Urbanization to spur growth, productivity – WB

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‘But cities must be competitive’

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HIGHLY populated urban areas like Metro Manila present economic and productivity opportunities for the country, but policymakers should enable cities to be come more competitive and less congested.

Vickram cuttaree, World bank sustainable development program leader for the Philippines, speaks during the Manila times Philippine Model cities forum held at the new World Manila bay Hotel on May 11. PHOTO By ROGER RAÑADA

The World Bank’s Sustainable Development program leader for the Philippines, Vickram Cuttaree, said cities that are competitive are also “inclusive and sustainable.”

Urbanization is a driving force for growth and poverty reduction, said Cuttaree, one of the distinguished speakers at The Philippine Model Cities forum hosted by The Manila Times on Thursday.

Globally, more than 80 percent of economic activity is concentrated in cities, and cities are essential to lifting millions of people out of poverty through the opportunities that density and agglomeration can bring with jobs, services and innovation, Cuttaree said.

“The high urban density in the Philippines provides a potential driver for enhanced productivity and economic growth,” he added.

Philippines urban areas are significantly more productive by about 120 percent than non-urban areas when the differences in population, land, land use and geography are taken into account.

“There is also strong statistical evidence that urbanization has been driving national productivity growth over time. Between 2000 and 2010, for every 1 percent increase in urban land, there was a corresponding increase of about 11 percent in national productivity,” Cuttaree said.

Population density is the strongest positive corollary with productivity—productivity goes up significantly as population density increases, he said.

“This provides encouragement that urbanization has had positive impacts for the country, however, there are limits to the benefits of densification, due to structural problems,” he said.

Metro Manila

Urban density is high particularly in Metro Manila, one of the fast-growing megacities in the region.

The latest data from the Philippine Statistics Authority (PSA) showed that among the country’s 18 administrative
regions, the most densely populated in 2015 was Metro Manila in the National Capital Region. Its population density was 19,988 persons per square kilometer.

This figure is almost 60 times higher than the population density of 337 persons per square kilometer at the national level, the PSA said.

“Although we all experience congestion in Manila and also in secondary cities such as Cebu and Davao, there are many encouraging opportunities for better leveraging urbanization in the Philippines. One only has to look at the vibrant private sector and development of areas such as Bonifacio Global City in Taguig City, or the Iloilo Business Park in Iloilo, City, Center, or a number of successful programs at the local level to know what is possible,” Cuttaree said.

Rising population and economic densities enable savings in transport and communication costs, lead to frequent interactions, promote finer specialization and knowledge spillovers, and heighten competition in product and labor markets, the WB representative observed.

A clear densification process has been experienced by Metro Manila since the 1990s together with a structural transformation of the urban economy, with industries moving out of the central urban areas into the metro fringe and secondary cities, and replaced by services, which can lead to a more efficient system of cities based on experience from developed countries.

Challenges

While urbanization in the Philippines has had positive impacts on increased productivity, economic growth and poverty reduction, the country has not benefited from urbanization gains as much as other countries.

Cuttaree said this is attributed to a number of underlying structural problems, such as the archipelagic geography which creates divisions in connectivity.

If not carefully managed and planned for, the benefits of urbanization are not realized and can result in congestion, slums, pollution and inequality, Cuttaree said.

“Many slums are located on river floodplains or along shorelines exposing low income populations to recurring floods. This creates an enormous burden in terms of loss of livelihood, damage to housing and assets, and increased health risks due to prolonged exposure to water pollution. Fires in slums are also quite common creating an enormous risk to low income families,” he said.

Making cities competitive

Some important factors that contribute to city competitiveness are strong institutions and governance for the effective management of cities.

Cuttaree said land administration and management systems (LAM) help shape the spatial, economic and social development in cities.

“Weak land administration and management, poor land use planning, and limited capacities in property taxation and valuation can have far ranging effects on the vibrancy of the land market, in shaping and rationalizing urban growth in a sustainable manner, and in generating revenues to support programs to improve urban life,” he said.

Inclusive urbanization, where everyone can reap the benefits of urban growth, is a key aspect of competitive cities.

“If urbanization is not managed well, it can give rise to inequality and exclusion that can derail the development process. Challenges such as economic, spatial and social exclusion will ultimately affect opportunities for city residents,” Cuttaree said.

The World Bank recently completed an urbanization review of the Philippines.

Cuttaree noted the review recommends a two-pronged approach for Metro Manila and other secondary cities.

“These issues span across administrative boundaries and can only be solved through strong political commitment and coalitions for change in metropolitan governance and land administration management,” he said.

“At the same time, investing in secondary cities presents an enormous opportunity for shifting the overall balance of spatial development in the country, increasing productivity in urban areas and avoiding, many of the problems that have evolved over time in Metro Manila as these cities grow,” he added.

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