Making Economic Hubs Thrive: A Case for Fiscal and Administrative Devolution in Sindh

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Industrial and commercial clusters in and around cities provide for the environment, necessary for rapid economic growth and high generation of revenues for running the business of the State. The density of the population, the knowledge spillover, the competitive environment and the economies of scale induce innovation, specialization and enhance productivity in the
urban population.

Pakistan’s economy needs to grow at 7-9 percent for the next thirty years to create two million jobs every year and reduce public debt. Such a high level of growth will mainly come from the industrial and services sectors which are highly clustered in the urban areas. Urbanization poses its own challenges which need to be addressed to harness its full potential. With the rising population in cities, there is increased pressure on the basic infrastructure and services like water, sanitation, waste management, housing and transportation. Sindh has witnessed a dramatic shift from a rural majority province to an urban majority province with an urban population that has grown to 51.8 percent, according to Census 2017. Through eective local governance, problems in the delivery and maintenance of municipal services can be minimized. Administrative and fiscal devolution to sub-national governments ensure eciency, accountability, and manageability of resources and service delivery at the grassroots level.

Although the Constitution of Pakistan recognizes Local Governments as an essential third tier of the State, it does not provide for its structure as elaborately as it does for the Federal and Provincial tiers. The local government system in Pakistan was created and disbanded several times since its first creation in 1959. The Devolution Plan of 2001 had been a significant milestone that introduced three tiers of local governments. The plan also introduced Provincial Finance Commission (PFC) Awards in Pakistan for the first time. Article 140 (A) under the 18th Amendment of the Constitution requires each province to hold local government elections, establish local government setup and devolve political, administrative and financial responsibility and authority to the elected representatives of the local governments. In Sindh, the last two legislative instruments that provide the basis for local government structure were Sindh Local Government Ordinance, 2001 and Sindh Local Government Act (SLGA), 2013. The SLGA-2013 and subsequent amendments are in sharp contrast with SLGO-2001 based on structures, revenue, and expenditure assignments of the local governments. Primary functionary bodies that were part of the local government previously were subsequently controlled by provincial governments including the Solid Waste Management Board (SWMB), Karachi Building Control Authority (KBCA), and Karachi Water and Sewerage Board (KWSB). This study also identifies various anomalies in the revenue and expenditure assignments between provincial and local governments.