megacity report 1439020

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M e g a c i t y C h a l l e n g e s

A s t a k e h o l d e r r e s e a r c h p r o j e c t

c o n d u c t e d b y G l o b e S c a n a n d M R C M c L e a n H a z e l

Sponsored by Siemens

A research project conducted by GlobeScan and MRC McLean Hazel

Sponsored by Siemens

Megacity ChallengeA stakeholder perspective



Content

Page

Key Findings 4

Megacity Challenges: an Overview 10

St ake ho ld er Pr io rit ie s: th e B ig Pi ct ur e 1 8

Five Infrastructures 24

Transportation 26

Electricity 32

Water and Waste Water 38

Healthcare 44

Safety and Security 50

City Governance and Finance 56

Conclusions 64

Appendix: Methodology 66

Chapter

01

02

03

04

05

06

07

08

09

10

11

12

Megacity Challenges

At some point in 2007, humanity will

reach a significant demographic mi-

lestone: for the first time in history more

people will live in cities than the coun-tryside, according to predictions by the

United Nations. By 2030, over 60% of

people will live in cities. The growth rate

is particularly rapid in many of the so-cal-

led megacities, cities with more than 10

million inhabitants. The megacities listed

by the UN already have a total population

of around 280 million. They are increa-

singly the growth engines of their respec-

tive national economies. But as these

cities and economies grow, so do the

challenges. One key issue is the burden

that growth is placing on urban infra-

structures.

Urban residents the world over want

— and deserve — a good quality of life.

They need good air to breathe, good wa-

ter to drink and reliable electricity to

power their lives. People need healthcare.

They also need to be mobile — so trans-

portation systems must be capable of

transporting millions of people while

putting as little strain as possible on the

environment and city budgets. In other

words, a good quality of life requires a

well-functioning infrastructure. More-

over, an effective infrastructure in turn

Acknowledgements

This report was written by the Economist Intelligence

Unit, based on research conducted by MRC McLean Hazel

and GlobeScan.

We would like to thank all those who participated in the

survey for their valuable insights and time.

Shanghai

contributes to economic prosperity, further

improving quality of life. Unfortunately,

the infrastructure in many cities lags be-

hind the population’s needs — a majorchallenge for city governments in both

emerging and industrialized nations.

This report summarizes the key find-

ings of a unique global research project

undertaken by two independent research

organizations with the support of

Siemens, the infrastructure provider. The

goal of the project was to carry out re-

search at the individual megacity level to

gather objective data as well as perspec-

tives from mayors, city administrators

and other experts on local infrastructure

challenges. Over 500 public- and private-

sector experts from 25 cities were inter-

viewed for this purpose.

The result is a fascinating and, we

hope, useful picture of how challenges

are prioritized and what infrastructure

solutions are best able to improve the

local economy, environment and quality

of life of megacities.

We hope you enjoy reading the report!

Prof. George Hazel, OBE,

MRC McLean Hazel

Doug Miller, GlobeScan

Preface

2 Megacity Challenges Megacity Chal



2007will be the year that, for the firsttime in history, more people will

live in cities than in the country. For many, it is

the megacity that symbolizes everything that is

inspiring and troubling about this era of rapid

urbanization.

Today’s megacities are home to almost one

in ten of the world’s urban population. Like all

great metropolises before them, these mega-

cities act as magnets for trade, culture, knowl-

Key findings

4 Megacity Challenges Megacity Chal

Key Findings

01edge and industry, but on an unprecedentedscale. In varying forms, they all face hugely

complex social and environmental challenges.

Achieving the opportunities for human and

economic development that megacities afford,

while improving their many problems, will

require the development of innovative infra-

structure solutions and new a pproaches to met-

ropolitan governance.

This report explores the key challenges and

trends that will shape urban developmglobal cities over the coming years.

ings are based on an in-depth survey

500 megacity stakeholders, including

officials, public- and private-sector em

and influencers such as academics, N

media. This survey was supplemen

extensive secondary research, enabl

shed light on the key challenges faced

cities at various stages of developmen

New York City

Key findings■ Megacities prioritize economic competitiveness and employment■ The environment matters, but may be sacrificed for growth■ Transport overtakes all other infrastructure concerns■ Better governance is a vital step towards better cities■ Holistic solutions are desired but difficult to achieve■ Cities will seek to improve services, but could do more to manage demand■ Technology will help deliver transparency and efficiency■ The private sector has a role to play in increasing efficiency



Key findings

6 Megacity Challenges Megacity Cha

Megacities prioritize economic competi-

tiveness and employment. When asked

which issues drive decision-making, 81% of

stakeholders involved in city management

cite the importance of the economy and

employment. There is a strong focus on creat-

ing jobs, with unemployment emerging as the

top economic challenge for survey respon-

dents from Emerging and Transitional cities.

Competitiveness in the global economy is

another important consideration. Six in ten

stakeholders think that their cities place a

high importance on making themselves com-

petitive to attract private investment when

deciding on infrastructure issues.

The environment matters, but may be

sacrificed for growth. Stakeholders through-

out the survey place a high importance onenvironmental issues. They see air pollution

as the most significant environmental chal-

lenge, followed by congestion issues. Six in

ten stakeholders believe their city’s leadership

recognizes the vital role that infrastructure

decisions can play in protecting the environ-

ment. Environmental issues also feature

prominently in the thinking of the infrastruc-

ture specialists in the survey: those in trans-

port predict an emphasis on mass transit solu-

tions, and those in the energy sector show a

strong inclination for solutions based on

renewables. But if a choice has to be made

between the environment and economic

growth, it is the latter that often wins out.This is particularly so in the developing world,

where 55% of stakeholders predict that their

cities will sacrifice environmental considera-

tions for the sake of increased capacity, com-

pared with only 14% respondents in Mature

cities who believe that this will happen.

Transport overtakes all other infrastruc-

ture concerns. Transportation emerges as

the top megacity infrastructure challenge by a

large margin. It is the one infrastructure area

that stakeholders believe has the biggest

impact on city competitiveness. They are also

highly aware of its environmental impact (for

example, air pollution) and are keen to move to

greener mass transit solutions. It is not surpris-

ing therefore to find that transport also

emerges as the top priority for investment.

Stakeholders acknowledge that the four other

infrastructure sectors covered by this study –

water, electricity, healthcare and safety & secu-

rity — are also in need of investment. Interest-

ingly, they are less likely to see a strong link

between spending in these areas and improvedcompetitiveness, despite the fact that each has

an important impact on the overall attractive-ness of the city for investment.

Better governance is a vital step towards

better cities. With so many areas crying out

for investment in better infrastructure, it is

not surprising that funding emerges as a big

issue for many stakeholders in the survey. But

for those involved in city management, it is

improvements to governance — rather than

just money — that are the top priority going

forward. Over half of respondents with know-

ledge of urban management see improved

planning as the priority to solving city prob-

lems, compared with only 12% that prioritize

increased funding. In addition to more strate-

gic planning, there is also a strong focus on

managing infrastructure and services moreefficiently. Both these goals will require cities

to make the step from passive administration

of existing services, to a more active style of

managing systems that focuses on improved

efficiency and more measurable outcomes.

Holistic solutions are desired, but are dif-

ficult to achieve. The main barriers to strate-

gic management are poor coordination between

the different levels of municipal government,

together with a lack of strong leadership,

according to the survey. Stakeholders express

a clear desire for a more holistic approach to

city management, but this is rarely the reality

today. Many megacities have a multitude of

administrative bodies with overlapping and

poorly defined responsibilities, which inevita-

bly saps efficiency and makes strategic plan-

ning difficult. Governance structures need to

balance the needs of the city with the wider

metropolitan area, and also take into account

the interdependencies between the various

infrastructures (water and healthcare, for

example). Cities and their needs are complexand the traditional, departmentally organized

approach to city governance needs to be

rethought to enable more holistic solutions

on the one hand, and more responsiveness

and accountability to citizens at a local level

on the other.

Cities will seek to improve services, but

could do more to manage demand. Faced

by huge pressures on public services, cities

tend to emphasize direct and immediate sup-

ply-side solutions. This does not always mean

adding more capacity: in many cases stake-

holders emphasize the need to increase the

efficiency of existing infrastructure over buil-

ding new roads, railways, hospitals and so on.

By contrast, although it gets mentioned by a

minority of respondents, demand manage-

ment never emerges as a priority. Demandmanagement approaches have been advocat-

ed in a variety of areas, but even the special-

ists in specific infrastructure sectors do not

see managing demand as the primary solu-

tion to their challenges. Yet with consumption

consistently outstripping supply in many

cities and infrastructure areas, there is a

strong case for the wider adoption of demand

management strategies on a global basis. In

this context, the proper pricing of

could be a step forward.

Technology will help to delive

parency and efficiency. Techno

help city governments in two major

making them more efficient, an

accountable to their citizens. Eigh

respondents think that their city wil

ingly integrate advanced information

ogy into their administration and o

over the next five years. Moreover, c

agement specialists predict a strong e

on digitalization or e-government rat

on recruiting more staff (64% to 36thermore the value of technology

restricted to rich cities. Cash-strappe

ing cities place almost as much impor

e-government and digitalization as

Transitional and Mature cities.

The private sector has a role to

increasing efficiency. The stakeho

vey provides a mixed picture on att

privatization. Most respondents

strong public ownership and control

structure sectors and services. How

majority of stakeholders also say that

open to public-private partnership

Private-sector respondents are natu

biggest enthusiasts, but more than

public-sector and elected responde

PPPs as a viable means to impleme

structure solutions and more thbelieve that privatization of infra

would increase its efficiency. Again

out that efficiency, rather than just fu

the main perceived advantage of

towards greater participation from th

sector. But even where cities move

the private operation of services to

efficiency, they want to retain stron

leadership and control.

Key findings of the researchinclude the following.

Buenos Aires



Key findings

8 Megacity Challenges Megacity Cha

Cities surveyed

Cit y Count ry 2003 2015 A rea S

Population Population in km2

in Mio. in Mio.

Tokyo Japan 35.0 36.2 13100

New York USA 21.2 22.8 10768

Seoul-Inchon South Korea 20.3 24.7 4400

Mexico-City Mexico 18.7 20.6 4600

São Paulo Brasil 17.9 20.0 4800

Mumbai India 17.4 22.6 4350

Los Angeles USA 16.4 17.6 14000

Delhi India 14.1 20.9 1500

Manila-Quezon Philippines 13.9 16.8 2200

Calcutta India 13.8 16.8 1400

Buenos Aires Argentina 13.0 14.6 3900

Shanghai China 12.8 12.7 1600

Jakarta Indonesia 12.3 17.5 16

Dhaka Bangladesh 11.6 17.9 1500

Rio de Janeiro Brasil 11.2 12.4 2400

Karachi Pakistan 11.1 16.2 1200 Ruhr Area Germany 11.1 11.1 9800

Cairo Egypt 10.8 13.1 1400

Beijing China 10.8 11.1 1400

Lagos Nigeria 10.7 17.0 1100

Moscow Russian Fed. 10.5 10.9 1100

Paris France 9.8 10.0 2600

Istanbul Turkey 9.4 11.3 2650

Chicago USA 9.2 10.0 8000

London Great Britain 7.6 7.6 1600

Infrastructure highlights

Transportation: More action needed to

manage demand

Congestion costs are huge for the megacityeconomy and environment. But despite some

success with congestion charging schemes in

several cities, the idea of road pricing has yet

to become a major focus for city stakeholders

around the world. Page 26

Electricity: Strong focus on renewablesWith demand again outstripping supply, there

is an emphasis on allowing electricity to be

priced by the market rather than subsidized.

Specialists in this sector also display a strong

appetite for renewable fuels, but it is likely

that surging demand will lead many growing

cities to continue to rely primarily on cheaperfossil fuels in the near future. Page 32

Water and waste water: Still fighting for

attention?

In many megacities, large sections of the pop-

ulation live without access to clean water or

basic sanitation. Research indicates that the

economic, not to mention social, costs of a

failure to address this problem are significant.

But only 3% of stakeholders cite water as the

major contributor to growth and competitive-ness. Page 38

Healthcare: Increased spending must be

combined with better managementOur survey indicates an emphasis on more

efficiency, delivered through common shared

healthcare infrastructure, ahead of simply

building more facilities. Preventative

approaches are desired, but external factors

are sometimes overlooked: no healthcare

stakeholder mentions water quality as a major

issue even in Emerging cities, indicating the

lack of a more holistic view to problem solv-

ing. Page 44

Safety & Security: Organized crime is a

bigger threat than terrorism

Organized crime is the biggest security chal-

lenge for megacities, and is cited as such by

twice as many stakeholders as those who

mention terrorism, the second most promi-

nent issue. Interestingly, surveillance is

emphasized well ahead of concerns for privacy.

0

About this reportThis report looks at the challenges facing

megacities in city management and five critical

infrastructure sectors: Transportation, Electrici-

ty, Water and Waste Water, Healthcare, and

Safety and Security.

The conclusions are based on a survey of 522

stakeholders spread across 25 cities. Stake-

holders were divided into four groups:

Elected political leaders (described in this re-

port as electeds).

Employees of the municipality (employees).

Private sector infrastructure providers, con-

struction company managers, and financiers

(privates).People who are in roles that influence infra-

structure decision makers such as thought lead-

ers, academics, NGOs, and media (influencers).

The survey included general questions onmegacity issues that were addressed to all 522

respondents. More detailed sections on specif-

ic areas (ie. the five infrastructure sectors as

well as city management and finance) were

addressed to those respondents with the most

relevant knowledge and experience. For the

latter, we use the terms specialist or stakehold-

er (as in transport stakeholder, or city manage-

ment specialist) as convenient shorthand

throughout this report. Sample sizes range

from 124 in transportation to 72 in electricity.

To understand the different challenges and is-

sues facing megacities at different levels of de-

velopment, the research analyzes three cate-

gories of city: Emerging cities, Transitionalcities and Mature cities. Although every city is

unique, those in each of these archetypes

share many characteristics and face many simi-

lar problems. Throughout this report, we high-

light challenges and priorities for each of the

megacity archetypes, as well as key areas

where action is needed to enable cities to bal-

ance competitiveness with quality of life and

environmental sustainability.

