EAST ASIA AND PACIFIC URBAN DEVELOPMENT SECTOR

Shanghai InternationalUrban Environment and

Sustainable DevelopmentConference Proceedings

June 27�29, 2001Shanghai, China

Shanghai International Urban Environm

ent & Sustainable D

evelopment C

onference Proceedings

SIEMENSSiemens AG

Wittelsbacherplatz 2

D-80333 Munich

Tel: +49 89 636 00

www.siemens.com

E A S T A S I A A N D P A C I F I C U R B A N D E V E LO P M E N T S E C TO RU N I TT H E W O R L D B A N K

1818 H Street, N.W.

Washington, D.C. 20433 USA

Telephone: 202-473-1000

World Bank East Asia and Pacific Website: http://www.worldbank.org/eap

World Bank East Asia and Pacific Urban Website: http://www.worldbank.org/eaurban

Conference organized by Shanghai Municipal Government; co-organized by

Siemens AG and The World Bank; co-sponsored by The Clean Air Initiative

for Asian Cities and GTZ.

www.shanghai.gov.cn

SHANGHAIMUNICIPALGOVERNMENT

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Shanghai International UrbanEnvironment and Sustainable

Development ConferenceMay 2002

Compiled and edited byLee Joanna Harper

Vellet Fernandes

Proceedings document of theShanghai International Urban Environment

and Sustainable Development Conferenceheld on June 27–29, 2001 in Shanghai, China

iii

Contents

Preface v

Acknowledgments vii

OPENING PLENARY SPEECHES

Xu Kuangdi, Mayor of Shanghai 1

Yukon Huang, World Bank China Country Directory 3

Dr. Heinrich v. Pierer, President and Chief Executive Officer, Siemens AG 5

Han Zheng, Vice Mayor of Shanghai 7

Kristalina Georgieva, Director, Environment Department, World Bank 11

Mr. Ernst H. Behrens, President and Chief Executive Officer, Siemens Limited China 17

Mr. Ravi Parthasarathy, Vice Chairman and Managing Director, IL&FS LIMITED 21

The Opening Plenary speeches are also available, together with a complete set of the presentationsmade at the conference, on the CD-ROM attached to this document.

v

Preface

Shanghai InternationalUrban Environment and

Sustainable DevelopmentConference

June 27–29, 2001Shanghai, China

With accelerated global urbanization,ever-expanding population and relat-ed urban environmental degradation,

a critical issue for city authorities in the new cen-tury is how to provide a safe urban environmentfor their citizens. There is a pressing need for cit-ies to come together to tackle these commonproblems.

Shanghai Municipal Government, in collab-oration with The World Bank and Siemens AG,held a conference entitled Shanghai Internation-al Urban Environment and Sustainable

Development Conference, from June 27–29, 2001.The conference provided an excellent opportuni-ty to bring together representatives from leadingcities of the world, environmental professionalsand industries, to discuss their concerns as wellas needs related to urban environmental issues,and explore possible paths and solutions for ur-ban environmental sustainability.

The aim of the Conference was to facilitateexchange of information among the participatingcities and different organizations on urban envi-ronmental management issues, to foster fruitfuldiscussion and to promote greater cooperationand networking between Shanghai and the par-ticipating cities as well as leading consultants inthe area of urban environmental protection. TheConference also encouraged in-depth explorationof links between urban environmental quality andeffective management strategies and tools andthereby help create better urban environments inthe 21st Century.

vii

The Conference could not have taken placewithout the energy, cooperation, and re-sources of the following people and orga-

nizations:The Organizer: Shanghai Municipal Govern-

ment; Co-Organizers: The World Bank, SiemensAG; Sponsors: GTZ, The Clean Air Initiative forAsian Cities, Roche (China) Limited; Implement-ing Agencies: Shanghai Environmental ProtectionBureau, Shanghai Finance Bureau; Shanghai Wa-ter Engineering Company (SWEC), for providingadditional financial assistance; Austin AUSINO,in particular Ken Rippin and his colleagues,George and Alice, for their integral organization-

Acknowledgments

al support; Michael Schmitt and his courteous andattentive staff at the Jing An Hilton Hotel; and allthe other tireless helpers and volunteers in Shang-hai whose time and effort made the conferencepossible.

Our sincere thanks also go to KristalinaGeorgieva of the World Bank’s Environment De-partment for financial support allowing thecreation of this document; and to Jim Cantrell andGerardo Cruz for their tireless work, good humor,and creative energy in designing and putting thisdocument together.

Photos courtesy of Curt Carnemark, LeeHarper, and Mara Warwick.

Aerial view of the Bund riverfront, Shanghai.

