Transcript Document 7441432

The Twenty First Century
Asia Becomes Urban
RAKESH MOHAN
DEPUTY GOVERNOR
RESERVE BANK OF INDIA
Presentation at the Urban Symposium
The World Bank, Washington, December 2003
Contents

Urbanization : A Recent Phenomenon

Asia Becomes Urban

We Have Coped Well

Asian Urbanization : The New
Challenges

Elements of a New Approach
Contents

Urbanization : A Recent Phenomenon

Asia Becomes Urban

We Have Coped Well

Asian Urbanization : The New
Challenges

Elements of a New Approach
Urbanization : A Recent Phenomenon (1)
Urban Population Growth across the Globe
Africa
Asia
Latin America & Caribbean
Oceania
Europe
North America
Global Total
Increase
Source : UN, 2002
in Millions % of total in Millions % of total in Millions % of total in Millions % of total
1900
1950
2000
2030
32
14.7
295
37.2
787
52.9
244
17.4
1376
37.5
2679
54.1
70
41.9
391
75.4
608
84.0
8
61.6
23
74.1
32
77.3
287
52.4
534
73.4
540
80.5
110
63.9
243
77.4
335
84.5
~250
~15
751
29.8
2862
47.2
4981
60.2
501
14.8
2111
17.4
2119
13.0
Urbanization : A Recent Phenomenon (2)
Urbanization has a positive link with
Economic Development
Source : Mario Polese, Pamela Echeverria and Mila Freire, 2002
Urbanization : A Recent Phenomenon (3)
India’s economic growth has been led by urban areas
 India has become increasingly urban


1981: 23 per cent
2001: 29 per cent
 Economic growth led by urban areas : industrial and
service sectors accounted for


1981 : 62 % of GDP
2001: > 75% of GDP
 More urbanized states recorded high growth rates



Tamil Nadu
Maharashtra
Karnataka
 At the local level, larger cities in faster growing states
have grown rapidly



Chennai (services)
Ludhiana (industries)
Mumbai, Bangalore (industries cum services)
Urbanization : A Recent Phenomenon (4)
Global Urban population will be mainly from
Developing countries
Source : UN, 2002
Urbanization : A Recent Phenomenon (5)
Center of Urban population moving South
Source : UN, 2002
No of Cities – 198
Mean Latitude - 34
Urbanization : A Recent Phenomenon (6)
Emergence of Mega Cities
In 1950, only one city with a population of over 10 million
In 2015, 21 cities expected to reach 10 million population
Source : UN, 2002
Note: Urban agglomerations with > than 1 mn population
Urbanization : A Recent Phenomenon (7)
Emergence of Mega Cities
Population of Cities with 10 million or more inhabitants
1950
1 New York
Source : UN, 2002
12.3
1975
1
2
3
4
5
Tokyo
New York
Shanghai
Mexico
Sao Paulo
19.8
15.9
11.4
10.7
10.3
2000
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Tokyo
Sao Paulo
Mexico City
New York
Mumbai
Los Angeles
Kolkata
Dhaka
Delhi
Shanghai
Buenos Aires
Jakarta
Osaka
Beijing
Rio de Janerio
Karachi
Metro Manila
25.2
18.3
18.3
16.8
16.5
13.3
13.3
13.2
13.0
12.8
12.1
11.4
11.0
10.8
10.8
10.4
10.1
2015
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Tokyo
Dhaka
Mumbai
Sao Paolo
Delhi
Mexico City
New York
Jakarta
Kolkata
Karachi
Lagos
Laos Angeles
Shanghai
Buenos Aires
Metro Manila
Beijing
Rio de Janerio
Cairo
Istanlbul
Osaka
Tianjin
27.2
22.8
22.6
21.2
20.9
20.4
17.9
17.3
16.7
16.2
16.0
14.5
13.6
13.2
12.6
11.7
11.5
11.5
11.4
11.0
10.3
Contents

