation with women at all levels in the formulation and implementation of development interventions and for more attention within capacity building to ensuring that women and men have equal representation on the staff of institutions and equal access to the services, resources and technical assistance that they provide.

Many of the agencies listed in Table 11.4 have increased the priority they give to urban infrastructure and services other than that directly related to shelter. Table 11.4 also includes commitments made to urban management and to integrated urban development projects that combine investments in different kinds of urban infrastructure and services, often in more than one city, and often include components to train local government staff and strengthen local institutions. Many integrated urban development projects are in cities that have been badly hit by a natural disaster and the project is to help rebuild or repair the damage.

NOTES AND SOURCES: Satterthwaite, David,"The scale and nature of international donor assistance to housing, basic services and other human-settlements related projects", Paper presented at the UNU/WIDER Conference on "Human Settlements in the changing global political and economic processes", Helsinki, 1995, 29 pages: Urban infrastructure includes ports, airports, urban electricity and water supply projects that were not included in Table 11.2. Urban electricity includes all projects with major electrification components in urban areas and/or electricity generating facilities directly linked to improving the service in a city or group of cities; it does not include general investments in power or in national or regional grids. Funding for colleges and hospitals do not include support for primary education, literacy programmes and primary health care which were included in Table 11.2. Public transport includes buses, intra-city and commuter line railways and subways. Funding for urban management includes projects or programmes whose main focus was urban cadastral surveys, institution building, training or research at city/municipal level, urban government finance, urban planning and urban traffic management. Integrated urban development: when a multi-sectoral or multipurpose project has components which come under four or more of the other categories listed in this table or table 11.2, it is categorized as an 'integrated urban development' project. The category on urban management and integrated urban development also includes funding for urban markets and industrial estates, city-wide investments in solid waste collection and management and in pollution control and in urban gas supplies. Aid and non concessional loan commitments to each of these can be disaggregated separately, but space does not permit this in this report. The database on which this table is based also records commitments to intra-urban roads and bridges and to building material industries although these too are not reported here.

Among the multilateral agencies listed, the World Bank remains much the largest source of development assistance to urban infrastructure and services with commitments totalling close to $27 billion between 1980 and 1993. Urban services such as secondary and higher education and hospitals received around two fifths of the funding with a third to urban infrastructure, 18 percent to integrated urban development and 7.5 percent to improving urban management. The trend over these fourteen year has been a shift away from large infrastructure projects to support for secondary and higher education, strengthening the capacity and competence of city or municipal authorities in urban management and integrated urban development.

The World Bank has also been giving a greater priority to pollution control in urban areas in recent years. Although loan commitments were made before 1990 - indeed, a loan commitment to Sao Paulo to help control river pollution is recorded in the Bank's 1971 Annual Report - it is only since 1990 that one or two projects received funding each year. In 1993, three projects received support with commitments totalling more than $700 million.

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CHINA: $250 million committed to the Southern Jiangsu Environmental Protection Project that will focus on cost-effective water-pollution control investments in urban and industrial projects. It will also strengthen the institutional, regulatory and environmental management capabilities of local agencies. Southern Jiangsu region is one of China's most industrialized areas.

MEXICO: $220 million committed to the Transport Air Quality Management Project for Mexico City Metropolitan Area. This is the government's program to reduce pollution in Mexico City that is being supported by technical and financial assistance in developing low emission vehicles and in the conversion or replacement of old high-use vehicles. It will also help finance the installation of vapour-recovery system at gas station.

BRAZIL: $245 million committed to the Sao Paulo Water Quality and Pollution Control Project. This seeks to implement a cost-effective approach to controlling water pollution in two of the most congested and polluted metropolitan areas of the country. This will be achieved through the creation of two urban water-basin authorities-for the Guarapiranga river near Sao Paulo and for the upper Iguacu river in Curitiba-and the financing of water pollution-control investments.

SOURCES: The World Bank, Annual Report 1993, Washington DC, 1993; Monthly Operational Summary of Bank and IDA Proposed Projects, IBRD, January 4th, 1993

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The Inter-American Development Bank made commitments totalling $4.2 billion during these fourteen years. Commitments were almost evenly divided between urban infrastructure (especially urban electrification and city water supply schemes), urban services (especially secondary and higher education and hospitals) and integrated urban development projects. The priority given to health and to secondary and tertiary education has grown in recent years, while that given to integrated urban development has diminished.

