Exploiting potential complementarities across jurisdictions and policy sectors
Horizontal co-ordination of urban plans should be enhanced ...
In China’s increasingly complex policy environment, the urban development strategy and its implementation need to be developed in collaboration and consultation with appropriate stakeholders. This can help to realise the central government’s strategic vision. The experience of OECD countries suggests that strategies developed without considering the rollout on the ground are at a higher risk of implementation failure. In China, as in all OECD member countries, complex policy challenges require ministries to look beyond their own work programmes to see not only how their work is affected by issues in other sectors but how their own sector influences and impacts other sectors. What happens on one government level will have an impact on other levels of government. Urbanisation is a complex policy issue that cuts across multiple ministries and levels of government. Concerted effort is required to develop innovative solutions and policy proposals that sustain the level and quality of services citizens receive. Ministries from central and sub-national governments that continue to work in silos will limit the public administration’s ability to commit to the implementation of the urbanisation plan. For example, in Japan, the 2012 Act to Promote the Low-Carbon City encourages local governments to develop a place-based, cross-sectoral Low-Carbon City Development Plan supported by three different line ministries. This helps identify low- carbon projects across sectors (health, transport, public housing, etc.) financed by the central government (OECD, 2013i).
Close co-ordination between the finance and urban planning departments is critical in developing financially feasible plans. Such co-ordination is not easy in China, where authority to create and dissolve governmental entities is highly centralised. If a subnational government wishes to integrate the functions of the planning department into the finance department, this must first be approved by the central government (Mikesell et al., 2011). In this context, the only way to enhance co-ordination between the planning and finance departments is to involve them in each other’s activities. This means allowing the finance agency to play a key role in the development of urban plans and making the planning department’s authorisation a prerequisite for the financing of any urban development project, or any other project that has an impact on urban development. A joint board composed of the planning and finance departments could be used to review and approve all urban development projects, to ensure they are aligned with the urban development plan and are financially viable. Forming this board, however, would not require endorsement from the central government.
... and promote effective public investment strategies.
Experience in OECD countries has showed that public investment can be a key contributor to economic growth, although its impact depends to a significant extent on how governments manage it. Public investment shapes choices about where people live and work, influences the nature and location of private investment and affects well-being. However, poor investment choices and implementation not only waste limited public resources and erode public trust, but they may also hamper future growth opportunities. Thus, Chinese policy makers may find the OECD Principles for Effective Public Investment (Box 3.6) a basis on which to assess the current arrangements for governing public investment and identify potential improvements.
Box 3.6. OECD Principles on Effective Public Investment
The OECD Principles for Effective Public Investment Across Levels of Government aim to help governments assess the strengths and weaknesses of their public investment capacity in a multilevel governance perspective and to set priorities for improvement. The Principles group 12 recommendations into three pillars representing systemic multi-level governance challenges for public investment:
Pillar I: Co-ordinate public investment across levels of government and policies.
- • Invest using an integrated strategy tailored to different places.
- • Adopt effective co-ordination instruments across national and sub-national governments.
- • Co-ordinate among sub-national governments to invest at the relevant scale.
Pillar II: Strengthen capacities for public investment and promote policy learning across levels of government.
- • Assess in advance long-term impacts and risks of public investment.
- • Encourage stakeholder involvement throughout the investment cycle.
- • Mobilise private actors and financing institutions to diversify sources of funding and strengthen capacities.
- • Reinforce the expertise of public officials and institutions throughout the investment cycle.
- • Focus on results and promote learning.
Pillar III: Ensure sound framework conditions for public investment at all levels of government.
- • Develop a fiscal framework adapted to the investment objectives pursued.
- • Require sound, transparent financial management.
- • Promote transparency and strategic use of public procurement at all levels of government.
- • Strive for quality and consistency in regulatory systems across levels of government.
Source: OECD (2014e), “Recommendation of the Council on Effective Public Investment Across Levels of Government”, www.oecd.org/gov/regional-policv/recommendation-effective-public-investment-across- levels-of-govemment.htm.
