municipal bonds are one of the financial instruments that provide required sources of municipalities for urban projects. Using this instrument dates back to the previous decades. Recently, municipal bonds have been used as participation papers in some cities by reforming the law of Iran business. Financing urban projects by selling municipal bonds in stock market and the amount of citizens’ acceptance of issuing such bonds are the title that we are going to discuss about it with Seyyed Mohsen Mozdabadi, the secretary of IUESA. Following is the full text:

Is it possible for municipalities to finance urban projects via stock market?

One of the important points in urban issues and projects is moving and directing the city toward sustainable development. In fact, when the issue of sustainable development was proposed as a core of development in 1980s and 1990s, it penetrated into all economic aspects and leaded to appear different types of concepts associated with sustainable development. One of the sub-concepts of sustainable development was the concept of urban sustainable development appeared as a result of sustainable development plan at a city level. Different instances of sustainable development contexts entitled urban sustainable development projects have been introduced which they listed below:

Development and improvement of urban infrastructures including transport, water and energy

Cultural heritage and places for uses in line with sustainable development

Urban health sites and removing environmental pollutions

Creating new commercial and economic infrastructures for average companies, ICT sectors and urban research and development sectors

Specialized educational and health care buildings

Energy efficiency and renewable energy in buildings

One of the important issues in urban sustainable development is urban sustainable revenue. The main purpose of this method is creating suitable revenue by presenting services in every field of urban development. It has been referred to some fundamental issues in the definition of urban sustainable development. Each of revenue resources, that have one of these features, is considered as sustainable revenue:

Continuity: revenue resource is continual and not to be fluctuated seriously at least in a short-term.

Desirability: earning money leaded to improve justice

Flexibility: suitable revenue base enlarged and covered with expenses

Sustainable revenues are not achieved in Iran due to lack of suitable regulatory and technical infrastructures, high expense, unwillingness of urban managers in applying modern technologies and issues like it.

It should be noted that private sector has showed its willingness in participating in urban projects in case of creating investment attractiveness. For example, during 1990 to 2011 the private sector had invested in developing countries more than 755 billion dollars in more than 2500 mainly urban projects.

Do other countries use such instrument to finance urban projects?

Studies in other countries have shown that both methods of financing urban projects are used, both based on debt and based on capital. For example an instrument like SOKUK has absorbed more than 125 billion dollars at international level in 2014. It is predicted this amount will reach to 150 to 175 billion dollars in 2015. Different countries use this instrument; even non-Islamic governments like England, the U.S., Japan and even the World Bank.

Investment risk, providing infrastructures of private sector participation and encouraging citizens to welcome urban investment should be considered in financing method of projects as important points.

Source : The monthly Journal of Bourse