The Asian Development Bank made commitments totalling $6.4 billion between 1980 and 1993. Just over two fifths went to urban infrastructure (mainly ports and urban electrification) with just under two fifths to urban services (mainly secondary and higher education) and 20 percent to integrated urban development. The Bank also made its first loan for a comprehensive urban environmental improvement project in 1992 - to Qingdao in China. The African Development Bank Group committed about $2.9 billion during these fourteen years. Most went to secondary and higher education, hospitals and city electrification.

US AID's Office of Housing and Urban Programs made large commitments to urban infrastructure, especially water and sanitation, during the period 1990-1993. For instance, during 1992-93, over $400 million was authorized for various initiatives to support private sector or municipal investments in water, sanitation and other forms of urban environmental infrastructure. In 1994, this Office became a unit within a new Environment Centre that US AID has set up to provide technical and programmatic leadership and support to itself (including its field missions) and its "domestic and international development partners on global and sustainable development environmental problems." The Office of Housing and Urban Programs has been remained as the "Office of Environment and Urban Programs".

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Table 11.5: Bilateral agencies" official development finance commitments for urban development by purpose, 1986-1990 (US$ million constant - 1990 value)

86 87 88 89 90 ALL

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Urban development 93.9 33.3 66.6 31.7 26.0 251.5

Housing 52.7 74.4 73.0 168.6 62.0 430.7

Water and waste management 617.2 741.5 1,195.4 998.5 917.0 4,469.5

Transport 72.1 138.8 120.3 457.9 540.0 1,329.0

Gas distribution 38.9 0.0 576.7 68.5 1.0 685.1

Electricity distribution 175.2 570.5 522.0 984.2 397.0 2,648.9

Pollution control 0.0 0.0 0.0 0.0 5.0 5.0

Harbours/docks/airports 478.6 652.7 629.4 716.4 334.0 2,811.1

Health 95.0 108.8 165.4 191.1 100.0 660.3

Cultural activities 35.5 93.2 68.7 35.8 21.0 254.2

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TOTAL 1,659.1 2,413.1 3,417.5 3,652.6 2,403.0 13,545.3

NOTE: The figures in this table differ from the original for two reasons. First, all totals have been converted to US$ at their 1990 value. Secondly, support for telecommunications has been excluded.

SOURCE: OECD Development Cooperation Directorate, Urban Development - Donor Roles and Responsibilities Issues Paper, note by the secretariat, Paris, 1992.

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The data available on other bilateral agencies was too incomplete to permit a detailed analysis of funding to urban infrastructure and services. One source of information about bilateral aid to urban development comes from the Development Assistance Committee of the OECD which drew from their own database to come up with figures on the scale of support from bilateral agencies to urban development. Their calculations are based on a more aggregated set of project categories over a more limited time period and their findings are presented in Table 11.5. These figures suggest that multilateral donors are a far more significant sources of funding for urban infrastructure and services than bilateral donors.

Various factors constrain a greater priority to human settlements from donor agencies. One reason is simply that recipient governments and/or development assistance agencies do not view human settlements projects as a priority or they equate "human settlements" with "urban" and choose to give a low priority to urban investments. There was certainly an "anti-urban" bias among many development assistance agencies during the late 1970s and for much of the 1980s. Some changes can be detected in the attitude of agencies towards human settlements projects. One reason may be a better understanding of the economic role of cities (and urban systems) and the difficulty for any nation in achieving a successful economic performance without a well-functioning urban system which includes adequate provision for the infrastructure that enterprises need. Another may be an acknowledgement within agencies that "human settlements" is not a sector but the physical context within which virtually all their development investments take place and a critical determinant both of economic growth and of people's quality of life.

