Transcript Role and Contribution of Cities to the Indian Economy

By
ASCI-WBI Programme on Strengthening Urban
Management in India
1
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
2
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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I. Urbanisation and Development
URBANISATION AND DEVELOPMENT
 agglomeration economies
special machinery
fashion apparel
entertainment services
interactive services
financial services
high tech farms
software
Internet
(Contd..)
 Macro Policies Matter
openness
Price Equalization
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I. Urbanisation and Development
HOW HAVE WE DONE IN THE PAST?
1950 - 2000
 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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I. Urbanisation and Development
URBANISATION TRENDS
(PERCENT URBAN)
Region
6
1950 1970 1990 2000 2020
World
29
37
43
48
58
Developed Countries
55
68
74
76
83
Developing Countries
17
25
35
41
54
Asia
17
23
32
38
51
India
17
20
26
29
41
China
11
17
26
35
51
I. Urbanisation and Development
LARGEST CITIES IN THE WORLD
1950
Population
(Million)
New York
12
1970
Population
(Million)
Tokyo
17
2000
Population
(Million)
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
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I. Urbanisation and Development
LARGEST CITIES IN THE WORLD (Contd..)
1950
Population
(Million)
1970
Population
(Million)
2000
Los Angeles
Moscow
Tianjin
Beijing
Rio de Janeiro
Seoul
Milan
Calcutta
Karachi
Berlin
3
Chicago
1950
7
Population
(Million)
Delhi
1970
12
2000
Developed Countries
11
8
3
Developing Countries
4
7
12
Developing Asia
3
3
9
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I. Urbanisation and Development
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
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II. Planning and Management of Cities: Role of Government
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
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II. Planning and Management of Cities: Role of Government
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
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II. Planning and Management of Cities: Role of Government
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
13
ACTIVATING CAPITAL MARKETS FOR
URBAN INFRASTRUCTURE

Need many borrowers, investors and may intermediaries
Who are the borrowers?


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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
ACTIVATING CAPITAL MARKETS FOR
URBAN INFRASTRUCTURE (Contd..)

They will need credit enhancement
Who can enhance their credit?

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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..)
 Who are the lenders?

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Individuals
Mutual Funds
Insurance Funds
Provident Funds
 What does Government do?
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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
ACTIVATING CAPITAL MARKETS FOR
URBAN INFRASTRUCTURE (Contd..)
 Globalisation of Capital Markets
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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
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
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III. Role of Markets in Financing Cities
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?


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India, China, Indonesia, with more than 2 billion people
urbanising and industrialising simultaneously
1990-2030
They 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
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
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IV. Cities and the New Economy
WHAT DO WE DO?
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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
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
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IV. Cities and the New Economy