aid and urbanization: an overview

Aid and urbanization

An overview

Nigel Harris

Most bilateral aid donors have regarded rural development as the priority area for alleviating poverty and supporting economic development in developing countries. This article is directed to showing why this is a mistaken approach and to increasing in- validity. Urbanization and its associated problems will dominate public perceptions in the coming 30 years as both Africa and Asia make the transition to predominantly urban societies. The article also ex- amines how far structural adjustment reforms, particularly in sub-Saharan Africa, promise to change this perspective, and what separate problems they may throw up. Finally, new trends in aid are ex- amined as they relate to the issues raised by urbanization.

This article is designed to allswcr a series ol qtiCS- lions. First, why do aid d()nou-s need t() develop an approach to urbanization in developing countries'? Second, what is the likely picture of less dcvclopcd countries" (LDC) urbanization in the inmleclialc [uture'. ) Third, will structural adjusllncni rc[ornls changc those estimates (if luturc urbanization'7 Fourth, wtlat arc the key problcn~s associated with rapid urbanization'? Fifth, how cffcclivc has public action been in tackling these problems? Sixth, will structural adjustincnl reforms affect these problcnls and thc effectiveness of public action? And finally, what should bc the priorities for aid in the urban field9

I. Why do aid donors need to develop an approach to urbanization in LDCs?

Therc arc two central reasons, aild one subsidiary,

Nigel Harris is with the Development Planning Unit, University College London, 9 Endsleigh Gardens, London WC1H 0ED.

This article was first presented at the ODA Workshop on 'Aid and Urbanization', held in London on 21 February 1989.

why aid d()nors should be collCCl-ncd with the urban sector in kDCs:

• Whore aid is directed to the relief of i~roblcnls o1 poverty, not only arc the poor well rcprcscniod in the cities, the urbail poor will ¢()ilstitutc thc nlajorily of the 1A)C poor in the mcditllll lcrnl. • The citics ;.ire a decisive lorcc in ccononlic dc- velopillOnl, in gcnoraiiilg thc jobs, incoillcs and productivity which arc lhc foulldaliOll of thai process.

Furthornlorc, the comparative advantage of lhc nl()ro developed counlrics parlicularlv in thc fields o1 infrastructure provision and nltllia~cnlcl*il iS strongest in thc urban sector.

Po VCI'IV

An early World Bank estimate (19N()) of the scctoi-al distribution of the poor suggcsls there is likely to bc all absolute decrease in the lltlillbci- o1 households m the worst p(ivorty in the rural areas o[ IA)('s tip to thc year 2()()() (froth ~3 million in 1975 to $7 million). At the same time, thc ilUlllbcr of poor urball households will more than double (from 34 million to 74 million). Thus, if thcsc projections arc born Otll. 57% of thc 131 inillion poorest houscholds in lhc 7¢;.ir 21)()() will live in urball areas.

We call pin point ihc regional c()nccntrations and rates of growth of ihis poor urban population I (sot Table 1 ). While the r;.ilc of growth is highcsi in l-]asl Africa, the largcsl concentration (and ;i growing one) is m South Asia.

1 'Poor households in 1975 are defined as those living in absolute poverty in 1975 in all rural areas except those in El Salvador and Jamaica and in all rural areas in East Asia, Malawi, Zambia and Egypt. In all other instances the numbers of those in absolute poverty are small in comparison to the numbers of those in relative poverty, which indicates that the relatively poor are the appropriate target group. In determining movements in and out of poverty in the course of time, the thresholds of both absolute and relative poverty are held constant in 1965 dollars.' Source as Table 1.

1 7 4 0264-2751/89/030174-12503.00 c{: 1989 Butterworth & Co (Publishers) Ltd

Economic development

Nearly 60% of the gross national product (GNP) of LDCs is now produced in urban areas (by about one-third of the labour force), and 80% of the increases in national output.-" In middle income countries the share is even higher - for example, 75% in Turkey (from 19% in the 1950s and 50% in the 1970s). This d i spropor t iona te contr ibut ion occurs because of the strikingly superior levels of productivity characteristic of urban areas in developing countries, the result of the peculiar selection of economic activities, supported by high concentration of skilled labour, infrastructure and services, as well as the economies of scale and agglomeration. The cities today are thus most often the main source of national savings, of the revenue of governments and, indeed, the resources to develop agriculture. ~ In providing large concentrated markets, with associated transport junctions, storage facilities and credit support, the cities also force the pace of growth and specialization in agriculture.

Fur thermore , the individual sectors of urban activity are often of decisive significance for national growth: manufacturing, infrastructure (particularly junctions and terminals - sea, air, road and rail), distribution systems and markets, financial and business services, education and health and government. Typically, a quarter of national capital formation takes place in housing and urban infrastructure, providing half the national capital stock. Construc- tion is also a major employer in activities with relatively high multiplier effects.

A failure to ensure the cities work efficiently, to maintain, improve and extend the infrastructure to support economic growth as the cities grow, to provide the financial and institutional basis to cope with rapid population growth, can be economically disastrous. Pot holes in city roads, an inadequate water supply, high rates of sickness in urban slums, then become not only formidable issues of welfare or immediate constraints, but have a direct effect on national output. The cities which should be provid-

2 Figures cited in Per Lijung and Catherine Farvacque, Addres- sing the Urban Challenge: A Review of the World Bank FY87, Water Supply and Urban Development Operations, General Operations Review (INU 13), World Bank, Washington, March 1988. 3 See the discussion by George S. Tolley, 'Urbanization and economic development', in George S. Tolley and Vinod Thomas (editors), The Economics of Urbanization and Urban Policies in Developing Countries, World Bank Symposium, Washington DC, 1987, pp 15-30; on the Indian case, see Satyendra Verma, 'Urbanization and productivity in Indian states', in Edwin S. Mills and Charles M. Backer, Studies in Indian Urban Development, World Bank Research Publications, World Bank, Washington DC, 1986, pp 103-136.

