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As cities grow and decentralization becomes more common, local governments are assuming greater responsibility for providing and financing effective public services. In East Asia (excluding Japan) conservative estimates indicate that $1.2 trillion in infrastructure investments related to urbanization will be needed over the next decade. However, local fiscal and financial capacity rarely keeps pace with these increasing responsibilities. As a consequence, municipalities often find that they must confront a four part agenda:

• manage available resources more efficiently and more responsively,
• advocate reforms in intergovernmental fiscal relationships so that functional responsibilities are clearly defined and revenue sources are adequate,
• mobilize new resources and increase their capacity to borrow responsibly for investments in local services, and
• seek ways of attracting private participation in the financing and delivery of local public services.

A Municipal Finance Thematic Group, drawing participants from across the Bank, focuses on assisting local governments through consultation and advice, strategic investment programs and capacity building to respond effectively to this agenda.