Urbanization : A Recent Phenomenon

Asia Becomes Urban

We Have Coped Well

Asian Urbanization : The New
Challenges

Elements of a New Approach
Asia Becomes Urban (1)
Asia Becomes Urban (2)
Development in Asian
Real Cities
United States
Singapore
China
India
Indonesia
Pakistan
Philippines
Source : World Bank, Databases 2003
Per capita
income $
1991
2002
25725 31977
18566 27254
377
942
321
494
832
1060
459
527
1060
1195
GDP
growth
(%)
1991- 01
3.2
7.9
10.1
5.5
4.1
4.0
2.9
Overall
budget
balance
1991 2001
-4.6
1.3
8.7
5.2
-2.3 ..
-5.5 -4.7
0.4 -1.2
-7.6 -4.7
-2.1 -4.0
Asia Becomes Urban (3)
Development in Asian Cities
1
2
3
4
5
6
7
8
9
10
1950
2000
2030
%
Population
%
Population
%
Population
Country
urban
(mn)
urban
(mn)
urban
(mn)
China
12.5
555 35.8
1275
59.5
1485
India
17.3
357 29.0
1009
40.9
1409
USA
64.2
158 77.2
283
84.5
358
Brazil
36.5
54 81.2
170
90.5
226
Indonesia
12.4
79
41
212
63.7
283
Nigeria
10.1
30 44.1
114
63.6
220
Pakistan
17.5
40 33.1
141
48.9
273
Mexico
42.7
28 74.4
99
81.9
135
Japan
50.3
84 78.8
127
84.8
121
Bangladesh
4.3
42
25
137
44.3
223
Source : UN, 2002
Contents

Urbanization : A Recent Phenomenon

Asia Becomes Urban

We Have Coped Well

Asian Urbanization : The New
Challenges

Elements of a New Approach
We Have Coped Well (1)
Emerging Urban Asia : Opportunity or Chaos?

Urban Chaos?








Deteriorating standards of Basic Services
Expanding Slums
Increasing Poverty
Rising Traffic Congestion
Increasing Pollution
Lack of green spaces
Lack of educational and health facilities, etc
Or Improving Quality of Life?
We Have Coped Well (2)
Water Supply and Sanitation : Improvement in urban services
% of urban population with access to
Improved sanitation
facilities
Improved water
China
India
Indonesia
Philippines
Korea, Rep.
1990
57
44
66
85
2000
68
61
69
93
76
1990
99
88
92
93
2000
94
95
90
91
97
Source : World Bank, Databases 2003
China
India
Philippines
Indonesia
Korea, Rep.
Source : UN, 2002
1960
107
78
8
14
7
Urban population (mn)
1970
1980
1990
145
193
317
110
158
216
21
18
56
12
33
30
13
22
32
2000
457
313
87
44
38
We Have Coped Well (3)
Power and Telecom : Significant improvement in urban services
% of urban population with access to
Telephone mainlines
Electric power consumption
(per 1,000 people)
(k wh per capita)
China
India
Indonesia
Philippines
Korea, Rep.
1980
2
3
2
9
71
2000
112
32
32
40
477
1980
253
130
44
355
859
2000
827
355
384
477
5607
Source : World Bank, Databases 2003
China
India
Philippines
Indonesia
Korea, Rep.
Source : UN, 2002
1960
107
78
8
14
7
Urban population (mn)
1970
1980
1990
145
193
317
110
158
216
21
18
56
12
33
30
13
22
32
2000
457
313
87
44
38
We Have Coped Well (4)
Health Services : Significant improvement in urban services
China
India
Philippines
Korea, Rep.
Hospital beds (per 1000 people)
1970
1980
1990
..
2.0
2.3
0.6
0.8
..
1.2
1.7
1.4
..
1.7
3.1
Source : World Bank, Databases 2003
China
India
Philippines
Indonesia
Korea, Rep.
Source : UN, 2002
1960
107
78
8
14
7
Urban population (mn)
1970
1980
1990
145
193
317
110
158
216
21
18
56
12
33
30
13
22
32
2000
457
313
87
44
38
2000
2.4
0.9
..
6.1
We Have Coped Well (5)
Urban Poverty : Rapid progress in reduction in India
Urban in (%)
1993-94 1999-2000
Andhra Pradesh
17.8
10.8
Karnataka
21.4
10.8
Kerala
13.9
9.6
Maharastra
18.2
12.0
Tamil Nadu
20.8
11.3
All - India
17.8
12.0
Source : Deaton and Drèze, 2002
China
India
Philippines
Indonesia
Korea, Rep.
Source : UN, 2002
1960
107
78
8
14
7
Urban population (mn)
1970
1980
1990
145
193
317
110
158
216
21
18
56
12
33
30
13
22
32
2000
457
313
87
44
38
We Have Coped Well (5)
Urban Poverty : Rapid progress in reduction
Country
China
India
Bangladesh
Indonesia
Philippines
Year (% population
1990 (38) 1992 (33.7)
1990 (56) 1992 (23.3)
1994 (28)
below poverty line)
1996 (<2) 1998 (<2)
1994 (30.5) 2002 (12)
1996 (14.3)
1996 (9.7) 1998 (17.8)
1997 (22.5)
Human Development Report 1996, World Development Report 2001 and Independent Study
China
India
Philippines
Indonesia
Korea, Rep.
Source : UN, 2002
1960
107
78
8
14
7
Urban population (mn)
1970
1980
1990
145
193
317
110
158
216
21
18
56
12
33
30
13
22
32
2000
457
313
87
44
38
Contents

