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Mumbai needs a fully empowered 'manager'

August 02, 2007 12:35 IST

If India is to have an international finance centre, it will emerge in a city that is already India's domestic financial fulcrum. In looking at infrastructure and governance, the MIFC Report leans towards the city's governance deficit as being the more critical.

If Mumbai had good governance it would not have the infrastructure deficit it has today. And, the new investments in infrastructure being planned would be wasted if the city's governance deficit were not fixed first.

Mumbai's becoming a successful IFC will require concerted efforts by the central, state and city levels of government. All three will need to dovetail efforts to transform Mumbai into a city that offers infrastructure, amenities and a quality of civic governance similar to other IFCs.

Many commentators and critics see this as 'dreaming' on the part of the High-Powered Expert Committee (HPEC). My response is simple. If Mumbai cannot offer those standards, then the globile (globally mobile) community of professionals, that make IFCs what they are, will choose not to locate in it.

Mumbai will not become an IFC or a GFC. That is not a matter of the HPEC's having dreams or nightmares. It will simply betray India's national interests.

It is not easy to create and govern a first world global city in a third world environment. Nor is it impossible. Malaysia has managed to do that with Kuala Lumpur. China has Hong Kong, Beijing and Shanghai. South Africa has Johannesburg and Cape Town. Brazil has Rio de Janeiro and Sao Paulo. Chile has managed to do that with Santiago, and so on.

The problems faced in Mumbai are not new. They have been solved by dozens of cities; many in the third world.

To accomplish the task of making Mumbai a global city, policymakers may have to consider the short-term perpetration of an inequity quite deliberately, as an investment in the future.

Focussing on making Mumbai a credible IFC involves actions that are elitist. But then international finance is elitist in nature. That is a politically incorrect admission to be candid about in the Indian socialist ethos. But whitewashing that issue risks missing the point. Going for an IFC in Mumbai is a policy choice that will invoke social reactions in the city and require astute political management.

Mumbai has a fractured geography with two financial centres located in the Bandra-Kurla Complex and Nariman Point/Fort. Intra-city drive times have become critical. It is urgent to build a metro to augment the suburban railways, along with intra-city and coastal expressways linking the islands to the mainland.

A host of PPP solutions, based on user charges, can be rapidly rolled out in order to alleviate infrastructure constraints such as transport, power, water, sewage, drainage and so on.

The exorbitant cost of real estate in Mumbai could inhibit its emergence as an IFC. Solving this problem involves repealing the Urban Land Ceiling Act and new thinking on FSI.

It will require bringing to closure the long-standing issue of rent control. An economic historian observed: "There are two ways of destroying a city completely. One is carpet bombing. The other is rent control. And, of the two, rent control is more effective." That statement must have been made after visiting Mumbai.

Mumbai has chronic fiscal problems that persist because of revenue under-collection with unsustainable tariff structures and non-transparent subsidies for services. Its property tax system requires restructuring and modernisation.

Financial allocations for Mumbai from central and state governments are too low in comparison with: (a) the tax revenues it generates; and (b) its legitimate needs for infrastructure maintenance and development.

Unlike Delhi, the other metropolitan centres in India are handicapped by not having their own revenue base or autonomous status within our three-tiered structure of governance. Thus they become step-children of state governments that rely on the rural majority vote rather than the urban minority vote.

In China, the four largest cities have been given provincial status; like Delhi. If this solution is out of the question, then Mumbai needs a fully empowered if not elected 'manager' for the city, who can be held accountable for everything that goes right or wrong in Mumbai.

The notion of a "city bandh" -- which has become a regular feature of Mumbai's life and the bane of its citizens -- is not a familiar feature in any other established or emergent IFC. In any other IFC a citywide shut-down, for any reason, would not be tolerated by its governing authorities because of the large economic, financial and reputation losses that the IFC would incur.

Ways need to be found to ensure that in the future, Mumbai is not vulnerable to bandhs. If that is not done, the implication is clear: the city will have no realistic prospect of emerging as an IFC.

The sheer size and rapid but disorderly growth of Mumbai presents a challenge in inducing sound institutions for urban governance. There is a need in Mumbai to create a fully empowered city government to manage urbanisation with political and financial accountability.

International experience suggests that without reforms in the institutional framework for urban governance, central and state level funds directed into urban infrastructure will not have the expected economic and social returns.

Municipal governance needs to coalesce under an urban development authority properly accountable to the city's electorate. Municipal services in Mumbai are fragmented across many different corporations, agencies, and local government bodies with conflicting lines of accountability.

In particular, poor communities have almost no voice over city policies except through extreme forms of public resistance when their interests are compromised beyond their limited abilities to cope.

In Mumbai, low-income households are at the regressive end of the fiscal system. At the same time, improvements in tax revenues and user charges are likely to be most acceptable if concurrent improvements were to occur in service delivery. This is perhaps analogous to the acceptance of tolling highways after high quality highways came about.

At present Mumbai has limited creditworthiness with opaque financial systems and primitive treasury management. A corrupt nexus between city councillors and contractors on a variety of public works contracts has emerged because of a lack of proper controls.

These need to be rectified before Mumbai can access capital markets. Transforming urban infrastructure in Mumbai, therefore, has dimensions of institutional, fiscal, financial and regulatory reform to ensure good governance.

Finally, becoming an IFC requires a city to exude genuine cultural tolerance and pluralism. A healthy and hospitable city environment that can attract expatriates requires open-mindedness, good residential facilities, office space, leisure and entertainment facilities catering to international tastes, smooth enrolment processes at good schools, hospitals, colleges, universities and sports clubs accessible to expatriates.

The foregoing suggests a daunting list of challenges (many of them political) that have been laid down in the MIFC Report. Its authors believe they can be met. We can succumb to cynicism that ensures nothing will happen. Or we can make it happen. The choice is ours to make and pursue.

The author was the chairman of the committee that wrote the MIFC report.

Percy Mistry
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