Municipal sector review
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- TURKEY MUNICIPAL SECTOR REVIEW
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MUNICIPAL SECTOR REVIEW 
September 2004 Turkey Country Unit Infrastructure and Energy Services Department Europe and Central Asia Region The World Bank Abbreviations, Acronyms and Currency Equivalents EIB = European Investment Bank, GDP = Gross Domestic Product GNP = Gross National Product IDF = Institutional Development Facility IFI = International Financial Institution Iller Bankasi = Bank of Provinces KfW = Kreditanstalt fur Wiederaufbau MoF = Ministry of Finance MoI = Ministry of Interior PFPSAL = Programmatic Financial and Public Sector Adjustment Loan PIP = Public Investment Program PTT = Turkish Post, Telegraph and Telecom SPA = Special Provincial Administration SPO = State Planning Organization TGS = Treasury Guarantee Scheme Currencies and GDP Estimates
TURKEY MUNICIPAL SECTOR REVIEW Table of Contents FOREWORD i EXECUTIVE SUMMARY ii 1. INTRODUCTION 1 Need for a Strategy 1 2. OVERVIEW OF URBAN AND LOCAL GOVERNMENT ISSUES 5 Urbanization Issues 5 Overview of Local Government 8 Local Government and the National Economy 11 An Example: Municipal Services of Water and Wastewater 14 3. CENTRAL GOVERNMENT FINANCING AND CONTROL 16 Central Government Oversight 16 Issues 17 Reforms 18 Central Government Transfers 21 Issues 24 Reforms 25 4. MUNICIPAL REVENUES 27 Locally Raised Revenues 27 Locally Raised Revenues and Population Size 29 Collection of Real Estate Tax 30 Issues 31 Reforms 33 5. MUNICIPAL BORROWING 35 Current Situation 35 The Treasury Guarantee Scheme (TGS) 36 Iller Bank 37 Issues 42 Reforms 44 Iller Bank Reform 46 Iller Bank Reform - Long Run 48 6. CONCLUSIONS AND NEXT STEPS 50 Approach Towards the Reform 50 Potential Role of the World Bank 54 Iller Bank Income Statement 1 Iller Bank Investments 1 Iller Bank – Considerations for a reform 1 World Bank Guarantee Instruments 1 Lenders 4 Municipal 4 LFI 4
World Bank 4 Local 4
Central 4
Lenders 6 World Bank 6 ANNEXES Annex 1 IllerBank Income Statements Iller Bank Balance Sheets Iller Bank Cash Flow Statements
FOREWORDDuring the last few years concerns about the sustainability of the Turkish municipal sector as a whole have emerged as many towns and cities have not met their financial obligations to the State. Treasury loan guarantees have been invoked as many municipalities and water utilities have failed to honor their debt service commitments. Excessive dependence on the State on the part of the municipalities is limiting the quality of local services and reducing the accountability of local authorities. The current Government recognizes the issues related to the municipal sector and has embarked on an overall public sector reform program that includes activities for the municipal sector. A draft framework law on Public Administration has been prepared and is currently under discussion. This framework law will be followed by other laws such as the Municipal Law, Municipal Revenue Law that are expected to enhance municipal financial management, strengthen the local institutional capacity, and increase local revenues. This report forms the basis of the discussions the Bank is currently having with the Government regarding the municipal sector in the context of the public sector reform agenda. While the issues presented in the paper will be addressed through the various initiatives taken by the Government, the report summarizes the current state of affairs, reflects the discussions the Bank has had with the Government, and is assisting the Government in forming policies. The suggestions made in this note have been taken into account at the formulation of the draft Public Administration Law and amendments to the Iller Bank Law. The report is a compilation of three background papers on central government oversight and control, local government operations, and activities related to municipal borrowing. These papers were discussed in a two-day consultative workshop in Ankara and the discussions were reflected in the draft report that was submitted to the Government in October 2002. Given the ongoing changes in the sector, the Government provided two sets of comments – in April 2003 and October 2003. These comments are reflected in the report. The primary authors of this report are Anders Zeijlon and Sudipto Sarkar (Task Team Leader). Other team members are: Anwar Shah, Samir El Daher, Alptekin Orhon, Kyoichi Shimazaki, Jane Ebinger, Bülent Özgün (consultant), Sinan Erer (consultant), Hakan Mat (consultant) and Elif Yukseker. Contributions and comments are gratefully acknowledged from Lee Travers, James Parks, Motoo Konishi, Takao Ikegami, Ismail Arslan, Kamer Karakurum Özdemir, Mathew Verghis, Jean-Jacques Dethier, Serdar Yilmaz, and Jan Brzeski. The team also appreciates the comments received from many officials in central and local government agencies in Turkey, including Treasury, Ministry of Interior, Iller Bank, the State Planning Organization, and a number of municipalities and other local government organizations. The peer reviewers for the document are Deborah Wetzel and William Dillinger. TURKEY MUNICIPAL SECTOR REVIEW Download 0.72 Mb. Share with your friends:
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