Urbanization has the potential to be a major driver of prosperity and inclusiveness in Indonesia, but fully realizing this potential requires bold institutional reforms, according to a World Bank report launched today. Indonesian cities need improved management and more adequate financing. This translates into expanding options for financing infrastructure and basic services, improving coordination among different levels and sectors of government and within metropolitan areas, and building capacity in local governments to better plan and implement urban development.
Indonesia has urbanized as it has climbed the ladder of development. Since 1950, average GDP per capita has increased almost nine-fold. At the same time, the share of the population living in urban areas has increased from 12 to 56%. Indonesia’s prosperity gains are closely linked to the benefits from urban agglomeration and the transition to an economy based on services and industry.
“As people and firms cluster in cities, it becomes easier to match talent to jobs, exchange ideas and knowledge, share inputs, and access markets,” said Kurt Kunz, Swiss Ambassador to Indonesia. “Cities are engines of prosperity, and this is why Switzerland supports sustainable urban development in Indonesia,” he added.
Although urbanization has slowed from the breakneck pace of the 1980s and 1990s, Indonesian cities continue to grow in population at a rapid pace. Today, about 151 million people live in urban areas. By 2045, the centenary of Indonesia’s independence, around 220 million people, or over 70% of its population, will live in cities.
“Better economic opportunities in cities have helped lift millions of Indonesians out of poverty and millions more join the middle-class,” said Sameh Wahba, World Bank Global Director for Urban, Disaster Risk Management, Resilience and Land Global Practice.
The report notes that Indonesia has not benefitted as much from urbanization as other countries. Between 1996 and 2016, every percentage point increase in the share of Indonesia’s population living in urban areas was associated with a 1.4% increase in GDP per capita, compared to 2.7% for other developing countries in East Asia and the Pacific. Indonesian cities also face challenges to their livability due to traffic congestion, pollution, insufficient affordable housing, and continued deficits in access to basic services. Moreover, while urbanization has made an important contribution to the overall rise of living standards, the benefits have not been shared equally.
The report Time to ACT: Realizing Indonesia’s Urban Potential argues that Indonesia’s ability to fully realize the promise of urbanization will depend on better managing “congestion forces” that arise from the pressure of growing urban populations on infrastructure, basic services, land, housing, and the environment. The report proposes three basic policy principles:
· Augment the coverage and quality of basic services and infrastructure to reduce congestion, boost equality of opportunities, and reduce disparities in human capital outcomes.
· Connect people with jobs and basic services within cities, and connect urban areas of different sizes with each other, with surrounding rural areas, and with international markets.
· Target places and people left behind by the urbanization process to ensure that they share the prosperity benefits of urbanization and that urban areas are livable for everyone.
“No large country has ever reached high-income status without also becoming urbanized,” said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste. “Because the urban environment is difficult and costly to change once built, delays in action will risk locking Indonesia further into a suboptimal trajectory of urban development. To succeed, Indonesia needs to act now.”
The report offers a novel way of classifying the different types of urban and rural places across the country. Drawing on a wide range of data sources, it takes stock of the extent to which urbanization in Indonesia has delivered on three key outcomes: prosperity, inclusiveness, and livability.
Work on the report was supported by the Swiss State Secretariat for Economic Affairs through the Indonesia Sustainable Urbanization Multi-Donor Trust Fund, and from the Australian government through the Local Solutions to Poverty and Partnership for Knowledge Based Poverty Reduction trust funds.
Rethink Cities to Help Asia Make the Most of Urbanization
Cities have always played a central role in economic development by bringing workers and entrepreneurs together, spurring innovation, and sharing resources including infrastructure more efficiently. This should be good news for developing Asia: by 2050, there is projected to be 2.96 billion people living in the region’s towns and cities – 64% of all the entire population – up from 1.84 billion – or 46% of the population – in 2017.
Unfortunately, while the region’s cities are sure to grow in size, they may fail to fulfill their potential as engines of growth and job creation due to underinvestment in urban infrastructure, a lack of affordable housing, and unsynchronized spatial and economic planning.
What are policymakers to do?
First, they must achieve a more accurate and granular understanding of how their countries are urbanizing. New data sources are needed because official statistics often fail to capture the true urban footprint of cities since they rely on municipal boundaries drawn decades ago, for example. Satellite imagery, however, shows clearly that developing Asia’s cities are expanding without regard to those boundaries, forming what we call “natural cities”. Our study, Fostering Growth and Inclusion in Asia’s Cities tracked almost 1,460 natural cities across developing Asia, with many of them in the People’s Republic of China (680 natural cities), India (320), and Indonesia (93). Further, cities are merging to form integrated urban agglomerations; 476 natural cities that were separate in 1992 had linked up to form 124 city clusters by 2016, the largest being the Shanghai-centered city cluster, home to 91.5 million people, and encompassing a total of 53 natural cites, including Nanjing and Hangzhou, in the Yangtze River Delta area.
