The U.N.’s urban agency is seeing record demand — even as its funding plummets

UN-Habitat Executive Director Joan Clos walks through Kibera, in Nairobi, in 2011. "Our portfolio is increasing very well and very robustly,” he said this month. “There is an important demand for the services of UN-Habitat.” (Julius Mwelu/UN-Habitat)

NAIROBI — On a computer in the lobby of the United Nations office here, a list of countries recently scrolled down the screen. Next to the virtual parade of nations, columns highlighted their financial contributions to UN-Habitat, the international body’s lead agency on urbanization.

Whether designed to publicly thank generous donors or name and shame the recalcitrant, the effect was clear: This gathering, the biennial meeting of UN-Habitat’s 58-country board that took place in early May, was a major fundraiser.

The funding appeal came at a critical time for UN-Habitat. On the one hand, the agency is facing far greater demand for its services, particularly from developing countries. On the other, its core funding stream has dropped precipitously — indeed, almost drying up completely over the past year.

[See: UN-Habitat facing ‘considerable decline’ in core funding, assessment warns]

Meanwhile, UN-Habitat also is undergoing a significant pivot in the wake of last year’s Habitat III conference. At the summit, held in Quito, Ecuador, national governments adopted the New Urban Agenda, a 20-year urbanization strategy that calls for the agency to serve as “a focal point for sustainable urbanization and human settlements.”

That was far shy of a ringing endorsement that UN-Habitat coordinate global implementation of the New Urban Agenda. Nonetheless, the agency is moving ahead to push governments and others to start acting on the voluntary agreement, which reflects the core of its approach to development.

But will UN-Habitat have enough money in the bank to deliver on that mission?

At this month’s Nairobi meeting, the agency’s board — known as the Governing Council — approved a two-year aspirational budget worth USD 500 million. With just USD 19.4 million coming from the United Nations, donor countries must write checks to cover the rest. But the lion’s share of that figure, some USD 454 million, will be for earmarked projects, from upgrading slums to building houses.

The means just USD 26.1 million will be allocated for general-purpose funds, so-called core contributions. That indicates a roughly 40 percent decline from what’s forecasted in the current budget, where USD 45 million is expected to cover the agency’s overall staff and administrative costs.

[See: UN-Habitat reforms will hold up New Urban Agenda implementation]

The reductions may be a tough pill to swallow, but UN-Habitat’s leadership insists that it will not affect the agency’s overall ability to deliver on the New Urban Agenda. “Although I would prefer [a larger] budget, the member states are the ones who decide,” UN-Habitat Executive Director Joan Clos told Citiscope. “Therefore, we are going to manage whatever they put in our hands in the most professional and productive manner.”

Outside observers, meanwhile, are more skeptical. “Excuse me for saying this, but that’s closing the agency,” said Alioune Badiane, a Senegalese urban development expert and former director of UN-Habitat’s Africa office, in discussions of the proposed core budget. “That’s the amount to finance a single government office in Senegal.”

Expanding portfolio

Even prior to debates about the viability of the new budget figure, however, there was a bigger problem: The old budget number has already become an elusive goal.

“Excuse me for saying this, but that’s closing the agency. That’s the amount to finance a single government office in Senegal.”

Alioune Badiane
Former director of UN-Habitat’s Africa office, in discussions of the proposed core budget

In the past several years, UN-Habitat’s core funding has declined considerably. Norway, for example, has decreased its core funding from a 2008 high of USD 8.3 million to a mere USD 600,000 this past year. The United States, the largest single donor to UN-Habitat, has dropped its core funding from the multimillion-dollar range to a fluctuating total of less than USD 700,000 since 2013.

True, some new donors have entered the fold. Germany ponied up USD 1 million in 2014, for instance, while India offered USD 247,000 last year and China gave USD 350,000 each of the past two years.

Nonetheless, the overall result has been revenue levels far below anticipated. UN-Habitat operates on two-year budgetary cycles, and for the current 2016-17 period, it has received just USD 2.5 million of that USD 45 million budget in non-earmarked contributions directly from national governments. UN-Habitat’s director of operations, Andrew Cox, told Citiscope he believes member states are unlikely to deliver the remainder of non-earmarked contributions to meet the full budget.

[See: 2018 reporting period will prove critical for New Urban Agenda, advocates say]

The backdrop to this sour financial situation is far rosier: The agency’s project funding for work on the ground — designing better refugee camps in Kenya, say, or crafting an urban plan for Belize’s capital — has increased dramatically. Such earmarked funding is at a healthy USD 202 million, up 25 percent from the previous year.