A i d and urbaniza t ion: an overv iew

ing an expanding stream of resources for national development can, if neglected, become bottlenecks that hold back the whole economy. The World Bank, for example, estimates that the costs to the manufacturing industry of poor urban infrastructure, transport and housing, are particularly high - taking up to one-fifth of start-up capital in Nigeria. "~

The poorer a country, the greater the potential for raising national productivity by concentrating resources in cities. Urbanization is a form of territorial specialization which parallels the other measures of economic development. For too long governments have regarded large cities as pathological symptoms of economic breakdown, rather than the inevitable (and ultimately, beneficial) result of economic development. Despite impressions to the contrary, there is no evidence that there are limits to the increase in productivity with increasing size of population.

2. What is the likely picture of LDC urbanization in the immediate future?

In the past 40 years, LDC urban populations have grown at between 3% and 5% annually, from a total of under 300 million people to 1.3 billion (thousand million) now. In the 1970s alone, the number increased by nearly 300 million. Currently, LDC cities and towns are receiving 45 million new inhabitants each year (compared to 7 million in the more developed countries, MDCs).

The Appendix presents some United Nations (UN) projections of current and future patterns of urbanization. Figure 1 projects the growth of LDC urban population to reach nearly four billion by the year 2020 (Figures 3, 4 and 5 show this for the regions). In 25 years (1985 - 2(11(I) LDC populations will increase by 1.2 billion (and rural populations by 45(1 million).

After 2010 it is estimated that rural populations will begin to decline absolutely. Thus, in the coming 3(1 years, the major demographic transition from rural to urban will occur. By the year 2020 over half of all Africans will live in cities and towns; just under half of all Asians; and more than 8 out of every 10 Latin Americans. In countries with large populations, the demographic transition makes for absolutely very large urban populations (Table 2).

Big cities

Just under half of all urban dwellers in LDCs will live in larger cities of one million or more inhabitants by the year 2000 (see Figure 2, Tables 6 and 7 in the

4 0p cit, Ref2.

CITIES August 1989 17'5

Aid and urbanization: an overview

Appendix). In 1950, there were 31 cities of this size in LDCs (and five of them had populations of four million or more). By 1985, there were 146 (and 28 of the larger size). Projected for the year 2025, there will be 486 LDC cities of one million or more people (and 114 of four million or more). Already the world's largest cities are becoming a feature of LDCs rather than MDCs (see Table 5 in the Appendix).

This process is exaggerated since, at the same time, the large old industrial cities of the MDCs are tending to lose population (there seems to have been some check to this most recently) as manufacturing industry and other activities locate in rural areas or small towns. In the MDCs, the highest rates of population growth are now in newer cities, smaller towns and rural areas. 5 In LDCs the dispersal pattern is also taking place, but still with relatively high rates of growth of existing cities. The spread of in f ra s t ruc tu re a long highways seems to have changed the locational comparative advantage between urban and rural areas for some activities. In Latin America, the annual population growth rate of "small and intermediate ' cities is now often equal to, or greater than, that of the larger cities. In India, there is some suggestion of an analogous phe- nomenon - the relative stagnation of population growth in the largest cities (with the exceptions of Bangalore and Delhi), while smaller cities in the central region accelerate/~ Of course, the redistribu- tion of population growth towards smallcr cities imposes even greater strains than before because smaller settlements carry much less 'spare capacity" than larger cities and have fewer resources to cope with expansion; thus quite small additions to their population can produce high levels of congestion.

lnJbrmal sectors However , while modern manufacturing industry may be relocating away from existing cities in the more advanced LDCs, the size of the informal sector complicates the picture. While the village can provide a location for some of the least skill-intensive non-agricultural activities (bidi-making or match- manufacture in India, for example), the more modern informal sector activities depend upon urban areas for components and spares, skilled labour and specialized markets. The more reforms allow comparative advantages io emerge, the more likely it is the most labour intensive informal activities will

5 For a comparison of current trends in urbanization in the US and India, see Nigel Harris, 'Some trends in the evolution of big cities: studies of the USA and India', Hab i ta t In ternat ional , Vol 8, No 1, 1984, pp 7-28. 6 Ibid.

grow, increasing the pace of urbanization. Thus, in contrast to the MDCs, it is possible that the dispersal of modern manufacturing in green field sites in developing countries can coincide with the continued growth of existing big cities.

Rates of growth While the numbers of new urban dwellers grow absolutely, the rates of growth of urban population have been falling since their peak in the 1950s, from 5.2% annually in the last half of the 1950s, to 3.4% in the 1980s. However, this decline reflects in the main the experience of middle income countries; in the low income countries, rates of urban population growth have increased, from 4.2% annually in the 1970s to 4.4% in the 198(}s. In sub-Saharan Africa, however, rates of growth still remain very high (see Table 8 in the Appendix).

The components of urban growth are now dominated by the natural increase of the urban dwellers (provid ing some 6()% of popula t ion growth) . Another 8-15% of population growth is due to the redrawing of urban boundaries or the reclassification of settlements, and between 25% and 32% to net migration (thus control of migration is not a very effective means of controlling the size of the urban population). Three out of four migrants who stay in cities improve their standard of living, a result one might expect given the unrepresentative character of migrants (young, better educated than the average for urban occupations the migrants join, motivated and healthier than the average, etc). Research suggests the income and employment situation of city workers correlates with age, sex and education rather than migrant/non-migrant status.

Africa On the latest figures awfilable, the fastest rates of urban population growth, albeit from a low base point, are now in sub-Saharan Africa. This averages 6% per year, and 8.5% in the 35 major capitals which are doubling their inhabitants every nine years (see Table 8 in the Appendix). In 1960, there were three African cities with populations of half a million or more, whereas now there are 28. In sub-Saharan Africa the coincidence of severe economic difficulties, agricultural problems and continuing high urban demand for labour makes for a particularly intractable set of problems (discussed later).