1

Xu Kuangdi

The Opening Speech onInternational Environment andSustainable DevelopmentConference

Xu Kuangdi, Mayor of Shanghai, China

Respectfully yours:Ladies and Gentlemen:

Today, we have pleasure to share our time withfriends all over the world to discuss the problemsof urban environment and sustainable develop-ment, which will provide us useful experience inimproving environment quality and promotingurban sustainable development in Shanghai. Onbehalf of Shanghai municipal government andpeople, and in my own name, I would like to ex-tend my warm welcome to all the guests. I wouldalso like to express my congratulations on thesuccessful opening of conference.

Environmental protection and sustainabledevelopment become a wide-regarded topic con-cerning our human being’s living, especially for adense populated city. As a mega-metropolis,Shanghai is putting growing emphasis on envi-ronment today. We know that the developmentof urban economy is foundation for improvementof people’s living standard, but we will never de-velop economy at the cost of environmentaldamage. Only environment and economy growharmoniously, can real high quality living beachieved, and city have continual energy and vi-tal force.

To realize the co-profitability of economy andenvironmental protection, we have made strate-gic industry restructure, which enable our

industrial-centered city shift to open and univer-sal functional economy-centered city. We triedhard to reduce pollution from start point, and en-courage clean production process. These years, theexpenditure on environment is climbing up to 14billion yuan, accounting for 3.12% of ShanghaiGDP, which is unprecedented in Shanghai’s his-tory. In addition, we have been taking manymeasures on pollution control and ecological con-struction, and carrying on “Three-year ActionPlan” on environment protection to expediteimprovement of urban environment.

To make water cleaner in Shanghai, we fo-cused on Suzhou Creek to push forward a citywiderehabilitation campaign on water environmentaltreatment. In three years, we finished rehabilita-tion of 15 thousand kilometers waterway. The longtime polluted creeks are turning clean; to makesky clearer, we improved balanced energy use andencouraged use of clean energy; to make landgreener, we have opened 2,430 ha of new publicgreen spaces since 1998. The public green spaceper capita will reach to 5.5 square meters this year,and the green space will cover 24% of the cityproper.

In the future, we determine to build Shang-hai to an international metropolis with prosperouseconomy, civilized society and graceful environ-ment, which is an important task endowed byhistory. Shanghai people have been making un-tiring endeavor to make it come true.

Finally, I would like to express my thanks toall guests who come from afar and give counselto Shanghai’s development. Let’s pool our effortsto create a more beautiful tomorrow.

I wish the conference a complete success!Thank you!

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Welcome Speech

Yukon Huang, World Bank ChinaCountry Director

Honorable Mayor Xu, Vice Mayor Han,Director Hong (SEPB),Ladies and Gentlemen:

It is a great pleasure and honor for the WorldBank to be a co-organizer of this important con-ference as part of our collaborative program withShanghai Municipality.

China is undergoing two profound transi-tions—from a command economy to a marketeconomy, and from a rural, agricultural society toan urban society. These changes put great stresson the environment and the social fabrics of itscities, presenting challenges of management, fi-nance and equity, to mention a few.

The Shanghai government has shown strongleadership in recognizing the importance of theurban environment for sustainable economicgrowth, most recently eloquently articulated in itsnew Five Year Plan. Shanghai has made remark-able achievements in the 1990s, both inrestructuring the city’s economy and upgradingits infrastructure, while at the same time protect-ing and improving its environment. It is an engineof growth in China, and a leading city-region inAsia. Shanghai has in many areas set an examplefor environmental policy and institutional reformsfor other cities in China, and is increasingly be-coming an important ‘resource’ city for Asia andbeyond.

This conference offers an opportunity to bothlearn from Shanghai and to share national and

international expertise and experience, drawnfrom major cities, academia, and industry (theprivate sector).

This is a rare opportunity to discuss some ofthe challenges to urban environment improve-ment that cities across the world are facing:industrial pollution control, air and water qualitymanagement, and financing for sustained im-provements. I would like to thank the ShanghaiMunicipal Government for providing such anopportunity. The conference is particularly im-portant in light of the emphasis the ChineseGovernment has given to the role of urbaniza-tion in the next decade.

I would like to make a few points on the sub-ject of the conference.

In their quest for improved livability andcompetitiveness, cities around the world are giv-ing more attention to urban environmental issues,and increasingly so from a regional perspective.

China’s further opening to the outside world,signaled by its joining the WTO, will lay out thenecessary conditions for progressive urban devel-

Yukon Huang

Delegates are welcomed to the Conference duringthe opening plenary session.

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Shanghai International Urban Environment and Sustainable Development Conference Proceedings

opment. But competition between cities, bothwithin and from outside China, is stronger thanever. Local, regional and global issues are con-verging. Cities are increasingly involved in globalcompetition, for financing, for investments, andmore, and need to be highly proactive to prosperin this new environment. Continued augmenta-tion of environmental infrastructure coupled withoptimization of existing assets will be critical forthe competitiveness of cities like Shanghai.