Urbanization : A Recent Phenomenon

Asia Becomes Urban

We Have Coped Well

Asian Urbanization : The New
Challenges

Elements of a New Approach
Asian Urbanization :
The New Challenges (1)
Infrastructure can't match boom in Bangalore
By S. Srinivasan
THE ASSOCIATED PRESS
Premji threatens protest for
better infrastructure
July 18, 2003 18:52 IST
Asian Urbanization :
The New Challenges (2)
Efficient Infrastructure is Essential for a
Competitive City
A survey of 165 firms in 5 cities showed:
Source : Mario Polese, Pamela Echeverria and Mila Freire, 2002
Asian Urbanization :
The New Challenges (3)
What is distinctive about the future?

India, China, Indonesia (with over 2 billion people) urbanizing
and industrializing simultaneously

Between 1990 and 2030, these countries, will go from 25-30%
levels of urbanization level to about 50-60%

Meanwhile other cities and countries will also be going ahead

Unprecedented demand for financial resources for power,
telecommunication
systems,
water
supply,
sanitation,
drainage, solid waste disposal, roads, housing and urban
amenities

Lumpy investments : upfront, while returns flow over long
time period

Mega City Management
Asian Urbanization :
The New Challenges (4)
1950
2000
2030
Urban
Urban
Urban
%
Population
%
Population
%
Population
Country
urban
(mn)
urban
(mn)
urban
(mn)
China
12.5
69 35.8
456
59.5
883
India
17.3
62 27.7
279
40.9
575
Indonesia
12.4
10
41
87
63.7
180
Pakistan
17.5
7 33.1
47
48.9
133
Japan
50.3
42 78.8
100
84.8
102
Bangladesh
4.3
2
25
34
44.3
98
Asia Total
17.1
230 34.9
1253
52.5
2440
Increase
17.8
1023
17.6
1187
Source : UN, 2002
Urban Population growth for the period 2000-2030 will be
greater than that witnessed in the last 50 years
Asian Urbanization :
The New Challenges (5)

Urban Infrastructure
Upgrading Infrastructure is the key challenge to
unlocking the economic potential of urban areas

The dimensions of this problem are huge:



3 million residents in Dhaka lack clean water
75% of the urban population in Delhi live in
unauthorized, unplanned settlements
Manila produces more than 6500 tons of solid waste
when its landfills can barely manage half of that

Given the budget constraints, these are immense
challenges but surmountable.

A NEW WAY of thinking is required
Contents

Urbanization : A Recent Phenomenon

Asia Becomes Urban

We Have Coped Well

Asian Urbanization : The New
Challenges

Elements of a New Approach
Asian Urbanization :
The New Challenges (6)
Three main levels:

Conducive Macro Economic Policies

Focus on City Management

Financial Development for Urban
Infrastructure
Elements of a New Approach (1)
Conducive Macro Economic Policies
 Fiscal policy
 Public investment in key infrastructure
 Malaysia, Coastal China
 India
Source : World Bank WP 5, 2003
400
300
200
100
0
East Asia and
Pacific
Europe and Latin America
Central Asia
and the
Caribbean
Middle East
and North
Africa
South Asia
Sub-Saharan
Africa
Investment in Infrastructure Projects with Private Participation by
Region, 1991-2001, $ Billion.
Elements of a New Approach (2)
Conducive Macro Economic Policies
 Fiscal policy
Tax policy

Widening of tax bases

User charges
Policy of fiscal transfers –
decentralization of powers and finances
Elements of a New Approach (3)
Conducive Macro Economic Policies
 External policy
Trade policy:

Openness - lower transaction costs

Price equalization
Investment policy:

Relative roles of public and private
(domestic and foreign) sectors
Elements of a New Approach (4)
Changing paradigm of planning

Cities no more connected only to their
hinterland; connected to cities and regions
globally