London



Megacity challenges: an overview

10 Megacity Challenges Megacity Challe

Megacity Challenges

02T

he rise of the megacity often

observers between wonder and

nation. On one level, these super-siz

are seen as the engines of the globa

my, efficiently connecting the flow o

people, culture and knowledge. They

least potentially, unprecedented cotions of skills and technical resources

bring increased wealth and improve

of life to vast numbers of people.

But megacities also conjure up

gether darker vision. All the cities co

this research face huge challenges

from congestion and pollution to

threats and inadequate services

under the weight of excessive deman

Key findings■ The number of megacities has multiplied over the past 50 years,

to the extent that they now provide a home to 9% of the

world’s urban population

■ Their importance in the national and global economy is

disproportionately high

■ City governance is having to adapt to the challenge of

delivering holistic solutions across vast metropolitan regions

■ City managers must strike the balance between three overriding

concerns: Economic competitiveness, environment and

quality of life for urban residents

Mumbai





Population density (per km2)

Istanbul0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

LagosLondon

MoscowMumbai

New YorkSão Paulo

Shanghai

S o u r c e : D e m o g r a p h i a ,

f r o m

v a r i o u s

Mega-growth, mega-complexitynamely economic competitiveness; quality of

life; and the environment.

The following sections look at the key chal-

lenges faced by cities at different stages of

development. We reveal the overall priorities

for stakeholders in a world where resources

are all too finite. The research also sheds light

on trends and strategies in five critical areas

of infrastructure — transportation, electricity,

water, healthcare and safety & security — as

well as through new approaches to metropoli-

tan governance.

Megacities have been described as the

urban phenomenon of the 21st century. Their

unprecedented size and complexity, and their

critical role as gateways in the global econo-

my, pose huge challenges for sustainable

urban development. We hope that this report

stimulates new thinking on the solutionsrequired to meet the Megacity challenge.

in the developing world also struggle to cope

with the rapid growth of informal settle-

ments. Today almost one in three of the

world’s urban population lives in slums, with-

out access to good housing or basic services,

according to UN-HABITAT’s 2006 State of the

World’s Cities report.

At one level or another, all of the stake-

holders surveyed as part of our research must

deal with this dual reality on a daily basis. In

their own areas, they hold significant respon-

sibility for overcoming the multitude of chal-

lenges that, to greater or lesser degrees, con-

front the 25 megacities covered by this

report. Many of them are also tasked with

delivering the solutions and services that will

enable their cities to compete in a globally

connected economy.This report looks at how stakeholders will

balance these demands in three major areas:

The megacity is a relatively new form of

urban development. In 1950, there were

only two cities with populations of over 10

million: New York and Tokyo. By 1975, two

more locations, Shanghai and Mexico City,

joined the club. But by 2004, the number of

megacities had rocketed to 22* and, together,

these cities now account for 9% of the world’s

urban population.

Urban growth is spread unequally around

the world, and the same is true of its largest

cities. Most of the megacities in the devel-

oped world are growing slowly, if at all. Tokyo

remains the largest with 35 million inhabi-

tants, but the fastest growth will be in thedeveloping world (particularly in Asia and

Africa), placing huge pressure on infrastruc-

ture in those locations. By 2020 Mumbai,

Delhi, Mexico City, São Paulo, Dhaka, Jakarta

and Lagos will each have populations of over

20 million. For many Emerging cities, soaring

populations are extremely difficult to man-

age: at current rates of growth, the number of

inhabitants in Nigeria’s Lagos will double by

2020, mainly through expansion of informal

settlements. By contrast, most Mature cities

(as well as many Transitional ones) will need

to address a different kind of demographic

challenge in the form of population ageing.

Today’s megacities are not only bigger

than the cities of the mid-20th century, theyare also more complex. For one, they are

increasingly competing with, and de

on, relationships with other cities in

al economy. At the same time, we are

ing the emergence of new city re

sprawling conurbations that ext

beyond the boundaries of a single cit

ples include the “BosWash stretch” (e

from Boston, MA to Washingon, DC) i

and Chongqing in China.

These huge megacity regions crea

urban dynamic. Commuters travel l

tances from densely populated subu

nomic activity frequently becomes d

trated, dissipating from the cente

periphery. Often fragmented system

ropolitan governance have not ca

with this trend, with the result that

cult to deliver an efficient, holistic ato infrastructure challenges at a

regional level.

* According to UN definition of megacity

Karachi





0

0

World’s most polluted Cities

Delhi(India)

Cairo(Egypt)

Calcutta(India)

Mexico City(Mexico)

Tokyo(Japan)

London(UK)

New York(US)

S o u r c e : T h e W o r l d B a n k

5 10

50

15

100

20 25 30

150

35 40

200

Population in 2005 (millions)

Particle matter in 2002 (micrograms per cubic metre)

1st

2nd

3rd

41st

57th

91st

96th

Pollution levels

Population levels

Megacities are the gateways of globaliza-

tion, driving the flow of people, goods,

knowledge, and money around the world.

Already, one-fifth of the world’s GDP is gener-

ated in the ten economically most important

cities. Megacities also make a disproportion-ately large contribution to economic growth at

a national level. According to a Munich Re

study, Tokyo accounts for 28% of the Japanese

population, but 40% of the country’s GDP.

Paris is home to 16% of the French population,

but is responsible for 30% of its GDP. In the

developing world, Lagos is home to 8% of

Nigeria’s population but contributes 30% of

the country’s output. In OECD countries, most

metropolitan regions have a higher GDP per

capita than their national average, higher

labor productivity levels, and many of them

tend to have faster growth rates than their

countries.

Given their weight in their respective natio-nal economies, the ability of these megacities

to compete at a global level is paramount. To

attract investment, these cities need modern,

efficient infrastructures. Transportation is an

obvious case in point, and megacity mayors

are eager to improve often overloaded road

and rail networks, ports and airports. Abundant

(and preferably skilled) labor together with

modern IT and communications technologies

are also hugely important, as evidenced by the

offshoring trend that has itself fuelled the

growth of cities like Bangalore in India. Anoth-

er crucial (although sometimes less obvious)

factor is the quality of basic services: people

with access to quality housing, education andgood basic services such as water and electric-

ity are much more likely to fulfill their potential

and contribute to economic growth. The wider

business environment is also a key factor:

research from the Economist Intelligence Unit

indicates that clear, business-friendly policies

and regulations is a more important factor in

attracting international investment than in-

centives such as subsidies and tax breaks*.

Competitiveness

Environment

Governance

Quality of life Environment

Competitiveness It would be wrong to assume that megacity

growth is automatically bad for the environ-

ment. It is obvious that a city with 20 million

people will have a large environmental

impact, but it is less clear whether that impact

is bigger than if the same number of people

lived rurally. Certainly there are those who

argue that clean, modern cities, where dense

living enables resources to be consumed effi-

ciently, provide an environmentally sustain-

able model for the future.

Whatever their potential, however, many

of today’s megacities feature a catalogue of

environmental problems. Congestion, air and

water pollution, waste management and

degradation of green areas are familiar issues

in most large cities around the world, and are

particularly extreme in the megacities of the

developing world. In London and Tokyo, for

example, air quality has improved

last 50 years. In Shanghai and Kuala

it has gone down.

Historically, cities tend to get r

then clean up later. Unfortunat

approach could be disastrous in the c

climate change: this is one reason

growing focus on sustainable urban

ment. Sustainable solutions promote

use of alternative energy sources a

energy-efficient buildings and t

measures to combat congestion

emissions, water and waste recycling

use of vegetation to filter pollution

ture carbon dioxide. While several ci

started implementing at least some

measures to good effect, there will b

for more concerted efforts if the env

tal cost of urbanization is to be reduc

* World Investment Prospects Survey, 2004

Strikinga balance

In megacities, the complexity of building

and maintaining infrastructures, and of

meeting the needs of a huge and often grow-

ing urban population, reaches new levels. As

they seek to address that challenge, those

involved in the delivery of services and solu-

tions must balance three overriding concerns.

São Paulo

M i h ll i




16 Megacity Challenges Megacity Chall

As i s clear from the research, each megaci-

ty has its own unique issues that require

specific, local solutions. Nevertheless, cities

at similar stages of economic and social devel-

opment face a number of common chal-

lenges. With this in mind, we have identified

three basic “archetypes”: Emerging cities,

Transitional cities and Mature cities, depend-

ing on their stage of economic and social

development.

Emerging Cities: Emerging megacities tend

to be characterized by high growth rates dri-

ven by migration and natural growth, much of

which occurs in informal settlements not

served by the installed base of infrastructureand services. Annual growth rates are on the

order of between 3% and 6%. A 3.5% growth

rate implies a doubling of population in 20

years. Emerging cities are typically in coun-

tries with urban populations of less than 50%.

Populations tend to be younger and more

male, with a high proportion of poorly edu-

cated rural migrants. Social polarity, and the

gaps in wealth, health, education, and politi-

cal power between groups is generally high-

est in Emerging cities.

Transitional Cities: Transitional megacities

have often developed mechanisms to more

effectively manage dynamic growth, and may

be seeing a slowing of annual growth rates.

Continued population growth stems largely

from migration, with lower natural population

increases; several of these cities are seeing the

first signs of an ageing population. Growthrates are typically of the order of 2%-3% per

annum and Transitional cities are often in

countries that are more than 50% urbanized.

Transitional cities have similar infrastructure

challenges as compared with Emerging cities

but are better able to respond financially and

organizationally. Increasing affluence

cities places additional new demands

structure as growth in demand for tra

tion, water, energy, and services ofte

outpaces population growth.

Mature Cities: Mature megacities ha

slower growth rates than both Emer

Transitional megacities, at around 1%

age. In some of these cities, the popul

stagnated or is shrinking. Mature m

also have older population profiles. T

in countries that are typically arou

urban. Mature megacities have built

basic infrastructure to serve their po

one or two generations ago. With hig

infrastructure in place the challenge

ed to coping with the need for renewing systems or to dealing with obso

where the installed infrastructure n

meets regulatory requirements or c

service expectations. The other, growi

of Mature megacities is responding

increased and changing demands for

of all types posed by their ageing pop

Three City ArchetypesMegacities may be engines of economic

growth, but they feature huge inequali-

ties in the distribution of wealth and econom-

ic opportunity. In its recent report on urban-

ization trends, UN-HABITAT describes cities as

“the new locus of poverty”. World Bank esti-

mates predict that while rural areas are cur-

rently home to a majority of the world’s poor,

by 2035 cities will become the predominant

locations of poverty.

The consequences of a failure to improve

quality of life for the urban poor are huge. The

UN-HABITAT research indicates that people

living in slums, where a large proportion of

the urban poor reside, are more likely to be

affected by child mortality and acute respira-

tory illnesses and water-borne diseases than

their non-slum counterparts. They are also

more likely to live near hazardous locations,making them more vulnerable to natural dis-

asters such as floods. Inadequate access to

basic services saddles them “with heavy

health and social burdens, which ultimately

affect their productivity”.* Poverty may be

less extreme in the more developed cities, but

social problems still abound. The OECD’s

report on competitive cities notes increased

socio-economic inequalities even in some of

its most dynamic metropolitan regions. It

points to large and persistent pockets of

unemployment: about one-third of the 78

metropolitan regions covered in the OECD

report have above average national unem-

ployment rates, and between 7-25% of popu-

lations live in deprived neighborhoods that

often have reduced access to public infra-

structure and services. The report concludes

that poverty and social exclusion lead to sig-

nificant costs including high levels of crimi-

nality (on average 30% higher in urban areas

than the national level). Failure to addressthese inequalities risks making megacities

centers of deprivation and instability with a

consequent negative effect on their economy.

Development decisions are often seen in

terms of difficult trade-offs between growth

and greenness, or growth and quality of life.

But there are obvious interdependencies

between the three concerns. Competitive

cities are more likely to have the wealth and

resources to invest in high-quality infrastruc-

ture and services, and to create economic and

social opportunities for large numbers of the

urban population. All things being equal,

environmentally clean, modern cities create

more attractive locations for a broad spec-

trum of business activities than those withheavy pollution. Equally, cities with a healthy,

well-educated urban population are better

positioned to attract investment than those

where deprivation and inequality blocks large

swathes of the population from participating

in economic growth. This suggests that, in the

long run, focusing on one of these concerns

to the detriment of the others will be a recipe

for failure.

Quality of Life

■over 40%

■ 20 – 40%

■ 10 – 20%

■under 10%

■High-income

countries

S o u r c e : U N M i l l e n n i u m

P r o j e c t 2 0 0 5 ( U N - H a b

i t a t 2 0 0 3 )

Proportion of urban populationliving in slums

* State of the World’s Cities 2006/7, UN-HABITAT

São Paulo

Stakeholder priorities The big picture



Huge cities create huge challen

the money and resources to

them are distinctly finite. How will

stakeholders responsible for deliver

tions respond? Having summarized

characteristics and issues faced by

megacities, we now turn to the priorkey factors that drive decision makin

25 cities covered by this report.

The entire sample of 522 stakehol

asked the survey questions referred

section. It is immediately clear that th

respondents are balancing a wide

economic, social and environmen

cerns. Nevertheless some clear

emerge.

Stakeholder priorities: The big picture


StakeholderPriorities

03Key findings■ Unemployment is the top economic

challenge

■ Air pollution and congestion are theprinciple environmental concerns

■ Stakeholders see transportation as the

main infrastructure issue and the top

priority for investment

■ Most stakeholders are optimistic that they

can solve city challenges, although

influencers in the survey are more skeptical

Moscow




infrastructure challenge by just 6% o

dents overall and 8% in Emerging citi

despite the fact that several cities co

the study face severe problems wi

scarcity/quality. Even lower proportio

tion electricity (2%) and healthcare

the main infrastructure challenge fac

city.

Investment needs: Stakeholders we

to rank 13 different areas according

need for investment over the next fi

years. Once again transportation co

as the top priority by a significant

cited by 86% of respondents. In join

place comes environmental protec



the problem to transportation and vehicle

emissions. General pollution and water prob-

lems are also cited, but are considered to be

less of a priority.

