I would like to first thank Prof Haresh Shah for the honour of addressing you at this

Transcription

1 GOH Speech by Chairman A*STAR Mr Lim Chuan Poh on Mega-Cities of Asia and their Evolving Risks Are these Risks Manageable at the ICRM Symposium rd April 2015, Nanyang Technological University Prof Haresh Shah Founding Chairman, ICRM Distinguished guests Ladies and Gentlemen I would like to first thank Prof Haresh Shah for the honour of addressing you at this 2015 ICRM Symposium. This year, the symposium will be focusing on the very complex issue of mega-cities and the unique risks they face. I understand we have in the audience many distinguished individuals from governments, insurance companies, academics and global bodies that will share on their respective areas of expertise and experience. My only qualification to speak on this topic is I live in a city and Haresh invited me to speak, so I hope I can add something useful to your discussions later on. In 2007, for the first time in history, more people lived in cities than rural areas. Considering that the first villages probably appeared about 100,000 years ago in the Age of Holocene with the advent of farming; and the first cities as we know them were built around 6,000 years ago when we were able to generate surpluses; Page 1 of 8

2 we have certainly urbanised very quickly in the past century a blip in geologic timescale. This rapid urbanisation has been largely beneficial for the world and greatly facilitated by our ability to provide clean water and modern medicine. Cities are the most economically efficient way of organising people s lives. They produce economies of scale and provide better access to public services and economic opportunities; they form the backbone of global trade and generate more than 80% of the world s GDP; and, they are centres of culture and innovation. Indeed, the denser the city, the more productive, efficient and powerful it becomes. It has been calculated that there is a 15% increase in wages with every doubling of the population, alongside other productivity measures. This means that the economic output of a city of 10m people will be 15 to 20% higher than that of two cities of 5 million people, something for Singapore to ponder over. It is no wonder then that some of these cities have developed into mega-cities, defined by the UN as a city with a population of over 10 million. With their large size, these mega-cities contribute a disproportionately large amount of their nation s GDP and are important hubs of economic and political activities. While in 1975 there were just 3 mega-cities (New York, Mexico City, and Tokyo), today this has grown to 28. Asia is emerging as the main driver in the growth of mega-cities. Page 2 of 8

3 By 2025, another 13 middleweight cities will join the ranks of the mega-cities, and 10 of them will be from Asia with 7 from China alone. The age of cities and mega-cities marks the transition of our world from the Holocene into a whole new geological age, the Anthropocene. This is an age in which human activities are the principal drivers of planetary changes. The starting point of the Anthropocene is debated by experts. Notwithstanding that, it is inextricably linked to the creation of cities and their vast resource needs, and how human industrial civilisation is altering the planet s atmosphere and natural ecosystems. Therefore, while the dense concentration of peoples, assets and infrastructure makes mega-cities powerful magnets for talent and industry, the flipside is it also magnifies the risks associated with any urban centre. These risks include natural disasters; infrastructure failures and industrial accidents; environmental degradation; pandemics; terrorism; poverty; crime; and social instability among others. These risks are also likely converge as a result of the complex inter-dependent networks within a mega-city, and therefore vulnerable to cascading failures across multiple sectors of the society. Page 3 of 8

4 For example, a power outage could lead to malfunctioning water treatment plants and therefore water contamination as happened during Hurricane Katrina. Mega-cities are also prone to natural disasters as they tend to be located near unstable coastal zones. Tokyo is ranked the highest in Munich Re s Risk Index of Megacities, because of both its high concentration of economic assets and high risk of natural hazards. Mega-cities have different risk profiles, and the primary distinction appears to be whether they are well-planned, developed mega-cities or less well-planned, developing mega-cities. Arising from haphazard rapid growth, many developing megacities face enormous risks due to poor infrastructure and inadequate housing. As a result, vast slums emerged with poor water and electricity supplies and they are vulnerability to spread of disease, crimes, social problems and many other hazards. In the case of Sao Paolo, income inequality and crime are the greatest risk concerns. When natural disasters strike, such perilous conditions amplify the losses. For example, Dhaka s frequent floods exacerbate already precarious water and electricity supplies, with water crises triggering socio-political instability. Well-planned, developed mega-cities also face the risk of natural hazards, but differ from developing mega-cities in that they are more exposed to risks such as cyberterrorism and financial crises, and less vulnerable to risks such as crime and social instability. While developed mega-cities may see higher absolute economic losses during a catastrophe because of their concentration of material assets, the relative economic and overall human casualties are typically much lower due to robust infrastructure, rigorous catastrophe planning and overall systemic resilience. Page 4 of 8

