51860 Systems of Cities Harnessing urbanization for growth and poverty alleviation THe World Bank urBan and loCal governmenT STraTegy Systems of Cities Integrating national and local Policies Connecting Institutions and Infrastructure Making pro-poor Supporting city policies a city economies priority Focusing on the core elements of the city system Promoting Encouraging a safe and progressive sustainable land and urban environment housing markets The square in the circle is an iconic symbol of the ideal city, spanning cultures across the globe, from the Middle East to Asia, from Latin America to Africa and Europe. The square is a metaphor for the house, and the circle is the universe encompassing it. Foreword From the earliest times, cities have been cen- their constituents, governments to collect ters of democracy, creativity, and economic taxes, taxpayers to demand efficient servic- activity. Why? Economics and geography in- es, investors to start new businesses. This form us that density and agglomeration are is where collective voices are heard and ac- essential for productivity and growth. Cities countability matters. also serve as catalysts for collective action, decision-making, and accountability. Successful cities change their ways, improve their finances, attract private investors, and The World Bank is putting forth its new Urban take care of the poor. The new Urban and and Local Government Strategy at a critical Local Government Strategy will help govern- time. For the first time in history more than ments at all levels make cities more equitable, half the world's people live in cities. Over 90 efficient, sustainable, and environmentally percent of urban growth is occurring in the friendly. The strategy draws on two principles. developing world, adding an estimated 70 mil- First, that density, agglomeration, and proxim- lion new residents to urban areas each year. ity are fundamental to human advancement, During the next two decades, the urban pop- economic productivity, and social equity. ulation of the world's two poorest regions-- Second, that cities need to be well managed South Asia and Sub-Saharan Africa--is ex- and sustainable. pected to double. The strategy unfolds along five business It is estimated that today one billion people lines: (1) city management, governance, and live in urban slums in developing countries. finance, (2) urban poverty, (3) cities and eco- Improvement in urban conditions, as demon- nomic growth, (4) city planning, land, and strated by many successful programs around housing, and (5) urban environment and cli- the world, shows that slums can become vi- mate change. These set out the objectives brant and well integrated parts of a city, as in and benchmarks for the Bank to monitor its Senegal, Singapore, Thailand, and Vietnam. financing and policy advice. Most of our cli- ents still face an immense lack of resourc- The demands of poverty alleviation, climate es, and it will take some time until all the change and sustainable growth will put to- poor will be fully integrated in the city tis- day's developing cities to the test. An estimat- sue. For this reason, the new strategy calls ed 70 percent of greenhouse gas emissions for a broader-based, scaled-up approach to come from cities and more than 70 percent urban poverty, focusing more than ever on of energy is consumed in urban areas. This policies and actions that can create livable places cities at the forefront of the climate cities. change agenda where denser, more com- pact cities will be the essential urban form in The World Bank's new Urban & Local Gov- the years ahead. ernment Strategy aims to be a key element in helping civic leaders and national authori- The new strategy also inaugurates the ties think through, and implement, policies Decade of the City, a decade that will be re- and programs for the benefit of their peo- membered for recognizing cities at the core ple, their cities, and their countries. I hope of growth and human development. Never you will take a moment to look through this before has there been so much interest in cit- strategy and learn how we hope to make a ies: city associations, citywide programs, city- difference. university and private sector partnerships. In developing countries, cities often provide the Katherine Sierra first opportunity for elected officials to meet Vice-President, Sustainable Development 1 Contents Foreword 1 The new Urban Strategy 3 A system of cities--driving growth, reducing poverty 4 Focusing on the core elements of the city system 6 Making pro-poor policies a city priority 10 Supporting city economies 12 Encouraging progressive urban land and housing markets 16 Promoting a safe and sustainable urban environment 20 Cross-cutting approaches to reinforce the strategy 24 Copyright © 2009 The International Bank for Reconstruction and Development/The World Bank Photos were collected from World Bank staff, the World Bank's Photo Library, the Institute for Research and Urban Planning of Curitiba, and Stock.xchng photographers Jurgen de Clercq, David Garzón Rodríguez, Cécile Geng, and 2 José A. Warletta. The new Urban Strategy Urbanization is a defining phenomenon of their urban planning regulations to enable this century, and the developing world is density and to prevent demand pres- the locus of this demographic transforma- sures for scarce housing and land to bid tion. Nearly two billion new urban residents up prices excessively. are expected in the next 20 years, and the urban populations of South Asia and Africa · The costs of not dealing now with the are likely to double. Much of the growth will coming urban growth will be excessive be in small and medium-sized cities; even and difficult to reverse. today more than half the world's urban population resides in cities smaller than · Actively fostering agglomeration's ben- 500,000. This raises questions about man- efits and managing congestion will have aging urbanization and delivering World big payoffs for economic growth and Bank assistance for urban development in poverty reduction. the coming decade. · To reach the increasing number of sec- With cities accounting for some 70 percent of ondary cities, where much urban growth global GDP, recent economic thinking is re- is happening today, the Bank will expand shaping the Bank's approach to urbanization. on its wholesaling approaches by work- A new paradigm, supported by a growing lit- ing through financial intermediaries and erature, underscores the benefits of urbaniza- by developing national and state pro- tion, driven by rising productivity, fluid labor grams that retail financial services and markets, and greater market access. For many technical support to local governments. today, the question is not how to contain ur- banization--it is how to prepare for it, reaping The new Urban Strategy realigns the Bank's the benefits of economic growth associated urban business with five business lines con- with urbanization while reducing congestion, sidered critical for cities and local govern- crime, informality, and slums. Urbanization, if ments in the decade ahead: properly managed, can also address the cli- mate change agenda through the design of · Focusing on the core elements of the city denser, more compact cities that increase system: City management, finance, and energy efficiency and reduce travel time and governance costs for urban residents and businesses. · Making pro-poor policies a city priority: The main messages informing the World Reducing urban poverty and upgrading Bank's new Urban and Local Government slums Strategy: · Supporting city economies: Cities and · Urbanization is too important to be left economic growth to cities alone--it requires national atten- tion to critical policy areas, such as land · Encouraging progressive urban land and and housing markets, that fall beyond the housing markets: Urban land, housing, purview of a single city administration. and planning · Cities will need to be equipped to handle · Promoting a safe and sustainable urban new residents--this will require being environment: Urban environment, climate more proactive, for instance, in updating change, and disaster management. 3 A system of cities--driving growth, reducing poverty Urbanization in the developing world was World Development Report 2009: Reshaping once considered too fast and unmanage- Economic Geography identifies higher densi- able, something to be resisted and control- ties, shorter distances, and lower divisions as led. Efforts by many national, state, and local the building blocks for economic success. It governments have been devoted to curbing also points out that no country has grown to it. Indeed, this thinking represents the old middle-income status without industrializing paradigm. Many policymakers now recog- and urbanizing. Building on these messag- nize that urbanization is not only inevitable--it es, the Bank's new urban strategy is based is also a powerful force for economic growth on facilitating spatial efficiency in production and poverty reduction. This new paradigm while addressing congestion and internal di- is grounded in the notion that density--and visions within urban areas (box 1). The focus the urbanization that drives it--is essential to is on harnessing the potential of urbanization achieving agglomeration economies and pro- to deliver equitable and inclusive growth and ductivity gains. Function, not size, is the met- poverty alleviation. ric for measuring a city's performance. So, how can urbanization be managed to harness Policy discussions should start with the in- its potential for economic development? stitutions and instruments that can promote Box 1. Systems of city clusters arrive daily from suppliers in the zone by a route that generally takes not more than one hour. In China's current 11th Five-Year Plan (2006­2010) practice, we are a single vast factory scattered is encouraging city clusters to become the main across the territory. The existence in a relatively form of urbanization. These clusters are de- small area of everything we need to make the signed to improve connectivity between large, whole range of audio products is the region's medium, and small cities, each forming a city strong point. In other places the cost of labor system. may actually be lower, but around their factory there is nothing else." China's encouragement of these city systems is motivated by the development paths of its two Improving the fluidity of markets for land, labour economic powerhouses: the Pearl River Delta and products hold the key for successful ur- and the Yangtze River Delta. The Pearl River banization--it allows the same parcel of land to Delta, encompassing Guangzhou, Shenzhen, accommodate higher value production, helps Dongguan, Foshan, and other cities, is home connect poor people with economic opportu- to 2.2 percent of China's population, but ac- nities, and lowers transport costs to facilitate counts for 10.3 percent of GDP. The Yangtze economies of scale and specialization. In fact, River Delta, encompassing Shanghai, Suzhou, integrating the institutions that govern the trans- Hangzhou, Nanjing and other cities, has only fer and use of agrarian and urban land is likely 6.7 percent of China's population and accounts to yield high payoffs in economic prosperity and for 15.7 percent of China's GDP. Why are these harmonious development. places successful? Consider Hunan Province, where the cities of Much of their success builds on exploiting Changsha, Zhuzhou, and Xiangtan are coop- economies of scale, along with agglomeration erating to build expressways and railways, im- economies from intraindustry and interindustry proving connectivity among three cities and interactions. In the words of the CEO of one of with their hinterland. A regional cooperation the Pearl River Delta's largest electronics man- plan specifies that market prices will allocate ufacturers, "The materials and components land for different uses and promote land inten- that we use in our 49 production lines today sification in central city areas. 