3. Will structural adjustment reforms change these estimates of future urbanization?

Part of the task of structural adjustment is to remove implicit biases ill pricing as between agricultural and

176 CITIES August 1989

other activities. In sub-Saharan Africa, it is thought that this may change the pattern of incentives which encourages people to migrate from rural to urban (and indeed, may produce reverse migration). However, structural adjustment reforms have been introduced in conditions of severe economic crisis in sub-Saharan Africa - between 1978 and 1985, real per capita GDP declined by over one-fifth - and it is not clear what the sum effects may be (even if the reforms can be continued).

3-he evidence of past bias against agriculture in some African countries is well-documented by now. Thus, in Tanzania the weighted average of agricultural producer prices in the early 1980s was said to be 46% below the real 1970 level, even though world prices had improved by 17% between 1970 and 1980. 7 In Ghana, by 1981, the real price facing cocoa producers was barely 15% of the 1963 level; nominal prices were increased 14 times over to 1986, but they were still under 43% of the 1963 level. These are extreme cases and not necessarily representative. But they show the scope for reform. Under the impact of price reforms in Tanzania, farm incomes are said to have increased by 5% in the first half of the 1980s when urban wages declined by 50%. In Ghana, farm incomes appear to have stagnated while urban incomes declined by 40%. In C6te d'Ivoire, when per capita income declined by nearly one-quarter in the first half of the 1980s, not only did the ratio between urban and rural incomes change (from 3.5:1 to 2.5:1), the upper income groups lost a disproportionate share of income; while high income groups lost by 18.2%, middle income by 10.8%, low income groups lost 3.7% (and rural households by 1.6% in the south, and nothing in the north), s

However, the processes of a changing ratio of income between urban and rural sectors may ante- date both the economic difficulties of the late 1970s and early 1980s and structural adjustment. World Bank estimates suggest, for example, that formal sector manufacturing earnings have been declining since 1970 for a number of sub-Saharan countries (see Table 4). ~

However, the quality of the data insofar as it effects the whole labour force may be suspect. Even with this data, a significant differential remains, and given continuing conditions of rural deprivation, the

7 F. Ellis, Agricultural Price Policy in Tanzania, University of East Anglia (mimeo), 1985. a World Bank, Financial Adjustment with Growth in Sub Saharan Africa, 1986-1990, World Bank, Washington DC, 1986, p 19, and The Courier, Commission of the European Communities, III, Brussels, September-October 1988. 9 See the wage indices presented in The World Development Report 1988, World Bank, Washington DC, 1988, p 238.

A i d and urbaniza t ion: an overv i ew

incentive to migrate or remain in urban areas may remain strong. A minority of farmers with viable commercial holdings may experience considerably enhanced incomes, but the gains to the mass of landless, sharecroppers and smallholders may not be sufficient to reduce the differentials in income with comparable urban activities. Furthermore, enhanced rural incomes may stimulate the urban sup- pliers to rural markets, producing further effects in sustaining important differentials. Improvements in agricultural productivity following enhanced pricing and a cheapening of inputs to agriculture may lead to labour being ejected from cultivation. In addition, insofar as the expected expansion of exports draws on processed agricultural goods or cheap manufactured products (as it is said to be the case with Kenya and Mauritius), the attraction of the urban labour market may be enhanced. Some of these factors may explain the case of Turkey with a somewhat violent phase of structural adjustment. Turkey is one of the few countries with a census every five years, which allows more careful correlation of economic and urban changes. The rate of urban growth doubled between the last half of the 1970s and the first half of the 1980s (when urban wages are officially said to have declined by nearly one-third, 1977-1984).

Table 8 (in the Appendix) shows the rates of growth of urban population (1965-1980 and 1980- 1985) for 36 countries of sub-Saharan Africa, the size of the urban population in 1950, 1987 and projected for 2025, with an indication of which countries have undertaken structural adjustment (or rather, have reached a loan agreement with the World Bank under this heading). Twenty-six countries had agreed on such a loan, but unfortunately, only six of these before 1985. However, 11 countries experienced an increase in urban growth in the more recent period, but neither this nor the experience of the majority appears to correlate with the fact of a structural adjustment. It would be premature to draw any firm conclusions on such slight data, but nonetheless, there are grounds for scepticism in believing that the results of price reform will produce a relative decline in urban growth, let alone an absolute one.

4. What are the key problems associated with rapid urbanization?

The main problems of cities fall into two interrelated areas. First, the growth of urban productivity is constrained by shortages or inadequacy of skills, poor maintenance of equipment, the notorious bottlenecks of the urban economy (transport, energy, communications, etc), problems of credit supply,

CITIES Augus t 1989 177

Aid arid urha#iicalion: a#t ol'¢rviuw

quality control, marketing, and so on. Second are the closely related questions of pover-

ty - productivity growth cannot be sustained in conditions of very low incomes. Urban low incomes, however, are not the same as rural. In agriculture, low income is related to seasonal unenaploynlcnt and underemployment ; in the cities, open unenaploy- ment is probably less inaportant than the fact that much of the workforce in paid very little for ex- traordinarily long hours of arduous work. Thus, low incomes ;ire related to low productivity in marg ina l economic activity: ie the problem is one of skills, training, capital per worker, etc, rather than simple job creation. Of course, the official statistics of emp loymen t usually omit the smallest or most irregular units of employment , no they arc an imper- fect indicator of the real labour market .

Ultimately, low incomes underlie the inability of the majority of households to house themsclvcs at tolerable standards, to maintain adequately nuch shelter as they arc able to sccurc, to purchase essential services and support a revenue basin sufficient to finance the provision of public services - water supply, sanitation, power, health, education, etc. Governments can do much to ease the supply, but not to make up for an overall deficiency of income. An important indicator of thin inadequacy is the incidence of ill-health as a result of inadequate nourishment -- up to half the children in slum and squatter sett lements in a W H O sample of LDC cities in the early 1980s suffered from "a prevalence of infectious diseases and malnutrition which in comparable and often grcater than that observed in rural populations ' , io

Current UN estimates suggest that over one billion people in LDCs are inadequatcly houscd. Lens than 50% of urban populations havc access to safe drinking water or to sanitation. Such issues particularly afflict the poor since they live in the least wcll-serviced districts and are obliged to dcpcnd upon much more expensive services provided by priwite water sellers and night-soil cleaners. Rapid urban iza t ion , w i thou t p r io r p repara t ion , can very much exacerbate these deficiencies. Take for ex;,inl- pie the changes in the average number of people per room as Cairo has grown (see Table 3). The average conceals the fact that, for a majority in 1976, there were over four people per room, and in some cases, up to 1().