Social issues: Stakeholder respondents men-

tion a wide range of social concerns, with no

clear priority emerging. Topping the list by a

small margin is poor quality housing and living

conditions, cited by 14% of all respondents.

This issue is particularly emphasized by stake-

holders in Transitional and Emerging cities.

Other key issues included the gap between

rich and poor (11%) and poverty (9%). Public

safety and crime also feature as a significant

issue for respondents in Emerging cities.

Infrastructure: Transportation is perceived

as by far the biggest infrastructure challenge

by stakeholders in the survey. Responding to

an open-ended question in the survey, 35% of

all stakeholders mention the transport system

or traffic problems as their city’s most signifi-

cant infrastructure challenge. In distant sec-

ond place is the inadequacy of the city’s infra-

structure (10%). Surprisingly, only 6% cite

finance issues as a big infrastructure chal-

lenge.

Other infrastructure areas appear to be

much lower on the agenda for stakeholders as

a whole. Even when added together, lack of

water and water sanitation is cited as a critical

Most serious economicchallenge

20%

14%

14%

8%

7% % of respondentsmentioning

Unemployment

Cost of living

Economic development

Inadequate infrastructure

Financing

Most serious environmentalchallenge

26%

15%

14%

13%


Air pollution

Transportation

General pollution

Water pollution

Solid waste

Most serious social challenge

14%

11%

9%

7%

% of respondentsmentioning

7%

7%

7%

Poor living conditions

Gap between rich and poor

Poverty

Education

Population growth

Public safety

Unemployment

Most serious challenge facing city’infrastructure

Transportation

Emerging Transitional Mature

% of respondents mentioning

Inadequate /inefficientInfrastructure

Planning

Lack of funding

Environment/pollution

17

9

9

3

9

43

14

8

11

4

10

9

4

2

Economy: Unemployment and underemploy-

ment emerge as the predominant economic

challenge in the survey (cited by 20% of

respondents overall). It is the top economic

challenge according to respondents in Emerg-

ing and Transitional cities, and comes second

only to economic development as a concern

in Mature cities. The next most commonly

cited issues are economic development and

the rising cost of living (both 14%).

Environment: Air pollution is considered by

far the most serious environmental challenge

facing megacities (26%), especially by those

in Mature cities (36%). A large proportion of

stakeholders mentioning air pollution relate

London




Infrastructure area most importantin attracting economic investment

27%

9%

6%

% of respondentsselecting

6%

6%

6%

6%

Transportation

Safety and security

Education

Communications

Energy supply

Leisure and culture

City management

5%Environment

4%Health care

3%Water

City’s probability of successfullymanaging short-term future

71%

66%

57%

55%

50%

42%

North America

Africa/ Middle East

India/China

Europe

Latin America

Other Asia

education, both cited by 77% of stakeholders.

The need to invest in environmental protec-

tion is emphasized particularly highly in Tran-

sitional cities, indicating that the desire for

ecologically sustainable solutions is not

restricted to the rich cities.

Water comes lower down the list of invest-

ment priorities overall, but is cited by many

more stakeholders in Emerging cities (81%)

where access to clean water and sanitation is

often a major issue.

Competitive drivers: When asked, again

with an open-ended question, which single

area of their city’s infrastructure is the most

important in attracting investment versus

Not surprisingly, respondents in the

Mature cities were more likely to rate their

cities as better than average, while respon-

dents in Emerging cities were more likely to

rate their cities the worst among the three

archetypes; but even here, almost one-half

consider their cities to be average in terms of

quality of life.

When respondents were asked to rate their

city’s probability of successfully managing its

future over the next five years, overall, two-

thirds responded positively (67%), with only

slightly better odds expressed by respondents

in Mature cities.

It is notable, however, that elected officials

and public-sector employees are most likely to

have an optimistic outlook, while in

in the survey tend to be more skept

findings suggest that cities will att

juggle economic, social and envir

concerns, but when push comes to sh

overriding issue in decision-making

nomic competitiveness.

This perspective filters down to th

zation of investment into transp

which is seen as central to a citiy’s

generate wealth and attract investme

High awareness of the need to

environmental protection, however,

that cities will seek to balance grow

sustainable solutions wherever this

and affordable.



Need for investment over the next fiveto ten years by infrastructure area

86%

100%

77%

77%

74%

71%

71%

Transportation

Environmental protection

Education

Health care system

Public safety and security

Waste management

70%Water

69%Public housing and

civic buildings

67%Energy supply

66%Social services

other cities around the world, transportation

is by far the most mentioned, followed dis-

tantly by safety and security. Far lower num-

bers of respondents cite education and

healthcare as key factors in attracting invest-

ment. Communications and energy are seen

as more important issues for attracting invest-

ment by respondents in Emerging cities.

Stakeholder outlook: Although stakehold-

ers are acutely aware of the economic, social

and environmental challenges faced by their

cities, the majority have an upbeat outlook.

For example, almost one-half of respondents

(44%) rate their city’s quality of life as better

than average.

Net rating — High minus Low

% saying high need for investment

Beijing

Five infrastructures



All cities need high-quality infrastructureto facilitate the movement of people and

goods, and the delivery of basic services to

their populations. But the challenge of deliv-

ering these infrastructures and services in

today’s megacity regions is immense. This is

true for Mature cities where, for example,

roads, rail networks, sewers and hospitals

were often built decades or even centuries

ago and in some cases are now becoming


Five Infrastructures

04increasingly unfit for purpose. It is also true ofthe Transitional cities, which are struggling to

cope with demographic change, and Emerg-

ing cities where even basic services are badly

lacking, particularly in the rapidly expanding

informal settlements. Moreover, in all three

city archetypes there are complex issues to be

resolved over the funding, management,

maintenance and efficient running of ser-

vices, as well as the need to find infrastruc-

ture solutions that are environmentainable.

The following section of the rep

with five major infrastructure area

portation, electricity, water and was

healthcare, and safety and security.

infrastructure sector, survey questio

answered primarily by those stak

with the most relevant knowledge a

ence, unless otherwise noted in the t

Shanghai

Transportation



Transport preoccupies the stakeholderslike no other infrastructure issue. As

noted above, the general survey marks trans-port out as the single biggest infrastructurechallenge faced by their cities, and by a largemargin*. That focus is particularly high in

Mature cities (45%) and Transitional cities(43%) and in Europe (52%), where car owner-ship in the EU has risen ten times more quicklythan the population over the past ten years. InEmerging cities, the emphasis on transport isless pronounced, but at 17% is still far aheadof the other infrastructure mentioned such aswater (8%) and electricity (5%). Transport isalso the priority for spending, with 86% ofstakeholders overall citing this as an impor-


Transportation

05tant area for investment. Transportation is topof the pile for a number of reasons. Whereassome infrastructure problems, such as lack ofwater, primarily affect the poorer areas of thecity, congestion, crowded trains and traffic-linked pollution are very visible at all levels of

society. But there is also a clear and direct linkwith city competitiveness. If megacities arethe engines of the global economy, it is thetransport network that keeps those enginesworking efficiently. When roads and railwaysseize up, or when ports and airports becomeoverloaded, the cost to the economy is high.In the UK, where many cities including Lon-don are struggling to keep up with traveldemand, the Confederation of British Industry

(CBI) estimates that the cost of cong£20 billion (US$38 billion) a year*holders in the overall survey are acuteof the importance of transport netdriving the economy: 27% mention tas the one area of the city’s infr astruc

is most critical in attracting investmahead of the second most cited issuand security, 9%).

Coping with growth: As well asacross all levels of civic society, problems affect cities at all levels of ment, although they manifest themdifferent ways across our three arcFor Mature cities, the primary proble

* Transport questions in the survey encompass mass transit, individual motorized transit, air and surface transport, and people as well as freight transit** “Running out of Road”, The Economist, 2 December 2006

Key findings■ Transportation is seen as the single biggest infrastruc-

ture challenge by a large margin, and is a key factor in

city competitiveness

■ With air pollution and congestion emerging as the

two top environmental challenges, stakeholders predict

a strong emphasis on mass transit solutions

■ Cities are more likely to focus on incremental improve-

ments to existing infrastructure, rather than new systems

■ Demand management is rarely mentioned as a major

strategy for addressing the cities’ transport problems

Transportation



monorail, despite the fact that the idea forone was floated as far back as 1952. Mean-while the number of public transport vehiclesis insufficient for the population of the city,forcing commuters to travel on the rooftopsof buses with all the inherent safety issuesthat this implies.

Istanbul, a Transitional city according toour methodology, faces both problems. Thecity’s geography poses its own problems, withmany of its residents commuting daily acrossthe Bosphorus from one part of the city to theother. With its many hills and narrow streets,Istanbul has a major problem with traffic con-gestion, particularly at peak travel times.

There is also a serious lack of public transportcapacity on the Asian side of the city. Istanbulis having to make major investments toaddress these problems. A 22km light metroline is currently under construction, and fur-ther lines are planned. In total, Istanbul plansto invest a further US$4.9 billion in tram and

metro projects over the coming ten years,over and above the US$1.6 billion on currentschemes*. The main cause of these problems,according to stakeholders in transport, is lackof resources, which usually means lack ofmoney (although skills and technology limita-tion are also noted). The second most citedunderlying cause, however, is governance-related: poor planning is selected by 21% oftransport specialists overall, and is especiallyemphasized by those in Transitional cities.Again, this is a significant challenge in Istan-bul’s case. The city has varying administrativebodies that have similar and sometimes over-lapping responsibilities. The result, a recent

report concluded, is that the city lacks anyform of holistic transportation planning**.

Incremental improvements over new in-

vestments: Stakeholders are split overwhether they will invest in new transportcapacity as the primary solution to the chal-

lenges outlined above, or seek to increaseefficiency of existing infrastructure. Evenwhere new investment is made available,however, it will most often be used to deliverincremental improvements to the transportsystem (for example, adding new lines to anexisting metro or new bus services) ratherthan outright spending on new transport projects. The most frequently mentioned solu-tion to transport problems is to reorganize orrevitalize the existing infrastructure (33%),whereas building new roads and facilities getsmentioned by only 12% of respondents. Thisfinding seems to reflect a growing trend. Inthe UK, for example, the recent review of UK

transport policy by Rod Eddington empha-sized the need for incremental improvementsto existing systems rather than new, show-case infrastructure projects.

Problems with congestion have, of course,major environmental as well as economiccosts. As noted in the previous section, air


or obsolete systems (40%), then systemcapacity (35%), according to respondentswith specialist knowledge of transport in theircity. With its ageing rail and underground sys-tems, London is a prime example. In a metro-politan area where an estimated 30 million journeys take place every day, transportinvestment over the past two decades hasbarely been sufficient to maintain the system,let alone to increase capacity to cope withsoaring demand. As a result, congestion andovercrowding is already acute on all of Lon-don’s transport networks, according to arecent report from Transport for London (TfL).

In Emerging and Transitional cities, stake-

holders with specialist knowledge of trans-port tend to be more concerned about inade-quate system capacity than ageing infra-structure. Indeed, sometimes basic infrastruc-ture is non-existent. For example, Karachi isthe only megacity in the world wi thout a masstransit system such as a metro system or

pollution and traffic problems came hand as the top two environmental in the survey. Travel by road or air issource of pollution: road transport responsible for over 40% of dischargepended particles into the atmosphere

Although decisions on transporments are first and foremost drivennomic and employment considaccording to our transport specialisronmental impacts are also deemetant by three-quarters of respondentprobably a key reason why the vast mthe transport specialists predict thcities will emphasize the develop

mass transit infrastructure over cmotorbikes by a margin of 71 to 29usually borne out in practice. An anplanned capital expenditures for 200eight of the cities under study gshows an emphasis of investment transit (that is, rail) over roads, w

Main cause of transportation problems

30%

21%

19%

16%


Limited resources

Poor planning

Insufficient infrastructure

No transportation network

Poor infrastructure quality

Predicted approach of transport experts

Mass transitinfrastructure

Individualmotorized

trans-portation

71%29%

* Briginshaw, International Railway Journal, June 2005, ** Evren & Caliskan, Fundamental Problems of Istanbul Transportation,*** http://www.mobilityweek-europe.org

% = predicted emphasis

Transportation




notable exceptions. Moscow has a world-classmass transit system, with high rail investmentlevels that are comparable with London, butcurrent planned expenditure shows an em-phasis on road over rail that is driven by a risein vehicle ownership. Lagos shows high-lev-els of investment in roads because urban railis virtually nonexistent and the city thereforerelies heavily on buses.

Mass transit may be favored, but there isno doubt that the pace of demand growth inmany of these cities makes delivering sustain-able solutions a huge challenge. Shanghaialone is expected to see a quadrupling of carsand trucks by 2020. The very dense urban

area and lack of parking and road space forvehicles has pushed growth outside the city,thus setting in motion a spatial developmentpattern that will be increasingly difficult toserve by more sustainable modes of trans-

port. In Shanghai and other Transitional citieswhere car ownership is set to soar, there areno easy answers to the issues posed by con-gestion.

Putting demand management on the map:

In recent years demand management solu-tions have been posited as a way to promotemore sustainable modes of transport overcars, but — somewhat surprisingly — thisemerges as a low priority in this part of thesurvey. Only 9% of stakeholders involved intransport mention demand managementsolutions as the best approach to resolvingtransportation issues.

This is despite a variety of schemes in glo b-al cities that indicate a role for demand man-agement in reducing congestion. Such solu-tions generally divide into two categories:“pull” measures that focus on providing

motorists with alternatives to using their cars,primarily by increasing the attractiveness ofpublic transport; and “push” measures thatincrease the cost or difficulty of using a car toreach a specific area. Various cities haveexperimented with demand management inthe form of road pricing or congestion charg-ing, including London, Stockholm and Oslo.Singapore introduced the world’s first signifi-cant road pricing initiative to control entryinto its central business district in 1975. Thecity today has electronic road pricing based ona system that uses on-board tags to identifyvehicles.