4 economic density and manage social and en- vironmental costs. Box 2. New diagnostic frameworks to As countries develop and economies grow, support national some places "take off," with rising economic urban strategies densities that attract people to live in or near towns and cities. The urban share of the pop- Planning urbanization will require national ulation rises sharply--from about 10 percent urban strategies supported by new diagnos- to 50 percent--as countries grow from low tic frameworks. The Bank will assist coun- incomes to lower middle incomes of about tries in responding to urbanization pressures $3,500. by piloting a new diagnostic framework and analytical tool. The Urbanization Review will Between 2000 and 2005, the average urban be a client-driven instrument to examine population growth for low-income countries demographic trends nationally and within was 3 percent a year, more than twice the critical urban agglomerations. It will look at rate for middle-income countries and more impacts on land and housing availability and than three times that for high-income coun- affordability. It will also look at mobility and tries. This spatial transformation is closely re- access to jobs and critical infrastructure ser- lated to the sectoral transformation of coun- vices. It will monitor the urban-rural spatial tries from agrarian to industrial and then to transformations. The Urbanization Review postindustrial economies, helped by a healthy will inform country assistance strategy for- farm sector. mulation with appropriate policy and insti- tutional responses in countries where rapid When agriculture is doing well, people who urbanization requires a strategic plan. move are "pulled" by prospects of a better life in cities--not "pushed" from rural areas. Not only does this make them better off, it also administering land rights should be spatially improves the conditions in villages they leave neutral--not distinguishing whether a place and increases the productivity of cities where is rural or urban. In places with low urban they settle. shares, assigning property rights will provide incentives to farmers for specializing in high- What are the policy priorities for successful er value crop production or making the land urbanization? available for urban uses. Urbanization policies should focus on increas- Urbanization is not a challenge exclusively for ing the efficiency of the transformation from cities, so addressing the new urban agenda a rural to an urban economy, in the process will require much closer collaboration across balancing agglomeration benefits and con- all tiers of government. To be effective, devel- gestion costs from concentration. The most oping countries will need efficient, multitiered important market failures to be addressed are policy coordination mechanisms to support those associated with land markets. Increas- policy formulation and coordinated interven- ing the spatial efficiency of production is inher- tions between national and local govern- ently linked to how the use of the same piece ments. Metropolitan and regional agencies of land changes to accommodate economic may be necessary where there is a mismatch density. For places with incipient urbanization, between municipal boundaries and the urban it becomes important that land is registered economic footprint in order to deliver servic- and property rights are allocated and protect- es more effectively and to promote economic ed. The national institutions responsible for growth. 5 Focusing on the core elements of the city system This business line assists cities and local on these core elements of the city system to governments in planning and financing function effectively (box 3). service delivery, strengthening urban gov- ernance, and making city management more effective. Over the past decade, de- City management centralization has devolved more authority to local governments, without the corre- If urbanization is to be harnessed for its po- sponding and necessary fiscal decentrali- tential to deliver growth and improved liveli- zation. This business line aims to support hoods for urban residents, cities and local updating legal and regulatory frameworks, governments need to be positioned to exploit building sound accountability mechanisms that potential. Yet a recurring theme across for local governments and utilities, and most of the developing world is the ambiguity promoting a mix of financing strategies by and confusion over the roles and mandates segmenting local governments into those of national, state, and local government ac- that can access market-based finance and tors in delivering services at the local level. those that will need technical assistance and performance incentives to access the Great strides have been made in recent market. These measures will be under- years in devolving authority to the local gov- pinned with improved local revenue mobi- ernments, as countries have increasingly lization, data collection, and monitoring at pursued decentralization. For many, how- the city level. ever, this process has been characterized by mixed signals, inconsistent legal and regula- Understanding urban development through a tory frameworks, and wide discrepancies be- city system approach departs from previous tween assigned and actual responsibility for strategies. Like all systems, a city depends delivering services. This is often the result of a on the smooth functioning of its constituent mismatch between expenditure and revenue elements. Under the new Urban Strategy, assignments, conflicting mandates between the focus is on the core elements of the city national, state and local actors, and uneven system--management, finance, and gover- capacity across local governments. nance. These three core elements need to function well for a city to deliver on its man- Professional development. Capacity build- date, including the delivery of vital services to ing to improve local government manage- the urban poor. ment is essential. But it needs to go beyond the provision of training to include reforms that Good management and information systems, change the "rules of the game," using incen- coupled with good leadership, can be inef- tives and rule-based policy frameworks. Pro- fective if not supported by adequate financ- viding resources to the local government tier ing. Similarly, a city without a commitment on a performance basis can instill a sense of to good governance and accountability will competition for resources and act as an in- have difficulty mobilizing tax revenue from its centive to reform. These reform measures citizens and financing from the market. These could range from financial management, ac- core elements of the city system remain the countability, local revenue collection, econom- most basic and important focus in the de- ic performance, and a host of other areas. cade ahead. Other methods that have proven success- City management, finance, and governance ful are professional certification programs are at the core of the Bank's urban business for municipal staff that elevate, profession- lines. It comprises the largest number of proj- alize, and promote their development. The ects and the highest lending volume. All other key is to design a system that recognizes 6 business lines in one way or another depend heterogeneity across the local government Box 3. Giving Ugandan local A second complementary program supported governments power over similar efforts with additional attention to build- purse strings ing local government capacity. The World Bank provided a $75m grant and $50m in additional In the mid-1990s, Uganda's overburdened cen- credit toward this effort. Other governments tral government implemented reforms to decen- joined: Danish International Assistance provid- tralize service delivery--to give local authorities ed $2.4m, Austria $0.3m, and the Netherlands more power to deliver basic services. Local $7.5m. control is preferable. Compared with regional ministers, local staff can better target needs and Local authorities thrived with the injection of make sure funds are delivered more efficiently. financing and expertise, letting them better monitor budget performance and resource But for this to work, local governments needed an allocation. By 2007, revenue bases in some overhaul: training, better accountability, more par- cases increased by 20% or more. And all major ticipatory decisionmaking, and robust oversight. local governments had three-year development plans and were submitting accounts to the To this end, the World Bank provided financial Ugandan auditing office on time. support to streamline the transfer of develop- ment funds from the central to local govern- With a renewed focus on strengthening the ments, boosting local capacity. The first project, policy and institutional capacity of local govern- the Local Government Development Program, ment, the central government has institutional- helped develop software for monitoring fund- ized new training schemes. And thanks to World ing allocations and was supported by $80.9m Bank advice and technical assistance, Uganda in World Bank funding and $9m from the Ugan- now has a bevy of accredited public and private dan national government and participating local training service providers that competitively bid governments. for government contracts. sector and provides an equitable basis for regions, working through the Bank's regional local governments of all sizes and capacities urban hubs in Marseille and Singapore and to participate. Block grants linked to perfor- with other regional partners. mance criteria are one way of providing such assistance. Community engagement. Building