The appalling charactcr of transport systems is painfully familiar - from the delays in the shipment

m WHO-UNICEF, Primary Health Care in Urban Areas: Reaching the Urban Poor in Developing Countries, World Health Organisation, Geneva, 1984.

of goods (which slows down or can stop factory production) to the overcrowded public transport systems. As cities grow, movenlent increases dis- proport ionately. The number of people moved pcr day can increase by 10-15% per year in expanding metropoli tan areas. The problems arc often not ones of physical capacity so much as the management of existing capacity. For example, the Calcutta pnblic bun corporation is subsidized by the equivalent of US$1 million per month since the revenues raised on operations will meet only half the running costs. Yet there is low fleet utilization, a high staff ratio and a poor rate of getting passengers to pay (by comparison with the privatc and unstibsidized operators: the cost pcr passcngcr kilomctrc for public and private is in the ra t io of 1.9 • 1).7). I I The n l a n a g e n l e n t and

nlaintenance of road iletworks shows even lllore serious problems: the World Bank alleges lhal in Zaire, the usablc paved road network is now under I()'Y<, of that which existed at the lime of Indepcnd- once due to poor maintenance.

L ( l t l d

In many cities there arc grave difficulties in identify- ing and securing land for urbanization. The physical shortages here are perhaps less significant than the problems posed by conlplex land tenure systems, speculative hoarding (particularly in inflationary conditions where land is a more secure slore of value), past interventions by public authorities (in- chiding the imposition of inappropriate land-use regulations), the difficulties of gaining access to the often large holdings of land in the hands of different government agencies, poor records, poor l y orga- nized land markcts and so on.

Public action to cope with and anticipate the range of problems which exist and will grow with urbanization is severely limited by the managerial and financial resources of public agencies. Excessive centra- lization of power and tax revenues in the hands of the central government has of ten reduced lower levcl tiers of the administration to mininaal conlpe- tence. Major urban development efforts in infrastructure can be lost through the institutional in- capacity of local authoritics to opcratc and maintain them. A poor policy f ramcwork blocks improve- ment. Poor pay, overntaffing, low morale in an untrained staff, weak financial nlanagcnlcnl (that may even be incapablc of collecting existing .-e- venue) are reinforcing factors that obstruct improvements.

Settlements in general and cities in particular arc

11 Op cit, Ref 9, p 144.


vital elements in a national spatial economy: that is, conceiving of a national economy as a geographically distributed system. In a developing country they are much more crucial than in a developed one. They are neglected only at high cost to the national capacity to produce. Rapid urbanization can swiftly exhaust the managerial resources of a society, producing self-destructive reactions that the cities must be reduced or eliminated. It is important in the context of economic development as well as the continual efforts to improve the condition of the poor that this demoralization is not allowed to overwhelm the exploitation of the practical opportu- nities for economic advance which the cities offer.

5. How effective has public action been in tackling the problems?

Public intervention in developing countries to secure a particular distribution of the national population or to guide the development of metropoli tan areas has a poor record of success. The performance is the poorer , the more rapid the spontaneous redistribu- tion of population has been. The reasons for the poor record are not difficult to find. First, even in fully state-owned economies (as in PR China or the USSR), public authorities cannot centralize power sufficiently to ensure that a detailed territorial plan can be achieved, even if there were any consensus on what was an optimal or desirable spatial form. Second, the city is a conjuncture of a great variety of changing forces, many of them imperfectly under- stood and not susceptible to easy pun i c control. In policy terms, these forces include not only most aspects of macroeconomic policy, but also many sectoral policies (industry, agriculture, finance, tourism, transport, &fence , etc).

It is hardly surprising that the small influence of explicitly spatial policy (on regions, industrial location, urban development , land uses, etc) is so fre- quently swamped by the sum of unintended territorial effects of non-spatial policies. The outcome is made worse where governments have little percep- tion of the demographic transition through which their countries are passing, where local government and other relevant pun i c agencies are weak, where political and economic interests paralyse effective action for long periods of time.

Poor diagnosis

An additional e lement in the poor performance of planning urbanization has been the frequent misspe- cification of the source of urban problems. Most often, city problems are attributed to excessive migration of population, rather than the more ob-

Aid and urbanization: an overview

vious sources such as low incomes, an inappropriate policy f ramework, weak and corrupt local government, etc. The mistaken diagnosis then shifts attention to seeking to prevent or guide migration. A 1983 UN survey of 126 LDC governments showed that three-quarters of them were officially pursuing such aims, even though migration is normally an economically beneficial by-product of changing employment location and it is not clear it can be controlled at tolerable cost. In terms of equity, as the World Bank's first report on PR China noted, 12 preventing poor people migrating out of poor areas prevents moves to greater equality. In analogous fashion, there are governments which justify rural development p rogrammes (entirely justifiable in their own terms) on the grounds that they will reduce outmigration to the cities, when the evidence suggests the reverse - rural development typically encourages outmigration by enhancing access to the city (by providing education for urban jobs as much as roads and bus services out of the village).

