The Nexus of Urbanization and Industrialization. Shahid Yusuf April 6 th, 2011 Washington, DC

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1 The Nexus of Urbanization and Industrialization Shahid Yusuf April 6 th, 2011 Washington, DC

2 Urbanization: Magnitudes 51% of the global population is urban Urban population grows by 1 million each week Each day 20,000 new dwellings and 160 miles of road are constructed In China alone 20 billion square meters of floor space being added each year, about half the total for the world. In 1800, average population of the world s 100 largest cities was 200,000. It was over 5 million in In 1800 Beijing was the only city with over 1 million people now there are hundreds.

3 Urbanization: Spatial Dimensions Urban populations growing by 1.9% per annum between 2010 and 2015 tapering to 1.85% between 2025 and Urbanization 70% by Urban densities are declining at about 2% per annum. Cities expanded built up areas 16 fold in the 20 th century. At current trends, in developing countries urban population will double by 2030 but built up area will triple. Example: Bangkok urbanized area grew 16 fold between 1944 and That of Accra registered a 153% increase from 1985 to Most cities fragmented. City footprint density half the built up area. Much urban land is open spaces.

4 Urbanization: Drivers Urbanization and industrialization are correlated but industry does not cause urbanization but without industry urban economic performance unsustainable. Factory employment, reliance on female workers, and use of steam power among early contributors to urbanization. Cities grow through natural increase, rural urban migration, annexation of land. African urban populations growing in spite of sluggish urban economic change.

5 Shares of Industry and Manufacturing in GDP: Industry Manufacturing Low Low and Middle Source: WDI

6 Urbanization: Economic Dimension 80% of GDP generated by cities. 600 cities account for 60% of global GDP, 380 are in developing countries. One fifth of GDP from 190 North American cities. Examples of spectacular urban/industrial growth in Southeast China, led by manufacturing. Shenzen s industrial output rose 70 times between 1980 and Xiamen s GDP rose 57 fold between 1980 and Emergence of dynamic urban industrial triangles in southeast Asia and northeast Asia; and of urban corridors for example Beijing/Seoul/Tokyo.

7 Rapid Urbanization: The Challenges Contribution/footprint of manufacturing is slipping. Countries where industrial growth is slow, too few jobs to absorb labor, youth bulge. SSA and Mid-East most affected Inadequate housing. Emergence of slums with poor pushed to the margins of the city. Inequality and if growth is slow, worsening poverty. Congestion, pollution, crime. Sprawl with attendant high infrastructure costs. Rising GHGs

8 Urban Advantage: Social and Human Capital Crucibles of social change. Introduce new modes of governance. More hospitable to democratic rights and women s empowerment. Are associated with declining fertility. Provide better and wider access to education, healthcare, clean water, and sanitation.

9 Urban Advantage: Economic Greater density and diversity: market opportunities and urbanization economies in larger cities. Specialization and scale economies Deeper labor pools/better labor market matches. Technological spillovers from looking, learning and absorbing. F2F contacts a big plus. Large numbers means greater economic stability, opportunities, resilience to shocks.

10 Urban Productivity Rises with size. Also bigger cities can be more innovative. Globalization increasing salience of cities with trade potential, and also dependence on global market, MNCs, international capital flows. Optimal city size related to how governments cope with complexity through long range planning, better management, accountable governance, inter-jurisdictional coordination, and provision of services. Large dynamic cities (nursery cities) incubate manufacturing firms which then move to smaller specialized cities in metro region.

11 In Successful Cities, look for Multiple, dynamic, growing, competitive industrial clusters producing tradable goods and services. Skills: cities flourish as skills increase technical and entrepreneurial. Net inlow. Many small firms; ease of entry and exit; access to finance from formal and informal sources and VCs/angels. State of the art ICT infrastructure. International connectivity to take advantage of globalization.

12 And Find Efficient governance and public private partnerships. Well managed municipal finances with adequate local tax base. Compactness zoning for vertical development, for energy efficiency and to minimize sprawl. Supported by public transport. Affordable housing and amenities. Seamless attention to energy/water/sewage needs. Policies tackling slums, bad inequality and crime. Effective setting and enforcement of standards and codes.

13 The Urban Future Concentration of populations in large metro regions comprised of networks of cities. Manufacturing industry will continue shrinking. Water access will become critical for many places. Some coastal locations may become vulnerable. Urban populations will age and needs will change. Lagging, isolated cities will need to contract and some may disappear. Innovativeness will be key to growth and resilience in face of harsher environment, rising populations and tightening resources.

14 Thank You