Urban expansion and formation of a city cluster in the Yangtze River Delta Area
This means urban planning cannot simply stop at the city limits. Efficient transport networks that extend from neighborhoods to workplaces prevent fragmentation of a city’s labor market.
Similarly, as cities cluster, decisions on where to place vital infrastructure, such as water treatment and solid waste facilities, transport hubs, green spaces, and industrial parks require coordinated decision-making among local government units. Unfortunately, companies operating in city clusters are now significantly more likely than those in stand-alone cities to complain about infrastructure and regulatory bottlenecks.
Second, policymakers must think of cities as labor markets. To be sure, cities are much more than places of work. However, they cannot thrive unless they function well for both enterprises and workers. This requires that travel within the city or city cluster is fast and cheap, that firms and households can easily relocate from one part of a city to another, and that real estate is affordable.
Asian cities need to do a lot on these fronts. Tests using Google Maps in 278 natural cities show considerable congestion during peak travel times in many large cities, such as Metro Manila, Dhaka, and Bengaluru. Moreover, in 199 of the cities a full quarter of the surveyed trips could not be made by public transport at all, while for the other three quarters, travel by public transport including walking to and from the transport hub was three times longer than by car.
This clearly shows that Asian cities must invest much more in efficient public transport if businesses are to attract workers and flourish. The transport system must combine trains, buses, taxis, ride sharing, and less formal services like jeepneys and autorickshaws—but regulating them well—to improve mobility.
Affordable homes are also critical to attract workers, keep them as their skills and families grow, and then allow them to easily shift to other jobs. However, our analysis showed that that home prices are well beyond the means of median-income households in more than 90% of cities. What is needed to tackle that is a combination of demand-side and supply-side policies, including reassessment of land use regulations that might be inadvertently restricting the supply of real estate.
Finally, growth requires vibrancy in all types of cities. Cities are connected to one another, and to the rural hinterland, through flows of goods, services, and people. Robust and balanced national economic growth depends also on mid-sized cities and even market towns that specialize in distributing agricultural produce.
This requires investment in efficient inter-city transport. Given competing demands on public funding, large cities should draw more on private sector funding. Such cities have an edge in attracting private investment because the agglomeration economies they generate promise high returns to those who choose to locate there. Allocations of public funds must follow the people. Many medium-sized cities in the region with populations of 1–5 million and some smaller cities with populations of half a million still attract migrants. Public investment should support that.
Asia’s steady urbanization represents an unprecedented chance for the region to ensure robust long-term growth and the creation of good jobs. Policymakers must not let the opportunity slip through their hands by neglecting their cities.
Towards smart sustainable cities: UNECE examines good practices to promote innovation
The world is urbanizing fast. Already today, half the population is living in cities. By 2050, that proportion is projected to rise to over two thirds. Cities are economic powerhouses, accounting for 80 percent of world GDP. They also have large ecological footprints, accounting for 60-80 percent of energy consumption and 75 percent of carbon emissions globally. If the world is to achieve the promise of the 2030 Agenda for Sustainable Development, of prosperity, within planetary boundaries, for all, cities will have to lead the way.
Many cities in the UNECE region have taken up this challenge. And innovation is key to meeting it. Leading cities are using innovative technologies and innovative ways of management and governance to deliver better environmental and economic performance and a better quality of life in an inclusive way.
Leading cities are hotbeds of this kind of innovation. They are dense eco-systems strong universities, innovative start-ups, small, medium and big companies, well-financed investors, deep and diverse talent pools, state of the art communication, transport and energy infrastructures, large local markets, good governance structures, and strong economic ties to the rest of the world. Innovation flourishes in these eco-systems.
But not all cities are there yet. Some are still more part of the problem than part of the solution. And often, innovative solutions pioneered in one city cannot be successfully replicated in others. At its annual session on 5-6 December 2019, the UNECE Team of Specialists on Innovation and Competitiveness Policies discussed what city administrations, citizens, businesses and national Governments can do to speed up the transition towards smart sustainable cities.
Networks exist at the national, regional and global levels where cities are exchanging experiences on innovative solutions for urban sustainability challenges. New technologies such as artificial intelligence and machine learning are key to generate the data and analysis that can make cities smart. But for leading cities, technology is not an end in itself. They use it to empower citizens – including marginalized and vulnerable groups – as well as businesses to identify local needs and to create innovative place-based solutions together with city administrations for people and the environment.