on suc- cessful local government and community- Benchmarking performance. Helping cit- based organization partnerships, the Bank ies strengthen data collection and manage- will share good practices and promote pro- ment systems will be a key focus of urban grams that improve community engagement development support in the decade ahead. in addressing urban poverty, crime, and vio- The new Global City Indicators Program, lence. For instance, practical measures sup- established by the Bank with other develop- ported through investment projects could in- ment partners, is envisaged as a facility that clude improving street lighting and renovating will help in that regard. The program, driven dilapidated public buildings or facilities to as- by cities, aims to provide a standard set of sist in bringing down crime and violence. indicators that will enable cities to compare and benchmark their performance against Technology. The Bank will also assist clients their peers. Using a web-based platform, the in accessing the benefits of information and program provides a framework for cities to communication technology advances and learn through peer networks of other cities, in support judicious efforts to promote the use their preferred mode. It is now rolling out to all of new technologies by cities where there is 7 demand. Advisory support in this domain can to strengthen service delivery. This support will help cities improve service delivery, enhance be provided in preinvestment planning within productivity, reduce costs, and increase local the city development strategy framework and revenues. The Bank will support this effort help to develop bankable investment projects by preparing an Urban ICT Toolkit that will with associated budgeting for recurrent operat- outline key program and policy areas for ICT ing and maintenance costs. integration to support cities and bring good practices from around the world. Urban governance Infrastructure service delivery The governance agenda is expanding in urban operations, and over the last six years there Urban transport infrastructure and services has been a 60 percent increase in the lend- are the backbone of an efficient city system. ing and capacity building assistance for urban Rapidly growing urban populations and rising governance. But much of this support has numbers of private vehicles are overwhelming been focused on supply-side dimensions, in- many cities, resulting in increased congestion, cluding improvements in systems and internal less mobility, more accidents, and poor air capacity, with less emphasis on demand-side quality. Responses to these intraurban chal- governance, including participation in budget- lenges include an emphasis on coordinating ing and investment planning and increasing land use planning and transportation and pro- the voice of citizens on service delivery. moting affordable public transport, with incen- tives for proper maintenance. Urban-rural and Participatory budgeting approaches in proj- interregional linkages are also important in ect design can often slow implementation of enabling a city system to function beyond the investments. Going forward, such participa- city core through connective infrastructure. tory approaches, vital to ensuring effective- ness and impact, should be introduced in the Another critical issue is the inadequate provi- preinvestment phase of the project cycle and sion of basic infrastructure--water and sani- benefit from city development strategies and tation, waste disposal, and power--to urban other participatory upstream instruments. residents. More than 50 percent of the urban population in South Asia and 40 percent in The new Strategy emphasizes expanding Sub-Saharan Africa lacks access to sanita- demand-side governance approaches. These tion services. interventions will include provision of policy guidance and sharing good practices in the These deficiencies have real economic con- implementation of service delivery surveys and sequences. In Latin American cities, poor or citizen report cards. Of critical importance will inadequate infrastructure is estimated to have be mainstreaming these practices in the ways reduced urban economic output by 10 to 15 cities and local governments routinely conduct percent. The impact seems to be even higher their business, emphasizing a client-driven, on small firms and home-based enterprises, end-user orientation in service provision. which cannot afford more reliable private sources, such as power generators and wells for water. Municipal finance In countries with severe infrastructure service National governments typically have devolved gaps and backlogs, the Bank will assist by service delivery and expenditure responsibilities supporting inventories of these backlogs, along to the local level but have retained control over with support to local governments in conduct- significant revenue sources. Central govern- 8 ing economic analysis and investment planning ments have tended to maintain decisionmaking power over taxes that can be levied locally, can access commercial credit and those that the tax rates, and user service fees that local may need subsidies. In this area, Bank urban authorities can charge for basic service de- teams will work with IFC colleagues in the livery. But local governments seldom tap the Subnational Finance Program to develop in- full range of local revenue sources available to struments that enable market segmentation, them, collecting only a fraction of the revenues removing subsidies to local governments that legally due under the taxing arrangements in can access finance, while providing technical place. As a result, most local governments assistance and support to those that have have a narrow fiscal base, with sharply limited not yet reached this stage. discretion over own-source revenues. Even when local authorities have the legal authority Performance grants and municipal con- to mobilize own-source revenues, they have tracts. Where local governments have not yet been reluctant to fully exercise it. reached credit-worthy status, performance grants and municipal contracts can provide Untied revenue-sharing. Clearly defined, incentives for reform and capacity strength- untied revenue-sharing between central and ening. Performance benchmarks may include local governments can yield local government such items as timely preparation of budgets receipts that are transparent legal entitle- and financial reports, greater citizen participa- ments. This will allow local governments to tion in setting budget priorities, better mainte- allocate the revenues received to expenditure nance of infrastructure assets, and measur- priorities at their discretion. They would share able improvement in local service quality or the revenues of buoyant tax sources, like the coverage. Local governments that perform VAT or income tax, that require uniform na- well or meet the contractual standard are re- tional administration, while retaining decision- warded with additional grant funds. Poor per- making power over the uses of funds. formers in principle should be penalized by a reduction in transfers. The Bank has assisted governments in ratio- nalizing intergovernmental transfer arrange- Blending financial instruments. A flex- ments. Bank advisory support will continue ible blend of financing instruments will ad- to focus on greater use of untied revenue- dress a wide array of different circumstanc- sharing and of performance grants or munici- es. Wholesaling will be applied to expand pal contracts that reward local governments reach and coverage to the growing popu- for specifically defined improvements in local lations in secondary cities. Intergovernmen- service delivery and management. tal transfers can serve as an on-granting mechanism to local governments that are Subnational finance. In the next few years, not creditworthy within a specified reform public institutions are likely to fill much of the program. Funds channeled through finan- subnational credit gap, just as international cial intermediaries will be based on market institutions fill part of the national credit gap. principles. Market-based financing to local This will create an opportunity for innova- governments can be extended through the tive design in using public institutions to help Subnational Finance Program, accompa- channel private savings to the subnational nied by efforts to develop the market for market, without displacing private institutions financial services, removing legal and regu- already active in the market. latory obstacles, developing local currency instruments and risk-sharing and guarantee More effort is needed to structure and seg- instruments to facilitate local and interna- ment the municipal market into ones that tional financial collaboration. 9 Making pro-poor policies a city priority Narrowly focused neighborhood slum up- Local initiatives have also been effective when grading interventions, while generally ef- linked to social programs and carried out in fective, have fallen well short of addressing partnership with local community organiza- the magnitude and scope of expanding in- tions. For example, programs in Jamaica and formality and slums. In addition to pursuing Brazil combine microfinance, land tenure, sound macroeconomic policies aimed at crime and violence prevention, investments in enhancing growth, cities need to be better social infrastructure for day care, youth train- equipped to address urban poverty. This ing, and health care with local community ac- business line aims to support cities and tion and physical upgrading of slums. national governments in addressing urban poverty by expanding policy-based inter- There is also an emerging role for the private ventions and scaling up investments in serv- sector in slum upgrading as businesses re- ices for the poor citywide and nationwide. It alize the potential purchasing power at the will be underpinned by urban poverty analy- base of the economic pyramid. An enabling sis to guide policy decisions. Partnerships environment for small private service provid- will be encouraged with nongovernment ers can help to facilitate private sector in- organizations, community-based organiza- vestments in slums. Microfinance has been tions, and the private sector. demonstrated to be a powerful instrument for poverty reduction that enables the poor to Many of today's urban poor in developing build assets, increase incomes, and reduce countries live in remote locations due to the their vulnerability to economic stress. Policy- high cost of housing in the city core. Living in based lending aimed at better targeting of peripheral urban locations, particularly with- subsidies to the poor while enhancing ac- out adequate access to transport services, cess to mortgage finance for middle-income can mean exclusion from a range of urban groups have had