Road pricing in Singapore runs in parallel

with a more radical “push” solution: a massivetax of over 100% on new car purchases.Where it has been implemented, there is evi-dence that demand management in the formof road pricing has delivered significant bene-

fits. In London and Stockholm, congestion hasbeen reduced by approximately 30%. Bothcities have experienced a reduction ofbetween 10-20% in fuel emissions and roadaccidents*. The economic impact has beenmore difficult to assess — TfL, for example,found no evidence of either a positive or neg-ative impact of congestion charging on aggre-gate business performance in central Lon-don**. But the London transport authoritysays that congestion charging brought in netrevenue of €174m in 2005-06. TfL now plansto extend the scheme in 2007, a move thatwill roughly double the charging area.

Projects like London’s are high profile, but

only a handful of cities currently have suchschemes in place. There are only a couple ofcurrent examples in the US, such as the SR 91Toll Lanes in Orange County, California. Inmany cities, the cost of car use in cities is actu-ally falling. In Shanghai, car ownership washistorically suppressed through high fees andlimited permits. In recent years, however, thishas been reduced (partly as a result of thepresence of vehicle manufacturing), andincomes are rising. In Mumbai, despite thecongestion and pollution caused by privatemotorized transport, road taxes and parkingfees remain low (demand management isnow being discussed). One would have toconclude that, globally, demand manage-ment as a solution to congestion remains anemerging concept that has yet to become a

priority in many of the cities under study.

The public and private sectors: For trans-port and other infrastructure sectors, the sur-vey also explored survey respondents’ viewson the involvement of the private sector indelivering solutions. Here, transportation isprimarily seen as a public rather than a privatetask by respondents to the survey (59% versus41%). Mature cities in particular are inclined

to predict an emphasis on public owrather than private (72% versus 28%sis of eight of the cities in the study the view that transportation in remains firmly within the realm oresponsibility, with high-levels of owand control through regulation and low levels of private-sector participoperations, with occasional exceptio

However, when asked to predict their cities would emphasize public ooperation of transportation infrastruthe future, there was more of an eq(53% public versus 47% private). Cwith current levels of private oper

transport, which is low on a global bmay indicate growing openness tosector management of services. Cthe rail sector is almost entirely pubtrolled and operated, with the notabtion being London where private oexist in a climate of regulatory congovernment involvement in infraprovision.

Globally, the road sector is largewith occasional examples of toll facilipricing. Airports retain a surprising dpublic control despite trends to privand increasing evidence of privaoperations. Ports are almost entirelycontrolled and typically take the formcontrolled companies that operate inprivate fashion. Overall, private-secto

pation in operations remains rare exfew cities.For those that predict a greater ro

vate-sector operation, surprisingly tadvantages of this approach are not faccording to the survey, but rather iefficiency and better management. Pdisadvantages of private operationmarily higher user costs, inability demand, and a profit-seeking menta

The best solution to transportationproblems

33%

17%

12%

12%

% of respondentsmentioning

11%

10%

9%

Reorganize/revitalizeexisting infrastructure

Allow private investment /increase investment

Build new roadsand facilities

Better management/governance

New equipment

Better use of mass transit systemsinstead of personal cars

Manage demand

*Sources: TfL, City of Stockholm, **TfL fourth monitoring report, June 2006

Electricity



Any di scussion of electricity infrastructurehas to take place against the backdrop of

rapidly escalating world demand. Simply put,expanding cities need additional electricity tolive and economies need it to grow. Between1972 and 2002, world GDP increased at 3.3%

per annum while electricity consumptionmore than kept pace at 3.6%. Even withexpected efficiency gains, the InternationalEnergy Agency predicts that between 2002and 2030 worldwide electricity demand willdouble. Most of this increase will come in thedeveloping world, especially the rapidly grow-ing economies of India and China. The IEA fur-ther foresees that OECD countries will need tomake nearly US$4 trillion in investment on


Electricity

06generation, transmission and distributionduring those years, while developing coun-tries will require some US$5.2 trillion*.

Only 2% of those questioned describedelectricity supply as their most serious infra-structure challenge. Moreover, the impor-

tance of investment in this area ranks belowfields such as transportation, water, educa-tion, public housing and security. Not surpris-ingly, Emerging cities see the issue as muchmore important.

Demand outstrips supply: The three cityarchetypes face different difficulties, but theyall revolve around the fact that demandgrowth is outstripping supply. According to

electricity stakeholders in TransitioMature cities, old or obsolete infrastrthe main problem. Then comes efficilowed close behind by lack of capaexample of the tight constraints westructure can place on the power syst

in the richest places comes from NThere, 80% of power must by law beed in the city because the transmissto bring electricity from outside simpcope with the higher load. Companieing to build small generating plants bis little land available on which to do out a solution, maximum capacity wmaximum demand by 2008**.

In Emerging cities, on the other h

* International Energy Agency, World Energy Report 2004** New York City Energy Policy Task Force, New York City Energy Policy: An Electricity Resource Roadmap, January 2004

Key findings■ Cities at all levels of development face a

challenge in keeping up with rapidly rising

demand for electricity

■ The impact on the environment is a major con-

sideration in decision making on energy issues

■ Stakeholders will emphasize renewable energy

sources in the future as much as fossil fuels

■ More stakeholders predict a leading role for

the private sector in electricity than in any

other infrastructure sector in the survey

Electricity



infrastructure is the biggest difficulty. Thiscan describe both average and peak load.Mumbai, for example, has seen hard to meetdemand growth of 12.4% over the last fouryears*. Meanwhile the power system in itsstate, Maharashtra, suffered its highestdemand peak in January 2006 which exceed-ed supply by 4,500 MW** more than one-third over the average requirement for all ofMumbai. As the next most important prob-lem, Emerging city stakeholders point to latemaintenance and lack of planning. Those inTransitional cities blame lack of investment.Lagos is an excellent example of how all theseproblems work together. There, because of lit-

tle investment since 1990, the 6,000 MW

maximum generation capacity cannot meetthe 8,500 MW that the city requires on aver-age before even considering represseddemand of 5,000 MW. Worse still, poor main-tenance means actual output averages 3,000MW. All this before 45% of power is lost in thepoorly maintained and frequently vandalizedtransmission system*.

The problems of Mature cities seems aworld away: the chief culprit is monopoly reg-ulation — such as a ten-year price freeze onChicago’s domestic electricity prices thatsometimes leaves the private utility thereforced to pay more on the open market forelectricity than it can charge. Such a structure

allowed unscrupulous power producers to

create the great California energy crisis of2000-01. Like their colleagues in Transitionalcities, for Mature cities stakeholders under-investment is the second most frequentlycited concern.

Pricing power: Electricity stakeholders ex-pect to address the energy needs of theircities mainly by putting money into powergeneration. When asked the single thing thatthey could do to solve problems in this area,the most frequent response was to improveon existing infrastructure or build new (citedby 29%) followed by general investment inthe system (23%).

The regulation of energy use — a heavy-


lack of sufficient generating capacity is by farthe most pressing concern, according to thesurvey. Old infrastructure and inefficientoperations are lesser problems because thereis relatively little of it anyway. This is a particu-lar issue in India and China where half thestakeholders cited difficulties arising fromlack of capacity. Shanghai, for example, hasfrequent brown-outs in summer. Businesseshave had to shut down completely or shiftproduction to night time when more electrici-ty is available.

Stakeholders in each type of city also ana-lyze the underlying causes of their problemsdifferently. For Emerging, and even more for

Transitional cities, unexpected load on the

handed version of demand managecame fourth (11%), but had no tMature cities where it would doubtlesdraconian. Mumbai does not have thThe local utility has resorted to “loding” — stopping provision to certaand restricting the use of neon sig ns cable TV transmission — to help mservice that already experiences powone to two hours per day in urban amore in rural ones**.

This does not mean efforts tdemand will have no role. When asmuch their cities would emphasizeation of new capacity compared with

management, responses were sp

The most serious problem of electricityinfrastructure

30%

27%

20% % of respondentsselecting

Lack of systemcapacity

Obsoleteinfrastructure

Inefficient operations

Combination ofproblems

20%

83%

100%

81%

81%

79%

76%

75%

Energy sources

Environmental impacts

Up-front capital cost

User affordability

Regulations

Appropriateness

73%Life cycle costs

73%Impacts on economy and

employment

Factors influencing the city’s decisionmaking on electricity supply

The best solution to electricity problems

29%

23%

13%

11%


Improve on existing infrastructure

Additional investment

Promote alternative energysources

Regulate energy use

Improve governance andadministration

* BEST data filed with regulator: MERC/22-26, 38, 39-45, 61 of 2003/1326 dt. June 7/22, 2006,**The Financial Express, 16 January 2006

*Nigerian Electric Power Supply Nigerian Electric Power Supply Industry, http://www.bpeng.org/CGI-BIN/news/reform%20 electricity.pdf,“You're going to feel a jolt, Chicago Tribune, 19 June 2006, ** Prayas submission on CII proposal for Pune Load Shedding, Dec 5, 2005,

% saying important impact

Electricity




evenly (53% versus 47%). If this played out inpractice, and nearly half of cities placed asmuch emphasis on demand management ason new capacity, this would be a significanttrend.

The potential value of demand manage-ment initiatives is certainly great. Studies inIndia indicate that they could eliminate 20%to 30% of demand growth*. To reach theeffectiveness foreseen this sort of demandmanagement will require a dramatic rampingup. Probably the most effective way to affectdemand quickly will be market pricing of elec-tricity. Electricity specialists expect theemphasis to be on selling power in their cities

at market prices rather than be subsidized(57% versus 43%). Denmark took this onestep further by heavily taxing use of fossil

fuels. The biggest outliers in the survey areIndia and China, where the combined equiva-lent figures are 36% at market prices and 64%subsidized.

Energy and the city environment: If ener-gy stakeholders aspire to modify demand,they also show a marked concern for environ-mental issues. On average, they thought thatover the next five to ten years their citieswould emphasize fossil fuels and renewabletechnologies to nearly the same degree (52%to 48%), an understandable result as thebroader survey lists air pollution as the singlelargest environmental problem cities face,

and global warming as the sixth (third amongMature city respondents). Only North Ameri-ca still seems wedded to fossil fuels (73% ver-

sus 27%). Environmental issues also figureprominently as key factors driving decisionmaking in the survey, along side financialconcerns.

The aspiration to move toward renewablesis clear, but there is a long way to go in prac-tice. London, for example, uses 39% gas, 35%coal, and 20% nuclear to power its genera-tors, but only 4% comes from renewablesources. Moscow uses Russia’s relativelycheap gas for 95% of its fuel mix; China andIndia both use readily available local coal sup-plies for 75% of theirs despite the detrimentaleffect on the already bad air pollution. Evenafter several decades of probably the most

active state measures in the world to promoteuse of renewables, by 2004 Denmark pro-duced only 25% of its power this way*. It is

therefore unlikely that renewables will pro-vide a major contribution to megacity powerneeds in the near future. Nuclear power — along proven technology — is another optionthat has been advanced as the best short-term solution to global warming by people asdiverse as British Prime Minister Tony Blair andthe environmentalist Professor James Love-lock**. Despite its low CO2 footprint, howev-er, nuclear power’s other drawbacks keep itfar less popular among all energy stakehold-ers than even traditional power sources (40%versus 60%).

The public and private sectors: If, as noted

above, those responding to the larger surveyput the importance of investment in electrici-ty behind many other infrastructure areas,one reason may be that cities are lookingmore to the private sector in this field than inothers discussed in this study. When askedabout the relative emphasis of reliance on pri-vate firms versus public bodies, electricitystakeholders expected to look 54% to the for-mer and 46% to the latter. Figures for privateor public operation of generation and distrib-ution facilities, as well as private or publicfinancing, were nearly identical.

The vast level of new generating capacityand money needed in the coming years isleading governments worldwide to considerhow best to use the private sector and com-petitive market forces. Those surveyed who

advocate private ownership or operation,indicate that greater efficiency is the majoradvantage, with access to funding mentionedless frequently. The disadvantages are primar-ily seen as higher user costs, which suggeststhat if privatization is to work there needs tobe strong competition to keep prices down.

A number of Mature cities, including Lon-don and New York, already have largely pri-vate, if highly regulated, power industries

serving their needs. Places as diShanghai, Mumbai, and São Paulo nificant private activity in a mixed sysfirst of these in particular has privatpation in power generation, whilePaulo nine separate companies compower distribution.

Meanwhile, Turkey, Russia, andhave reached different stages of resttheir state power sectors as a precprivatization of, and the introductionpetition in, various functions. In tcases, the need for investment andefficiency is driving the process.

Regional differences: Given theilevels of economic development, thent city archetypes have understandferent needs and responses in theelectricity supply.

The responses from continental Euparticularly interesting. This region combine a much more traditional vierole of the state in power generation vision with a far greater concern for mental issues. Contrary to overall electricity stakeholders in Europe slightly greater emphasis on subsidiing than the free market (53% versuand by far the greatest focus on puprivate ownership of any region (6238%). In making decisions about esupply issues, they put far more emp

environmental impact. This may beson why European stakeholders are group in the survey that expects to loto demand management than new (60% versus 40%).

These figures should serve as a that even though megacities worldwsimilar difficulties across diverse fieresponses will be profoundly affectedpolitical and cultural contexts.

Predicted approach of electricity experts

Renewabletechnologies

Fossil fuels

48%52%

* Demand-Side Management (DSM) in the Electricity Sector, Prayas Energy Group (Pune) for Climate Change & Energy Programme World WideFund for Nature, February 2005

* IEA, Energy Policies of IEA Countries – Denmark, 2006, **PM 'convinced' on nuclear future, 29 November 2005,'Only nuclear power can now halt global warming', The Independent, 24 May 2004


Water and waste water



One of the Tokyo-based respondents toldthis survey, “Recently there are often

rainfalls of more than 100mm. Rain water isstored in underground rivers to avoid flooding.Most people do not know. Real infrastructureshould be working in the background withoutbeing noticed.” For Mature cities, “working andunnoticed” is usually a good description of thewater infrastructure: the presence of gooddrinking water, sanitation, and drainage aresimply assumed. Any problems, such as therecent drought restrictions imposed in London,provoke annoyance. Catastrophic failures, suchas in the wake of hurricane Katrina, provokeoutrage. As in both these cases, the publicinsists that those responsible should have had


Waterand Waste Water

07proper infrastructure in place – the problem iscertainly not nature. For Transitional, andespecially for Emerging cities, the situation isprofoundly different. The UNDP estimates thatin 2004 some 1.1 billion people lived morethan 1km from the nearest safe water source.Worse still, 2.6 billion people, roughly 40% ofthe world’s population, had no access toimproved sanitation. These figures, UNDPsuspects, probably underestimate the scale ofthe problem. Official data for Jakarta andNairobi, for example, both indicate 90%coverage for clean water and sanitation. Thesefigures apparently leave out huge slum areas,in the former accounting for some 7.6 millionpeople without such facilities. The roughly 1

million residents of Nairobi’s notoriouslum rely on putting human waste bags and throwing it into the street*.