“The good news is that although the unearmarked funds are diminishing, as in the rest of the U. N. programmes, our portfolio is increasing very well and very robustly,” said Clos. “There is an important demand for the services of UN-Habitat.” Clos, who was a key architect of the New Urban Agenda, says this is in part “a recognition of the impact that Habitat III has had worldwide in terms of changing the paradigm of urbanization”.

Still, it’s easy to see the dilemma. For every 10 dollars spent in the field, UN-Habitat needs about a dollar to run its Nairobi office, according to Cox. With its current core contributions, the agency can fund a project budget equivalent to just USD 25 million, an eighth of its current size. “There is an expectation that we deliver on the [agency’s] mandate, but people aren’t paying,” Cox said. “That’s the dynamic that has to change.”

This funding paradox has had an impact on the ground. Even as special projects such as the agency’s signature slum-upgrading programme have received an infusion of cash, keeping staff in-country has been a challenge without core funding. “There is no more presence of UN-Habitat on this continent,” said Badiane, the Senegalese specialist, following the closure of several African country offices in recent years. “Because of lack of resources — not because of lack of interest.”

[See: U. N. increasingly looking to its urban agency on crisis response]

A case in point is Cameroon, where UN-Habitat’s country office closed in 2006. The agency had worked in the West African nation for 25 years on national urban policy, energy-efficient buildings, slum upgrading and more. Further, it’s a country that appears to have come onboard with the agency’s current thinking about the potential positive power of cities.

That worries some local officials. UN-Habitat has a key role to play in responding to the “new challenges of 21st-century urbanization, which now more than ever must serve for a veritable economic transformation of our country,” Housing and Urban Development Minister Jean-Claude Mbwentchou said in a written statement to Citiscope. “Without resources, this mission will be hypothetical.”

Tapping the Global South

So why has funding been cut back at UN-Habitat? Member states, both those with deep pockets and otherwise, have expressed a mix of opinions.

“There is an expectation that we deliver on the [agency’s] mandate, but people aren’t paying. That’s the dynamic that has to change.”

Andrew Cox
Director of Operations, UN-Habitat

One part is global trends. Once-generous Norway, for instance, is facing different political winds at home. “Our taxpayers are increasingly concerned with how their money is spent and expect that we deliver on our promises,” said Victor Ronneberg, Norway’s permanent representative to UN-Habitat.

This is a dynamic that goes well beyond UN-Habitat. While global development aid is at an all-time high, more and more of that funding is coming as earmarked contributions at the expense of core funding, according to the Organization of Economic Cooperation and Development.

[See: Trump budget proposal would result in ‘big impacts for cities’ around the world]

At the same time, there are strong indications that at least part of UN-Habitat’s financial predicament is self-inflicted. “In recent years, UN-Habitat set wildly unrealistic budget expectations,” U. S. head of delegation Katherine Monahan said this month. “Donors will not accept such irresponsible planning going forward.” In this case, “unrealistic” appears to refer to the UN-Habitat leadership’s inability to actually raise the money required by the agency’s initial budget.

Another major donor country’s representative, speaking on the condition of anonymity, fingered the agency’s governance as the main issue. The representative indicated that a move from a 58-member Governing Council to a smaller executive board, which other agencies have adopted, would inspire more donor confidence. The representative also called the agency’s financial situation “specific to UN-Habitat”.

For the Kenyan government, UN-Habitat’s problems start at the top. The country’s permanent representative to UN-Habitat, Anthony Andanje, told Citiscope that his government’s main issue is with Clos and his team, noting concerns over “how the leadership makes decisions.” He explained, “In Kenya’s opinion, they don’t consult member states.”

[See: New details approved on monitoring of New Urban Agenda]

Last year, Kenya made a USD 1 million contribution to the agency. But that was split among in-country earmarked projects and the fund to support preparations for Habitat III — none of it was to be used for the agency’s core operating fund.

Nonetheless, Andanje also indicated that his government was keen to see UN-Habitat’s coffers refilled — and that significant responsibility for this needs to start being taken up by those governments that are particularly keen to use the agency’s services: those in the Global South. He expressed frustration that this had yet to happen.

“We gave some money thinking that our friends on the continent would prompt other people to make their contributions, but it has not,” Andanje said. Last year, African countries gave just USD 181,000 in core contributions according to UN-Habitat’s financial records.