positive impacts for the facilities, services, and jobs. In many areas, urban poor--and for housing outcomes more neighborhood stigma, which can reduce generally--in Brazil, India, and Mexico. peoples' access to jobs and increase other types of discrimination, is also a major con- Broad-based policies. Urban poverty re- straint for the poor. duction strategies will take a two-pronged approach. First, they should include proactive Several countries with national approaches policies that promote macroeconomic stabil- to slums have reduced or stabilized slum ity and growth, well defined property rights, growth in the last 15 years. In Brazil, Co- a good investment climate, an attractive in- lombia, Mexico, South Africa, Thailand, and centive framework, functioning land and labor Tunisia, political commitment at the central markets, and investments in education and government level has led to large-scale slum infrastructure. In many countries, urbaniza- upgrading and service provision for the poor tion has helped to foster this growth and thus through legal and regulatory reform on land can reduce urban poverty over the long term, policy, regularization programs, and inclusive providing new income opportunities for rural policies. migrants, and through the second-round im- pact on those who stay in rural areas. Among programs aimed at the urban poor, slum upgrading is probably the most com- Scaling up services. The second approach, mon. Slum upgrading programs have a long equally vital, involves working with countries history, becoming quite popular in the 1970s to scale up slum upgrading and services for with a shift away in the mid-1980s. This shift the poor to a national scale. Programs im- has been attributed to donors' focus on hous- proving living conditions in slums through ing finance, adjustment loans, and public ser- extending affordable services to slum dwell- 10 vice privatization. ers and investing in upgrading can have Filling knowledge gaps. Increasing support Box 4. Millennium for analytical and diagnostic work on urban Development Goal for poverty will help fill knowledge gaps and pro- slum improvement vide the basis for better designed programs and policies. While the past decade has gen- Millennium Development Goal 7 sets the ob- erated substantial new information on the jective for urban poverty alleviation by calling characteristics of urban poverty, there are still for the improvement of the lives of at least major knowledge gaps. Cities often lack the 100 million slum dwellers. Estimates sug- tools to diagnose urban poverty and assess gest that around one-third of the urban pop- the extent to which their policies are pro- ulation in developing countries--nearly one poor. Many cities lack even the most basic billion people--are living in slums. Slums are information on who the poor are, how many generally characterized as informal settle- there are, and where they are located. ments with poor quality housing, limited access to services, high densities, and in- Putting the poor on the map. Building an secure land tenure. Insecure tenure puts information base at the city, country, region- the urban poor at constant risk of eviction, al, and global levels, as well as the capac- prevents them from building assets and ac- ity to use the information, is a top priority. cessing credit, inhibits using one's home for New tools such as geographic information income-generating activities, and does not systems and poverty mapping are important allow for investments in service provision. instruments for urban poverty analysis. New Countries farthest from reaching the MDG analytical tools, such as the Vulnerability target on slums are mainly in Sub-Saharan Assessment, are being developed to support Africa, where urbanization is rapid and local cities in their efforts to collect and analyze governments lack the capacity to accom- data. The Assessment is designed to survey modate new residents. and analyze the vulnerability of populations in urban areas based on their multiple depriva- tions, as well as the risks to climate change enormous benefits in health outcomes, help impacts due to their precarious location in cities to adapt to the risks of climate change, informal settlements. It will include a map- reduce environmental and social costs, and ping of slums and vulnerable populations as generate new employment opportunities. In- a basis for targeting assistance to the urban novative approaches now provide important poor. opportunities to improve service provision, such as delivering output-based aid, offer- Safety nets. Specifically designed social ing pro-poor incentives to utilities and the programs and safety nets for the urban poor private sector, and creating an enabling en- need strengthening. Conditional cash trans- vironment for small private service providers fers are particularly relevant in times of finan- while ensuring quality and affordability for cial crisis when poor families may deem it consumers. necessary to withdraw children from school to seek employment. Workfare programs or Going forward, the Bank is partnering with labor intensive public works projects can also the Cities Alliance in exploring ways of scal- be very effective in urban areas to provide ing up to national approaches. In this context, income support and short-term work oppor- the Bank aims to develop more policy-based tunities, offer on-the-job training for unskilled approaches that will tackle the difficult issues workers, and construct or rehabilitate needed related to land and service delivery in informal public infrastructure. To maximize the impacts settlements. This will pave the way for a more on the urban poor, works can be carried out comprehensive approach to upgrading at the in low-income settlements, hiring local resi- national level. dents for slum upgrading activities. 11 Supporting city economies With cities as the engines of economic What are the priorities for urbanization poli- growth, this business line outlines a range cies in cities and towns in intermediate and of strategies cities can pursue to drive advanced stages of urbanization? growth. They include improving the sub- national investment climate, increasing In addition to facilitating density is ensuring competitiveness, and partnering with the that urban settlements are well connected to private sector. Cities can also develop cul- each other to gain from complementarities tural heritage assets linked to sustainable in their production structures. Market towns tourism development and, in postindustrial facilitate internal scale economies for firms, cities, use brownfield redevelopment and while also serving as conduits for marketing urban revitalization to transform idle land and distributing agricultural produce. Medi- and property into productive re-uses. New um-size cities provide localization economies tools are also being tested to help cities de- for manufacturing industries--benefits that velop market intelligence to attract new re- come from the co-location of manufacturers tail investment, financial services, and real within one or two industries that can benefit estate developers to underserved inner-city from supply chain linkages. And the largest areas. cities provide urbanization economies, char- acterized by diverse facilities that foster inno- One of the main insights from economic vation in business, government, and educa- thinking on geography and economic devel- tion services. opment is that firms in many industrial and business service industries value agglomera- As demand for land bids up prices in metrop- tion. They prefer to concentrate close to other olises, investors make decisions on relocating firms in the same or related product lines, businesses--weighing the costs of wages, and in locations with good access to domes- rents, and congestion with the benefits of ag- tic and international markets. This economic glomeration. It is common for manufacturing concentration accelerates when countries lib- activities to deconcentrate from city centers eralize and open to trade. to their surrounding suburbs--but not for services. In India, liberalization in the early 1990s led to greater concentration of industry in port cit- The stock and quality of electricity networks, ies and metropolitan areas. Recent evidence road and other transportation systems, and suggests that just 20 cities--with good mar- telecommunication systems matter most for ket access--accounted for some 60 percent national growth. In India, the quality of transport of private manufacturing investment in India interconnectedness between cities is closely between 2000 and 2005. Similarly in China, related to urban growth and urban produc- foreign firms entering after the "open door" tivity. Further evidence shows that improving policy in 1978 have preferred to locate in cit- urban airport accessibility and size in countries ies with a large industrial base and a history such as Uzbekistan and Honduras can reduce of foreign investment. total air transport costs by 10 percent. The benefits of agglomeration have been well Similarly, improving urban seaport efficiency, documented in China, Japan, Korea, and port infrastructure, and handling can reduce Malaysia. China is perhaps most revealing, shipping costs by more than 12 percent. In with 50 percent of GDP generated in coastal international trade, this is equivalent to reduc- urban agglomerations accounting for only 20 ing the distance between origin and destina- percent of the territory. Many of the Bank's tion by 500 miles. These findings stand up clients have cities that would like to emulate in other sectors of economic infrastructure China's experience, and local economic de- and in other regions. In Sub-Saharan Africa, 12 velopment approaches are in high demand. power failures in Tanzania account for the equivalent of a 10 percent sales loss for the Such data have been used to define appropri- median manufacturing firm. ate entry points for technical assistance and investments in improving a city's economic The operating scale of urban and metropoli- prospects. Going forward, the Bank will ensure tan economies often does not coincide with appropriate linkages of subnational Investment their physical and administrative boundar- Climate Assessment and Doing Business data ies. In many countries, no institutional entity with the design of the next generation of local covers the economic footprint of the urban economic development projects. or metropolitan economy. So, decisions on infrastructure investments and its financing Supporting urban regeneration. For post- are made through complex (and inefficient) industrial cities in transition, the Bank can negotiations between central government, assist by supporting urban regeneration and often multiple municipalities, regional or state brownfield redevelopment approaches (see authorities, and