5 Moreover, developed mega-cities are bolstered by risk transfer mechanisms such as insurance cover. As a comparison, less than 5% of disaster losses in developing Asia are insured compared to 40% in developed countries. The IFRC (International Federation of Red Cross and Red Crescent Societies) has called this disparity between developed mega-cities and developing ones the "urban risk divide. This significant urban divide should be taken into consideration when understanding the risks of mega-cities. Another pertinent point is the consequences of disasters also depend on the extent of global influence of a mega-city. Mega-cities at critical global nodes of connectivity can cause extensive global repercussions if a disaster strikes. These mega-cities, such as New York, London, and Tokyo, are all in industrialised economies and dominate by their economic power and influence rather than simply the size of population. The 2008 financial crisis that started in New York is a clear case in point. What began as turmoil in the US mortgage market quickly morphed into a global meltdown affecting almost every economy. Mega-cities at regional nodes of connectivity may also have enormous consequences on their region of influence, with ripples in other parts of the world although global impact may be more limited. For example, the 1997 Asian Financial Crisis which started in Bangkok hit some of the regional economies badly (Malaysia, Philippines, South Korea and Indonesia), with some impact on Russia and Africa, but muted impact on Europe and the US. Page 5 of 8

6 Mega-cities in developing economies tend to dominate by their size of population rather than influence. Even though they may be nodes of globalisation in their respective countries, they tend not to have a significant role in the global city network. Thus, while disasters striking developing mega-cities may wreak devastating losses to the local economy, they have very little impact on the rest of the world. For example, the 2007 South Asian floods affecting Bangladesh, India, Pakistan and Nepal (Dhaka and Delhi are among the mega-cities affected) was described by UNICEF as the worst flooding in living memory, but the global stock markets were not affected like they were with the 2011 Tokyo tsunami. Let me end by highlighting the increasing interconnectedness of global systems, and how this affects the transmission of disasters from one corner of the globe to the other, often in unexpected trajectories. Increased international travel, the globalisation of supply chains, and the digital revolution connecting the world online, have multiplied the channels through which disasters can propagate and rapidly. WEF estimates that if a new strain of avian flu were to spread through the air travel network of major world cities, 3 billion people could be exposed within a short time. This is the classic butterfly effect (coined by Oxford Professor Ian Goldin), whereby an event in one location can lead to unpredictable turbulence in the whole global system. In recent years, we have seen a few cases of local disasters leading to knock-on impacts throughout global supply chains. The 2011 Tohoku earthquake and tsunami led to decreases in auto production around the world; Page 6 of 8

7 the 2011 Bangkok floods led to a global shortage of computer hard disks; and, global semiconductor prices nearly doubled following the Chi-Chi earthquake that hit Taiwan in Beyond the physical world, increasingly, the significant risks will shift to our cyber and cyber-physical connectedness. As we think about the risks of mega-cities, we will also have to think about the risks of mega-cybercities. As long as we are connected to the Internet, intelligent infrastructure and industrial processes, we are at risk of cyber-attacks from anywhere in the world. The more intensely connected we are, the greater the risks, and this will always be more so for the developed mega-cities with many of them now pursuing the vision of smart cities. As an illustration, if technology giants such as Amazon, Google or Facebook were to suffer major outages or glitches, innumerable organisations and individuals relying on their online services would be immediately affected. So when we think of mega-cities and their evolving risks, we really need to take a holistic perspective of networked threats in both cyber and physical dimensions and their global footprint. I hope this has provided some food for thought as you delve into more specific areas of analysis and case studies of the risks of mega-cities over the next two days. These discussions will be important in fostering a better understanding of how the public and private sectors can work together to prepare for and manage the risks associated with continued rapid urbanisation and globalisation. Page 7 of 8

8 With that, I wish everyone a productive and fruitful conference. Thank you. Page 8 of 8