Leading cities provide spaces for experimentation such as living labs or test beds to scale up what is working and stop what is not. They invest in infrastructure and education to make sure everyone has access to new technologies and the opportunities they create. National Governments can support cities in their transition towards sustainability through smart regulation, including on data security and privacy, and through public procurement for innovation, as well as regional policies that bridge the gap between leading cities, their hinterland and smaller communities.
The results of the meeting will inform good practice recommendations to be presented to the UNECE Committee on Innovation, Competitiveness and Public-Private Partnerships in 2020. Subsequently, UNECE will use these good practices in its policy analysis and advice to help member States to further improve their policies in this important field.
The UNECE Team of Specialists on Innovation and Competitiveness Policies is a network of innovation policy experts representing Governments, government agencies, the business and academic communities and civil society from throughout the UNECE region.
Banking on nature: a Mexican city adapts to climate change
The Mexican city of Xalapa is surrounded by ecosystems that not only harbor stunning flora and fauna, but also provide crucial services to the city and its 580,000 people.
The cloud forest, an indigenous mountain rainforest neighbouring the city, provides 30 per cent of Xalapa’s water supply, while the diverse soil and vegetation around it is a vital store of carbon. But both these natural assets and the city itself are feeling the effects by climate change. Fluctuating temperatures and rainfall patterns are destabilizing the mountain slopes around the city, leading to frequent landslides, while intense rains in the mountains cascade into urban areas below, causing turmoil for the city’s residents.
“Human resilience to climate change depends on ecosystems, and we need urgent measures to protect them,” says Isabel Garcia, author of a study examining the climate vulnerability of Xalapa.
In particular, Garcia’s study identified urban expansion–and its effect on the surrounding environment—as an exacerbating factor in the climate-related risks facing the city.
“We have a city that has approximately 20,000 uninhabited homes, because they were built in inaccessible areas, without potable water and drainage services,” Xalapa’s Deputy Director of Planning, Angélica Moya, says.
“We have irregular settlements in areas that should have never been urbanized, and now we have landslides and floods.”
Focusing on natural solutions
Recognizing both the climate change impacts facing the city and the importance of Xalapa’s surrounding ecosystems for helping its people adapt to these changes, local authorities are now turning to natural solutions. Partnering with the UN Environment Programme (UNEP), they are working to restore and protect large areas of cloud forest around the city under the Global Environment Facility-backed CityAdapt project.
A five-year initiative, CityAdapt is working across Latin America and the Caribbean to support cities in their efforts to adapt to climate change, an issue that is increasingly a priority for municipalities around the region, according to UNEP’s Director for Latin America and the Caribbean, Leo Heileman.
“In Latin America and the Caribbean, where 80 per cent of the population lives in cities, we urgently need to shift from vicious cycles of degradation to the virtuous dynamic of resilient ecosystems,” Heileman says.
The CityAdapt project marks Xalapa as the first Latin American city to seize the potential of ecosystem-based adaptation–an approach that uses nature to adapt to climate change. By leveraging the natural environment–like the role of trees in regulating water flow and preventing landslides and erosion—ecosystem-based adaptation can help reduce both flood and drought, and is often much more cost-effective than engineered structures built to serve the same role.
“The main goal of this project is to enhance the capacity of local governments to face the adverse effects of climate change,” Sergio Angón, CityAdapt National Coordinator in Mexico, says.
Within the framework of the project, two reports have already been produced for Xalapa on climate change vulnerability and potential climate scenarios for 2039.
The vulnerability analysis identified areas most at risk from climate change. It also measured the adaptive capacity of the ecosystems that currently provide Xalapa with surface water supply, soil retention and carbon storage.
According to the analysis, Xalapa’s cloud forest—an ecosystem already reduced to just 1 per cent of its former range around Mexico—could see temperatures rise by as much as 1.8°C by 2039, impacting biodiversity, as well as potentially increasing the spread and intensity of diseases in the nearby coffee plantations.
Balancing people and nature
But by restoring the forest and working to limit the growing city’s negative impacts on the surrounding environment, CityAdapt is helping Xalapa strike a vital balance between people and nature.
“We need to move Xalapa in an orderly way towards a new model of territorial development, in which resilience is the key focus,” Xalapa mayor, Hipólito Rodríguez, says.
Alongside research and forest restoration, CityAdapt is backing other adaptation initiatives, such as enhanced watershed planning, and strengthening local livelihoods.
Rainwater harvesting systems are being introduced in public buildings and schools, ensuring adequate water supplies in the face of increasingly unpredictable rains, while the project is also teaching climate-resilient agricultural practices to local communities.
“This is an opportunity to rethink the way we build a city,” says Angelica Moya.
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