[See: Six months after Habitat III, is the New Urban Agenda gaining political traction?]

Either way, appeals beyond traditional donors are arguably the future of the agency’s financial strategy. According to the Habitat III Secretariat, last year’s Quito summit was the first in U. N. history to receive a higher percentage of donations from Global South countries than from Global North ones. That trend could bode well for the agency going forward, particularly as poorer countries increasingly look to figure out how to use urbanization as a positive tool for development.

But that strategy will need time to take hold. While a fixed contract for a UN-Habitat service is “easy to explain to a minister”, UN-Habitat’s Cox said, convincing those countries to contribute to the agency’s general operating fund requires more coaxing. “We’re hoping once they get used to contracting us directly, then they also see the logic in increasing core contributions.”

India, for one, made a verbal pledge to increase its voluntary contribution in an interview with Citiscope, following this month’s election of Housing Minister M. Venkaiah Naidu as president of the UN-Habitat Governing Council, although he did not provide a specific figure.

Reform, reform

At the same time, any strategy that puts greater weight on developing nations to support UN-Habitat does not preclude the usual suspects. “Traditional donors will continue to play an extremely important role,” Cox said. “This is how we can provide services to least-developed countries.”

“Last year’s Habitat III summit was the first in U. N. history to receive a higher percentage of donations from Global South countries than from Global North ones. That trend could bode well for the agency going forward.”

And despite approving the recent budget, member states do not appear to be in lockstep about the agency’s financial future. What they are clear on is that they are all looking keenly at what “reforms” will be undertaken.

Kenya offered a cautious endorsement, for instance, pending those broader changes. “[Member states] are not going to put any more money into this institution until [the agency] is restructured,” Andanje said. “That has been made clear by many of the delegations, especially the donors. Germany is very clear on it.”

[See: Panel’s formation marks turning point in confusion over New Urban Agenda monitoring]

The United States, which pushed hard for tamping down on the UN-Habitat expenditures, expressed contentment with the outcome of the budget talks. “This is certainly more realistic than in previous years,” Permanent Representative Lori Peterson Dando told Citiscope via e-mail. “The United States hopes that if UN-Habitat continues down a reform track and implements reforms in a meaningful way, it will be able to better demonstrate its value to other member states and elicit additional member state contributions, including from non-traditional donor states and the private sector.”

(Peterson Dando said that as a rule, the U. S. does not comment on future funding prospects, but the recently announced budget proposal from U. S. President Donald Trump envisions a sharp drawback on funding to the United Nations.)

These reforms are twofold. First, UN-Habitat is currently undergoing an evaluation by an eight-member panel at the behest of U. N. secretary-general. This assessment, due out next month, is likely to recommend changes to how the agency is governed by member states, its management structure and its work on the ground.

For now, then, countries are in a wait-and-see mode about what form such a restructuring might take. Many donor nations would prefer a leaner agency more akin to a think tank. But developing countries would prefer to see boots on the ground. Ultimately it will be up to the U. N. General Assembly to make that decision, expected by the end of the year.

[See: UN-Cities? Rumoured proposal gains steam]

Second, Clos’s term is set to expire at the end of this year. While he may received a short extension into 2018, his two-term mandate is nonetheless coming to an end. Several government officials have indicated to Citiscope that what they have described as his undiplomatic style has not endeared himself to member states and may in part be responsible for the decline in donations.

“Joan Clos has very good ideas, but he’s hot-headed,” said Badiane. “The financial crisis the agency finds itself in is because he doesn’t listen, even to donors. He doesn’t know how to look for money.” New leadership could spur newfound confidence in the agency, prompting more funding.

But even the prospect of significant changes within the next year, by which time the new budget comes into effect, are not reigniting interest among those who feel spurned. The aforementioned donor country that preferred to remain anonymous told Citiscope via e-mail: “We don’t believe it is a realistic budget, considering the funding trends [in] recent years. It is hard to say right now if we will come back as a donor of core support in the future.” The government of Norway, meanwhile, declined to comment.

Looking at the new figures, however, Cox countered that core funding represents just 6 percent of the overall budget, a relatively small amount that should not be hard for member states to come up with. That amount is necessary to both keep up with UN-Habitat’s basic operations and deliver on the New Urban Agenda. “You can’t have one without the other,” he said.

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Gregory Scruggs is a senior correspondent for Citiscope. Full bio

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