The process of urbanisation globally is undeniable and irreversible. According to McKinsey, the world’s 600 major cities will house 2bn people by 2025, or 25% of the global population. These urban centres will generate 60% of global GDP. Similarly, an April 2011 report by Frost & Sullivan, a business research and consulting firm, noted that “future urbanisation will drive integration of core city centres or downtowns with suburbs and satellite cities, resulting in expanding boundaries from the current average of 25 miles (40 km) to around 40 miles (64 km).” This will translate into the emergence of 30 mega-cities, 15 mega-regions and a minimum of 10 mega-corridors with more than 20m people by 2020. According to McKinsey, some 100 of the 136 new cities that will enter the top 600 cities (as determined by GDP, number of households and population) by 2025 will be Chinese. However, cities such as Lagos, Cairo, Jakarta, Istanbul and Doha also feature prominently, either because of GDP, population or both. The growing pains these cities are experiencing contain valuable lessons for Ulaanbaatar, as it goes through its own expansion period. The city saw its population increase by over 60% in the past decade, from 772,969 in 2000 to 1.24m in 2010, according to official statistics (which may not account for many living in the poorer districts).
CHALLENGES: Some 70% of the world’s population will live in urban areas by 2050, according to the UN, while more than half of the globe already lives in cities. This growth presents a series of challenges for urban planners and policymakers alike. On a strategic level, urbanisation raises a range of questions from food security and resource allocation to economic development strategies. On the planning level, such outsized growth touches on liveability and viability concerns for transport networks and real estate markets. For Joel Kotkin, the author of The City: A Global History, the trend towards rapid urbanisation and sprawl is problematic. “Forcing people into one mega-city is not a good idea,” he told OBG. “We are going to have to work out how to slow migration from the villages in the longer term.”
CHANGING ATTITUDES: This may be true to some extent, but development thinking on urban versus rural life has shifted over the past 10 years. A 2007 report from the UN Population Fund, an international development agency, noted that “cities concentrate poverty but they also represent the best hope of escaping it.” This followed a 2003 report from the UN Human Settlements Programme (UN-HABITAT), which stated, “Cities are so much more successful in promoting new forms of income generation, and it is so much cheaper to provide services in urban areas, that some experts have actually suggested that the only realistic poverty reduction strategy is to get as many people as possible to move to the city.” This apparent shift in global thinking was supported by data and other information that showed the wealth-generating potential of cities and their green credentials. As such, policymakers have begun to move away from the thankless task of putting the brakes on the ceaseless urban march to concentrating on policies that can improve city living.
This is not to suggest that everyone is comfortable with uncontrolled growth and urban sprawl. Kotkin argues that economically developed and vibrant countries are marked by their urban options. “In the US, Canada and Australia you have several poles of attraction. If things are not working in Montreal, you can go to Calgary,” he said. “Why are populations moving from larger cities to smaller cities? Where the economy is declining, populations concentrate in one place. When a country is growing economically in a broader way, you see reverse population movements.”
DIVERSITY: This theory may hold true in the US. The country had 34 cities with a population greater than 500,000 in 2009, according to the US Census Bureau. Furthermore, while the country’s largest city, New York, continues to grow (at a rate of 9.4% from 1990 to 2000), its speed of expansion is dwarfed by that of newer cities. Indeed, the top three cities in the US in terms of population (New York, Los Angeles and Chicago) had single-digit growth rates between 1990 and 2000, compared to cities such as Houston, Texas (19.8%), Phoenix, Arizona (34.3%) and San Antonio, Texas (22.3%).
However, this pattern has not been replicated everywhere. In Turkey, GDP growth has been strong over the past decade, reaching 8.9% in 2010, but Istanbul continues to be a pole of attraction for Turks looking for work. According to the Turkish Statistics Institute, Istanbul’s population increased by 341,322 between 2007 and 2009. In absolute terms this rise in the number of people in Istanbul is greater than the population of 32 individual provinces within Turkey. A similar phenomenon can be seen in other developing countries, like Mongolia, where Ulaanbaatar is experiencing massive urban expansion on the back of its economic growth.
