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<Municipal Solid Waste Management> Asia 2.2 Topic k: Financing East Asia/Pacific MSWM services account for a high percentage of the municipal budgets. For instance, in Malaysia, an average of 50% of the municipal operating budget is spent on MSWM, and of this, 70% is spent on collection. Financial options and mechanisms vary from city to city and from country to country. In general, there are three sources of funds, namely, municipal taxes, fees charged for services, and subsidies from municipal revenues received from government sources. Increasingly, MSWM authorities in industrialized and developing countries are seeking cost recovery through the levy of fees for services provided. Throughout the region there is a range of methods by which costs are being recovered via user fees. The deposit-refund system for many recyclables is being expanded in cities like Bangkok, Singapore, Tokyo, and Jakarta. Volume-based fees are being tried out. There are several forms of levy: (a) direct fees based on waste volumes; (b) indirect fees derived from, for instance, property taxes; and (c) fees collected with payment of electric bills, or with water bills based on floor area and annual rental values of properties. In some cities of industrialized countries of the region, fees are charged, directly or indirectly, for all services rendered. Some have laws to encourage recycling by specifying mandatory deposit and return requirements. The aim is to shift some of the burden of waste disposal and the recovery of materials back to the manufacturers of products by ensuring that retailers, and then wholesalers, take back materials. To fund clean-up programs some of these cities also levy advance disposal fees for a variety of products and packages. Faced with resource constraints, many developing countries are looking to the private sector for solutions. Cities in Indonesia, Korea, Malaysia, Singapore, and Thailand, among others, have contracted out part of their MSWM services to private contractors. In Malaysia and Singapore the privatization program has gone much further. All MSW incineration plants in Singapore are to be privatized by 1996 and a private limited company will handle all refuse collection starting in the same year. In Malaysia, private companies are invited to bid for any of the privatization-cum-concession agreements for MSWM services in the country. Private companies are free to form joint venture companies with foreig waste management companies that have the financial resources and experience to win collection contracts from municipal authorities, and to design and build transfer stations and landfills or any final disposal systems. An important cautionary note here is reflected in current thinking among many experts that the most effective, efficient, and accountable system of MSWM will evolve through a combination of government-run and privatized services. Although privatization advocates say that privatization is key to cost recovery, others in the region have shown that good cost recovery can occur without privatization. The social implications of such privatization have yet to be evaluated. For some developing countries fees, labor relations, and the role of pickers and waste dealers are points of tension when privatization is introduced. Private companies sometimes cut corners and often do not fulfill the conditions of the contracts. In most cases, private companies employ fewer workers and collect and transport more waste per vehicle. South and West Asia The different histories of colonial administrations, differences in city and town size and status, and the lack of national standards have resulted in a great variety in financial arrangements for MSWM in South and West Asia. There are also variations within cities, where services and payment methods differ. In general, most urban administrations do not have adequate financial resources to establish and maintain all aspects of sound waste management. They have difficulty raising loans for major improvements in collection, transportation, and disposal. In the Indian subcontinent (excluding Nepal and Bhutan), municipal corporations allocate money for waste management activities. Usually there is no direct funding to urban local bodies from central or state governments for routine operations. In the 1970s the Indian government gave grants to cities over a certain size for the purchase of mechanical compost plants and other infrastructure items. Since then there have been special-purpose grants from time to time; solid waste management is often a component of grants for environmental improvement of urban slums, for instance. Sometimes neighborhoods or corporations contribute voluntarily to local infrastructure in the form of street bins. Cities and towns have to rely upon municipal taxes, mainly property taxes, for the funds to provide services. There is no special tax, but institutions, hotels, and commercial firms may be required to pay for collection, either to the municipality or a private hauler; cooperative housing estates in India charge households special fees since the municipal service does not enter the estates. A widespread problem is the low rate of collection of taxes and special fees. The property tax base for municipal services has had implications for equitable coverage: illegal settlers, such as squatters, are not deemed eligible for collection services in most cities. In many cities, only 50% of the population is registered on the property tax assessments and, of course, some of the taxpayers are delinquent. Taxpayers have resisted suggestions for a direct tax for waste services or an increase in the property taxes. Solid waste management consumes 20% (or much more) of the total municipal funding for services and within this the salaries and wages component is usually over 75% of the annual expenditure on MSWM. Funds for capital investment are inadequate. Cities often have difficulty raising loans for infrastructure needs and must rely on agencies such as the World Bank, or national agencies such as the Housing and Urban Development Corporation in India. A great handicap to financial planning is that most municipalities do not actually know what the various components of MSWM cost them, as financial reporting systems are poorly organized. In addition, the funds needed for operations, maintenance, etc., may come from different categories of the municipal budget and be administered by departments other than that for solid waste. In the central and northern parts of the region there are, in some rare cases, direct fees for MSWM. Capital expenditures are covered by the national ministries (of environment, for instance). Decentralized modes of payment for service have developed in an ad hoc fashion. In a few cities in India, Nepal, and Sri Lanka, a portion of municipal salaries designated for workers in an area is paid by the community directly to the sweepers, an institutionalization of earlier informal arrangements. There are cases where residents have financed construction of communal bins and street sweeping in their neighborhood. An important trend affecting financial and other aspects of solid waste services is privatization, which takes several forms, including contracting out, franchises, and partnership arrangements. In some cases, private arrangements for collection are of long standing, since the authorities have been unable to provide services to peripheral areas, or have not had sufficient vehicles. In Bombay, more than 50% of vehicles for waste transportation are hired from private contractors. In recent years, municipalities have sought to contract out to save expenditure on capital equipment and to improve efficiency. Collection has been privatized in parts of a number of Indian cities, including Delhi, Madras, Ahmedabad, Baroda, Bangalore, and Rajkot. Some cases of de-routing and disposing of waste at illegal sites have been reported. Disposal sites have mostly not been privatized (leaving aside when towns dump their wastes on private land to achieve landfilling), but the City of New Delhi recently invited bids for disposal. In Colombo, private firms will be building a new sanitary landfill. Moves toward privatization may be opposed by labor unions, particularly in the subcontinent, and as a result, solid waste departments have not been able to reduce the current workforce after privatizing. International aid from multilateral and bilateral agencies has been important for most of the large cities throughout the region. Such aid has covered infrastructure development, equipment, and training, but has not usually supported community-based approaches or traditions of waste reduction. Decentralization from central and regional governments is forcing local governments to restructure their funding systems. Municipal managers are discussing the introduction of fees, decentralized modes of payments, and higher specific charges (where they already exist). In poorer countries, the poverty of many residents will make it difficult to achieve full cost recovery for adequate MSWM in the near future, but the demonstrated willingness of people to pay for a cleaner neighborhood is an encouragement to reform of administrative and financial arrangements.
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