A growing challenge for the em

world: Our overall survey data refdifferent experience of respondents aarchetype cities. When survey respwere asked about the most seriostructure challenges facing their citierelated issues were split into separatries: water supply and wastewater ment. If added together, the combinastitutes the third most frequently ci(8%), a figure that nevertheless pubehind transport as a perceived c

* UNDP, Human Development Report, 2006

Key findings■ Water and sanitation is seen as an important issue

by specialists in this sector, but comes lower down the

list of priorities in the survey overall

■ Even in Emerging cities, the importance of water issues

for their economic development is not widely recognized

■ Solutions that focus on water reuse emerge as a

significant trend for the future

■ There is some movement towards private sector

management of publicly-owned water provision as a way

to improve efficiency




serious drinking water problems in the 21 st

century*.Investment priorities also reflect a higher

focus on water issues in Emerging cities. Ove-rall, 70% of respondents believe that there is ahigh need for investment in water and wastewater infrastructure, placing it sixth out of 13infrastructure areas. In Emerging cities, how-ever, the figure was much greater (81%).

Hidden costs: The link between public healthand clean water and sanitation is clear: theUNDP estimates that a lack of these servicesresults in about half the developing worldsuffering from a health problem at any given

time, and accounts for 1.8 million annual childdeaths from diarrhea alone. Conversely, intro-duction of safe water supplies and sanitation inLondon and various American cities about a

century ago coincided with the largest drops ininfant mortality and increases in life expec-tancy those locations have ever seen. Cholera,of only historic interest there, is a frequentvisitor to Lagos where water treatment iseffectively nonexistent*. Nevertheless, health-care stakeholders make no mention of the roleof water infrastructure in improving healthcareoutcomes, which may reveal a lack of holisticthinking.

In the same way, when all survey res-pondents were asked about factors enhancingeconomic competitiveness, only 3% placedwater supply and sanitation first, even inEmerging cities where water is such a big issue.

Noticed or not, water and sanitation are inreality crucial for economic development. TheWHO estimates roughly that lack of access tothem costs developing countries US$170

billion per year, or 2.6% of their GDP**. Sub-Saharan Africa loses about 5% of GDP, or someUS$28.4 billion annually, a figure thatexceeded total aid flows and debt relief to theregion in 2003. Conversely, investment inwater can generate a high return. The UNDPestimates that every US$1 spent in the sectorcreates on average US$8 in costs averted andproductivity gained.

According to water stakeholders, theprimary difficulty this under-appreciated areafaces overall is older, obsolete infrastructure(cited by 47% of respondents). This figure iseven higher in Mature cities (59%), andespecially Europe (63%) and North America

(66%). These cities, having benefited from safewater for over one 100 years, face thedifficulties of maintaining or upgrading cen-tury-old facilities. London’s water company,


(35%). In Emerging cities, water issues comesecond (13%), but in Mature ones they appearwell down the list (3%). Similarly, overall waterpollution/water quality is listed as the fourthlargest environmental challenge (13%), butcomes second in Transitional cities (22%).

Shanghai is one Transitional city facinghuge challenges in this area. Its main watersource — the River Huangpu — is so con-taminated by industrial and agriculturalpollutants that it has been devoid of aquaticlife for over 20 years. The River Yangtze, thealternative water source, faces increasedsalination in its lower reaches resulting fromlower water levels brought about by the Three

Gorges Dam. Meanwhile, ground water isfacing increasing contamination from sea-water. Little wonder that the UN namedShanghai one of six major cities likely to face

even after substantial upgrading effloses one-third of water to leaky pipeswhich occurs in London’s Victsystem***. New York, meanwhile, walways had a clean water source so cleto require filtration, now may have US$8 billion to filter suspended particTransitional and Emerging cities aobsolete infrastructure: Moscow’s wtem rivals that of London and New Yoand urgently needs modernization.

A bigger role for water reuse: Devarying intensity of challenges to wastructure in the different city arc

stakeholders overall had a similar appsolving these problems. Asked whichwould have the biggest impact, tcommonly cited choice was renovatiovement of the infrastructure (42%), by the more general one of iinvestment (29%). Respondents didmuch value in raising the low political water — 5% suggested making it a pwhich is interesting in light of therecent call to do so in its 2006Development Report.

Any renovation and investment isto revolutionize how cities addresneeds. Water stakeholders expect emphasis in their cities in the next fivyears will be slightly more on iefficiency than new plants and facilitversus 48%). This is even more likely case in Mature cities (62% versus 38an approach makes sense in a city lwhere ongoing investment and expansion over a century and a half hsound basis for future water provisionrelatively low emphasis on new pEmerging cities (52% versus 48%) mfrom widespread denial about the exteproblem. Mumbai, for example, c

The most serious problem of watersupply and wastewater management

47%

14%

12%

20% % of respondentsselecting

Old or obsoleteinfrastructure

Lack of systemcapacity


Combination ofproblems

92%

100%

91%

90%

85%

81%

79%

Water quality

Environmental impacts

Up-front capital cost

Appropriateness

User affordability

Impacts on economy andemployment

Factors influencing the city’sdecision making on water supply andwaste water management

* ht t p: // ww w. ch s. ub c. ca /c hi na /s ha ng ha i. pd f, ht tp :/ /w ww .e hp on li n e. org/ do cs /1 99 4/ 10 2- 2/ fo cu s. ht ml * UN DP 20 0 6, ProM ED -mai l 6 Ja nu ary 20 0 6, ** W HO (W or l d H e al t h O rg an izat i on ), “E co no mi c a nd He al t h E f fe ct s o f I nc re as in g Coverag e o fLow Cost Water and Sanitation Interventions”; UNHDR Occasional Paper, http://hdr.undp.org/hdr2006/pdfs/background-docs/Thematic_Papers/WHO.pdf),***”Drought in London”, London Assembly Committee, July 2006, ****"New York’s Water Supply May Need Filtering”. New York Times, 20 July 2006.

% saying important impact





water provision covers 95-100% of itspopulation: the UNDP suspects the number isclose to half of that*.

One surprising finding is the emphasis inthe future on water reuse rather than thetapping of new sources (55% versus 45%).Such an approach need not solely involvewater for industrial use. Beijing’s Bei XiaoheWastewater Treatment Plant currently providesdrinking water for 400,000 people and isundergoing an expansion — the largest suchproject in the world — to more than doublecapacity. It will provide drinking water at thecoming Olympic Games. Singapore, mean-while, hopes to get 20% of its water requi-

rements from a recycling plant: the PrimeMinister proudly serves its output at state din-ners.Market forces and conservation: Focusedon investment, water stakeholders see asmaller role for demand management: only

15% cited it as the best strategy to address theirproblems. Simple expedients in this area canhave a great impact. Shanghai’s recent require-ment that families replace 13-litre toilets with9-litre ones will save the city US$189 millionannually in water treatment costs**. Ratherthan focusing on education programs, how-ever, water stakeholders expect to managedemand and encourage conservation throughmarket forces. Overall, they foresee the em-phasis for water revenue to be more on userfees than on taxes (67% versus 33%). In Maturecities the former figure rises to 80%. The con-straint in Emerging and Transitional cities ismore likely to be the technological one of

installing metering equipment than anythingideological.

Lagos, for example, is happy to privatize itsbankrupt Lagos State Water Corporation buthas no idea where 90% of the company’s watergoes*.

The public and private sectors: Althoughmarket mechanisms will apply in water pro-vision, water stakeholders still expect theemphasis on the public sector to predominateover the private in operating facilities (57%versus 43%). North Americans seem par-ticularly attached to public operation (78% ver-sus 22%), this being one of the few areaswhere Europeans are happier to contemplateprivate sector participation (52% versus 48%).

Such an emphasis could involve a remark-able increase in private participation. Current-ly, the UNDP estimates that public utilities pro-vide 90% of the developing world’s water;Veolia Environment, the world’s biggest pro-

vider of water and waste recycling services,puts the world figure at 95%**.

Recent trends suggest, however, that al-though private-sector involvement in waterwill increase, it will do so in specific areas andtake on very specific forms. In the 1990s, the

World Bank encouraged greater private par-ticipation in water provision. A number ofhigh-profile grants of concessions tocompanies to provide municipal water faileddramatically, for reasons ranging from thepolitical difficulty of raising prices to covercosts through to currency exchange-ratefluctuations. Although there have beensuccess stories in this field – notably in Chileand parts of Manila – this history and the highupfront investment costs involved with waterhave increased corporate reluctance to take onsuch concessions***.

Instead, a variety of World Bank and OECDpublications**** indicate that the private

sector is moving more into the management ofpublicly owned water provision to improveefficiency, and especially the building andoperation of waste treatment plants. Privateoperation in particular involves lower risk – asthe state or the public utility, not the end user,

is the customer – and are less psensitive. A typical example is a neplant set to open in Moscow in 20structed by a German company uBOOT model (Build, Operate, Own, TThe company will operate and revenues from the facility for ten yeait slowly transfers it to the municipali

Private contracts also now tensmaller than the huge concession1990s, although there are more of th54 countries having opened the doocontinued on with, private participwater infrastructure in the last 15 ytime goes on, smaller domestic comp

taking a larger share of the market handful of transnational operators, incompetition.

In areas with reasonable levels ofreturn, private-sector participation wgrow as the survey results indicatehowever, have only limited abilityEmerging cities, as companies are avoonly politically sensitive business moalso locations unlikely to be profitabever welcoming.

The vast majority of new private invin water projects is currently going in(56% of the world total) and Algeria Lagos finds a purchaser, it will be an eto the trend. Emerging city water stakexpect the split of public and private ein the operation of new facilities to besus 43%. Most will likely need thecontribute far more than this.

The biggest advantages cited by tcates of privatization are increased ebetter funding, better quality manand a higher-quality service.

Those who are more skeptical avate-sector involvement cite high users, profit seeking and inadequate major impediments.

The best solution to water problems

42%

29%

15%

12%


Improve existing waterinfrastructure

Increase investmentfunding

Manage demand witheducation/awareness

Better information andtechnology

Improve management

Predicted approach of water experts

New sourcesWater reusesystems

45%55%

* Urban Water Sector in South East Asia, Benchmarking Performance, Water and Sanitation Program (WSP) May 2006, UNDP, Human Develop-ment Report. **"City Launches Toilet Reform", Xinhua News Agency, 13 May 2002, ‘Shanghai Flash’, Consulate General of Switzerland in Shang-hai Commercial Section, Issue 4, July 2003.

*"Lagosresidentsthirstforbetterwatersupply",PlanetArk,10 June2003,**UNDP,HumanDevelopmentReport,2006,p.10,"Watersupplybogsdownincomplexity",InternationalHeraldTribune,20 August2005, ***UNDP,Human DevelopmentReport, ****Forexample,see http://www.ppiaf.org/Gridlines/14ppiwater.pdfand paperslisted onhttp://www.oecd.org/document/22/0,2340,en_2649_37425_37456726_1_1_1_37425,00.html#Background,*****http://www.degremont.com/uk/files/actualites/presse/files/2004/juin/contrats.htm


Healthcare




Healthcare

08 A

round the world, healthcare systems arecoming under increasing pressure. The

rising cost of prescription drugs and privatehealth insurance is one challenge. Hugeinefficiency in the delivery of healthcare isanother. But it is arguably the phenomenon ofpopulation ageing that creates the biggestlong-term problem for many countries, par-ticularly in Europe and East Asia.

Increased life expectancy means thathealthcare systems face an increase in theproportion of older patients. Ageing alsoplays a role in the occurrence of chronicdiseases, which in turn leads to greaterdemand for long-term care. That people livelonger has much to do with the achievements

of medical science, but it comes at con-siderable financial cost. People over the ageof 75 incur per capita health expendituresthat are five times higher than people aged 25to 34. Ageing is currently estimated toaccount for 6%-7% of the increase in health-care costs per year.

Costs rising fastest in developed world:

Spiraling healthcare costs are particularlymarked in the developed countries with theirextended health systems. Between 1990 and2004, health spending has been growingfaster than total output in all OECD countriesexcept Finland. In the US, which has the mostexpensive healthcare system in the world,

health expenditure as a percentageduction has increased from 13.1% to six years*. In contrast, developing ccannot afford to spend anywhere much on healthcare, and access to treis often non-existent or inadequateing to the World Bank, developing chave 90% of the world’s disease load12% of its health spending. Moretically, the poorest countries have 56load but only 2% of spending**.

Healthcare in megacities reflecbroader national environments. Ecities have basic infrastructures andfor privately funded care for the eoften provide only rudimentary

* Source: OECD, ** OECD Health Data 2006, October 2006, World Bank, Health Financing Revisited: A Practitioner’s Guide, 2006

Key findings■ City healthcare systems around the world will struggle

to cope with the effect of an ageing population

■ There is a high emphasis on increasing the efficiency

of the system to contain costs while improving quality

■ Stakeholders predict an emphasis on preventative

solutions and integrated healthcare

■ Healthcare is mainly seen as a public task, but

significant proportions are open to private sector

involvement — with quality of service and efficiency

cited as key advantages

Healthcare



Lagos’s health system cannot even providebasic needs in the face of serious AIDS,tuberculosis, and malaria problems*. Mum-bai, although India’s richest municipality andspending 25% of its budget on health, can stillcare for only 20% of the population, leavinglarge slum areas poorly served**. Transitionalcities are doing better, with places likeIstanbul and São Paulo seeing good impro-vements in recent years***. This city arche-type is now beginning to face medical pro-blems associated with more developedsocieties: whether the effects of pollutionarising from industrialization in Shanghai, orthe need for specialized facilities for Seoul’s

ageing population as Korea undergoes thedemographic transition typical of matureeconomic development. Mature cities such asNew York, which boasts one of the world’shighest concentrations of hospitals, are

troubled by healthcare inflation and diseasesof affluence, such as obesity-induced dia-betes and cardiovascular problems.

