by Shreekant Gupta
The year 2008 marks a watershed in human history when, for the first time, more than half of humanity of about 3.3 billion people will come to live in towns and cities. This fact is particularly salient for South Asia, home to over 1.6 billion people or a quarter of humanity, of which a third live in urban areas. As the world becomes increasingly urban, the centre of gravity of this process is moving to South Asia which will account for five of the world’s 10 biggest cities within seven years time, namely, Delhi, Dhaka, Karachi, Kolkata and Mumbai. By the same year, 2015, a total of about 700 million South Asians will live in towns and cities, a colossal number by any yardstick.
At the same time, South Asia is witnessing rapid economic growth and transformation, and its towns and cities are at the heart of this process. Growth is taking place in dynamic sectors such as manufacturing, information technology, high-end service industries, trade, retail, and banking, insurance and finance, all of which are urban-centric. By the year 2011, the urban share in India’s national income is expected to go up to 65 percent even though only slightly more than 30 percent of the population will be urban by then. In Pakistan and Bangladesh, the hypertrophic cities of Karachi and Dhaka respectively dominate the economy. The mega-city of Karachi, for instance, not only accounts for about a tenth of the total population of the country’s 165million people but it also generates 60 to 70 percent of national revenue and over 40 percent of the value added in manufacturing.
While the Indian success story is well known (it is at present the second fastest growing economy in the world), that of Pakistan is less well so. Despite the political turbulence, its economy too has been doing quite well. On 24 January 2008, The Economist newspaper spoke highly of the latter’s economic growth (ranging at over 7 percent annually) and said it had the best performing stock-market in Asia: Pakistani companies had high dividends on average – 4 percent – and a low price/earnings valuation – under 15 times. Sri Lanka too had (and still has) the potential to become an Asian Tiger, if only the ruinous civil war would stop.
While, on one hand, towns and cities are “engines of growth” for the rapidly growing economies of South Asia, unplanned and unmanaged urbanisation poses a serious threat to the very same growth, in addition to generating social tensions. All urban areas in the region, big and small, face similar challenges of providing good governance, livelihood opportunities, adequate housing, water, sanitation, transport and other amenities to their residents. Thus, unless South Asia can make its towns and cities liveable where its citizens can pursue economic progress, the region will not be able to sustain and accelerate its growth trajectory.
Any visitor to South Asian cities comes away with an impression of stark contrast – incredible wealth and consumerism juxtaposed with abject poverty and squalor. While average incomes are relatively high in towns and cities, these averages conceal wide disparities in income. In India alone, urban poor account for at least a third of the urban population if not more. Given a total urban population of over 300 million, this translates into a staggering 100 million or more destitute people in India’s towns and cities, living in slums, shanties and sleeping on the streets.
A key challenge in urban South Asia is to make local governments truly representative and accountable to the people. Here the experience of countries in the region has been varied. Ironically, local democracy has gone furthest in Pakistan and that too during the regime of General Musharraf. Following local government elections in 2001, a lot of administrative and expenditure responsibilities were devolved to district governments headed by an elected nazim (Mayor). Sri Lanka too has had some success in devolution. India, however, has lagged behind and its towns and cities are still effectively run by municipal commissioners (career civil servants) who are only accountable upwards (if at all) but certainly not to the people. It is again an irony that, in a country which (rightfully) takes pride in its democracy, urban residents have no say on issues that impinge on their daily life such as water supply, sanitation, garbage, streetlights, schools, health clinics, local libraries, and such like (what economists call local public goods). While all major cities of the world – New York, Paris, Tokyo (and Karachi) – are run by elected mayors who represent (and are answerable to) the people, this is not de facto the case in India. While democracy may not be sufficient, it is certainly necessary for better governance and to put people in charge of their own affairs.
The second key challenge is to improve urban governance. This in effect means making public servants accountable. All across South Asia, low paid but employed-for-life functionaries results in sloth and inefficiency. The latter arises partly due to the large degree of discretion these functionaries enjoy given extensive controls on economic activity that still prevail. Dozens of permits and clearances are required to set up even a small shop or trade and this encourages rent-seeking. Periodic pay hikes to unionised government employees results in asymmetric incentives (carrots but no sticks) and city bureaucracies, instead of downsizing and becoming better paid, end up becoming fatter and more slothful. Indeed, the precarious state of municipal finances all across South Asia is a third key challenge – bloated payrolls and inadequate revenues make cash-starved city governments dependent on (and hence subservient to) handouts from state/provincial/federal governments. The main sources of wealth in a city, namely, land and property are inadequately taxed. Instead, many cities rely on antediluvian sources of revenue such as octroi (an entry tax on goods coming into the city!) as well as regressive indirect taxes such as sales tax. In a city like Mumbai with Manhattan like real estate prices, property tax is not the primary source of revenue for the city, it is octroi!
In sum, for South Asia to manage its urban transition and to ensure sustained economic growth, governments will have to get serious about making cities habitable. And for that to happen reforming these three Fs – functions, functionaries and funds – is vital.
Dr Shreekant Gupta is a Visiting Senior Research Fellow at the Institute of South Asian Studies, and former Director of the National Institute of Urban Affairs, New Delhi, India. He can be contacted at: firstname.lastname@example.org The views are personal.
Also published here