Rapid Urbanization "Poses Major Problems and Challenges"

ISTANBUL, TURKEY (4 May 2005) - An estimated US$40 billion per year is needed for urban infrastructure investments to meet the demands of the explosive urbanization of Asia during the past four decades, a seminar heard yesterday.

"In the mid-1960s, only one person in five lived in towns and cities," said Bindu Lohani, Director General of ADB's Regional and Sustainable Development Department at an ADB seminar on Financing the City - Asia's Cities: Problems and Opportunities.

"Today it is one in three, and by 2020, it will be one in two."

The seminar, moderated by ADB Vice President Geert van der Linden, was the first of a series of three yesterday on the problems and opportunities presented by the projected growth of Asia's urban centers, held on the eve of the opening of ADB's Annual Meeting of the Board of Governors in Istanbul.

Mr. Lohani explained that city growth has been largely unplanned and uncontrolled, with a plethora of problems ranging from inadequate water supply to festering slums. Despite this, he says, cities are the engines of national economic growth, citing Bangkok, which generates about one-third of Thailand's gross domestic product (GDP).

"New financing modalities must be employed, such as sub-sovereign lending, local currency bonds, and providing a strong role for the private sector," said Mr. Lohani.

ADB, for its part, will be undertaking a number of activities to strengthen its support to cities in Asia. This will include providing more investments using innovative approaches, helping cities to improve governance, building enabling environments that allow fuller participation from the private sector, strengthening stakeholder participation, and ensuring the sustainability of projects.

Kadir Topbas, Mayor of Istanbul, echoed the importance of cities to the overall national economy, saying that Istanbul accounted for fully 3% of Turkey's GDP.

Yet Istanbul, a city rich in culture and history, needs to substantially upgrade its transportation and water infrastructure. Each of these programs will cost the city an estimated $4-5 billion.

"We need to learn from the experience gained by other cities," he said. "Networking among city officials from Asia and elsewhere is vital both to avoid repeating the mistakes of the past and to identify new and successful ways of doing things."

One major problem, highlighted by Freddie Tinga, Mayor of the City of Taguig in the Philippines, is that cities have to fiercely compete for limited financial resources. To gain an advantage, he said that a city's "product" must be perceived by the investment community as worthy of their attention.

Market frameworks can be used as an effective tool for improving cities, but, explained Bradford Gentry from the Yale School of Forestry and Environmental Studies, who spoke on market frameworks for improved urban environmental performance, using the water sector as an illustration, a number of elements are necessary to make this work.

First, the city's governance framework must be well established. "City administrators need to create space for increased private investment by providing clarity and predictability over time, but opportunities also must be made available to leverage public investment," he said.

Incentives for improved performance, such as providing effective oversight and enforcement of standards, are another essential element. Mr. Gentry cautioned city leaders that they will make mistakes, but encouraged them to learn from these mistakes and keep experimenting.

An essential component in building a city, added Mayor Tinga, is the meaningful participation of stakeholders in developing the city.

"Major city development initiatives will only work when the people of the city are fully informed participants," he said, at the same time giving credit to ADB for insisting that stakeholder involvement be included as an integral part of ADB's assistance to Taguig development and thereby demonstrating to city officials the fundamental importance of local participation.

Contact Person

Robert Dobias
Tel. No. (+90-212) 241-8000 loc. 2303
E-mail: rdobias@adb.org