A more intractable constraint is the operational difficulties experienced by development assistance agencies in expanding their commitments to human settlements projects. One study that included interviews with a range of staff from different development assistance agencies found a variety of institutional constraints in increasing the priority to many human settlements projects - especially for shelter, water supply and sanitation, primary schools and primary health care and community development. One reason is that human settlements specialists within the agencies find it difficult to convince others in the agency that a higher priority should be given to human settlements projects. A second reason is that many agencies' institutional structures do not allow them to expand their funding to a multiplicity of small scale projects; this is especially the case in development banks where one important measure of their "efficiency" is the scale of their lending relative to their staff costs.

A third reason is the inability or reluctance of donor agencies to fund recurrent costs, often part of an institutional legacy that was set up to fund capital projects. Yet the capital costs of building a school, community centre or health clinic within a low income area is relatively modest but the recurrent costs are often much more difficult to fund.

Box 11.12 summarises some characteristics of successful shelter and basic services projects that reached poorer households and contrasts them with project characteristics that the institutional structure of development assistance agencies tends to favour. For instance, slum or squatter upgrading projects which seek to be participatory, working with community organizations formed by poorer groups in the settlement, take many years to implement and require a high input of staff time relative to the project cost. Yet there are great pressures on virtually all development assistance agencies to minimize the amount of staff time per unit of expenditure. Such pressures will mean that agencies tend to favour large, easily supervised projects. In addition, the fact that most development assistance agencies have a relatively small proportion of their staff based in recipient nations and that these staff have relatively small decision making powers make it difficult to design projects which mesh with the local context and local processes.

CHARACTERISTICS OF MANY SUCCESSFUL BASIC NEEDS PROJECTS

Small scale and multi-sectoral - addressing multiple needs of poorer groups

Implementation over many years - less of a project and more of a longer term continuous process to improve housing and living conditions

Substantial involvement of local people (and usually their own community organizations) in project design and implementation

Project implemented collaboratively with beneficiaries, their local government and certain national agencies

High ratio of staff costs to total project cost

Difficult to evaluate using conventional cost-benefit analysis

Little or no direct import of goods or services from abroad

Large scale and single sector

Rapid implementation (internal evaluations of staff performance in funding agencies often based on volume of funding supervised)

Project designed by agency staff (usually in offices in Europe or North America) or by consultants from funding agency's own nation

Project implemented by one construction company or government agency

Low ratio of staff costs to total project cost

Easy to evaluate

High degree of import of goods or services from funding agency's own nation

SOURCE: Jorge E. Hardoy and David Satterthwaite, "Aid and Human Settlements", report prepared for the Institute for Research on Public Policy, Canada, 1988.

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Development assistance agencies would find it easier to increase the scale of their human settlements commitments if there were effective counterpart institutions within recipient nations who could take on most of the responsibility for project formulation, implementation and evaluation and doing so working closely with the project-households and their community organizations. This is one reason why a greater priority has been given to building the capacity and competence of local authorities most of which are weak and ineffective as was described in Chapter 5. The development of stronger, more competent and more representative local governments within recipient nations would remove a major constraint on increasing development assistance flows to human settlements and would certainly increase the quality of donor assisted urban projects. However, many donor agencies find it difficult to strengthen "institutional capacity" since again their main expertise and experience is in project funding.

Another constraint is the poor match between the "project orientation" of most development assistance agencies and the funding needs of local institutions. Inadequate provision for infrastructure and services within most urban centres in the South can be attributed largely to a lack of resources and trained personnel at the level of the city and municipal authorities. An aid project can remedy such deficiencies within a project site - but in effect, it makes up for a failure of local bodies to make such investments in previous years. The project may improve conditions considerably at first but rarely does it increase the capacity of local bodies to maintain the new infrastructure and services and to make similar investments in other areas of the city. Urban authorities need a continuous capacity to invest in and maintain infrastructure and services - or to oversee other bodies (private enterprises, community organizations, cooperatives etc) which provide some services. Funds available on an irregular basis for specific projects are not an effective substitute. This suggests not only a need for increased priority among development assistance agencies for shelter (including the basic infrastructure and services which are part of shelter) but also that such development assistance should be provided within a long term strategy to develop the capacity of national and local governments to plan, invest in and manage infrastructure and service provision and to involve other key local actors in this process (including private sector institutions, NGOs and community organizations).

NOTES AND REFERENCES