Central government should actively promote cross-jurisdictional co-operation
China’s central government should take a leading role in promoting both crossregional and cross-local collaboration. The benefits of public investments are rarely confined to predetermined administrative boundaries. Spillovers and efficiencies of scale are key drivers for planning and implementing investment projects co-operatively across jurisdictions, to ensure an approach to policy making that reflects functional economies rather than administrative boundaries. There are certain challenges to this co-operation, of course. For example, there could be significant differences in income levels between adjacent jurisdictions. Yet competitive pressures may arise even in a partnership of equals. In China, it is also possible that inter-jurisdictional competition may be an obstacle to foster horizontal co-operation at the local level. But these challenges need to be faced to make the most of complementarities.
One way to encourage horizontal co-ordination would be to enshrine in the Urban and Rural Planning Law the need to collaborate across jurisdictions, both cross-local and cross-regional. At present, there is no mention of the issue of co-ordination in the law, and that would send the right message across levels of government regarding the need to collaborate. The provision of financial preferences at the national level for joint subnational public investment proposals, as allowed for in Norway and Spain, is another alternative. In Switzerland, one-third of sub-national funding from central government is reserved for inter-cantonal investment projects. In Germany, Brandenburg has sought to combine top-down and bottom-up elements in an effort to foster cross-municipal coordination. The Land government has identified 16 “growth cores” around Brandenburg, chiefly the leading municipalities in various parts of the territory, around which the other municipalities can organise. To tap the resources available to support projects in these growth cores, municipalities must affiliate with one of them and must also be ready to participate in the financing. The Land gives priority to projects that are expected to generate positive spillovers across municipal boundaries. This approach not only gives the municipalities an incentive to collaborate, it also requires them to approach the Land for support on the basis of growth potential rather than need. China could also consider establishing an inter-ministerial regional development agency in the central government, similar to the Delegation Interministerielle a lAmenagement du Territoire et a lAttractivite Regionale (DATAR) in France. Its task would be to implement regional policy of the government while NDRC, the central planning agency, took care of strategic matters.
Although cross-sectoral co-ordination remains weak in many OECD countries, several examples of good practice could inspire the design of horizontal co-ordination mechanism in China. For example, in the United States, the White House Council on Strong Cities, Strong Communities is an example of cross-sectoral collaboration to ensure the long-term economic development of cities. The initiative has brought together a significant number of central sectoral ministries to develop the programme in six pilot cities.
Revamping metropolitan governance arrangements could deal with fragmentation at the sub-national level
In China, the lack of co-ordination among sub-national levels of government and fragmentation hamper policy effectiveness and reduce the economic performance of metropolitan areas. Metropolitan areas typically cross multiple administrative boundaries, and the mix of local governments often results in a fragmented approach to policy making and urban planning design. Even if different administrative entities could individually achieve the short-term political targets, working in isolation, they are more likely to fall short of developing the economic potential of a metropolitan area. OECD work indicates that metropolitan cities in OECD countries with a higher level of governmental fragmentation experienced lower growth of gross domestic product (GDP) per capita over the last decade (Ahrend et al., 2014).
Three approaches to municipal reform can be observed across most OECD countries (OECD, 2014c). China may consider their example in revising metropolitan governance arrangements:
- • Municipal mergers have been adopted in some OECD countries (e.g. Denmark, Finland, Greece, Iceland, the Netherlands, Norway and Sweden) to reduce the number of municipalities and increase their scale in terms of geography and population (OECD, 2014c). China has seen movement towards administrative consolidation, especially in the lower tiers of government, where two or three (or more) towns have been merged to become a district, and counties into cities. The primary motivation is to quicken the pace of urbanisation. This is a positive step towards amalgamation of sub-national authorities, which may have an impact in the reduction of costs associated with public service delivery. However, based on the experience of OECD countries, the lesson for China on municipal mergers is that cost savings may not be realised until several years after the reform, as the chief rationale is usually to improve the quality of services, which may require more spending.
