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By
South Asia Urban and City Management CourseGoa, India
World Bank Institute
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OUTLINE OF PRESENTATION
I. URBANISATION AND DEVELOPMENT
II. PLANNING AND MANAGEMENT OF CITIES: ROLE OF GOVERNMENT
III. ROLE OF MARKETS IN FINANCING CITIES
IV. CITIES AND THE NEW ECONOMY
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URBANISATION AND DEVELOPMENT
I. Urbanisation and Development
Economic Growth Accelerates Urbanisation Urbanisation promoted by
economies of scale in production
information externalities - technology- suppliers- purchasers- market conditions
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URBANISATION AND DEVELOPMENT (Contd..)
agglomeration economies - special machinery
- fashion apparel- entertainment services- interactive services- financial services- high tech farms- software- Internet
Macro Policies Matter- openness- Price Equalization
I. Urbanisation and Development
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HOW HAVE WE DONE IN THE PAST?1950 - 2000
I. Urbanisation and Development
Developing world has coped well in the last 50 years.Urban population has grown from 300 million in 1950 to 2 billion in 2000
Biggest cities in the world are in the developing world now General improvement in Urban Services during this period:
Health services Nutrition levels Access to safe water Education Housing
But large unmet needs
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URBANISATION TRENDS (PERCENT URBAN)
I. Urbanisation and Development
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LARGEST CITIES IN THE WORLD1950 Population 1970 Population 2000 Population
(Million) (Million) (Million)
New York 12 Tokyo 17 Tokyo 28
London New York Mumbai
Tokyo Shanghai Sao Paulo
Paris Osaka Shanghai
Moscow Mexico City New York
Shanghai London Mexico City
Essen Paris Beijing
Buenos Aires Buenos Aires Jakarta
Chicago Los Angeles Lagos
Calcutta Beijing Los Angeles
Osaka Sao Paulo Calcutta
I. Urbanisation and Development
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LARGEST CITIES IN THE WORLD (Contd..)
1950 Population 1970 Population 2000 Population (Million) (Million) (Million)
Los Angeles Moscow Tianjin
Beijing Rio de Janeiro Seoul
Milan Calcutta Karachi
Berlin 3 Chicago 7 Delhi 12
1950 1970 2000 Developed Countries 11 8 3
Developing Countries 4 7 12
Developing Asia 3 3 9
I. Urbanisation and Development
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OUTLINE OF PRESENTATION
I. URBANISATION AND DEVELOPMENT
II. PLANNING AND MANAGEMENT OF CITIES: ROLE OF GOVERNMENT
III. ROLE OF MARKETS IN FINANCING CITIES
IV. CITIES AND THE NEW ECONOMY
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PLANNING AND MANAGEMENT OF CITIES Local governments are typically weak and lacking in
prestige
National governments are too distracted
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
II. Planning and Management of Cities: Role of Government
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PLANNING AND MANAGEMENT OF CITIES (Contd…)
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
Increase prestige of mayors and legislators
Professionalise staff, improve salary structures
II. Planning and Management of Cities: Role of Government
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PUBLIC GOODS TO BE FINANCED FROM TAXES Making property taxes more buoyant
Modernisation of cadasters Renew property valuation Transparent land price system Modernise collection
Making subventions from higher levels less discretionary Most services can be decentralised
Power Water Telecommunications Sanitation Solid Waste Disposal Land Development Transportation Housing
II. Planning and Management of Cities: Role of Government
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OUTLINE OF PRESENTATION
I. URBANISATION AND DEVELOPMENT
II. PLANNING AND MANAGEMENT OF CITIES: ROLE OF GOVERNMENT
III. ROLE OF MARKETS IN FINANCING CITIES
IV. CITIES AND THE NEW ECONOMY
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ACTIVATING CAPITAL MARKETS FOR URBAN INFRASTRUCTURE
Need many borrowers, investors and may intermediaries Who are the borrowers?
Municipal Governments Urban Development Authorities Water Agencies Power Generators, Transmitters and Distributors Solid Waste Agencies Land Development Agencies Others
III. Role of Markets in Financing Cities
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They will need credit enhancement Who can enhance their credit?
Credit Rating Agencies Municipal Development Funds Urban Infrastructure Banks Bond Banks Bond Insurers Bond Guarantors Project Appraisal Agencies
III. Role of Markets in Financing Cities
ACTIVATING CAPITAL MARKETS FOR URBAN INFRASTRUCTURE (Contd..)
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ACTIVATING CAPITAL MARKETS FOR URBAN INFRASTRUCTURE (Contd..)
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 Set Benchmarks Fuel Bond Markets : Govt. borrowings Fiscal inducements Regulatory Agencies
III. Role of Markets in Financing Cities
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ACTIVATING CAPITAL MARKETS FOR URBAN INFRASTRUCTURE (Contd..)
Globalisation of Capital Markets
Domestic savings will not be enough Vital to channel international savings Development countries have aging populations They need to get high returns on their savings Developing countries can provide these higher returns
III. Role of Markets in Financing Cities
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ACTIVATING CAPITAL MARKETS FOR URBAN INFRASTRUCTURE (Contd..)
How do we 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
III. Role of Markets in Financing Cities
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OUTLINE OF PRESENTATION
I. URBANISATION AND DEVELOPMENT
II. PLANNING AND MANAGEMENT OF CITIES: ROLE OF GOVERNMENT
III. ROLE OF MARKETS IN FINANCING CITIES
IV. CITIES AND THE NEW ECONOMY
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WHAT IS DISTINCTIVE ABOUT THE FUTURE?
India, China, Indonesia, with more than 2 billion people urbanising and industrialising simultaneously
1990-2030They will go from 25-30 per cent Urbanisation level to 50 to 70 per cent
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. Have to be made upfront. Returns flow over long time period
IV. Cities and the New Economy
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CITIES AND THE NEW ECONOMY Cities are incubators of new ideas Cities are centres of information exchange Cities are centres of modern services Cities are incubators for entrepreneurs Knowledge industries need interaction
research institution medical institutions entertainment financial services
High Skill Workers demand high quality public services High quality cities will be the leaders of the future
IV. Cities and the New Economy
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WHAT DO WE DO? Cost minimisation 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 for regulating demand Decentralise service provision Public goods provisions by city governments More citizen participation in urban governance Mechanisms for resource generation. Expanding capital markets
IV. Cities and the New Economy
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CONCLUSIONS
We have coped well in the past
No reason why we cannot do so in the future
New challenges posed by volume of new requirements China, India, Indonesia
Local capacities must be strengthened
Decentralisation, commercialisation essential
Capital market development will need new institutions
Need for new vehicles to channel international savings to urban investment in growing cities
IV. Cities and the New Economy