REAL ESTATE PRICES: Rapidly expanding cities face common challenges, from clogged roadways to inadequate housing provision. High population densities place significant stress on public services. They also have a tendency to drive up real estate and living costs. According to Kotkin, “The concentration and density around Seoul, for example, leads to incredibly high real estate prices. In this case, city living comes at an enormous price financially and health-wise.” This is evident in Cairo. According to a July 2010 article by GRMC Advisory Services, a consultancy based in Dubai, demand for housing units in the greater Cairo area stood at 4.9m units in 2010 and should increase by 143,000 per year. This puts pressure on land and real estate prices.
From a wider perspective, this price pressure has had a sizeable impact on the nature of development in the city. According to a 2008 World Bank report, in the year 2000, almost 60% of inhabitants in greater Cairo lived in informal settlements built since 1950. Furthermore, the population of these areas was growing at a rate of 3.2% per annum against an increase of less than 1% in formal areas of the city. This uneven rate of development makes urban planning increasingly difficult.
AFFORDABLE HOUSING: This is likely to be good news for developers, who will see bigger margins as a result of the strong demand. On the other hand, rising prices have generated questions about affordability. For example, in Ulaanbaatar apartment prices grew over 40% in one district in 2011, with another more representative district up 17%. Therefore, many residents who cannot afford housing in the centre are forced to live in ger (tent) districts on the outskirts, though a government plan to add 100,000 new housing units should help this.
It is not necessarily the case that there will always be a tension between private sector developers looking for maximum returns and government institutions trying to ensure an adequate living standard for its inhabitants. As Geoffrey Payne, an independent consultant working for the World Bank, told OBG, “Developers want to make money with minimum risk, but there are many examples of public-private partnerships around the world that have been profitable and also aided development. There is not necessarily a conflict between the private sector and the planners.”
NEW APPROACH: The move to regulate social and affordable housing through partnerships with the private sector is rare in developing countries. Cities from Lagos to Jakarta are dependent on government-led affordable housing drives. Some city administrators are addressing these issues. Abu Dhabi, for instance, announced a scheme in 2008 to donate government-owned land to a private developer, Al Rayan, to build affordable housing units on a 93,000-sq-metre plot on the outskirts of Abu Dhabi City.
While such plans may be welcomed by investors for bringing clarity, they can also erect barriers to investment and development. For example, in Istanbul, the municipality recently approved a development roadmap for the central district that was poorly received by developers because of height restrictions and certain zoning regulations. Indeed, urban specialists have pointed to the importance of creating specific regulations and policies that establish incentives for the private sector rather than generating sweeping blueprints.
TRANSPORT: Payne believes transport planning can be used as a tool to support economic growth. “Public transport is an effective means of regulating land prices, opening up new areas and commercial markets,” he told OBG. “If you open up areas in the periphery through transport, you will generate substantial increases in land values and demand, which if done properly can have large returns for the public. New Mumbai is a good example where they recovered the costs of the infrastructure by selling the rights around railway stations. The linking up of public bus and train hubs also generated significant commercial potential, providing many opportunities for investors and the poor.”
Such policies are particularly important in a place like Cairo, which has continued to grow outwards with little improvement in its public transport infrastructure. According to a 2006 World Bank report, if no action is taken to improve the city’s transport solutions by 2022, there will be a 50% reduction in the average travel speed from the 21-km-per-hour figure recorded in 2001. The report also suggests that economic losses to pollution and congestion, which were estimated at LE3bn ($523m), or 4% of local GDP in 2001, would also increase in the coming years.
Commentators like David Sims, the author of Understanding Cairo: The Logic of a City Out of Control and a World Bank consultant, emphasise the importance of building a rapid transit system quickly. For places like Cairo, however, the issue is funding and planning. The key infrastructural and housing concerns weigh heavily in mega-cities like Cairo in ways that are more pronounced than in smaller, wealthier cities such as Abu Dhabi. While the latter is plotting a course, the former faces uncertainty encumbered by decades of little planning, a critical population mass, sprawl and comparatively small public budgets. Although Ulaanbaatar is plagued by similar traffic problems and a lack of infrastructure, its smaller size may enable it to avoid becoming another Cairo, should it act swiftly.
Urbanisation will present major challenges over the coming decades. The process itself, however, is no longer considered the primary issue. Instead, it is how individual authorities meet the challenge that will define the success or failure of the first fully urban century.