the private sector. A critical boxes 5, 6, and 7). While the Bank's engage- part of the new urban strategy involves filling ment in these areas has been somewhat lim- this void, with support for both infrastructure ited, growing demand, particularly in Eastern decision-making and its financing. Fostering cities as gateways. At the national Box 5. Cultural heritage and regional level, policies will need to enable assets promote cities to function as gateways to international local economic markets and as facilitating agents for domes- development tic production and consumption markets. This cannot be achieved by cities alone. National More than a decade of experience in cultural policy coordination is essential to ensure that heritage interventions linked to sustainable cities have good connectivity to port and other tourism development position the Bank to transport infrastructure and to ensure appro- provide critical assistance in this area. Since priate linkages and connectivity between cit- the 1970s, the Bank has provided financial ies and their hinterland to serve as markets for resources for 241 projects having a direct agricultural goods and production centers for investment component in heritage conserva- agro-processing and marketing. The World tion and reuse with a total investment value of Bank can assist by supporting regional plan- $4bn. There are currently 117 projects under ning and integration analysis and strategy for- implementation, with a direct investment value mulation, as well as related inter-agency coor- of $1.8bn in cultural heritage components. dination efforts that facilitate such linkages. In 2000, the Bank established a dedicated Improving the subnational investment cli- Trust Fund for Cultural Heritage--funded by mate. Often the first place to start for attract- Italy--that has provided almost 30 grants for a ing investment to cities is improving the sub- total of $5.7m. The first round of funding sup- national investment climate, with a focus on ported 21 grants for vital technical assistance, reducing red tape. Over the past several years, capacity building, training, analytical work and the World Bank has expanded the scope and pre-investment design studies that attracted coverage of subnational Investment Climate additional financial support, leveraging about Assessments and Doing Business Surveys, $185m. This assistance has made cultural providing critical information about a city's heritage preservation, its adaptive reuse, and ability to attract investment from a private sec- sustainable tourism a fast growing area of tor perspective. Because the methodology support from the Bank and its development and indicators are standardized, cities can partners in assisting developing countries to compare their performance with their peers promote local economic development. and establish benchmarks for improvement. 13 Box 6. Reclaiming Eastern and investors wary. In some cases a partner- Europe's land assets ship with governments can assuage fears, as was done at the Skoda Plzen rehabilitation of Large swaths of cities across Central and East- a 180 hectare site using financing from the ern Europe still showcase the derelict remnants Czech government and the private sector, but of command economies. Abandoned or un- highly contaminated sites may require full gov- derused industrial land covers 13 percent of ernment financing. The German government Prague and 27 percent of Sofia. Many of these had to invest $1.5b in over 100 projects to sites, known as brownfields, are located cen- turn abandoned steel works and mining op- trally and in close proximity to commercial cen- erations in the Ruhr Valley into sites for other ters. Brown they may be, but developers and kinds of production, parks, office and residen- city planners see opportunities, if only someone tial spaces. would remove waste and clean up the contami- nation, a common and costly obstacle. The World Bank, for example, is carrying out a pilot work program of stock-taking analysis in Many cities have already done this, starting by a few interested cities, and learning exchang- treating brownfields in different ways. Some are es with cities in Western Europe that have attractive enough to be developed entirely with experience in brownfield redevelopment, to private funding. Private cash is turning Bucha- build a foundation for assistance with brown- rest's Semanatoarea Plant into a business and field sites. Compiling case studies and best retail park, with a conference center and 1,200 practices from similar projects elsewhere will apartments. hopefully usher in new public-private financ- ing schemes and much needed technical as- Other sites are more challenging: unclear sistance. Soon more city brownfields will have ownership can make cleanup more difficult shoots of green. Europe, East Asia and the Middle East and serviced industrial land or enterprise zones in North Africa, has signaled the need to expand partnership with the private sector. engagement in both advisory services and in- vestment lending in response. One effort now The strategies provide an operational frame- under way is to document good international work for city visioning exercises and consulta- practice in, say, riverfront or waterfront rede- tions with the private sector, NGOs, education- velopment approaches. Here the experience al institutions, media, and other stakeholders. of OECD countries provides insights on deal- Linking strategy formulation to master plan- ing with real estate developers, environmen- ning and capital investment planning is vital, tal remediation for brownfield redevelopment, but many city development strategies lack well and district level redevelopment. prepared investment plans and the financing to implement them. So, the Bank will support Analyzing competitiveness. City develop- capital investment planning to prepare bank- ment strategies with a local economic de- able investments over a multiyear program velopment focus have often applied com- that can attract needed financing. petitiveness analysis to identify promising manufacturing or service industries of a city Assessing inner-city markets. Market intel- economy. Specific sectors can be targeted, ligence can help cities attract investment in such as tourism, light manufacturing, fisheries often overlooked inner-city areas. A new tool, or port activities. Or the strategy might adopt the Inner-city Market Assessment, is being pi- a spatial approach by focusing on redevelop- loted in Bogota and Johannesburg, using data 14 ment of central business districts or providing mining techniques to uncover underserved Box 7. Beyond oil: diversifying exchange with the city of Rotterdam to provide Yemen's economy Yemen's port city officials with best practice ex- through its port cities amples about rehabilitating ports and integrat- ing port activity with the city economy. Compared with a few years ago, Aden's seafront fish market is now a center of burgeoning en- Attracting new businesses is critical. To most in- terprise. During peak periods there are roughly vestors Yemen's economy begins and ends with 230 fish sellers in the market (up from only 50 in oil. It accounts for 33 percent of GDP and a dis- 2003), and 200 fishing boats now moor in the proportionate 85 percent of export revenue. This bay area, far more than the 60 before. The mar- makes Yemen relevant to the global commodity ket is managed by the local Fisherman's Asso- market, but it is a precarious foundation for an ciation, a model of good practice, which carries entire national economy--and indeed a govern- out regular cleaning and maintenance of the ment that relies on one resource for 70 percent new facility and leases out stalls to small-scale of its revenue. It is not just irregular oil prices that fishermen, many of whom supply new restau- pose worries; the big problem is that the oil is rants. As part of a broader redevelopment effort running out. Production decreased by a third be- for the waterfront area, the market also links to tween 2002 and 2008, and it only has 3 billion an adjoining tourist attraction--a Portuguese barrels left--a lot, but a billion less than in 2006. castle on Sira Island--and has triggered private investment in residential and commercial build- A partnership with the Bank's private sector ings in the surrounding area. The upgraded fish arm--the International Finance Corporation--is market also provides $25,000 in annual revenue also helping to establish a one-stop-shop for to the local government. business registration and investor services. Local businessmen have provided a ringing endorse- The difference from 2003 is investment. The ment of these new initiatives by contributing to a Sira Fish Market is just one of several projects new Private-Public Partnership Fund, which has under Yemen's Port Cities Development Pro- mobilized more than $350,000 in private contri- gram (PCDP), a 12-year $98m effort to create butions to build a training center and fund reha- employment opportunities in the port cities of bilitation of other infrastructure in Aden. Aden, Hodeidah, and Mukalla. In Aden, the PCDP has helped rehabilitate a small-scale in- The second phase of the program is set to begin dustrial area lacking basic electricity, roads and in 2010, and will focus more investments on Ho- sanitation infrastructure. The program began in deidah (which is being promoted as an agro- 2003 with small infrastructure investments, fol- processing center) and Mukalla (for its tourism lowed by drafting city development strategies. development strategy), while scaling up financ- For the first phase, the World Bank provided a ing across all cities to support investments of $23.4m adaptable program loan, and offered national significance; investigate the creation of technical assistance to develop a port sector a value chain that could deliver local economic strategy. With the support of Cities Alliance, the growth within four to five years; and improve the PCDP also organized a study tour and learning management capacity of the three port cities. markets in urban areas and attract invest- attracting investment (in addition to expand- ment, broaden retail services, and create jobs. ing the local tax base). In Johannesburg, for Due to the informality of living conditions and example, a partnership with the Post Bank market opportunities in inner-city areas, there could help in providing basic savings and loan has been severe undercounting in population services down market, targeting the under- and market potential. Initial indications sug- served residents and businesses in the city's gest good scope for enhancing services and Urban Development Zone. 15 Encouraging progressive urban land and housing markets Enabling land and housing markets remains requires policies to push formal housing and a cornerstone of the urban policy frame- land