By Pedro Sousa
Cities are home to more than 50% of the world’s population, and the number could reach 70% by 2050. It seems clear governments have increasingly understood that urbanization is one of the most important global trends of the 21st century. Cities are the key drivers of global and national economic growth and have become economic and political powerhouses. According to the World Bank, 80% of global GDP is generated in cities. Since the early 2000s, three-quarters of the world’s 750 largest cities have grown faster than their national economies. New York State’s GDP is larger than that of Spain or South Korea. New York’s annual budget of $82 billion is bigger than the national budgets of 160 countries. São Paulo state is richer than Argentina, Uruguay, Paraguay and Bolivia combined. Guangdong in China is wealthier than Russia or Mexico. Mexico City has roughly 100,000 police – a larger force than the national law enforcement departments of 115 countries. The populations of mega-cities like Seoul and Tokyo are larger than those of most nation states. This has prompted the OECD to ask whether such cities are “now the most relevant level of governance, small enough to react swiftly and responsively to issues and large enough to hold economic and political power”. How countries prepare for their urban future might mean significant potential for wealth creation at all levels of government and society, with far-reaching social, economic and environmental impacts. Urbanization and economic development are very much connected, as evidenced by Tokyo, Seoul, and Singapore. Cities and good policies play a major role in the development process as “no major country has ever reached middle-income status without also experiencing substantial urbanization”.
National and city leaders have become very aware of cities’ economic potential. City leaders, in particular, have, for several years, taken actions to build competitive urban areas, that attract businesses and industries to create jobs, increase incomes, and raise productivity through innovation. By having a high concentration of productive entrepreneurs and firms, cities are able to attract skilled workers, thus achieving higher productivity. The goal is to eliminate extreme poverty and to promote shared prosperity, via the power of urban well-being and the urban livelihood. Mayors and governors have also been pushing to exercising political and economic power globally. It is no wonder that mayors are participating in international economic forums, conducting diplomacy as new actors and new voices to global governance. City governments are building their own diplomatic networks. Gothenburg, Lodz and Liverpool, have official representations in Brussels. Some examples of multilateral arrangements of subnational governments are the Local Governments for Sustainability (ICLEI), United Cities and Local Governments (UCLG) or the Cities Climate Leadership Group (C40). In The Hague, over 60 mayors established the Global Parliament of Mayors. Hong Kong and Macao are members of the World Trade Organization, whereas Flanders, Hong Kong, Macao and Madeira are associated members of the United Nations World Tourism Organization. Chicago and Mexico City signed the Global Cities Economic Partnership.
Neglecting urbanization planning and urban governance can lead to many challenges like traffic congestion, sprawl, slums, pollution, and crime. Mega-cities bring with them increased water consumption, air pollution, congestion and wastes. Almost inevitably, cities are also sources of growing environmental degradation. An estimated 70% of greenhouse gas emissions come from cities and more than 70% of energy is consumed in urban areas. So cities are now essential in the climate change agenda. Promoting sustainable cities and urbanization is a must to achieve poverty reduction and to build a sustainable future. Looking at urbanization offers a massive opportunity to conduct policy action that aims for global sustainable development.
It is relevant to note the vast majority of today’s urban growth is occurring in developing countries, which is already exhausting national and local-level capacities to adequately plan for and design a sustainable model of urbanization in some African regions. Urban growth is rising fast in Africa. By 2050, cities in the developing world will absorb more than two billion new urban residents, representing 95% of global urban growth, with African cities representing the majority of the increase. There is some criticism that the current pattern of urban growth in Africa is following the model of the last century. This means lack of public space and over-relying on industrialized forms of transport, for instance, which is seen as contributing to fragility and conflict, environmental degradation, and socio-economic exclusion. Lack of access to clean water, sanitation and other essential services is a very serious problem for 60% to 70% of people residing in Africa’s large metropolises that live in slums – a fifth of the world’s one billion slum population. Add to this, the concern of how land is being consumed to accommodate population growth. Rural population growth rate is declining, however the absolute number will still reach one billion by 2050. This will require a positive connectivity between urban and rural settlements. Thus, the urbanization policy field needs a well thought out approach where national governments and local governments around the world can benefit from knowledge sharing and experiences in the type of policies, as well as implementation.
Key to urban Africa is its infrastructure financing needs. Due to lack of resources, several African cities are facing enormous financing challenges when it comes to urban infrastructure and planning. Addressing the widening infrastructure gap is key to achieve Africa’s potential, connecting people to markets, jobs, schools and basic services, and to harness the economic opportunities of urbanization. That can only be realized with human resources, large-scale capital and technical capabilities. This means providing local governments with the financial resources and frameworks required to design and invest in local infrastructure and basic services, and ensure that growth is distributed equitably amongst the urban population.