Facilitation

The poor results of past action as well as the daunting scale of the problems of existing cities (in conditions of increased financial austerity) has en- couraged a rethinking of the role of government . This has led to some efforts by governments to withdraw from the direct provision of certain urban services and housing, and greater concentration on f a c i l i t a t i n g a c t i o n by p r i v a t e f i r m s , n o n - governmental organizations or self-help. This has tended to shift attention away from one-off projects to medium-term programmes and sector level policy reforms (including decontrol) , from new additions to capacity to the rehabilitation and maintenance of existing capacity. There has been a comparable move away from the regulation of land uses and ambitious at tempts to determine the territorial distribution of population to seeking to ensure the cities b e c o m e increas ingly eff icient ( w h a t e v e r thei r population size), from an emphasis upon order to one on economic growth. In the most ambitious version of this change, some countries are seeking m e d i u m - t e r m economic policy packages for a national sett lement system, the heart of which is a projection and programme of investment needs for urban infrastructure and institutional mechanisms for the co-ordination of the public agencies involved (the Indones ian Nat ional Urban D e v e l o p m e n t Strategy is possibly the most ambitious at tempt at

12 China: Socialist Economic Development, Annex B, Population, Health and Nutrition, REPORT No 3391, June 1981.

CITIES August 1989 179

A i d and urbaniza t ion: an overv iew

this, but other at tempts have been made in Egypt, Pakistan, Malaysia and Peru).

Management The emphasis on government as facilitator makes urgent the need for effective local government . Yet in many countries, this is one of the nlost notorious areas of government incompetence. Often, local authorities are burdened with large financial deficits (in extreme cases, equal to 5% of the GDP) , but arc unable to expand their revenue sonrces because of the pre-emptive claims of central government . In some cases, the local administration cannot even collect the revenue to which it is entitled. Often they have been given new respons ib i l i t ies without changes in finance or staff. So bad has the problem becon3e in some countries, central govennnent offic- ers despair of the possibility of reform and seek methods to bypass local government (through, for example, statutory development authorities). Other inntwations may include measures to prNatizc some local government functions, provided the policy f ramework is conducive to this. Even then, in poorer countries there may be difficulties becausc capital markets are limited, public agencies often havc unattractive rates of return and specific services do not attract eager buyers who can sustain serviccs at an acceptablc standard and price. There are also administrative problems in ensuring monopoly posi- tions are not exploited. It is therefore still necessary to make local authorities and public utilities work more efficiently.

In the case of local government reform, greater financial and legal au tonomy appears a precondition for effective financial management . 1~ Some governments are now beginning to move in this direction. Fur thermore , other innovations are being introduced to support this process the provision of stable automatic transfers from the centre on objec- tive criteria, the possible establishment of mtmicipal banks, an easing of the restrictions on municipal borrowing from private capital markets and so on. With a strengthened financial basis, reforms of management systems, improvcd pity to recruit and hold competent staff and continuous training for example become feasible methods of enhancing the capacity of local government to manage the process of rapid urbanization.

6. Will structural adjustment reforms affect these problems and the effectiveness of public action?

It is difficult to separate the effects of structural adjustment from the very severe results of short- term economic crisis. In sub-Saharan Africa, the short term has hitherto dominated most other con-

siderations: high interest rates on cumuhltive debt (US$88 billion at the end of 1985): declining com- modity prices (now fortunately checked): exchange rate instability (affecting ill particular dollar de- nominated commodi ty exports): it low rate of growth of demand for primary exports; and the disastrous effects of drought (again, now fortunately reversed). It is estimated that between 1979/1981 and 1985/ 1987, the deterioration in the terms of trade cost the countries of sub-Saharan Africa nearly US$3 billion; increased interest rates took another US$2.1 billion: and reduced flows of net credit and direct investment another US$2.6 billion. In comparison to this loss of US$7.7 billion, official grants have grown by US$1.1 b i l l i on . Furthermore, the length of t ime thc crisis lasted was underest imated, thus jeopardizing governments" capacity to pcrsist in unpopular reforms, especially its debt servicing cost camc to lake an increasingly greater proport ion of export earnings. For the poorest countries of Africa, the ratio of debt to export revenue hits increased in the 198()s from under 100% to 5()()% (in some cases, 1(1 years export revenue would be required to pay off the principal).

In the worst circumstances, structural adjustment seems to have exaggerated the effects of short- term crisis on the possibilities of efficient urbanization. The radical reduction in public spending hits affected incomes, and the public provision of infrastructurc (disportionately affecting urban areas). Shifting resources to the production of tradeable goods and away from services could exaggerate this. The sacri- rice of maintenance spending to budgetary economies likewise has had severe effects on existing infrastructural capacity (so ultimately afflicting the tradeable goods sectors). Changes in the u rban- rural terms of trade have tended to fawmr food producers over food consumers (ie farmers on the one hand; the urban waged, the landless and smallholders with a food deficit on the other). Wage freezes or cuts in real wages exaggerate these delete- rious effects, as does the ctttting of subsidics on food. Devahtation increases the domestic price of food imports, again disproportionately affecting the urban sector. Increased indirect taxation can make the situation worse, as with the introduction of certain user charges (thus the Nigerian introduction of fecs for primary and secondary education xsith parents responsible also for the purchase of books is said to have led to a drastic decline in enrolments among children from poorer families).

~3 See the discussion in the World Development Report 1988, op cit, Ref 9, pp 158-167, and on the decentralization of educational and health facilities, pp 131-141.


These are not invariable effects, and different countries have been able to introduce reforms without the results experienced elsewhere. Countries with some capacity for exporting manufactures have not experienced a crisis as severe as those exporting raw materials. Thus, Mauritius is often cited as an example of the possibility of resumed growth. Be- tween 1983 and 1985, manufactured exports doubled and over took sugar as the main export , and have continued at a rate of between 20% and 30% annually (however, it is not clear how much of this trade is a diversion of South African exports, seeking markets in Black Africa). Kenya also increased manufactured exports by 11% per year between 1982 and 1987. Fur thermore , there is evidence that those countries which have undertaken structural adjustment reforms prior to the economic crisis, have made a swifter recovery - between 1984 and 1986 countries which completed the first phase of structural adjustment before 1985 expanded by 0.8% annually; the rest continued to contract (by 2.5% annually). 14

The effect on the poor, both urban and rural, however, must have been severe in much of Africa. U N I C E F has documented the declining health posi- tion of children as a result of cuts in health spending, rising food prices and declining incomes (made particularly severe where women are the sole bread- winners). There is evidence of growing child malnutrition, independently of the effects of famine, and a decline in at tendance in education. In some cases, diseases thought to have been eliminated (for example, cerebral malaria in Madagascar) have re- turned. There is also evidence of a reversal in the increase in the figures for the average expectation of life at birth.