Given the scale of these challenges, it issurprising that healthcare is not more of apriority for respondents in the overall survey.It comes well down the list of socialchallenges (mentioned by only 4%) and infra-structure challenges (1%). Of the 4% whothink it the leading area for determining acity’s competitiveness, most are in the healthfield. The combination of underinvestmentand lack of focus can prove dangerous. As onesurvey participant from Beijing noted, theoutbreak of SARS had a pronounced effect on

the Chinese Government’s attention tohealthcare.The biggest problem facing city healthcare

systems is lack of capacity followed closely byinefficient operations, according to the

survey. Concerns about inefficiency were par-ticularly marked among stakeholders fromthe Emerging cities. Overall, it appears thathealth stakeholders think that it is not enoughsimply to pump money into current systems.Far more important is the need to put cityhealth infrastructures in order so that theycan use what they have more efficiently.

Improving healthcare efficiency: Whenasked about solutions to these problems,most stakeholders again offer a combinationof greater efficiency and increased capacity.Those in Mature cities expect to emphasizeefficiency gains by a wide margi n (61% versus

39%). Emerging cities also had a greater focuson measures to improve efficiency, withstakeholders prioritizing the need for bettergovernance of healthcare, a more integratedhealthcare system, and only then more staff.


Stakeholders in Transitional cities different order of priorities, in thexpect to emphasize new capacincreased efficiency. Their preferredis more money, so greater investmecomes well ahead of the needintegrated system (17%) in their view

The desire to control costs and efficiency also informs two other trensurvey: towards preventative and awacute medical care (67% versus 33%particularly in Transitional and Maturtoward common healthcare infraswith shared services as against indeindividual institutions (63% versus 37

One universal point worth noting acity archetypes is that stakeholders fomuch more on their systems as the of health, rather than on patient behliving conditions. When naming t

The most serious problem in thehealthcare sector

32%

29%

19%

14%

% of respondents selecting

Lack of system capacity


Obsolete infrastructure

Combination of problems

* www.vanguardngr.com/articles/2002/features/health/gh105092006.html; USAID Nigeria:http://www.usaid.gov/ng/index.htmFinancialNigeria.com (2006); Economic Report: New Polio Report Challenges Nigeria's Commitmentto Health -care Delivery 05/09/2006

** T.R. Dilip and Ravi Duggal, “Unmet Needs for Public-Health Care Services in Mumbai, India”, Asia-Pacific Population Journal, 2004*** OECD, Health Data 2006: How does Turkey compare?, “Sumario de Dados, 2004”; Secretaria Municipal de Governo Municipal

Healthcare




effective single strategy to address thechallenges outlined above, health promotionand education came well down the list, citedby only 5% of respondents. Getting thepatient to avoid anything from unsafepractices that spread HIV/AIDS to theexcessive drinking devastating Russian healthwould have a profound effect. So too wouldaddressing significant air or water pollutionissues, such as those in Transitional cities likeShanghai and Mexico City, with even Maturecities like Tokyo, London and New York excee-ding WHO-recommended nitrogen dioxidelevels.

IT in healthcare: IT has a major role to playin healthcare, supporting both treatment andadministration. The shift towards electronicpatient records is one example. São Paulo hasa medical smartcard that lets patients taketheir medical record between hospitals on

wallet sized pieces of plastic. IT can also savemoney: for example, a new system linkinghospitals in Copenhagen is expected to bringsavings of approximately US$46 millionannually. These are attractive benefits, butimplementing IT systems is not just a matterof finding suitable technology. Specialistsargue that the problems experienced by theUK’s National Health Service in implementingelectronic patient systems are more to dowith the difficulty of achieving cooperationon a huge project between a multitude ofstakeholders than the technology itself. Thesechallenges indicate that organizational inno-vation will be just as important as technolo-

gical advances when it comes to improvingthe performance of megacity healthcare systems.

The public and private sectors: Stakehol-ders in the survey believe that public healthinfrastructures will be the path for the future.

In terms of public or private ownership oroperation of facilities, they expected theemphasis to be for the former (58% versus42%). They also believe that there will be agreater emphasis on free-to-user medical ser-vices as opposed to healthcare models wherepatients pay for treatment (59% versus 41%).

Attitudes do vary by city archetype, how-ever. Transitional cities are especially likely toemphasize public ownership (63%), operation(63%) and free health care (70%). However,Mature city stakeholders expect fee-payingservices to be emphasized slightly more thanfree ones in the coming years, and splitroughly evenly on public or private ownership

and operation. Currently the public sector isdominant in healthcare in the developedworld, with the state covering 70% of healthspending in OECD countries, so this may con-stitute a relatively high degree of openness toprivate-sector involvement.

Emerging cities stakeholders greater emphasis on public ownershand operation (59%) in the future. Tbe viewed in the context of low pubding on healthcare in these countr29% of health spending comes from lic purse, and in India the figure is jaccording to the World Bank). Whmoney will come from to move thisaspiration is unclear.

The one certainty is that Emergifaced with pressing health probleneed to use whatever resources tmuster, public or private, in as efficieas possible.

In this context it is worth noting tother infrastructure sectors in thequality of service and efficiency aremajor benefits of privatization. Hcosts and profit-seeking are perceivemain disadvantages.

Predicted approach of healthcare experts

New capacityIncreased efficiency

49%51%


Safety and security



Security has one important qualitativedifference from other infrastructure areas

in this study: whereas water or transport pro-vide something tangible, the ultimate goal ofsafety efforts is to create a subjective state ofmind. Statistical success is not enough. In2005, the FBI reported that violent crime has

been decreasing in America for a decade, buta Gallup poll showed that two thirds of thepopulation believed the complete opposite.Worries have real world implications: flyingafter September 11, 2001 was objectivelysafer because of enhanced security, butpassenger numbers suffered nonetheless.

Whatever the difficulties, urban specialistsunderstand that security is a crucial infra-


Safety and Security

09structure element. The complete surveypopulation ranked public safety and securityas the second most important infrastructurearea in determining competitiveness with 9%of respondents. It is also the sixth-biggestsocial challenge, while crime/corruptioncomes in tenth.

Threats against the city: The more detailedsurvey answers by security stakeholdersfleshes out their more informed concerns.Organized crime, including by armed gangs,is their biggest challenge — named by 36% ofthose questioned and by even higher num-bers in the Emerging and Transitional cities.Next, a surprising distance behind, comes

terrorism (18%), a particular conEmerging and Mature cities.

Although distinct threats, the twoin important ways. Terrorists use oviolence to weaken the state: crimindo so to gain wealth. This frequently a distinction without a difference: t

their ends, the IRA robbed banks andcartel undermined the Colombian practice, the main problem facingprofessionals is organized grouchallenge the rule of law, and that inly cooperate with each other whatefinal goals. A recent study, Illicit bNaim, shows that globalization hasorganized crime and terrorism to c

Key findings■ Safety and security comes second only to transport as a factor

contributing to city competitiveness

■ Organized crime emerges as the biggest problem, followed some

distance behind by terrorism

■ Cities are attempting to shift to a more proactive approach to security

■ Although open communities are the favored as the route forward

for most, gated communities will also be emphasized by many —

especially in Emerging cities

■ Public surveillance is deemed more important than protecting privacy

Safety and security



Towards proactive protection: How canthe city protect itself against these threats?The survey indicates a greater focus on thethreats themselves, rather than underlyingcauses. The leading ones they named were:crime itself (put first by 24%), corrupt orincompetent law enforcement (15%), poorplanning/city management (10%), terrorism(9%), and natural disasters (9%). In otherwords, the causes of crime, terrorism andnatural disasters are criminals, terrorists, andnatural disasters, or incompetence in fightingthem. Social issues such as unemploymentand poverty are well down the list. The lack ofa holistic approach to these threats is evident,

possibly because security specialists in thesurvey feel that the underlying social causesof crime are outside their remit.

Asked how best the city could addresssecurity issues, the most popular response isadditional officers and law enforcement

capacity (28%), while the third is betterpreparedness and planning (17%). Emergingcities emphasize the former and Mature ones

— which can already afford larger policeforces — the latter, but the common messageis more capacity, better used.

Over recent decades numerous policedepartments have shifted from a reactiveapproach to take the fight to the enemy. Thesurvey results show this occurring worldwide.Respondents indicate that, given a two-waychoice, the emphasis of security efforts wouldbe towards preventing problems over pro-tection from them (60% versus 40%). Inanother question they emphasize protecting

the city from threats over responding to them(57% versus 43%).The success of so-called “risk-based po-

licing” has been dramatic. New York City’songoing, widely copied COMPSTAT program,which analyzes police data to indicate crime

hotspots, allowing frequent tactical resourcereallocation, was important in that city’s dropin crime figures in the late 1990s. A similarinitiative in Bogotá, and related efforts toreclaim crime-blighted public spaces iden-tified by technology, were instrumental inreducing its murder rate by 48% between1994 and 2005. A slightly different, butrelated approach, which has spread from theUK through Europe and Australasia is dubbed“intelligence-led policing”. In addition tocrime data analysis, this involves the sys-tematic collection of informant informationdescribing the criminal environment and par-ticularly the behavior of repeat offenders.

Safety over privacy: A strategy based onpredicting crime has its controversial ele-ments. Survey respondents thought that theemphasis on the need for public surveillancewould far outstrip privacy concerns, a con-


and thrive. For example, from 1990 to 2005money-laundering expanded five times morequickly than global trade.

The next most pressing safety concern,potential natural disasters, shows theimportance of context in risk perception. Ove-rall, 13% name this as their city’s leadingsecurity challenge. Mature city respondents,however, rank it almost as high as anythingelse, while Emerging city respondents do notmention it. The latter are not exempt frompotential disasters. Lagos will lose significantterritory if global warming raises sea levels.With a barely functioning security apparatus,however, it cannot even properly address

current annual floods. Shanghai, though,with a low crime rate and greater resources,can invest in preparation for potential earth-quakes and flooding. Security stakeholdersare perhaps focusing on where they have thecapacity to make a difference.

viction strongest in Transitional andcities — where risk-based policingadvanced.

In pursuing their campaign criminals and terrorists, however, stakeholders fully understand the maintain perspective. The most ifactors influencing their decisions aron the economy and employmentpriateness, public satisfaction and coimpact. These all come well ahead The city's protection cannot unduly cpeople's lives and businesses — indfocus of decisions is to enhance teconomic competitiveness and quali

Technology is essential for rpolicing, and a vital tool for generalance in cities wishing to increascapacity. Crime mapping is just one Another ubiquitous and sometimuseful one is CCTV. Introduction o

The most serious safety and securityproblem

36%

18%

13%

8%

% of respondents selecting

8%

6%

7%

Organized crime

Terrorism

Natural disasters

Ethnic conflicts

Mass events

Crime and violence of all types

Combination of problems

Predicted approach of safetyand security experts

Prevention ofproblems

Protection fromproblems

60%40%


Public surveiProtecting Privacy

59%41%

% = predicted emphasis % = predicted emphasis

Safety and security




system, for example, in central Johannesburgbrought an 80% drop in crime in 2002 andwas instrumental in the revival of a previouslydevastated downtown*.

The security stakeholders see technology'simportance, expecting the emphasis on itspurchase to be greater than investment inhuman resources (54% to 46%). This figure,though, also indicates that technology with-out having enough people to use it is insuf-ficient. More strikingly, while 28% of res-pondents see more officers as the best way topromote security, only 4% wish to rely onmore CCTV alone. Technology is seen as acrucial tool, not a complete solution.

Mobilizing citizens: The survey also indi-cates the international strength of anotherimportant shift in policing: enlisting the

community in efforts to promote its ownsecurity. After more enforcement capacity,respondents thought the best option for citieswas increasing awareness/education/sense ofcommunity (18%). Combining these respon-ses with those advocating the same measuresspecifically directed at youth raises the figureto just under one quarter.

Community involvement can make a hugedifference. A core part of Chicago’s Alter-native Policing Strategy has been mobilizingthe public. From 1992-2002, robbery in thecity declined by 58% — more than anywhereelse in America — and more importantly fearof crime fell by 20% among the most

vulnerable. Still more dramatic were efforts inSão Paulo’s Jardim Ângela, which the UN oncelabelled the world’s most violent neigh-borhood. Efforts by the city and 26 NGOs to

increase community cohesion were crucial inreducing the murder rate there between 1999and 2004 by over 73%.

Harnessing community strength, however,alters the relationship between the securityforces and society. Safety is no longer simply astate-provided public good, but becomespartly the responsibility of individual citizens.Now, measures like Neighbourhood Watch orcountless volunteer citizen patrols in NorthAmerica — from New York’s Guardian Angelsto the South Cariboo Citizens on Patrol in ruralBritish Columbia — are no longer branded asvigilantism but are often assisted by thepolice. Once people in a community feel that

they have responsibility for their own safetyand security, the incentive exists to turn toprivate security solutions if they considerpublic efforts insufficient.

The public and private sectors: Thegrowth of a private-sector role in such a tradi-tionally public field sparks some anxietyamong those surveyed. Those most opposedare moved by more ideological arguments:this field is the role of the state (39%); the pri-vate sector is unaccountable (23%); and pri-vate security companies are elitist (16%). Themuch smaller number favoring greater privateparticipation instead point to utilitarian justi-fications: such arrangements are credible andreliable, they attract investment, and arehighly efficient.

Given such views, the surprise is that indeveloping solutions to the security problems

of their cities over the next five to ten years,on average these respondents expect effortsto emphasize private versus public efforts by33% to 67% — a finding that could be signifi-

cant in what is currently a state-dofield.

Force of circumstance is drivgrowth, in two areas. The first companies hired to perform specifnot front-line, tasks by government with a security role. This arouses relatle controversy. Britain, for exampsources part of its passport applicacess to Siemens Business Systems aairports use private security firms degree.

