Sun, Mar 03, 2013 - Page 9 News List

The benefits of building sustainable cities right

As urban migration increases in the developing world, nations are being encouraged to invest in coordinated urban development to avoid future problems

By Mahmoud Mohieldin and Zoubida Allaoua

For example, Seoul’s population more than tripled from 1960 to 2000. South Korean policymakers, anticipating the challenges, strengthened institutions for valuing and pricing land, trained a cadre of appraisers to ensure transparency in the valuation process, and publicly disseminated land-value information. At the same time, the government supported construction of high-rise residential buildings capable of housing the growing urban population and developed multiple transport modes, including highways, rail networks and subway lines, which have helped to connect people with employment opportunities within and among cities.

Likewise, leaders in Singapore and Japan treated public transport as a crucial aspect of land-use plans. As a result, they boast some of the world’s lowest energy consumption as a share of GDP.

In order to encourage citizens to use public transport, policymakers in Tokyo reduced subsidies for private cars, so that driving one became five times costlier than using public transport. Complementary investment in high-speed inter-city transport has reduced travel times between Japan’s two largest agglomerations, Tokyo and Osaka, which are more than 500km apart, to less than two and a half hours, thus integrating labor and housing markets and enhancing productivity.

Of course, financing rapid urban development requires significant capital outlays to build efficient systems for transport, water provision, solid waste management and sewage removal and treatment.

As these investments bolster economic growth, increased tax revenues would imply more sustainable financing, as would local governments’ ability to leverage land markets and approach local-currency debt markets.

In Mumbai, the auction of 13 hectares of land in the new financial center, the Bandra-Kurla Complex, generated US$1.2 billion. This amounts to more than 10 times the Mumbai Metropolitan Region Development Authority’s total expenditure in 2005 and six times the total value of municipal bonds issued by all local governments and utilities in India in more than a decade.

Similarly, in Istanbul, the auction of an old bus station and government building in 2007 generated US$1.5 billion — more than the city’s total expenditures and infrastructure investments in 2005. Colombia’s finance ministry has also developed Findeter, a bond bank that finances regional urban infrastructure projects by providing resources to financial intermediaries that allocate them to subnational authorities.

By building sustainable cities, policymakers can support social and economic development, while minimizing environmental damage. Managing urbanization as it occurs, rather than struggling to fix cities later, is an opportunity that developing-country leaders should not miss.

Mahmoud Mohieldin is managing director at the World Bank Group. Zoubida Allaoua is director of the World Bank’s Urban and Disaster Risk Management Department.

Copyright: Project Syndicate

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