A country to follow closely is the one that will soon have the biggest population in the world: India, home to over a billion people. The yearly pattern is clear and is rising. Up to 70% of Indians live in rural areas, 58% of whom depend on agriculture as their primary source of income. Millions of Indian citizens are leaving their traditional homes in rural towns and villages, and are heading into urban areas. According to the UN World Cities Report 2016, 500 million people currently live in 31 megacities around the world, and 9.6 million people will move to New Delhi by 2030. According to UN criteria, India currently has five megacities: New Delhi (26.5 million people), Mumbai (21.4 million people), Kolkata (15 million people), Bengaluru (10.5 million people), and Chennai (10.2 million people). The rural migration to urban areas is growing rapidly, which will create 2 more megacities: Hyderabad (12.8 million by 2030) and Ahmedabad (10.5 million by 2030). This phenomenon is and may continue to be overwhelming if not addressed. The UN report points out that many millions of people who move to India’s growing cities will miss out on the economic benefits of urban living.
Despite the uncertainty in the global economy, India has been the world’s fastest-growing large economy, outpacing China over the past year. The IMF sees India with a robust growth rate of 7.6% in 2016 and 2017. India ranks 39th among the world’s most competitive economies, up 16 places from last year, according to the World Economic Forum’s Global Competitiveness Report 2016-2017. Only about 12.5 million Indians – roughly 1% of the population – paid tax on their earnings in 2013. There are some experts who question India’s ability to repeat China’s record of sustained, fast growth. This type of economic growth has the potential to improve living standards. However, India has the largest number of poor in the world and it is challenging to lift 1.2 billion people out of poverty.
Prime Minister Modi has been pushing for policy changes aimed at boosting growth and improving public finances. India’s industrial malaise is poor productivity. The Modi government launched the “Make in India” campaign that encourages global companies to use India as a manufacturing export hub. The National Manufacturing Policy (NMP) aims to raise the share of manufacturing in India’s GDP to 25% by 2022 and create 100 million additional jobs in the sector. The viability of an export-led manufacturing model, however, is increasingly being questioned. The Indian government expects to meet its budget deficit target of 3.5% of GDP this fiscal year. India is the world’s fastest-growing importer of crude so the decline of commodity and oil prices has helped meet targets to lower inflation. India’s Finance Minister Arun Jaitley has stressed India’s need to urbanize rapidly in the next two decades in line with its present development in order to relieve the pressure on agriculture. Jaitley belives urban centres in India will become the hubs of growth over the next two decades.
Other Asian economies like Japan, South Korea, Taiwan, are the example of how to benefit from urbanization and technological advancement. These countries linked their economies to the rest of the world creating a massive market for their industries and services. China did the same using a model of low-cost mass production, using urbanization as industrial hubs. India has around 30% of its population in urban areas. This figure will substantially increase and an urban India will become a hub of growth. To achieve sustainable inclusive growth, it must develop the necessary infrastructure like water, transport, roads and sanitation. Substantial land expansion has been key to the growth of Asian cities. China is planning to build additional urban space equivalent to ten times that of the area of New York City, during the next ten years. Urban land area is projected to more than double between 2010 and 2050, in South Asia. Cities that have planned for expansion by building roads and providing public transport, basic services, and affordable housing, are very different from those that have not made such investments in strategic planning for urban expansion. Take the traffic congestions, slums and pollution levels of Delhi, Dhaka, Jakarta, and Manila, as example.
Thus, it is vital to understand how big emerging countries have and are handling the challenge of urbanization and what were the best practices that other countries, like India, might need to adopt. India is in a transition phase and looking for a solution that would be inclusive and collective. Inclusion, the right to shelter and the provision of sustainable housing and related services is one of the key themes of the SDG agenda, given the expanding urban slums and an increasing demand for sustainable housing. The Government of India has conceived an urban renaissance that calls for decentralization of powers and capacities of local governments and empowering the aim to pursue global standards and the Sustainable Development Goals. This is based on five pillars: a) Empowering ULBs especially the Mayors, b) Public participation in policy formulation and execution, c) Building Capacity to deliver on goals, d) Changing urban planning frameworks and e) making city governments financially self-reliant.
The lack of good strategic planning for urbanization is in part due to governance and politics. Capable and effective urban governance involves decision-making supported both nationally, and, subnationally, prioritizing investments in cities as a priority for development. The much needed funding is not made available from national budgets, and projects take a short-term perspective, because votes to remain in power matter. So the challenges are there for urban governments. To tackle these challenges, cities and their leaders must effectively use policy levers that focus on economy-wide interventions as well as specific industrial sectors, such as institutions and regulations, infrastructure and land, skills and innovation, and enterprise support and finance. A well designed and well implemented urban planning that brings up jobs, affordable housing, public transport, improves health and education services, is a necessary driver of sustainable, equitable and prosperous societies. All of this, and the wave of local leaders and city dialogue platforms that are emerging, demand that urbanization is addressed by economic policy makers and by the international macroeconomic coordination system interested in successfully implementing the SDG agenda.