Daniel Platz

In most developing countries a shortage of long-term, local-currency fi nancing for small-scale infrastructure projects impedes local economic development. Inadequate fi scal transfers, little own source revenue and low creditworthiness make it diffi cult for local governments to fully fund projects on their own. Th is paper proposes the use of project fi nance as a means to attract fi nancing from domestic banks and institutional investors. Donors can play a catalytic role by providing technical assistance to develop projects and credit enhancement to attract commercial fi nancing.

In light of increasing urbanisation and an ambitious new 2030 Agenda for Sustainable Development, subnational entities (cities, towns, provinces) in developing countries need to find ways to unlock private funds in order to finance large-scale capital investments. This article reviews whether issuing bonds at the local level is an objective worth pursuing for sub national entities in developing countries. The author argues that even in the most advanced emerging market economies, raising finance through such mechanisms remains rare and has proven to be a complex effort. The international community may therefore re-evaluate its agenda to promote such instruments in even more challenging settings, such as in Least Developed Countries in Africa and or South Asia. Developing local borrowing practices takes time and donors could adjust their efforts towards helping local authorities access subsidised lending and performance-based grants first, before moving on to more market-based terms....

The material in this publication may not be reproduced, stored or transmitted without the prior permission of the copyright holder. Short extracts may be quoted, provided the source is fully acknowledged. The views expressed in this publication are not necessarily the ones of the Friedrich-Ebert-Stiftung or of the organization for which the author works. Dialogue on Globalization contributes to the international debate on globalization – through conferences, workshops and publications – as part of the international work of the Friedrich-Ebert-Stiftung (FES). Dialogue on Globalization is based on the premise that globalization can be shaped into a direction that promotes peace, democracy and social justice. Dialogue on Globalization addresses " movers and shakers " both in developing countries and in the industrialized parts of the world, i.e. politicians, trade unionists, government offi cials, businesspeople, and journalists as well as representatives from NGOs, internati...

This paper sets out to explore the potential of sub-sovereign bonds in financing infrastructure in developing countries. Taking into account the historical experience of the US, it develops a supply and demand side framework for analysis of the market for sub-sovereign bonded debt in developing countries and applies this framework to Mexico, India and South Africa. Finally, it draws lessons for countries seeking to promote markets for sub-sovereign bonds. Evidence suggests that the regulatory environment, a diversified financial sector and increased capacity for debt support and management matter most for the development of the sub-sovereign bond market.

Urbanization, rapid economic growth and increasing populations in Asia pose great challenges on municipal governments to improve their water supply systems. The successful development of municipal bond markets could open new sources for investments into the water sector. There are three basic prerequisites for the successful sale of municipal debt, namely, the development of a modern and diversified financial sector, investor confidence and issuer familiarity, as well as a conducive regulatory environment. The article provides a detailed account of how these factors evolved in the nineteenth century United States and how they provided the basic tenets for the development of the world’s largest and most efficient municipal bond market. It concludes that the development of the municipal bond market was closely linked to the emergence and expansion of public water supply systems. Taking the US experience into consideration the article explores the potential demand for municipal bonds i...

In today’s developing world the vast majority of water and electricity services are provided by public utilities. Rather than asking “who should provide the servicesâ€, the authors adopt a financing point of view and look at how access to basic utilities for all can be funded in a sustainable manner. The paper is based on a series of multi-stakeholder consultations which the Friedrich-Ebert-Stiftung, in cooperation with the UN Financing for Development Offi ce and the International Poverty Center of UNDP has organized in 2006 and 2007. [FES Occasional Paper]