The second category results fromindividuals or companies exercisiresponsibility for their own safety

their fears are insufficiently allayedstate’s efforts. An increasingly commof this practice around the world is tcommunity — protected by walls andits own private guards. Although mosindicate that such neighborhoods enjthe same level of safety as their surrothe feeling of security within is imuch higher.

Such private security procuremensome controversy. In our survey, resthink that their cities will strongly emdeveloping open communities ovecommunities (61% versus 39%). In Ecities, however, with higher crime rfewer public resources, respondents inclined to predict an emphasis on gaopen communities (52% versus 4crime rates drop and resources rise

Transitional and Mature cities, supgated communities lessens.

Thus, where cities can providesecurity of their residents, or mortantly make them feel safe, the pubwill outsource some highly controlfor reasons of efficiency and financethey cannot, the private sector wicessity do so for those who can afford


Develop gatedcommunities

Develop opencommunities

39%61%

88%

100%

83%

82%

82%

78%

Impacts on economyand employment

Public satisfaction

Appropriateness

Community impacts

Regulations

Factors influencing city’s decisionmaking on safety and security

* (http://www.joburg.org.za/metro_police/police_projects.stm, http://www.joburg.org.za/july_2002/cctv.stm)

% = predicted emphasis% saying important impact

City governance and finance



Metropolitan governance has increasingly complex as cities h

phed into agglomerations combiningadministrative organizations and jurisThis has led to calls for a complete rment of urban governance. Megacneed innovative funding strategies t

much-needed investment to address structure challenges outlined in prevtions.

These requirements are widely edged, but there is considerable debahow to address them. As usual, a onall strategy is inappropriate: governafinance structures must be adapted tounique circumstances and needs of e


City Governanceand Finance

10

Beijing

Key findings■ Economic growth and employment are the primary drivers in decision-making for

specialists in city management

■ Environmental issues are also important but are sometimes sacrificed in the race for growth

■ Attempts to deliver holistic solutions are often undermined by a lack of strategic

planning and poor coordination between different levels of government

■ Many cities focus on increasing supply to cope with growth; demand management

strategies have yet to be widely adopted

■ Infrastructure will usually remain under public control, but the private sector has

an important role to play in managing services for increased efficiency




6% of respondents to this survey saw educa-tion as the most important area determiningcity competitiveness. Similarly, cities need ahealthy workforce to achieve their economicpotential, yet in the survey only 3% citedhealthcare as the single biggest factor in citycompetitiveness. It is therefore worth stressingthat the health, education and welfare of thecity’s inhabitants may be at least as big a factorin attracting investment and delivering growthas physical transport infrastructure.

Environmental concerns are important

but are sometimes sacrificed for growth.

Respondents also have a high awareness ofecological factors: six in ten city managers inthe survey think that their city’s leadership rec-ognizes the vital role that infrastructure deci-sions can play in protecting the environment.This echoes a wider sensitivity to environmen-tal issues in the survey overall — for example,the desire to make transport greener byemphasizing mass transit solutions, or to placean increased emphasis on renewable energysources to provide a greater proportion ofpower to the city.

Even so, when push comes to shove thesearch for economic competitiveness oftenwins out over environmental considerations.For example, 45% of respondents overall pre-dict that their cities will increase infrastructurecapacity at the expense of the environment.Stakeholders in the developing world are par-ticularly likely to put capacity growth first:

about 55% of respondents in Emerging andTransitional cities believe their cities will sacri-fice environmental considerations for the sakeof increased capacity, whereas only 14% ofrespondents in Mature cities believe that thiswill happen.

More resources need to be made available

for the urban poor. A wealth of depressing

statistics drive home the scale of urban pover-ty. Worldwide, 18% of all urban housing unitsare non-permanent structures and at least 25%of all housing does not meet urban construc-tion codes. Problems are especially acute in theEmerging cities and particularly in Sub-Saha-ran Africa, which has the highest slum growthrate.

In the UN-HABITAT report, Kofi Annan com-ments that efforts to improve the lives of theurban poor have not kept up with the rate ofurbanization. Many in the survey seem toagree: only 37% of stakeholders say that theircity makes adequate infrastructure invest-ments into the poorer areas. Respondents inEmerging cities are most likely to think thatinvestment into poorer areas is inadequate.

It is not that stakeholders in the survey donot appreciate these problems. Education andhousing are two areas where stakeholders saythere is a high need for investment. However,Emerging cities often lack the resources toaddress these issues effectively.

Better performance begins with better

governance. Stakeholders are aware that get-ting money to invest in improved services,though important, is not the only issue. Long-term strategic planning emerges as the singlebiggest problem facing city managers in thesurvey. When asked what the best solution is tothe challenges they face, one-half of respon-dents in this area call for better planning, ver-sus only 12% that cite the need for more fund-

ing. The call for better city governance isechoed in a related issue, the need for moreefficiency in the management and implemen-tation of infrastructure. Only half of all respon-dents to the survey say that the implementa-tion of infrastructure decisions is currentlydone well, although that proportion rises toapproximately two-thirds for public-sectoremployees and elected officials.

Finance is of course a major issue, and iscited as such when we asked the differentinfrastructure specialists about their chal-lenges. What is clear, however, is that city man-agement stakeholders see that good gover-nance is a prerequisite for raising funds andachieving value for money. In this respect,good governance is the cornerstone of com-petitiveness. Poor governance also acts as abarrier to achieving the goals of sustainabledevelopment. Even in the more developedcountries, recent OECD research* on metropol-itan governance discusses how the currentstructures are not well-suited to balancing theneeds of economic competitiveness and ‘live-ability’. The three main obstacles identified area fragmentation of administrative jurisdiction;strain of the financial and fiscal abilities of localmunicipalities in metropolitan areas; and a lackof transparent, accountable, decision-makingprocesses. The report goes on to identify cer-tain features that can contribute to the dualgoals of enhancing competitiveness and live-ability of large metropolitan regions. Theseinclude stronger area-wide metropolitan gov-ernment, improved coordination and integra-tion of policies in metropolitan areas, and gov-ernance and strategic planning to supportmore sustainable urban development.


However, some strong themes and challengesemerge in the survey that provide an insightinto how governance and finance strategiesmight evolve in megacities globally and at thethree archetypal stages of development.

Growth and competitiveness are the pri-

mary drivers in decision-making. The clearpriority for those stakeholders in the surveyinvolved in city management is to grow theeconomy and create or protect jobs. Whenasked to rate the importance of ten factors interms of their impact on the city’s decisionmaking today, 81% acknowledge the impor-tance of the economy and employment,whereas smaller proportions cite the impor-tance of responding to citizens (73%) or of con-sidering community impacts (68%).

Competitiveness also emerges as an impor-tant consideration in decisions relating to spe-cific infrastructures. Six in ten stakeholdersthink that their city places a high importanceon making themselves competitive to attractprivate investment when deciding on infra-structure issues, a proportion that rises amongelected officials and municipal employees.

A multitude of different factors combine tomake a city competitive. Some are related tophysical assets, others to the contributionmade by the city’s inhabitants*. As noted inprevious sections, stakeholders are highlyaware of the more tangible and direct factors — namely that a good transport infrastructureis vital for commerce. By contrast, other infra-

structure areas covered by this report are seenas social or environmental problems in need ofinvestment, but are rarely linked with city com-petitiveness. This may be an oversight. Forexample, a number of surveys of internationalexecutives by the Economist IntelligenceUnit** indicate that the availability of skills is adecisive factor in attracting overseas invest-ment from global businesses. Despite this, only

City management must becom

transparent and accountable. Maholders in the survey are aware of theimprove transparency in municipalment. Only 44% of city managemeholders agree that their city has traand consistent decision-making pwhen it comes to investing in infraswhile 38% disagree, and the remaineutral on the subject. One-half ofdents believe that their city’s biddingdering processes are major obstacletimely implementation of infrastruc jects. Once again, improvements in thare vital steps towards improving afunding. Investment and lending is inly tied to clear measures of how monespent, and assurances that projects wciently managed. When the World Bana deal with Nigeria in 2006 to lend US$lion to improve drainage and solid waagement in Lagos, the agreement clauses on transparency and financiaing. Political reform at the metropolhas been a key factor in delivering iinfrastructure in Bogotá, Colombia. case study** emphasized the imporcity-level leadership and an enablingcontext, especially in a developing

12%

% of respondenmentioning

Improve management /planning

Additional funding

Better education 5%

The best solution to city managemen

*In its recent report on city competitiveness, the OECD notes that factors such as infrastructure and accessibility, industry and eco-nomic scale and structure, human capital and the labor force act as major determinants of city competitiveness.**For example, World Investment Prospects 2004, CEO Briefing 2005

*OECD Policy Brief, The reform of Metropolitan Governance, October 2000; OECD Policy Brief, Competitive Cities in the Global Economy, 2006**The Mobilization of Private Finance in Bogotá,





Important measures included reforms thatgave more authority to local officials and madethem accountable to their constituents. Fiscaldecentralization provided funding sources forlocal programs and initiatives. The combi-nation of these factors and an enabling legalframework provided a window so that localofficials could be more responsive to localissues, as well as needs of the poor in particular.

Silos and short-term thinking are holding

megacities back. The underlying reason forpoor planning, according to city managers inthe survey, is poor coordination and a lack ofleadership. While the influencers and private-sector respondents are especially critical, evenone-third of the public-sector employees arenot satisfied with their own performance inthis regard. Poor coordination between depart-mental silos makes it hard for cities to provide astrategic response to complex infrastructurechallenges across multiple jurisdictions. Theinterdependencies between different infra-structures are seemingly overlooked, judgingby the survey — the fact that improved waterand sanitation is rarely cited as a key step topreventative healthcare being a classic example.

There is a clear stakeholder emphasis onholistic urban management over separatedresponsibilities in the survey (61% versus39%). But it appears that current structures formunicipal governance often prevent this fromhappening. For example, another recent OECDreport* analyzed the challenges posed by frag-

mented governance in Mexico City. The city’soverall metropolitan area consists of fourmajor governmental units: the Federal District(itself consisting of 16 sub-units); the stategovernments of Mexico and Hidalgo (with 59municipal governments); and the federal gov-ernment (which maintains substantial day-to-day responsibilities). The different governmen-tal entities within the metropolitan area clearly

recognize the need for cooperation at the met-ropolitan level, as evidenced through the largenumber of coordinating bodies that have beencreated to manage specific issues, but the over-all impact of these has been minimal. The over-all impression is that these plans are poorlylinked to the political channels through whichinvestment decisions and budgetary allocationare determined. These problems resonate else-where. The city of São Paulo is one of 39 citieswithin the greater Metropolitan area, and thecity government has major challenges in coor-dinating its activities with surrounding com-munities. The municipal government wentthrough a process of decentralization in the1960s that was necessary to address the prob-lems of rapid growth but, as stated in a recentreport from the Woodrow Wilson InternationalCenter for Scholars, better municipal coordina-tion will now be vital for improving the effec-tiveness of metropolitan governance. Coordi-nation is also a major issue in Mumbai, wherethere are multiple administrative agenciesoften with overlapping authority. It is estimat-ed that, compared with other large cities, ittakes more time in Mumbai to process typicalmunicipal tasks such as building plans or con-struction regulation**. A government task-force identified improved governance as a keystep towards Mumbai becoming a World ClassCity***. This challenge of delivering holisticsolutions that balance the needs of the city andthe wider metropolitan region are acknowl-edged by some, but by no means all, of the

stakeholders in the survey.One implication of the research is that the

traditional model of municipal governmentmay need to be reconsidered. As opposed tohaving many departments based around a sin-gle discipline (for example, planning, transportand environment departments), cities mightadopt “local area teams” that offer the multi-disciplinary skills required to deliver integrated

solutions at a local level. This would need to becombined with a central planning and deliveryteam with responsibility for delivering holisticsolutions across the metropolitan region.

Cities emphasize supply over demand

management. Faced by huge pressures onpublic services, cities tend to emphasize supply-side solutions. This does not necessarily meanbuilding more roads, railways, hospitals and soon. On the contrary, there is often a preferenceto increase efficiency of existing infrastructureas opposed to building new capacity. For exam-ple, healthcare stakeholders make the case forintegrated healthcare systems, those in trans-port emphasize the need for incrementalimprovements to existing systems, and citymanagement stakeholders look to the efficien-cies offered by IT. Where cities invest in newcapacity, this tends to be combined with thedesire for more efficient management of projects to achieve a better outcome. Demandmanagement does get mentioned by a minorityof respondents, but never emerges as a priority.This is true even of responses from specialists inparticular infrastructure sectors — a findingthat is perhaps surprising given that demandmanagement has been a hot topic for severalyears. Despite the success of several road pric-ing schemes in cities such as London and Singa-pore, only a fraction of respondents citeddemand management as a priority for solvingtheir city’s challenges. Demand management iseven less likely to be cited as a key solution by

stakeholders in the Water and Waste Water sec-tor, despite the fact that many (including theUNDP) have argued for the benefits of meteringand pricing water.

Information technology will help to drive

transparency and performance. IT can playan important role in improving transparency,accountability and the efficiency of municipal

services. As a measure of transparency, theWorld Bank report on city governance and glob-alization looked at whether cities have a web-site that includes information on the city bud-get, and advice on how to start a business.Those that met these criteria tended to performbetter across a range of public services. Ofcourse, as well as increasing transparency, ITcan improve cost-efficiency. In Denmark, thecountry that topped the Economist IntelligenceUnit’s e-readiness rankings in 2006, e-procure-ment is saving the country’s taxpayers as muchas US$188m per year. Politicians elsewherehave also cottoned on to the benefits of e-gov-ernment strategies. EU ministers have nowdecreed that by 2010, at least 50% of publicprocurement in member countries should becarried out electronically. The value of technol-ogy is well recognized by city managementstakeholders in the survey. Eight in ten respon-dents think that their cities will increasinglyintegrate advanced IT into their administrationand operations over the next five years. More-over, respondents predict an emphasis on digi-talization or e-government over recruiting more

staff by a ratio of 2:1. Interestingly, Ecity respondents predict almost aemphasis on e-government and digias those in Transitional and Mature cigesting that the benefits of IT are not rto the rich cities alone.