systems down market, while creating work. But where formal markets have failed and sustaining more bottom-up approaches to reach a majority of citizens due to land that serve the poorest. scarcity and affordability issues, practical measures include microfinance for incre- Eliminating regressive policies and regu- mental housing solutions, low-cost building lations. Urbanization will continue to put technologies, and rental housing. Most im- pressure on already limited access to land, portant, to anticipate future urban growth, so cities should eliminate policies and regu- urban planning audits are recommended lations that exacerbate this pressure. Urban to ensure that urban regulations are not set regulations are indispensable for markets arbitrarily, preventing cities from achiev- to function, but they should be assessed ing higher densities and causing land and for their impacts on land and housing sup- housing scarcities that can drive up prices. ply, affordability, and structure. Urban spatial structures evolve slowly but often irreversibly Starting in the early 1990s, many developing through market responses to infrastructure country governments and donors adopted investments, regulations, and taxes. The ef- an "enabling markets" approach to housing, fects of ill conceived policies are thus difficult based on policies encouraged by the World to undo. Bank. This approach focused reforms on se- curing land rights, providing access and cost How then should cities proceed? Experience recovery for infrastructure, and improving the suggests that only a few regulations are criti- balance sheets of housing institutions. World cal: minimum plot sizes and minimum apart- Bank and donor projects helped to reform ment sizes, limitations on floor area ratios, and expand mortgage credit, spreading these zoning plans that limit the type of use and the systems worldwide. The hope has been that intensity of use of urban land, and land subdi- pushing this and other aspects of the formal vision ratios of developable and saleable land sector housing systems down market would in new greenfield developments. Cities can eventually reach lower income households. use urban planning audits to determine which regulations should be changed to enable Despite some successes, affordability prob- density and urban form to move in tandem lems persist, and informality in the housing with urbanization. The Bank is developing a and land sectors abounds. By the mid-2000s, global knowledge product for cities to sys- it became clear that the enabling markets tematically assess urban planning regulations approach was far too sanguine about the and guidelines and their potential distortion- difficulties in creating well functioning hous- ary effects. ing markets where everyone is adequately housed for a reasonable share of income on Preparing the fringe for new settlement. residential land at a reasonable price. The Given the predictable rapid increase in city general principles of enabling markets are still populations, a more proactive public role in valid, but must be combined with sensible preparing the periurban fringe to accommo- policies and pragmatic approaches to urban date new settlement would in many cases planning and targeted subsidies for the urban be sensible. One approach would require poor (box 8). governments and municipalities to acquire land for block-level infrastructure rights of Four key housing and land issues consis- way around the peripheries of rapidly grow- tently pose the greatest challenges in most ing cities. For some cities, former irrigation urban areas: planning for markets, public land networks may be a useful starting point. This management, property rights, and housing should be complemented by institutional 16 finance. Dealing with each set of challenges measures to protect these rights of way from Box 8. Promoting pro-poor project in Ho Chi Minh City, benefiting 1m urban growth residents. As urban populations increase rapidly, so too Midway through the project, over 200,000 of does urban poverty. In Vietnam, every year Vietnam's poor have benefited directly from sees one million new urban residents. By 2020, schools, health clinics, and community centers. 40 percent of Vietnam's 100m are expected to New drainage and wastewater systems in mul- live in cities. Rapid development is sure to fol- tiple cities are benefiting 400,000 people. More low, but what is less certain is that it will help than 36,000 housing improvement loans have those most in need. Too often, gleaming city been made, with a 95 percent repayment rate. centers are surrounded by slums. Eighty percent of households in targeted cit- ies now have proper land-use certificates, an To address this problem, the Vietnam Urban increase from 50 percent before the program, Upgrading Project, launched in 2004, tar- and property values have increased two to four geted certain cities to help planners develop times. better pro-poor strategies. New partnerships between communities and local governments But perhaps the most encouraging benefits are have helped resettle families out of dilapidated the reforms to administrative procedures that shanty-towns, upgraded infrastructure, and ex- are aimed to be more inclusive of local commu- panded social services. Small-scale loans allow nity voice and priorities. Participatory planning for incremental home improvements and tech- and community supervision of works were in- nical assistance has drastically improved land stituted in all target cities, and a National Urban administration processes. Upgrading Strategy was approved by the Prime Minister in 2009. Funding has been collaborative: Vietnam allo- cated $150m to the program, supplemented by Phase two of the project is upgrading low-in- $5m from the Japanese government and $4m come areas for another 600,000. All told almost from local community groups. IDA contributed 2m people are expected to benefit directly from $222m. In July 2009, an additional $160m was both phases, and another 1m will experience approved to complete a canal improvement indirect benefits. encroachment before building the infrastruc- decisionmaking chains for the use of these ture, which should occur only after effec- lands, and improving information systems tive demand is confirmed and resources are related to these assets. Where appropriate, available. governments are advised on the design and execution of market-based auctions of some Managing public lands. Recent Bank tech- public land assets. In recent years, such auc- nical assistance to governments on public tions have raised noteworthy sums of mu- land management is paying dividends and nicipal finance for Cairo, Mumbai, Bangalore, should be expanded to policy-based lending Istanbul, Cape Town, and Bogota. This ap- where appropriate. While not all governments proach needs to balance the risks of making are large land holders, those that do control municipal budgets too dependent on land- a large stock in the public sector need to be based finance, a source of vulnerability dur- strategic in the way they manage those as- ing an economic downturn. sets, including the way they are disposed. Bank advice on public land management Continuing with sites and services. The has addressed inventorying and accounting deficit of affordable shelter supply and the for public land assets, clarifying rules and dominant incremental construction patterns 17 of the urban poor, suggest a continuing role Work on housing finance and subsidy reform for sites-and-services projects. Once the is expected to continue in Brazil, Egypt, India, mainstay of the Bank's urban assistance, and elsewhere as countries look to the for- these projects are increasingly rare in the mal housing sector as a source of economic Bank's portfolio except in post-disaster re- stimulus in the current downturn. Likewise, construction. But for governments with large where primary markets exist, it makes sense tracts of public land, they sometimes offer for countries to pursue a secondary market a politically irresistible opportunity for direct strategy as a source of long-term capital for intervention in urban shelter markets. Going financial institutions--as long as the lessons forward, Bank support for such projects will from the recent experience of lax underwrit- engage governments in careful scrutiny of ing and weak oversight are incorporated. the proposed locations based on effective demand and transport connectivity to labor Promoting microfinance for housing. markets. Housing microfinance holds promise as a way to reach individuals or families who build Compulsory land acquisitions. The Bank incrementally or who are too poor to qualify can now finance compulsory acquisition of for conventional loans. Most housing micro- land when a direct role in land development finance experts believe there is vast potential is justifiable. Compulsory land acquisition is demand for their products. Experience sug- already common in many Bank operations. gests that housing microfinance products Such acquisitions may be justifiable for rights have served the low-income salaried poor, of way for road or rail network improvements. and even those with irregular incomes, with They may also be needed to bring trunk-level encouraging results. Subsidies are not neces- infrastructure services within reach of existing sary as long as loan amounts are reasonable informal settlements on the edge of the city or and terms are short. One of the most promis- to provide adequate transport links between ing innovations is the "hybrid value chain" in sites and services projects on the periph- which private sector companies (such as ce- ery and income-earning opportunities in the ment or floor tile companies) team with micro- heart of the city. They may also be required finance providers and citizen groups to lower for negotiated resettlement or relocations as- the cost of producing housing. Here, the sociated with informal settlement upgrading Bank can help promote, expand, and evalu- or inner city regeneration. ate existing and new microfinance efforts. Developing primary mortgage markets. Supporting rental markets. Rental hous- Prerequisites for a functioning primary mort- ing is an important part of a balanced hous- gage market include land titling or at least ing policy. Renting may be a better option for a registry system, enforcement of contracts smaller households, newer households, and including foreclosure procedures, and fair poorer households. It also allows workers to and transparent underwriting guidelines. The more easily move to jobs. And it frees capital World Bank has helped and will continue to for other types of investments. In developing assist countries develop primary mortgage countries, the demand for rental housing is markets. In Brazil, Mexico, and Morocco, substantial, accounting for between one-third the Bank provided