However , there are means available to offer some measure of protection to the poor against the effects of both crisis and structural adjustment reforms. These range from employment stimulation program- rues (including public works initiatives) to making a more discriminatory use of user charges, food sub- sidies, and so on. In some cases, elements of social spending which most directly affect the poor can be protected, and priorities can be laid down to amelio- rate the effects of economies (for example, protecting primary health care clinics as opposed to modern hospitals). The use of fl)od stamps for school meals can also sustain consumpt ion for the poores t groups. 15 Of course, for the poorest countries such

14 The Courier, op cit, Ref 8. ~ For detailed proposals, cf UNICEF, Within Human Reach: A Future for Africa's Children, UNICEF, New York, 1985; G.A. Cornia, Richard Jolly and Frances Stewart, Adjustment with a

A i d and urbaniza t ion: an overv i ew

measures may strain precisely the scarcest skill, managerial and administrative capacities, and different types of innovations are required which lessen this effect.

7. What should be the priorities for aid in the urban field?

International aid to developing countries is a small element in total saving and investment (for example, in comparison to a total LDC investment in infrastructure and housing of the order of US$100-150 billion annually), and it is important therefore that it is used to exploit the 'comparat ive advantage ' of the donor and to achieve the maximum effects. In the past, aid was often seen as primarily a capital transfer, a means to add to the capacity of an LDC, to relieve a critical bottleneck. The approach fos- tered some well-known problems - the highway built to standards and specifications that assumed, wrong- ly, a local capacity (in terms of finance, skills and institutions) to maintain it. Rapid depreciation of aid projects is sadly common in many LDCs.

This experience, as well as the rethinking of government roles by aid recipients, shifted attention to the importance of technical support , the facilitation of activities rather than the direct provision of capacity. This has led in some cases to a shift from financing projects to sustaining medium-term programmes of self-reinforcing measures. In the urban field, this was part of the background to the World Bank ' s Urban Deve lopment Programmes which were directed at a locality and combined measures in the fields of housing, health care, education, employment stimulation, small business development , transport and land.

However , the programme, like the project, can still operate in isolation without much spread effect. The exemplary case too often proved no example at all, Thus, the World Bank ' s sites and service schemes not only proved poor in terms of cost recovery (they could not house the poorest people at costs they could afford), they were not replicated. The Bank now argues that the locality p rogramme cannot be effective if the policy f ramework is wrong and if the implementing institutions are poor. Atten- tion has shifted upwards to policy (finally resulting in general support for the balance of payments while structural adjustment is pursued), and downwards to the reform of institutions and their financial management , and the relationships to bodies outside the

Human Face: Protecting the Vulnerable and Promoting Growth, Clarendon Press for UNICEF, Oxford, 1987; and L. Demery and T. Addison, The Alleviation of Poverty under Structural Adjust- ment, World Bank, Washington DC, 1987.


A i d and urhaniza t ion: an ol,('rl'icl','

public sector, lit the Bank's case, this has led to a rcasscssmcnt of the original diagnosis: low incomes are not the result of a hick of employment but of the very low productivity of labour in the work that the poor do. Aid, it is concluded, must thcrcfl)rc nlake a shift of emphasis from the at tempt to tackle urban poverty directly lo efforts to improve urban productivity (as, it is said, the only sustainable means to improve the condition of the poor).

This change of emphasis fits much inorc closely the comparat ive adwlntagc of aid donors. For this is not in the absolute size of funds mobilized, but in the fact that they tire foreign exchange and therefore provide exceptional access for LDCs to international e x p e r i e n c e . Thus , aid is b e c o m i n g technica l flssistance-led rather than capital-led. And technical assistance is becoming less the transmission of wcll- codified techniques (local capacitics for training tire increasingly able to fill this need), and rather utorc technical innovation, research, policy reconsidera- tion and areas less easily defined, organization and management .

In the case of the urban sector, the weakness of public sector agencies has been described. If they could be strengthened (and their functions rcdc- fined), the effects would be much greater than that achieved by an aid donor substituting itself for an inadequate set of agencies (as, some might argue, the World Bank did in Calcutta through the Calcutta Metropoli tan Development Authority~<'). An institutional approach encourages the combining of elements lit complementary packages over the meditun term consultancy, research, training, the twinning of agencies, as well as supporting capital aid. One of the Bank 's innovatory loans ilt this field to Mexico combined training and consultancy to 132 munici- pies, with selected capital aid used as the incentive to undertake the programme.

There tire problems involved in this approach. For the aid donor, it is much more politically exposed to be so closely inw)lved with tin agency. A capital project disposes of large sums in a form relatively easy for a donor to administer, and produces an output which is politically and diplomatically im- pressive. Policy advice, training, enhancing the capacities of institutions are less easy to manage,

~6 Per Lijung, 'The World Bank support for institutional and policy reform in the metropolitan areas: the case of Calcutta', paper for the XVll Triennale di Milano (Policy Strategies and Projects for Metropolitan Areas), Milano, 1988 (forthcoming in Habitat Inter- national).

monitor and ewlluate, find involve much greater administrative inputs for the disposal o1: quite small sums of aid. Thus, if the change of emphasis is to be made effective, it will require not only changes in the organization of the aid donor 's administration but greater reliance on bodies outside the donor agency.