- • To foster inter-municipal co-operation, OECD countries have been adopting arrangements that allow local jurisdictions to work together for certain common services or investments. In China, given that each level of government has to produce a plan in different sectors in a context of weak co-operative relationships among local governments, incentives for better co-ordination for urban policy design among sub-national governments are needed. There is little evidence that the urban plans developed by provinces and municipalities are prepared in coordination with other economic development plans. To increase policy coherence across city-region areas, China could develop city networks and develop delivery agreements at the metropolitan or micropolitan levels. In China, as in OECD countries, central government could play a key role in initiating the intermunicipal co-operation governance agreements through the use of fiscal or legal instruments. Canada’s experience with intermunicipal co-operation for infrastructure funding could be a source of inspiration for China. In 2005, the government instituted a Gas Tax Fund (GTF) to share half the revenue from the federal excise tax on gasoline with 3 600 municipalities across the country, in order to fund sustainable municipal infrastructure, including transit and waste. To access the funds, municipalities must apply jointly. The programme has resulted in the construction of regional water filtration plans, community co-generation systems and community transit. In 2007, France created agglomeration contracts that involve the central state, the region and the intermunicipal body of either Agglomeration Communities or the Urban Communities, focusing on human capital improvement and economic development initiatives. The introduction of the metropolitan contracts was a major step in recognising functional economic areas, fostering collaboration among municipalities around a commonly defined project for economic development without creating a formal metropolitan body. To strengthen cross-sectoral planning for urban development, Chinese authorities could identify gaps in existing legal authorities and develop tools for co-ordinated response to urban planning involving several sectors. Communication plans involving agencies/organisations in different sectors could also be developed. Using all available co-ordination mechanisms for cross-sectoral planning is a good start for better planning.
• To encourage complementarities, OECD countries tend to focus on metropolitan areas rather than municipalities to address the special needs of larger cities and surrounding areas. There is a growing interest in metropolitan governance bodies - broadly defined as bodies organising responsibilities among public authorities in metropolitan areas, including voluntary associations of municipalities, with few or no legal powers.16 There are different approaches to metropolitan governance: informal/soft co-ordination; intermunicipal authorities, supra-municipal authorities, and special status of metropolitan cities. It is difficult to recommend China a metropolitan governance model, since this is a matter of political and social choice. However, some lessons for effective metropolitan reform emerge from the experience of OECD countries that could prove useful. First, it is critical to identify a common cause for collaboration and build on successful collaboration outcomes (e.g. the creation of the metropolitan authority in Barcelona in 2011). Second, metropolitan leadership and ownership need to be developed (e.g. the leadership of the metropolitan Paris). Third, it is essential to empower and engage stakeholders at an early stage, and ensure accountability and transparency (e.g. the mixed committee of elected officials and citizens of the Montreal Metropolitan Community, which met to discuss a strategic metropolitan plan). Fourth, strengthening the evidence base and tracking progress is needed (e.g. the Greater Toronto Civic Action Alliance’s report on “Enough Talk: An Action Plan for the Toronto Region”). Fifth, sources of financing must be secured (e.g. London’s Business Board includes members from commerce and industry). And sixth, it is critical to balance clear timeframes and flexibility (Sweden, for example, first tests governance reforms in a few pilot regions).17 An additional message for China is that reform of metropolitan governance is a long-term process. It takes time to create institutions and trust, and even once they are up and running, governance structures may need to be further adapted (OECD, 2014c). The experience of the metropolitan area of Aix-Marseille in France also shows the need to tackle fragmented governance to foster more dynamic and inclusive growth (OCDE, 2013).
To help innovative thinking, the role of mayors needs to be redefined ...
Mayors in China act as chief executive officers (CEOs) of their cities (Henderson, 2009). They are given performance standards and objectives by higher levels of government and are accountable for performance to them. Mayors are mostly focused on economic growth and development issues - which are a legacy of the central planning era. They have little to do with the quality and delivery of urban public services. Henderson (2009) notes that some standards imposed by upper-level governments may deal with national objectives concerning, for example, rural land acquisition or urban density, but these are often ignored with impunity. Rather mayors may de facto be heavily graded on industrial growth.
As China shifts from a focus on economic growth to providing its citizens a better quality of life, the role of mayors must adapt. Mayors could be encouraged to become more accountable to citizens for the quality of public services, and citizen satisfaction should be taken into consideration in assessing mayors’ performance and their nomination for promotion. Such considerations might also be extended to all senior positions in sub-national governments. Chinese mayors should be prepared to take a leadership role in helping cities accomplish their goals, without engaging the central and even provincial governments. For example, one option might be to bring together other mayors and financial experts to design new ways of evaluating and financing infrastructure. The mayor’s new role would involve the bigger picture, questioning existing practices and scrutinising successful examples beyond the city’s borders. OECD countries such as Canada, Chile, the Netherlands, United Kingdom and the United States have introduced the role of city manager in some municipalities to run the daily management of the administration, while the mayor is responsible for decision making on policy issues and community goals.