The private sector has a role to

increasing efficiency. The survey pmixed picture on privatization. Generrespondents predict public ownershipstructure sectors and services. Howemajority of stakeholders also say thatopen to public-private partnerships (Psurprisingly, private-sector respondentmost likely to predict privatization. Hmore than 70% of publics and electPPP’s as a viable means to implement inture solutions and more than 60% beprivatizing infrastructure would incefficiency. Surprisingly, respondentsmain advantages of privatization as efficiency, rather than money. Givenwas traditionally perceived primarily atap the private sector for increased fun

Predicted approachon city management

Digitalizatioe-Governme

More staff

64%36%

*OECD Territorial Review, Mexico City, 2004, **Mumbai City Development Plan, Appraisal Report, 2006,***Transforming Mumbai into a World Class City, First report of the Chief Minister’s Task Force, 2004






may represent a significant shift in attitudes. Bycontrast, the main disadvantages of privatiza-tion are seen as potential higher user costs andinadequate supply for the broad population. Areport from the World Bank acknowledges that,while there is growing empirical evidence of pri-vatization’s benefits, this often coincides withdissatisfaction and opposition among citizensand policymakers. It argues that rather thanabandoning privatization, there should be aredoubling of efforts to privatize correctly. Thisentails tailoring privatization to local condi-tions. The report also warns against focusingsolely on privatization transactions, arguingthat instead cities need to create a framework inwhich public-private partnerships can succeed.This involves developing and protecting com-petitive forces, creating proper regulatoryframeworks before privatization, introducingand enforcing transparency in the sales process,developing social safety nets for the adverselyaffected, and introducing innovative pricingand subsidy mechanisms that ensure access toaffordable basic services. Get these admittedlycomplex issues right, and the efficiency gainsfrom privatization can be compelling.

Megacities are calling for public leader-

ship. It is clear that many stakeholders are opento the benefits of public-private partnership,but they are also reluctant to relinquish publiccontrol of services. If anything, our city man-agement specialists call for stronger municipalgovernment. As noted in the infrastructure sec-tions of this report, stakeholders predict an

emphasis on public ownership. The need forstrategic solutions at a city-wide level is also dri-ving a shift towards greater central control andautonomy within municipal government. Thereis a clear emphasis on greater regulation ratherthan deregulation in the future (58% versus42%), and a bias towards centralization ratherthan decentralization in city management (62%versus 38%). Thus it seems that governmentand the public sector will seek to provide strongleadership, but will bring in the private sector tomanage and increase the efficiency of services.

“By raising the price [the seller of scarce corn] discourages the consumption, and putseverybody more or less, ... upon thrift and good management. ... If by not raising the price highenough he discourages the consumption so little that the supply of the season is likely to fall shorof the consumption ..., he exposes the people to suffer ... the dreadful horrors of a famine.”

Adam Smith, Wealth of Nations, (1776) Book 4, C

75%

PPP’s are viable means ofimplementing infra-structure solutions

ElectedsEmployees

Privates Influ-encers

Role of public private partnershipsand the private sector

73%77%

70%64%

Privatization of cityinfrastructure wouldincrease efficiency

ElectedsEmployees

Privates Influ-encers

63%

77%

63%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

The link between supply, pricing and demand

management has long been at the heart of

economics. It has moved toward the heart of

sustainable development strategy as well.

Kyoto’s carbon emission trading provisions are

just one example.

For megacities encountering water, fuel, or

transport constraints, correct pricing can play

an important role in building a sustainable in-

frastructure, by unleashing entrepreneurial in-

genuity in support of the environmental trinity:

reduce, reuse, recycle.

Beijing, for example, a city that faces serious

water shortages and where low prices led to

rampant waste, has seen nine price increases

for water customers in the last 15 years, rai-

sing the price by some 3,000% – although still

costing the average household only 1.8% of its

total outlay. Between 2001 and 2005, the city’s

overall use dropped by 15%. The EU has adop-

ted this strategy too: its Water Framework

Directiverequires pricing by 2010 that encou-

rages resource efficiency.

Prices can also affect electricity use and the ty-

pes of fuel used for power. Denmark’s policies

of selective taxation of fossil fuels throughout

the 1990s were central to bringing about itsvastly increased energy efficiency — its energy

intensity, or energy used per unit of GDP — is

35% below the average of International Ener-

gy Association Member States, and its renewa-

bles sector now provides 25% of all its energy.

Road pricing can have even more rapid results

in transport. In its first six months, Central

London’s Congestion Charge brought a drop of

30% in non-exempt vehicles entering the char-

ging zone, most of the occupants of which

had switched to more sustainable means of

travel, such as public transport.

Success in this type of demand management,

however, requires more than simply taking

people’s money. First, new fees must be correctly

targeted. Price increases work better in some

places than others. For example, the market for

indoor residential water use is relatively inela-

stic. For water, industrial and (often heavily sub-

sidized) agricultural users — including garden-

ers — are much m ore responsive: higher prices

led to a roughly 25% improvement in Chilean

irrigation efficiency between 1975 and 1992,

and numerous companies in water-poor Chen-

nai (India), rather than pay for expensive pri-

vate supplies, are treating their own wastewater.

Even more importantly, such charges require

groundwork to garner political support. Despi-

te using market mechanisms, charges to pro-

mote sustainability are not market driven: a

cyclical fall in crude oil prices is more likely to

exacerbate global warming than reduce it, for

example. Price setting, and its acceptance by

consumers, is a process both deeply political

and expensive when misjudged. The largeCochabamba water concession in Bolivia

collapsed in 1999 over protests at charges for

previously free water, putting an acrimonious

end to plans for a new dam and purification

plant; and in early 2005 the residents of Edin-

burgh voted three to one against a congestion

charge modeled on London’s successful sche-

me, slowing the spread of such arrangements

to other cities in Britain. Doesn’t mark

cing further disadvantage the poor? S

form of subsidized service for those w

simply destitute will be essential, but

tice the main beneficiaries of infrastru

charges are, when properly constructe

least well off themselves. According to

UNDP, in megacities the people least l

be connected to the water system are

orest residents, especially those in slu

must pay exorbitant prices for bottled

dubious quality. Meanwhile, subsidies

go to those connected to the municip

stems and able to afford water. In Ban

and Kathmandu, 30% or more of thes

fits go to the richest 20% of the popul

Using water charges to fund expansio

network to poor parts of cities, as the

water utility does in Abidjan, does far

reduce costs to those less well off tha

offering free water. Sim ilarly, those i

who cannot afford its Congestion Cha

bably cannot afford a car to begin with

raised to improve the public transport

they use and improved air quality with

ced noise in their urban environment

them nothing.Thus, properly structured and targeted

ges can lead to more sustainable infra

re and thereby help with all three goa

ban leaders: a more competitive city,

environment, and an improved quality

for all residents. Adam Smith was righ

ting the price right is as much a moral

an economic operation.

Pricing andSustainability

% Agree

Conclusions



Dense, vast and complex, megacities pose

challenges on an unprecedented scale

for urban planners, city managers and those

responsible for delivering basic services and

infrastructure. It is clear that each city has its

own unique issues and circumstances to

address. However, this research has highlight-

ed a number of common themes and trendsthat will shape the evolution of megacities

over the coming years.

The majority of stakeholders see economic

competitiveness as a priority. This is under-

standable: unless megacities can create

wealth and attract investment, they will not

create the number of jobs needed for their

burgeoning populations, nor will they attract


Conclusions

11require megacities to contract out the man-

agement of more services to the private-sec-

tor.

One of the more surprising findings in the

survey is the fact that the main perceived

advantage of private-sector operation is

improved efficiency, more than access to

funding.Where cities do increase private sector

involvement, they will need to create the right

framework for success. There is a variety of

models available, where ownership and oper-

ation of services can be shared. But when

entering into partnerships with the private

sector, the consequences must be well

thought through, and success will require a

“context-sensitive” approach to priv

with overall control (and responsibi

ing with the public sector.

Overall, the research indicates tha

ities are moving from passive admin

of services to active management

infrastructures.

This entails a desire for strong putrol of services and the ability to

strategic, city-wide response to t

lenges that they face. If comprehen

ernance models and efficient man

structures are put in place, econom

tiveness, environmental protection a

ty of life for all citizens need not be c

tory goals.

the financial resources needed to address the

huge challenges that they face. However,

while areas like transport infrastructure are

recognized as being vital to competitiveness,

stakeholders often overlook the economic im-

portance of other areas – in particular educa-

tion, healthcare and basic services such as

water.City stakeholders do place significant

importance on environmental considerations,

and there is a clear aspiration to focus on

more sustainable solutions in many of the

infrastructure sectors. However, the survey

also suggests that, when push comes to

shove, ecological considerations can be sacri-

ficed in the race for economic growth. In par-

enue. A key factor in this will be the correct

pricing of services to support sustainable

goals.

Delivering in each of these areas will

require new governance structures and more

efficient management. Stakeholders are high-

ly aware of this, but delivery is tricky. Gover-

nance structures need to deliver holistic solu-tions across infrastructure sectors, which

balance the needs of the city with the wider

metropolitan area and take into account the

interdependencies between the various infra-

structures. This may mean a new non-de-

partmental approach to the management of

cities.

The search for improved efficiency may

ticular in Emerging cities, economy and

ecology are still often viewed as contradic-

tions.

Can stakeholders’ desire to deliver greener

solutions be reconciled with the need to deliv-

er growth? This is the question at the heart of

the debate on sustainable development, and

one that cannot be fully addressed in a paperof this size. However, a greater focus on

demand management – a concept that the

survey indicates has yet to gain global accep-

tance — would be one way that cities could

develop more sustainable infrastructures.

Failure to monitor and manage the use of

many services (for example, road usage or

water) also creates problems in raising rev-

Appendix



This report studies infrastructure chal-

lenges and governance trends in the

world’s largest megacities. The research

focuses on five critical infrastructure sectors –

transportation, water, electricity, healthcare

and safety & security. It also looks at how city

management is evolving to address these

challenges, based on the views of a range of

municipal stakeholders.

The UN defines a metropolis as a “megaci-

ty” if it has a population of 10 million or more.

This report focuses on 25 megacities and met-

ropolitan areas, most of which were selected

on the basis that they are the most populouscities in the world*.

Choices include some large metropolitan

agglomerations like the German Ruhr (with a

large number of independent municipalities).

London, which has fewer than 10 million

inhabitants, was chosen for its economic

importance.

The findings in this report are primarily


Methodology

City archetypes: It is recognized that cities

are unique, as each city today is a reflection of

its own unique mix of social, political and eco-

nomic history. Nonetheless, as an organizing

principle for the study of megacities, a sec-

ond, and related, element of the MRC McLean

Hazel study has been to undertake an analysis

of whether there are logical, simplifying,

groupings of megacities in order to facilitate

an understanding of the processes and

dynamics of urbanization on a global basis.

These groupings should be powerful enough

to undertake a first order generalization in

order to simplify further analysis and providea common understanding of key issues.

Our analysis is based on three major arche-

types: Emerging Cities, Transitional Cities,

and Mature Cities, using a simple two-axis

grid based on readily available data.

The methodology employed uses a combi-

nation of absolute Gross Metropolitan Product

(GMP) to position cities along a vertical axis

and a proxy for the level of social and

development along the horizontal a

ranged from approximately 1,500 eu

ta for Emerging cities, to 5,000 eur

for Transitional cities, and 30,000 eu

ta for Mature cities.

The proxy for social and physical

ment was a composite measure th

national scores from the United

Human Development Index, city sco

Mercer Human Resource Consultin

Quality of Living Survey, and nation

from Transparency International's Co

Perception Index.

Each index was brought to a comm

for the purpose of developing the co

measure. The composite index rangetypical value of 0.40 for Emerging Cifor Transitional cities, and 0.98 fo

cities. Sensitivity testing, by vary

weightings of these three indices, rev

tle change in the city groupings.

The UN Human Development In

standard comparative measure of w

for countries. It employs measure

expectancy, literacy, education, a

dards of living for countries worldwid

used to assess a country’s level of

ment and to measure the impact of e

policies on quality of life.

Mercer’s city-level Quality of Life

based on detailed assessments and

tions of 39 key quality of living deter

grouped into categories that include

and social environment; economic ment; socio-cultural environment;

and health considerations; schools

cation; and public services and tra

tion.

The Corruption Perceptions Ind

more than 150 countries by their p

levels of corruption, as determined b

assessments and opinion surveys.

based on the following research initiatives

and methodology.

Stakeholder survey: The report is based on

a survey of 522 stakeholders spread across 25

cities, with approximately 20 interviews per

city**. The survey was conducted by Globe

Scan*** between September 28 and Novem-

ber 17, 2006, either face-to-face or by tele-

phone. Respondents include four stakeholder

groups: elected political leaders (Electeds);

employees of the municipality (Employees);

private-sector infrastructure providers, con-

struction company managers, and financiers(Privates); and people who are in roles that

influence infrastructure decision makers and

implementers such as thought leaders, acade-

mics, NGOs, and media (Influencers). Sixty-

nine percent of respondents have at least ten

years of experience in city infrastructure.

City diagnostics: MRC McLean Hazel under-

took an analysis of critical infrastructure sec-

tors in eight of the 25 cities covered by this

report.

The megacities studied were: Istanbul,

Turkey; Lagos, Nigeria; London, England;

Moscow, Russia; Mumbai, India; New York,

USA; Shanghai, China; and São Paulo, Brazil.

The project relied exclusively on secondary

data sources (ie. existing studies and data

sets).

A primary goal of the project was to devel-

op an understanding of the key functional

characteristics of the megacities on a sector-

by-sector basis, the level of service provided,critical challenges faced, solutions employed

to overcome these challenges, and important

barriers remaining to be overcome. Where

possible, MRC McLean Hazel’s research

focused on the entire metropolitan region;

where data availability issues preclude this

full metropolitan perspective, focus is given

to the core cities within the region.

Stakeholder survey

Electeds:100 (19%)

Privates:108 (21%)

Influencers:130 (25%)

Unweightedtotal:

522 (100%)

Public Employees:184 (35%)

12

*Based on methodology used in Megacities – Megarisks: Trends and challenges for insurance and risk management, Munich Re, 2004**The graphs in this report only display the most frequently mentioned factors and thus do not always add up to 100%***and various local partner companies

megacity report 1439020

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