housing development and two-thirds of the housing stock in many policy loans in excess of $1 billion, as well cities. In a rapidly urbanizing world, the de- as a technical assistance to promote the mand for rental housing will continue to grow. conditions needed to push formal finance down market. As part of this effort, the Bank Segmenting rental markets will lead to better- helped rationalize the system of homeown- targeted policies. Some overall policies may ership subsidies by targeting lower income make sense--reasonable codes, balanced 18 households. landlord-tenant relations, elimination of rent Box 9. Numbers on doors: a special unit to manage it. To support them, how to address the the World Bank has reviewed practices in 13 developing world African countries, and written a comprehensive street addressing manual for developing sys- In recent decades, many cities in the developing tems and keeping them updated. world have experienced rapid urban growth. But inadequate identification systems have created a There are three main benefits. For local govern- worrisome predicament: all the efforts to improve ments, addresses increase municipal revenues government capacity and service delivery can be and improve urban management. For the pub- useless if ambulance drivers and tax collectors lic, it makes the city more user-friendly. And for cannot find (or even know about) a residence. the private sector, it enables utility concession- aires to manage their networks effectively and Painting house numbers seems like a cheap improve fee collection. remedy. The challenge is knowing what to paint. Expanding a moribund system or starting from The program also advises governments how to scratch is not as easy as it first seems. Imagine go about setting up addresses. Officials must creating a computerized address database in work closely with the public, which can pose a sprawling city with thousands of unmarked a few pitfalls. Street addresses can raise the homes stacked along winding streets. With no issue of property rights. Names and numbers system of street coordinates, how can drivers are a sign of ownership, a thorny subject in find their way around a constantly growing city? many cities. Numbering squatter settlements How can municipal services be provided, and can be interpreted as an implicit recognition of able to pinpoint breakdowns in water, electric- ownership. Such uncertainties should not deter ity, and telephone systems? governments from working with local commu- nities in finding intermediate solutions, given the Implementing a system is generally undertaken potential benefits of increasing access to ser- by municipal administrations, which may set up vices for the poor. control, tax incentives. But a more nuanced tools, such as street addressing in informal picture of local rental markets is needed to urban areas (see box 9). Street addressing, develop local policies. Developers, small- now implemented in more than 50 African scale operators, people sharing living quar- cities, basically maps existing settlement pat- ters with tenants--all have different needs terns regardless of the land tenure or own- and motivations. The Bank is well positioned ership and translates that spatial information to provide research and technical assistance into a geographic information system that to cities seeking information on the various city administrators use for a wide variety of ways rental properties come to market, how purposes ranging from postal delivery to epi- the properties are financed, how land pres- demic monitoring. In the coming decade, the sures affect the operation of rental markets, Bank will expand use of this product in other and how migration affects rents. regions, where appropriate. It will also ex- plore other emerging incremental approach- Expanding street addressing. The Bank in- es to consolidating property claims, including tends to help client countries expand the use those linked to legally recognized forms of of intermediate land tenure and administration land tenure. 19 Promoting a safe and sustainable urban environment This business line advocates a focus on this path dependency into account in the de- urban form and design to achieve efficien- sign of cities, it is important that consumers cy gains, reduce a city's greenhouse gas respond accordingly. In cities where densities (GHG) emissions, and take advantage of the are low, consumers respond by locking into co-benefits of climate change mitigation vehicle purchases, housing types, and loca- and adaptation. As part of the Urban Strat- tions that prevent them from responding to egy, the Bank is launching the ECO2 Cities price signals and government-induced incen- Program. Using an ECO2 Cities Audit, par- tives to change behaviors. Good examples of ticipating cities can develop a baseline di- cities that have addressed the challenge of agnosis of their current status and suggest reducing dependence on cars are Hong Kong such measures as changing technologies and Singapore, which limited individual car and retrofitting infrastructure and buildings. use and urban sprawl early on. The Bank's joint work with the Global Facil- ity for Disaster Risk Reduction, combined Smart growth policies can address housing, with the development of a new Vulnerability transport, and environmental concerns by Assessment tool, aims to improve the safety promoting denser developments when such and well-being of vulnerable urban popula- density is desirable--and can support jobs, tions, particularly the poor. services and other amenities. The vulnerability of urban systems to climate Reducing energy use through efficiency mea- change poses numerous dilemmas for de- sures and improved urban planning can re- cisionmakers and stakeholders at the local, duce a city's dependence on imported fuels national, and regional levels. A majority of and reduce energy costs, freeing up resourc- the world's cities are on coasts or river flood es for improved city services. It brings socio- plains, especially such megacities as Mumbai economic benefits, such as reduced com- and Săo Paulo. Climate change risks must be muting times, improved air quality and health, understood in a context of deteriorating envi- and more green and community space. And ronmental health conditions due to rising air it improves competitiveness by lowering en- pollution, and significant risks to urban water ergy bills and operating costs. But there may supply due to watershed mismanagement. be substantial barriers to energy efficiency-- such as rigid procurement and budgeting Linking environmental health, energy efficien- policies, low energy prices, inadequate plan- cy, and livability concerns, leading cities are ning and design methods, and limitations on now considering how to build sustainability public financing. There may also be limited into the way they plan for the future. This has technical and risk management skills, large important climate change co-benefits, be- project development costs, public repayment cause a greater emphasis on public transit, concerns, limited equity, and the need for higher density, energy-efficient buildings, and new contractual mechanisms. Public end-us- better facilities management can contribute ers may have limited incentives, unclear own- to city development objectives while reducing ership of cost savings, and a general lack of a city's greenhouse gas emissions. awareness. And financiers may be faced with high transaction costs, high perceived risks, Rapidly urbanizing cities in middle-income behavioral biases, and problems in adopting countries can determine their efficiency in their new technologies. choice of urban form and corresponding infra- structure investments, simply because such A sharper focus on climate change and its im- investments represent long-lived capital stock pact on developing country cities will require that can lock in emissions for long periods. retooling the approaches to urban environ- The investments tend to be "lumpy" and can mental management. The World Bank's ap- 20 generate significant ancillary emissions. Taking proach is informed by a five-cluster analysis of key issues and constraints and the corre- For larger urban centers or centers of heavy sponding responses. industry (irrespective of national income), the second cluster must also be addressed. · Cluster 1: Urban household and work- Larger and more successful urban centers place environmental health challenges also need to give priority to the third cluster, are characterized by poor quality hous- while addressing the first two for their low- ing, cheap dirty fuel, and inadequacies income population. in provision of water, sanitation, and solid waste removal. This cluster also includes The fourth cluster must be a priority for urban the environmental health aspects of oc- centers where extreme weather events are al- cupational health and safety, such as bi- ready causing problems or are likely to do so ological pathogens, chemical pollutants, in the near future because of climate change. physical hazards, and health-damaging noise levels. Since per capita greenhouse gas emissions of urban citizens in the developing world · Cluster 2: City system environmental are usually one-twentieth to one-hundredth challenges comprise air and water pol- of those in high-income nations, cluster five lution, traffic accidents, and solid waste may well be a lower priority for many cities. management. But carbon financing and other incentive pro- grams can make it worthwhile for a city to re- · Cluster 3: City eco-system challenges duce emissions. Many cities have taken initia- are interactions between cities and their tives on their own, and such innovations need physical regions that include unsustain- to be shared across countries and regions to able use of freshwater resources, the ero- provide guidance for other cities wishing to sion of protective eco-systems, poor wa- emulate their success. For example, Amman, tershed management, city expansion into Jordan, attracted by the link to carbon financ- hazardous sites, and the export of solid ing, aims to capture methane gas at the city wastes, liquid wastes, and air pollution. landfill and convert it to green energy to be fed back to the grid (box 10). · Cluster 4: Disaster risks to the city sys- tem comprise extreme events within and For slums (cluster 1), upgrading would be the around the city, such as cyclones, storms, principle approach, but with specific applica- earthquakes, floods, and landslides. tions including support for home improve- ments, such as concrete floors in homes and · Cluster 5: Cities and global environmental increasing ventilation, and supporting pro- challenges are characterized by issues grams targeting vulnerable groups, such as of resource availability and eco-system waste pickers. The approaches recognize the functioning at a