... and local officials should be made accountable for urbanisation and service delivery
The New Urbanisation Plan 2014-2020 requires the development of reliable mechanisms for accountability and transparency, for oversight and feedback. Such mechanisms should encourage ethical behaviour, by making unethical activities hard to commit and easy to detect. Accountability mechanisms set guidelines for government activities, for checking that results have been achieved, and for checking that due process has been observed. They include internal administrative procedures (requirements that activities or requests be recorded in writing), comprehensive processes such as audits and evaluations of an agency’s performance, or new forms of procedures such as whistleblowing (which can encourage public servants to expose wrongdoing committed by others or to say no when asked to do something inappropriate). They might also be external to the public service: for example, oversight mechanisms such as legislative or parliamentary committees.
Recognising how aspects of the accountability framework fit together is critical (Smoke, 2013). Reasonable national standards and oversight for metropolitan and other local governments are legitimate, and collection and analysis of performance data help higher levels to allocate resources and provide useful information to citizens. Strong downward accountability mechanisms - beyond competitive elections - are needed to realise the anticipated benefits of decentralisation, which is already in place. One option Chinese authorities might consider is a management accountability framework that defines the conditions necessary to ensure good government and promote management excellence. The Canadian Management Accountability Framework (MAF) gives China a valuable example of a mechanism for accountability (Box 3.7. The MAF is a key performance management tool that the federal government uses to support the management accountability of deputy heads and improve management practices across departments and agencies. The main lessons for China from Canada’s experience are that: i) leadership at the top is critical to improving management practices; ii) recognition at the outset that managing with a focus on results requires a culture shift and that progress takes time and sustained focus; iii) performance management assessments should be constructive and encourage continuous improvement, and not be used as a means to penalize organizations or people; iv) the assessment tools need to be kept updated; and, v) the exchange of best practices through annual conferences and workshops supports the continuous improvement of management practices across government.
Box 3.7. Canada’s Management Accountability Framework
In the context of increased emphasis on results and performance management, and increased delegation of management functions to departments, the Canadian government has developed a Management Accountability Framework to ensure departmental accountability for management results. The MAF is structured around 10 key elements that collectively define management and establish the expectations for good management of a department or agency. It sets clear indicators and measures that can be used to gauge performance over time to help managers, deputy ministers and central agencies assess progress and strengthen accountability for management results.
The MAF is part of the government’s efforts to move away from prescriptive rules and heavy central regulation to focus on risk-based monitoring and accountability for results. The government uses annual MAF assessments to identify management strengths and weaknesses in individual departments and agencies, and ultimately government- wide. The assessment process leads to a joint agreement on specific management improvement action plans and ultimately public reporting on the state of management. MAF assessment now also factors into deputy ministers’ performance appraisals.
Source: Treasury Board of Canada Secretariat (2014), www.tbs-sct.gc.ca/maf-crg/index-eng.asp (accessed 2 December 2014).
The National Audit Office of China has a central role to play in fostering accountability of central and sub-national governments. Its mandate might include not only the traditional tasks of verifying legality and regularity of financial management and of accounting but also reviews of efficiency and effectiveness of financial and programme management, in the context of public service delivery and urban development programmes (e.g. infrastructure construction). The US Government Accountability Office (GAO) constitutes a good example of a modern supreme audit institution. China may wish to model its National Audit Office on the GAO, by giving it a broader scope of tasks, which could include auditing sub-national governments at the request of the State Council on issues such as urbanisation. GAO, for example, supports congressional oversight by: i) auditing agency operations to determine whether federal funds are being spent efficiently and effectively; ii) investigating allegations of illegal and improper activities; iii) reporting on how well government programs and policies are meeting their objectives; iv) performing policy analyses and outlining options for congressional consideration; and v) issuing legal decisions and opinions, such as bid protest rulings and reports on agency rules. GAO stands out among its counterparts in OECD countries, because it also advises Congress and the heads of executive agencies on ways to make government more efficient, effective, ethical, equitable and responsive.