In the British case, the Overseas Dcvch~pmcnt Administration (OI )A) , despite a clear public com- mitment to the priority of rural development , has responded to many requests in the past that have affected urban development in LDCs, even though these have not been classified as urban. Aid to ports, manufacturing industry, suburban railway systems, bus systems, highways, water supply and housing, tourism and so on, may be predominant ly urban in effect. But lit O D A , "urban" has tended to bc defined narrowly as old-style town and country or physical planning which, as has been argued earlier, is not the appropriate focus (hence O D A ' s urban aid is not classified as "urban'). The spatial economy, urban and rural, is a vital element in nat ional economic development and is not primarily a nlatter of physical ordering. There is a case for O D A to seek to put together the elements of its activity which relate to the urban ecoltomy in order to scc how far they can be inutually reinforcing, thcy rcvcal gaps, the filling of which could have disproportionate development effects, find they allow the possibility of learning. There arc also vital lessons from the experience of other donors, particularly affecting the new stress upon the role of agencics thus, for example, the 15 years in which Calcutta has been the centrepiece of the World Bank's urban lending provides an unrivalled set of lessons on the efficacy of the methods employed, the strengths and weak- nesses, which in turn provides the basis for new policy directions.

This article has cndeavoured to show that urbanization in developing countries is going to be of increasing importance and that aid has a particular and important role in helping in the management of thtlt process. An urban strategy (whether as a tuitional economic policy f ramework for sctt lements or development phms for particuhlr cities) is one of the means to assist the anticipation of events which now appear inevitable, for concentrating the efforts of relewmt public agencies in enhancing the productivity of cities find in seeking to minimize the damagc to popular welfare which can result from rapid urbanization. The role of external assistancc in implementing such fl strategy can be of particular importance.


Appendix 4000

3000

2000

I000

i i

i /

/ /

/ / / - -

/ / /

/ ° / /

~ " / /

. f / . . . . .~ -

1960 1980 2000 2020 1950 1970 1990 2010

Developing regions

Asia

Developed regions

Africa North America Latin America Europe USSR Oceania

Figure 1. Urban population trends by region, 1950-2025

Developing countries

World

Developed countries

(in millions). Source: A s T a b l e 5.

50

s s

40

1960 1980 2000 2025

Figure 2. Percentage of urban population in cities of more than one million, 1960--2025. Source: As Tab le 6.

000 Africa

700

600

500

400

300

200

Western Africa / /'... Eastern Africa

/~-'" Northern Africa , . - - /

100 - - ~ _ . ~ ' ~ ~ Middle Africa Southern Africa

0 1960 1980 2000 2020

Figure 3. Urbanization trends in Africa by subregion, 1960-2020 (population in millions). Source: As Tab le 5.

2500

2000

1500

1000

500

Aid and ttrbaniz~llion: an overview

1960 1980 2000 2020

Asia tota l

South Asia

Southern Asia East Asia

India PR China

South Eastern Asia

Western Asia

Figure 4. Urbanization trends in Asia by subregion, 1960-2020 (population in millions). Source: As Table 5.

Lat in Amer ica 600 tota l

500

400

Tropical

South America / /

300 / / . / /

/ /

/

200 / ' / • - -

/ / / .~

f / / " 100

Tempera te . . . . . S o u t h A m e r i c a

C a r i b b e a n o ° ° o

1960 1980 2000 2020

Figure 5. Urbanization trends in Latin America by subregion, 1960-2020 (population in millions). Source: As Tab le 5.

Braz i l

!Cen t ra l Amer ica

Mexico


A i d and urbaniza l ion: an overv i ew

Table 1. The projected regional distribution of the poor, 1975-2000.

Region % share of total Cumulative (total number in growth (%) brackets, million) 1975 2000 3 6 (4.7) 3 4 (3.2) 8 8 (5.7) 31 44 (32.6) 17 12 (8.7) 39 26 (19.3) 100 100

1975-2000 East Africa 353 West Africa 201 East Asia/Pacific 116 South Asia 219 Europe/Middle East/North Africa 57 Latin America/Caribbean 49

Source: Calculated from Table 7, World Bank, Poverty, Poverty and Basic Needs Series, World Bank, Washington DC, September 1980, p 3. Note: Totals do not add to 100 because of rounding. For qualifications, see original. Base figures from UN median variant of population growth, and World Bank projections of real national income growth.

Table 2. Projected urban populations (millions).

1950 1987 2025 India 62 210 658 Bangladesh 2 14 79 Pakistan 7 33 119 Indonesia 10 47 152

Table 3. Urban growth in Cairo.

Cairo Total population Number of people (million) per room

1947 2.0 2.0 196O 3.4 2.3 1976 5.1 3.3

Table 4. Indices of manufacturing earnings, selected African countries, 1970, 1980 and 1985 (1980 - 100).

1970 1980 1985 Zambia 137 100 95 Zimbabwe 85 100 142 Kenya 140 100 76 Tanzania - 100 45 Ghana 106 48 (1983) Nigeria 100 100 86 (1983) Cote d'lvoire 109 100 136 (1983) Senegal 160 100 101 Ethiopia 159 100 79 Somalia 186 100 69 Botswana 37 100 85 Burkina Faso - 100 107

Source: See Ref 9.

Note: 1970 estimates calculated by Philip Amos in Afncan Development and Urban Change, (mimeo), Development and Project Planning Centre, University of Bradford, October 1988, p 14

Table 5. Ranking of city agglomerations by population, 1960, 1980 and 2000.

