Urban Development, Private Investment and Regulation: A Holistic Approach

1. United Nations – UN-Habitat – Urban Development and the Law Urban development, private investment and regulation 14 March 2014

2. Urban development, private investment and regulation • Overarching themes • Context • Significance • Linkages • Practicalities • Challenges • Example – Iraq • A way forward • Policy concerns • Priorities

3. Overarching themes • Look through prism of deliverability from an investor’s viewpoint • Vision • Due diligence • Holistic project planning • Holistic project management • Law as a hygiene factor and facilitator • Not about creating legal systems

4. Context • Urban development does not pay for itself • It is rare for urban development to be paid for by public funds alone • Even if paid for by sovereign funds external private sector finance will usually be needed • In any event the private sector may well be needed as occupiers or operators • Especially where mobile, international institutional private sector interests are to be attracted, private sector drivers, sensitivities and expectations must be addressed

5. Significance • If investors will not invest, things will not happen, or cannot happen beyond funding based on sovereign wealth running out • So for urban development to be economically sustainable in the long term, it is essential to create the right environment for investment

6. Linkages • Close links between urban development, private investment, law and regulation • Regulation is at the heart of creating and conserving and enhancing investor willingness and investor values • Regulation can take many forms: restrictions on rights to develop and build; creation of state sanctioned monopolies for providers of public utilities and services; limitations on rights to use services to permit holders • Regulation, applied rightly, can therefore be both a driver of and a catalyst for investment in urban development • Regulation and the rule of law go hand in hand – regulation without even-handed, proportionate enforcement is meaningless

7. Practicalities (1) • Forms of private sector investment: • Collaboration with public sector to introduce innovation and best practice as well as capital • Public procurement of specific assets/ public goods • Confidence to invest in wider urban space • Investor expectations: • Political and applicable law stability for duration of investment • Property rights clearly identifiable, transferable recognised and enforceable • Contract rights recognised and enforceable against counterparty • Ability to repatriate returns

8. Practicalities (2) Promoting investor confidence: • Effective legislation supported by proportionate, transparent regulatory, licensing and enforcement regimes • Credible urbanisation strategies and objectives which are supported by credible budget strategies and programme for delivery • Robust strategic planning and civic governance procedures are necessary pivot points for investor engagement and delivery • Democratic legitimacy - Key stakeholder support and engagement critical

9. Practicalities (3) Requirement for an holistic approach: • legislative and regulatory processes - underlying and anticipated • development of policy and strategy • implementation by public stakeholders • Due diligence, anticipation and project management are inter-related and critical

10. Challenges • Foresight • Focussing on delivery • Proportionality versus perfectionism • Legal Clarity versus legal straightjacket – need for frameworks first • The squeezed balloon problem • One size doesn’t fit all • Portability of concepts • Clarity of vision comes first. Quality of governance, machinery of regulation and project management are every bit as important as quality and clarity of legislation and policy

11. Example - Iraq • Direct investment into land based urban infrastructure and housing development (65,000 units) • High level issues encountered symptomatic of those more generally encountered

12. Iraq – High level issues (1) • Counterparty risk – lack of legal representative status and enforceable substance of National Investment Commission and inability to bind/ commit all relevant permitting authorities • Lack of clarity on enforceability – Riyadh/ ICC convention • NIC/ One Stop Shop concept not work • Political risk

13. Iraq – High Level Issues (2) • Lack of clarity on landownership rights: rights in rem and musataha – inability to grant security or subdivide and lack of efficient and certain land registration capability • External infrastructure interfaces – lack of certainty will be delivered/ sufficient capacity/ risk of interruption • Inability to sub-grant rights to third party developers • Repatriation of profits and inability to pass FDI incentives to third party developers and supply chain

14. Iraq conclusions Challenges: • Levels of expertise/ desire to address investor expectations • Flexibility - positions adopted in contractual negotiations • Legislative structure and wider regulations • Underlying financial models to be developed in greater detail • Confidence in public stakeholders/ procuring authorities

15. A way forward • Economically Sustainable urbanism • Creation of investor confidence • Long term strategic plan • Project planning • Project management

16. Policy Concerns • Law for law’s sake and regulation for regulation’s sake are counter-productive • Vision, strategic planning, law, regulation and policy sit side by side • How to energise delivery at local level without being bogged down by national political debate? • How to avoid over-prescription • How to balance

17. Priorities • Focus on and work back from a selection of real life priority projects • Develop some real world template frameworks, recognising that one size doesn’t fit all • Recognising local granularity • Recognise the inherent linkage between regulation, investment and urban development and use that recognition to frame plans of action • Identify examples of workable best practice • Engage with the investor community early when planning and developing

18. THANK YOU

19. Tim Pugh and Mukhtiar Tanda 14 March 2014 This document provides a general summary only and is not intended to be comprehensive. Specific legal advice should always be sought in relation to the particular facts of a given situation.