UR Seoul, 29 June 2011

Image source: NASA

Urbanization ReviewPrioritizing Policies For Urbanization

World Bank, Finance Economics and Urban DepartmentState Secretariat for Economic Affairs, Switzerland

Cities AllianceKorea Research Institute for Human Settlements

Image source: NASA

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Outline

• Framework

• Diagnostics

• URs in action

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FRAMEWORK

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A paradigm shift in considering urbanization policies

From targeted interventions to economic and social integration

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Policy challenges become more complex as urbanization proceeds

Accra

Kolkata

Sao Paulo

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Consider Accra – Ghana’s primate city .. Where economic shadow of Accra is dominated by small towns and rural areas

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Peak PPP$ 607,000/ sq km; G Econ Database, Yale Univ

Institutions for land registration have been set up, but land transactions are still constrained

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Disconnect between poor people and basic services

Source: UR team estimates using ‘poverty mapping’ methodology; GLSS4

Institutional priorities of fluid land markets to encourage economic concentration along with improving basic services everywhere

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Now consider Kolkata .. One of India’s largest metropolitan areas

• Kolkata’s spills over municipal borders and is surrounded by smaller cities, towns and rural areas

• Institutional rigidities in land use conversion

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Most poor people are still in rural areas, with limited access to basic services

• Most poor people are still in rural areas, with limited basic services

Rural XS S M L XL0%

10%

20%

30%

40%

50%

60%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Water within premises (%) Total number of poor ('000)

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Transport connectivity can help integrate product markets

• Manufacturing is suburbanizing outside the core metro area

• But transport costs are particularly high between metropolitan core and periphery Source: Economic Census 1998

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High metropolitan transport costs reducing economic integration potential

• Freight rates for short distance (less than 100km) transport is on average as high as Rs. 5.2 per ton km (US$ 0.12) between large cities and their immediate hinterland

• Use of old trucks + high rates of empty backhauls

Survey along 45 Routes

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Sao Paulo’s landscape is dominated by dense urban settlements

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Prosperity and Poverty are concentrated in large cities and the metro area

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Sao Paulo has put in place the core institutions and connective infrastructure for successful urbanization

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Basic service delivery

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Remedial interventions now needed to improve livability and integrate slums with

formal settlements• Sub-standard living

conditions– Poor service delivery – Hazard vulnerability– Crime and violence

• How to integrate slums with the rest of the city?– Land markets and housing

services– Urban transport– Targeted interventions

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Sequencing soft and hard structures

• Soft structures – when considerable uncertainty on whether a place will take off– Focus on preparing for potential urbanization– Information, property rights , land markets, health, education, water,

sanitation

• Hard structures – often justified in rapidly urbanizing places – attracting skilled workers and private investment– where land is scarce– fiscal capacity is sufficient

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Framework for sequencing policies and investments

Recognize the most important market forces; Release constraints on the key factor markets

Institutions Infrastructure(public and private sectors)

Interventions(Correcting government failures and managing market failures)

Early

Intermediate

Advanced

Connective infrastructure– hard structures

Enable private markets, provide social services – soft structures

Compensating and countervailing interventions

Accra

Kolkata

Sao Paulo

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DIAGNOSTICS

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Compiling and analyzing credible data

Create a common data platform for analytic work –

• High level of spatial detail

• Spatial trends of people and economic activity

• City-level data on economic, social, environmental indicators

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System of indicators

• Salient– distill key insights from influential analytic work

• New Economic Geography• Urban Economics • World Bank’s operational experience

– Helps in identifying tradeoffs

• Standardized– measured in a consistent manner to facilitate comparison across

places and over time

• Simple– easy to communicate

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Roles of Indicators

• provide preliminary assessment or "quick-tracking" at a lower cost than in-depth analyses

• not substitutes for a comprehensive assessment where fundamental issues and trade-offs must be evaluated

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Diagnostic focus • Common Institutions – Fluid land markets: economic concentration– Basic services: convergence of social indicators

• Connective Infrastructure – Extra urban: product market integration– Intra urban: labor market integration

• Targeted Interventions– Remedial: identify government failures visible in

slum formation– Social: identify market failures such as emissions and

unsustainable urban form

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Consider urban land markets

• Urban Form and Efficiency

– Residential prices in CBD vs the urban fringe– Average commercial prices/ sq meter– Density Regulation (height restrictions, set backs,

minimum lot size)– Geographic Constraints (water, mountains, steep

slopes)

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Consider institutions governing use of land : Office rents reflect a city’s attractiveness

• Office rents – What

businesses are willing to pay for being in a city

Ahmedabad

Chennai

Hyderabad

Kolkata

Pune

Bangalore

Mumbai

Delhi

0 200 400 600 800 1000 1200 1400

Office Rent ($/m sq)

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Excessively high rents could signal market distortions

• Delhi – 80 percent of Tokyo’s

office rents; 10 percent of income (India)

• Mumbai– 124 percent of

Singapore’s office rents; 12 percent of income

• Bangalore– 75 percent of New York’s

office rents; 8 percent of income

• Supply constraints?– e.g. FAR and other

property development constraints

Ahmedabad

Chennai

Hyderabad

Kolkata

Pune

Bangalore

New York

Seoul

Singapore

Mumbai

Paris

Delhi

Tokyo

0 200 400 600 800 1000 1200 1400 1600 1800

0 5000 10000 15000 20000 25000 30000 35000 40000

National income per capita ($ ppp 2003) Rent ($/m sq)

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Hints that land market distortions are reducing efficiency and welfare

Source: Bertaud and Brueckner (2004)

Tota

l Pop

ulati

onDistance from City Center

A Simulation for Bangalore

HYDER

ABAD

BANGALORE

BOMBAYPUNE

CALCUTT

ADelh

i

AHMADABAD

NEW Yo

rk0

2

4

6

8

10

12

14

16

India -- Maximum FAR

Non-Residential

Residential

FAR

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Now consider connective infrastructure• Scale of Interaction– volume (tone/pax-km, by mode)

• Cost of Interaction – average freight transport costs (per tone-km),

total freight costs, travel time to the nearest regional hub and port (roads or railways)

– transport costs/travel time/quality (roughness) of roads connecting the city to the nearest trunk transport network

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In Vietnam, a large share of freight is moved among cities in the same or nearby provinces

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But freight transport costs particularly high on short trips between large cities and their hinterlands – potentially

reducing trade and specialization

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URS IN ACTION !!!

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Pilot Urbanization Reviews– Uganda (early)– Sri Lanka– India – Indonesia– Vietnam– China (intermediate)– South Africa – Brazil (advanced)– Colombia– South Korea

Incipient

Intermediate

Advanced

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Thank you

• Somik V. Lall (slall1@worldbank.org)• Henry Jewell (hjewell@worldbank.org)• Austin Kilroy (akilroy@worldbank.org)• Nancy Lozano (nlozano@worldbank.org)• Hyoung Gun Wang (hwang4@worldbank.org)