1960 1980 Agglomeration Population Agglomeration Population

(millions) (millions) 1 New York/NE New Jersey 142 Tokyo/Yokohama 17.7 2 London 10.7 New York/NE New Jersey 15.6 3 Tokyo/Yokohama 10.7 Mexico City 14.5 4 Shanghai 10.7 Sao Paulo 12.8 5 Rhein-Ruhr 8.7 Shanghai 11.8 6 Beijing 7.3 London 103 7 Paris 7.2 Buenos Aires 10.1 8 Buenos Aires 6.9 Calcutta 9.5 9 Los Angeles/Long Beach 6.6 Los Angeles/Long Beach 9.5

10 Moscow 6.3 Rhein-Ruhr 9.5 11 Chicago/NE Indiana 6.0 Rio de Janeiro 9.2 12 Tianjin 6.0 Beijing 9.1 13 Osaka/Kobe 5.7 Paris 8.7 14 Calcutta 5.6 Osaka/Kobe 8.7 15 Mexico City 5.2 Greater Bombay 8.5 16 Rio de Janeiro 5 1 Seoul 8.5 17 S&o Paulo 4.8 Moscow 8.2 18 Milan 4.5 Tianjin 7.7 19 Cairo/Giza 4.5 Cairo/Giza 6.9 20 Greater Bombay 4.2 Chicago/NE Indiana 6.8 21 Philadelphia 3.7 Jakarta 6.7 22 Detroit 3.6 Milan 6.7 23 Leningrad 3.5 Manila 6.0 24 Naples 3.2 Delhi 5.9 25 Jakarta 2.8 Baghdad 3.9

2000 Agglomeration

Mexico City S&o Paule Tokyo/Yokohama Calcutta Greater Bombay New YorldNE New Jersey Seoul Tehran Shanghai Rio de Janeiro Delhi Jakarta Buenos Aires Karachi Dhaka Cairo/Giza Manila Los Angeles/Long Beach Bangkok Osaka/Kobe Beijing Moscow Tianjin Paris Baghdad

Population (millions) 25.8 24.0 20.2 16.5 160 15.8 13.8 13.6 13.3 13.3 13.2 13.3 13.2 12.0 11.2 11.1 11.1 11.0 107 10.5 10.4 10.4 91 8.7 7.4

Source: United Nations, Urban and Rural Population Projections 1950-2025: The 1984 Assessment, New York, 1986.


Ai d and urbanization: an overview

Table 6. The growth of cities with more than one million inhabitants, 1960-2025.

Number of 'million' cities 'Million' cities as % urban population In the In developed In developing In the In developed In developing world countries countries world countries countries

1960 114 62 52 29.5 27.3 28.4 1980 222 103 119 34.0 33.4 34.6 2000 408 129 279 40.8 34.0 44.2 2025 639 153 466 43.2 32.6 46.4

Source: United Nations, Estimates and Projections of Urban, Rural, and City Populations 1950-2025: The 1982 Assessment, New York, 1984.

Table 7. The growth of cities with more than four million inhabitants, 1960-2025.

Number of 'four million' cities 'Four million' cities as % urban population In the In developed In developing In the in developed in developing world countries countries world countries countries

1960 19 10 9 13.4 14.2 12.5 1980 35 13 22 15.8 14.1 17.2 2000 66 16 50 19.9 13.4 23.2 2025 135 21 114 24.6 12.8 28.2

Source: As Table 6.

Table 8. Sub-Saharan Africa: rates of growth and size of urban population at different dates, and the proportion of growth still to occur.

Urban Population % of growth 1950 Low income Annual increase Size (million) -2025 occurring

1965-1980 1980-1985 1950 1987 2025 after 1987 Ethiopia 6.6 3.7 na na na na Burkina Faso 3.4 5.3 c 0.1 0.6 6.0 91 MalawP 7.8 na 0.1 1.0 8.7 90 Zaire a 7.2 8.4 c 2.0 12.0 58.0 83 Mali a 4.9 4.5 0.3 2.0 10.0 87 Mozambique a 11.8 5.3 0.1 3.0 20.0 84 Madagascar a 5.7 5.3 0.4 3.0 15.0 85 Uganda a 4.1 3.0 0.2 1.7 17.0 91 Burundi 1.8 2.7 ° 0.1 0.5 3.0 85 Tanzania a 8.7 8.3 0.3 6.2 47.0 87 Togo a b 7.2 6.4 0.1 0.8 5.0 86 Niger ~ 6.9 7.0 c 0.1 1.2 9.0 88 Benin 10.2 4.4 0.1 2.0 9.0 82 Somalia a 6.1 5.4 0.2 2.0 8.0 80 Central African Republic a 4.8 3.9 0.2 1.0 5.0 77 Rwanda 6.3 6.7 c 0.04 0.5 5.0 92 Kenya a 9.0 6.3 0.3 4.8 42,7 89 Zambia a b 7.1 5.5 0.2 4.0 19.0 81 Sierra Leone a 4.3 5.1 c 0.2 1.0 4.0 78 Sudan 5.1 4.8 0.6 5.0 25.0 83 Lesotho a 14.6 5.3 0.01 0.3 2.0 84 Ghana a b 3.4 3.9 c 0.6 5.0 27.0 84 Mauritania a 12.4 3.4 0.02 0.8 4.0 81 SenegaP b 4.1 4.0 0.1 3.0 11.0 78 Chad a 9.2 3.9 0.1 2.0 8.0 81 Guinea a 6.6 4.3 0.2 2.0 8.0 83

Middle income Liberia 6.2 4.3 0.1 1.0 5.0 83 Zimbabwe 7.5 5.0 0,3 3.0 17.0 87 Nigeria" 4.8 5.2 c 3.5 25.0 179.3 88 Cote d'lvoire ~ ~ 8.7 6.9 0.4 5.0 21.0 80 Botswana 15.4 4.5 - 0.3 2.2 89 Cameroon a 8.1 7.0 0.4 5.0 21.0 78 Congo ~ 3.5 3.6 c 0.3 0.8 3.0 83 Mauritius a b 4.0 2,1 0.1 0.5 1.0 63 South Africa 2.6 3.3 c na na na na Gabon a 4.2 4.6 0.1 0.5 2.0 75

a In receipt of one or more World Bank Structural Adjustment loans. ~ In receipt of such a loan before 1985. c Rate of urban growth increased between the two periods. Source: First two columns, from Table 32, World Development Report 1988, op cit, Ref 9, pp 284-285, ranked by per capita income, ascending. Other columns from The Prospects of World Urbanization, United Nations, New York, 1987.


aid and urbanization: an overview

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