global level, with rising importance of incremental housing improve- greenhouse gas emissions being the ments to the lives and well-being of the poor. most pressing. For the environmental challenges of cities There are good reasons to set priorities for (cluster 2), the Bank is focusing on phasing different clusters over time and in accord out highly polluting vehicles, improving public with a city's development. In low-income and transport, and monitoring air quality more in- middle-income nations, for instance, setting a tensively. For solid waste management, new priority for the first cluster would be most ap- sector policy-based approaches are being propriate. These challenges can and should tried, as in Morocco, establishing a sound be addressed through focusing on sound policy framework to set collection and man- municipal management, and the provision of agement standards, ensure cost recovery, basic services. and put in place accountability measures 21 Box 10. Carbon credits for collection and transport, and upgrade an ex- a city: improving isting disposal facility to meet the city's future municipal solid waste long-term needs. Technical assistance and management in Amman institutional support will help Amman improve strategic planning and evaluate performance in For the residents of Amman waste disposal the solid waste sector. is basically the same as it is anywhere else around the world. The Greater Amman Munici- The project has substantial environmental ben- pality (GAM) collects around 2,400 tons of solid efits. Engineering services will enhance the waste on a daily basis for almost all residents environmental and operational performance and disposes of it in a semi-controlled landfill of existing disposal facilities. And current prac- outside the city. tices will be more low-carbon and allow for the generation of green electricity. This would seem a luxury for an emerging economy--indeed, it is--but Amman resi- Attached to this lending operation, the World dents are paying dearly for it, through levies on Bank has entered into an agreement with the electricity bills and fees tacked onto business municipality to develop and implement a Clean licenses. Good service is not the only reason Development Project operation, and to pur- costs are too high: the system is comprehen- chase part of the certified emission reductions sive but terribly inefficient and does little to col- resulting from this project. These amount to lect revenue from other sources, such as recov- 0.9 to 0.95m tons of CO2 equivalent from 2009 erable materials and landfill gas recovery. to 2014, creating revenues estimated at $15m by 2014. The project will also generate green To increase revenues, the municipality is work- electricity (about 160,000 MWh by 2014), with ing with the World Bank on the $40.5m Amman revenues estimated at $25m to 2019. The proj- Solid Waste Management Project, approved in ect will thus generate net revenues of $16.9m in September 2008. It will fund two new transfer present values, following an incremental invest- stations to improve cost effectiveness for waste ment of $23.5m. between municipalities and national oversight include a focus on managing watersheds and agencies. protecting city rivers and lakes from illegal dumping of untreated wastewater. In dealing with eco-system management (cluster 3), a combination of specific inter- Most recently, the Bank has developed a ventions and holistic approaches is being holistic approach to promoting ecological tested and developed. These approaches in- and economic cities: the ECO2 Cities Model clude focusing on urban design issues, such combines energy efficiency design with en- as including appropriate infrastructure and vironmentally sound technologies (box 11). basic services for pedestrians, cyclists, and This approach begins with an ECO2 Cities other nonmotorized transport in city planning audit to diagnose potential efficiency gains schemes, creating a variety of housing and and emission reductions as a basis for inter- transportation options that would minimize ventions that include retrofitting infrastructure motorized vehicle transport for low-income and buildings, coupled with introducing groups in accessing city jobs, and using in- new technologies. In greenfield situations, clusionary zoning, shared-equity arrange- the ECO2 Cities model or approach can be ments, and tax incentives to create afford- adopted from the outset. Cities have a role able, mixed-income communities in transit in each of these areas, but there is often a 22 corridors. Increasing areas of support also need to coordinate with national transport, Box 11. Eco2 Cities: ecological tourists, provided bike routes and pedestrian cities as economic pathways that linked into the transportation cities network, and increased property values. Rapid urbanization in developing countries Curitiba is not alone. Singapore, Stockholm, Yo- presents a unique opportunity to plan, develop, kohama, and Vancouver all show that it is possi- build, and manage cities that are ecologically ble to realize greater socioeconomic value from and economically sustainable. It also provides smaller and renewable resource bases while si- an impetus to retrofit and redevelop existing multaneously decreasing harmful pollution and areas. Doing so has immediate effects and unnecessary waste. Urban sustainability of this locks-in systemic benefits in the future. kind is a powerful investment that will pay com- pounding dividends. In a fast-paced and uncer- Through its innovative approaches to urban tain global economy, cities that adopt such an planning, city management, and transport, Curi- integrated approach are more likely to survive tiba, a city in the Brazilian state of Paraná, has shocks, attract businesses, and manage costs. been able to sustainably absorb a population increase from 361,000 (in 1960) to 1,797,000 (in To systematically promote these efforts in the 2007). Well known for its innovative bus rapid developing world, Eco2 Cities, a new World transit system, Curitiba has implemented inno- Bank initiative, aims to help cities achieve vative planning solutions and institutionalized an greater ecological and economic sustainabil- enduring culture of sustainability. Consequent- ity by providing a foundation for integrated and ly, Curitiba has the highest rate of public trans- sustainable urban development. It is based on port ridership in Brazil (45 percent), the lowest a one-system approach that helps cities plan, congestion related economic losses, and a low design, and manage integrated urban systems rates of air pollution. The city's programs have and marks a clear divergence from typical silo- also made a concerted effort to make the re- based urban development. It also promotes a forms pro-poor, building ecologically-friendly more holistic framework for decision-making community housing and starting small business and investment planning by incorporating and assistance programs. accounting for life-cycle cost-benefit analysis, the value of all capital assets (manufactured, Curitiba also invested in large parks for flood natural, human, and social), and a broader prevention and recreation, solving the city's scope of risk assessments in decision making. flooding problems at one-fifth the cost of con- The Eco2 analytical and operational framework structing canals. This also greatly enhanced can be adapted and customized to the particu- the attractiveness of the city for residents and lar needs of a city. water, and environment agencies at the pol- phase, activities include the damage, loss, icy level. and needs assessment, which form the basis for the reconstruction and recovery plan. The In responding to disaster risks (cluster 4), goal for the urban planner should be to main- the Bank supports approaches to climate stream these activities in the policies of city change­induced and other risks due to government. natural causes. Interventions include risk assessments, zoning regulations, land use To address resource use efficiency and eco- planning, building codes, disaster resilient system functioning at the global level (cluster construction of critical infrastructure, and 5), a combination of energy efficiency mea- preparedness activities, including city and sures, emissions monitoring, and carbon fi- subcity emergency plans. For the recovery nancing approaches is recommended. 23 Cross-cutting approaches to reinforce the strategy Four building blocks will support the imple- · Partnerships. Ongoing collaboration will mentation of the Bank's Urban Strategy: be fostered through thematic group en- gagement and special initiatives. External · Knowledge programs, product develop- partnerships will be enhanced through ment, and dissemination. These activi- joint collaborative ventures with develop- ties will ensure that the Bank maintains ment partners, using to the extent possi- its leadership in developing knowledge ble the Knowledge Partnership Platforms programs and products, while promot- of Marseille and Singapore. Cities Alliance, ing the dissemination of knowledge and Water and Sanitation Program, UN Habi- good practices through a variety of in- tat, and United Cities and Local Govern- struments and initiatives. The Urban ments will continue to play important up- Research Symposium will be contin- stream, preinvestment roles through their ued, coupled with expanded collabo- engagement with cities on several levels. ration with universities and think tanks on critical areas of research interest. A · Results management. A renewed focus on new Scholar in Residence Program will results management is elaborated in this reinforce this partnership, with an initial strategy in response to the global agenda focus on urban planning. New and on- on aid effectiveness. The Bank's urban going knowledge products and services units are defining meaningful and measur- are also being developed or brought able project indicators to better report on in line within the framework of the new the impacts of the Bank's urban develop- Urban Strategy. ment assistance. Support to national gov- ernments and cities will come in the form · Financing strategies. Financing strate- of establishing urban databases and facili- gies for urban development will address tating participation in the new Global City a range of circumstances, depending Indicators Program. The Bank recognizes on the financial status of the local gov- that building successful institutions and ernment, the impact of the global eco- in-country data collection and analysis will nomic and financial crisis, and the quality pay the largest dividends in strengthening and coverage of existing infrastructure urban management and increasing re- services. sponsiveness to the results agenda. 24 Sustainable Development Network Urban and Local Government Anchor www.worldbank.org/urban urbanhelp@worldbank.org