In fact, making embryonic democracies work and using decentralization to improve the quality of services requires a hierarchy of institutions. For instance, electoral rules determine the nature of local representation at the national level and the distribution of power between the executive and other branches. Similarly, local election rules can be designed to increase voter participation and even out representation across social and income groups. Fiscal rules can buttress political autonomy by assigning revenue bases and responsibilities and prescribing revenue-sharing arrangements between the center and the localities. Institutional development is also urgently needed to make cities livable as well as economically competitive.
Rules governing land use, housing, and investment in urban infrastructure are critical.
Although the public sector is likely to remain the most important player in urban planning and delivery of basic services, throughout the world partnerships between the public sector, NGOs, and private entities have become an important source of capital, skills, management, and initiative. Public-private partnerships rely upon a framework of formal and tacit rules that create the environment for enduring business relationships. All change courts risk. The East Asian crisis was a stark reminder of the downside of globalization, while Brazil's state-induced fiscal crises demonstrate the risk of localization. But, at the same time, the forces of globalization and localization are providing much of the stimulus for development.