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Improving Rural Public Services and Balancing Rural-Urban DevelopmentChi Fulin,25 March 20061. As we are creating new socialist countryside across the country, this symposium is timely and much needed. Our theme for the next two days is “Rural Governance and Township Government Reform”, based on which we will discuss Chinas practicalities and international experiences, rural public service and governance, and township government reform. To ensure that realities are addressed, two special seminars have been planned. The first is on farmers expectations and grassroots practices, where rural grassroots leaders shall voice their views and suggestions. The second is on institutional innovation, where local and overseas experts will discuss pertinent issues and offer insights. 2. China is en route to achieving complete xiaokang or a society of modest means. Both development and reform have entered a new phase where new approaches are required. So, what is “new” in the rural development programme? It is new because from now on, industry will subsidise agriculture, and cities will support rural development a new phase, with a new focus. The programme will try to correct the urban and rural system duality, and bridge gaps, allowing rural residents to share the benefits of reform and growth. 3. For balanced development, the key is to reform the rural institutions. In the next years, priorities of rural reform are to protect farmers land use rights with new laws, establish a public service system, and improve public governance. Thus, based on todays theme, I would like to propose three aspects for discussion:I.Expand Public Service in Rural Areas; Narrow Growing Urban-rural Gap.4. Socio-economic changes are at a critical juncture, and narrowing income gaps is of overriding importance. This widening gap is attributed to many complexities, the crux being inadequate public services and their inequitable distribution. Education and medical expenses grew faster than disposable incomes of low and medium income families. A questionnaire survey conducted recently showed that 82% of the experts surveyed found public goods in China are inadequate and unevenly distributed. Some estimated that about 20% of the wealth gap is attributable to education. Thus, while we combat corruption, we should provide public services as a means to mitigate income gaps.5. Rural-urban gaps lie not only in economic development and income distribution, but also in primary health care, compulsory education and basic living security. In 2004, nominal urban-to-rural income gap was 3.2:1. Considering the above factors, the real value would be 5 or 6: 1. Based on this analysis, public service deficiency accounts for 30-40% of the income gap, a percentage close to that of Latin American countries. A recent UN survey on Chile showed that 40% of poverty reduction is accredited to social policies.6. The gaps, whether in nominal or real terms, point to the importance of public services. Gap narrowing is not about economic sizes. Rather, it is about public services and living standards. Hence, providing basic and secured public services to farmers will effectively narrow gaps, paving for a market-driven integrated growth. Recently, the central government decided to expand fiscal coverage and improve services in rural areas. Additional funding for education, public health, culture, and capital construction will target mostly at rural areas; likewise, income from government land leases.7. Where should state resources be channelled? Some argue for investments in infrastructure. But my opinion is that recent infrastructural investments have been excessive. Infrastructure in some areas more than meets the needs of socio-economic development, and resources are often wasted. Rural infrastructure is generally underdeveloped; thus, moderate investment is necessary. But the real needs lie with basic public goods; in other words, we need higher state spending on rural public services and social development to effectively address the rural problems.II. Expedite Building of a Rural Public Service System to Correct Urban-Rural System Duality. 8. Against the current backdrop, a public service system is needed to resolve the many tensions: that of rapid economic growth vis-vis balanced development and resources; and that of rapidly increasing demand for public goods and services vis-vis their supply. The former may be addressed with sustainable development and an improved market economy; the latter requires a public service system. This will enable us to achieve balanced socio-economic development and wider social support for the reform. Correcting the duality is imperative in gap reduction. During the 10th five-year-plan, the dual tax systems for rural and urban areas were merged - a historic move. Hence, during the 11th five-year-plan, substantial inroads into a uniform public service system will help achieve our objectives.9. How important is a new public service system in correcting system duality? Public service imbalances and the absence of a rural public service system are major impediments to balanced development, and the cause of urban-rural segregation. Discrimination against rural migrant workers and rigidity in the residence registration system are exacerbating factors, which are unfair and unjust, and have provoked many social conflicts. A direct result of such duality is migrants being passed off in urban public services; their social security, employment, compulsory education and healthcare largely neglected. This goes to show that early establishment of a rural public service system based on which a uniform public service system be built is the prerequisite to removing discrimination and the residence registration system. In other words, balanced development must stem from one uniform public service system. 10. During the 11th five-year programme, we must make breakthroughs in unifying the public service systems. We will create: first, a uniform compulsory education system; second, a rural cooperative medical system; third, a rural basic living security system; fourth, a pension system meeting rural needs. The central government has decided to include rural compulsory education in the fiscal budget, and will establish machineries to share funding responsibilities with local governments. From 2006, healthcare subsidies for rural residents will be increased, to improve healthcare during the 11th five-year-plan. From this, we will progressively establish a uniform public service system. This will, to a large extent, relieve social pressure in rural areas. III.Improve Rural Public Governance by Establishing a Public Service System 11. During the 11th five-year-plan, to resolve the two growing tensions, the government should: first, continue the market-oriented reform and transform the government-led growth into market-led growth; second, be the driver and main provider of public services. Thus, changing the governments role is critical and necessary a change that is also a key reform component. 12. The new rural development program is also an opportunity for the government to learn new concepts and methods of rural governance. The rapidly increasing demand and serious shortage of supply of public services pose major rural governance problems. However, local governments, especially township governments, lack functional capabilities; and they fail to comprehend the central governments call for intensifying and expanding public services. Therefore, building a new public service system shall be the key component in the township government reform. 13. To do so, we must proceed from various fronts: First, the central and local governments to divide public service responsibilities; that is, based on the needs for public services, redefine their functional scopes. At the same time, set in motion a bottom-up accountability system, whereby lower levels of governments are accountable for public service provision, and implement a new “province-directly-governs-county” administrative system to improve rural public services. Second, establish comprehensive public service systems. Issues of immediate importance are: 1) Establish effective public servicing and social development programs and mechanisms via township government reform2)Expand the scope of public spending in rural areas via expedited fiscal system reform of counties and townships; 3) County and township governments to strengthen public services in rural areas by establishing rural education, public health care and social security systems; 4) Focus on protecting farmers land use rights by establishing property protection laws and a lobbying mechanism, 14. We are at a crucial point. In the next years, more deep-rooted and complex conflicts and problems will surface. It is the sense of history that gives us confidence and determination to reform, and to obtain substantial breakthroughs, from which we find consensus and redouble our e

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