Clusters initially organically formed however
need to be strongly supported



Bangalore – linked more to the US than Hubli-Dharwad
Pearl River Delta – produces more than 40% of world
light fixtures
Mumbai – Nasik – Pune Corridor
Government investment into Chinas SEZs
Local and national governments need to
proactively help create linkages
Elements of a New Approach (5)
Conducive Social Sector Policy
 Developing human capital, R&D is key to ensure
supply of able skilled workers key to sustain
competitive edge
Carl Dahlman, Jean Eric Aubert, 2001
Elements of a New Approach (6)
City level initiative vital in Social Sector
 Cities need to acknowledge relevance of High
Quality Human Capital and invest in
• Schooling
• Higher Education
• Skills Training
• Research and Development
Into emerging industries/services which are in demand
and add value to the city economy
Elements of a New Approach (6)
Focus on City Management


New York Budget > US 40 $ Billion

Only 2 state budgets are larger

Less than 15 countries have larger budgets

Microsoft and Dell revenues at 20 billion $
Brihan Mumbai Municipal Corporation Budget
> US 1.2 $ Billion

Larger than 9 Indian States

2 times the revenue of India’s most respected Companies
• WIPRO
• INFOSYS Technologies
Elements of a New Approach (7)
Focus on City Management

Local governments are typically weak and lacking in prestige
Elements of a New Approach (8)
Focus on City Management
Source : UNCHS, 2001
Revenue raised by local governmnets
Countries/Regions
Per Capita revenue
per year in $
Developed Countries
2906
Latin America
87
Africa
15
Asia
153

Increase prestige of mayors and legislators

Professionalise staff, improve salary structures
 National governments are too distracted : but need to
realise that cities and esp. the Megacities are the major
“Engines of Economic Growth”
Elements of a New Approach (9)
Focus on City Management

First Task is Two Fold :

Reduce Burden on Local Government

Strengthen Local Government

Limit Financial Role of Local Government to provision of
public goods

Strategic planning not master planning

Decentralise all services which can be paid for

Public or private sector providers

Competition where possible

Forge Links between financing and returns:
Accountability

Increase public participation in design and management
of local delivery
Elements of a New Approach (10)
Focus on City Management

The decades of the 1950s, 1960s and 1970s
was focused on centralized Urban Planning,
economic planning

Since the late 1970s, saw the growth of open
trade / globalization/open markets

Formation of major urban groups (together
capturing more than 85% of China’s FDI)



The Yangzi River Delta with Shangai as the centre
The Pearl River Delta with Guangzhou, Shenzhen and
Hong Kong as key players
The Shandong Peninsular with Quigdao, Yantai and
Jinan
Elements of a New Approach (11)
Financial Development for Urbanization
 Making Local Governments Credit Worthy

Make property taxes more buoyant

Make subventions from higher levels less discretionary

Decentralize more services

Freeing Property markets (ULCRA, DDA and even in
China’s SEZs)
 Making Urban Infrastructure Projects
Commercially viable

There is a need for many borrowers, investors and
intermediaries

Urban infrastructure projects will require credit
enhancement
Elements of a New Approach (12)
Activating capital markets for Urban Infrastructure
 Who are the lenders?
Individuals
 Mutual Funds
 Insurance Funds
 Provident Funds

 What does Government do?
Equity for Project Agencies
 Guarantee Mechanisms
 Funds/Programmes for staff professionalisation
 Sets Benchmarks
 Fuel Bond Markets : Govt. borrowings
 Fiscal incentives
 Regulatory Agencies

Elements of a New Approach (13)
Activating capital markets for Urban Infrastructure


Globalisation of Capital Markets
 Domestic savings will not be enough
 Vital to channel international savings
 Developed countries have aging populations
 They need to get high returns on their savings
 Developing countries can provide these higher returns
How to link rich country savers to Urban Financing ?
 They must have safe vehicles for investment
 Income financing of mature projects can be
securitised
 Government and other Equity Funds can provide initial
funding
 After risks are reduced packaged securities can be
sold internationally
 This would increase financing turnover
What do we do?
 Cost minimization
 Search for low cost technologies
 Make urban investment more demand oriented.
Fashion institutional structures which respond
flexibly to demand
 Reduce upfront investment.
 Unbundle where possible
 User charges as price signals to regulate demand
 Decentralise service provision
 Public goods provisions by city governments
 More citizen participation in urban governance
 Mechanisms for resource generation.
 Expanding capital markets
Conclusions
 We have coped well in the past
 No reason why we cannot do so in the future
 New challenges posed by volume
requirements China, India, Indonesia
of
new
 Local capacities must be strengthened
 Decentralization, commercialization essential
 Capital market development will need new
institutions
 Need for new vehicles to channel international
savings to urban investment in growing cities
Thank You