Cities around the world are also makinggreater strides in changing the role of the gov-ernment from a service provider to more of anenabler and facilitator for service delivery. Theenvironment of cities depends on the quality ofvarious municipal services, and the efficiency andeffectiveness of these services, in the end, willdetermine the livability and quality of life for itsresidents. This is also increasingly becoming animportant element of a city’s global competitive-ness.

Water and air transcend jurisdictional bound-aries, and consequently need to be addressed ona regional basis. City management must not onlydeal with core urban areas, but peri-urban areasof surrounding cities and towns and the rural hin-terland, implications of river basins etc. Shanghaiis a good example, with a large metropolitan ar-eas, and being situated at the heart of the YangtzeDelta Economic Region.1

The World Bank has a long and productivecollaboration with Shanghai in improving thecity’s urban environment and infrastructure. Dur-ing the last 20 years we have had the opportunityto assist Shanghai in its institutional reforms andcapacity building, and have provided financing for

a large and diversified portfolio of investmentprojects corresponding to lending of close to $2billion, or about 5% of the total lending to China,including projects for improved water and waste-water management, roads, ports, and powersupply. The Shanghai Municipality was one ofthe earliest in China to corporatize the wastewa-ter operations and to implement a wastewatertariff. It was also the first to successfully imple-ment a citywide urban information system for theplanning and management of urban construction.

Shanghai has demonstrated that rapid eco-nomic development does not need to be at theexpense of environmental degradation. Indeed,Shanghai has shown that an attractive environ-ment is an indispensable ingredient of a city’scompetitiveness.

Again, we are pleased to have the opportu-nity to contribute in a small way as a partner withShanghai to advance the important subject of thisconference. The challenges are many.

On behalf of the World Bank, I welcome youto the conference and wish you productive delib-erations.

Thank you.

Note

1. This includes Jiangsu, Zhejiang and Anhui Prov-inces. This Region has a population of about 200million, and is the principal economic producer inChina, providing 22 percent of total national GDPand about 40 percent of the secondary sector GDPin China. In particular, the city is the “anchor” of agrowth corridor which include the cities of Heng-zhou and Ningbo in Zhejiang province.

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Welcome Speech

Dr. Heinrich v. PiererPresident and Chief Executive Officer

Siemens AG

L adies and Gentlemen,I really wish I could be addressing you inperson today at what promises to be an

extremely interesting conference. And I especial-ly regret not being able to see many friends andrevisit one of the most dynamic and fascinatingcities in the world—a city our company is proudto be associated with for over 120 years. Thankyou, Mayor Xu Kuangdi, for giving me this op-portunity to join you all today in spirit, if not inperson.

It is a great honor and privilege for Siemensto join with the Municipality of Shanghai and theWorld Bank as an organizer of this important con-ference. This is a fitting continuation of a projectthat we began together years ago, when we cre-ated a joint vision of sustainable megacitydevelopment in the 21st century. Our vision ofShanghai was presented to millions of visitors atthe EXPO 2000 in Hanover, Germany, last year.And this vision, I am pleased to hear, will be thetheme of Shanghai’s application to host the WorldExposition in 2010. Obviously, sustainable urbandevelopment and sound environmental policy arekey factors in shaping the quality of life for thegenerations to come.

Urban development has made remarkableprogress in China, particularly in the last decade.Living conditions, infrastructure and the urbanenvironment have improved continually, and cit-ies have made a tremendous contribution to the

rapid, healthy and impressive development ofChina’s economy.

Although the pace of urbanization in Chinahas been quite high over the past twenty years,the level of urbanization in the country is still be-low other developing countries. Experts say thefirst half of this century—especially the first 20years—will be marked by extremely rapid urban-ization. The level of urbanization is expected toreach the 50 percent mark in China by 2020. Thismeans that millions of rural residents will bemoving to cities. The living space, jobs, life-styleand consumer behavior of countless millions ofpeople will change radically. This will have anenormous impact not only on social and economicthemes, but on issues of resources and the envi-ronment as well. The scope and intensity of thisdevelopment will be unprecedented in humanhistory.

All stakeholders in China’s future—fromgovernment agencies and institutions, municipalauthorities, the business community and the gen-

Dr. Heinrich v. Pierer

Professor Xu Zuxin of the Shanghai EnvironmentalProtection Bureau, Dr. Walter Schusser of Siemens,

and colleagues continue the discussions over a meal.

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eral public—must work closely, constructively andrelentlessly to master this unique challenge. Waysmust be found to adapt urban infrastructures, eco-nomic structures, industrial structures and socialstructures to meet changing needs. And to en-sure an ever better quality of life.

Here, again, we are talking about creating abetter quality of life that is sustainable. Thingslike adequate living space, efficient transportationsystems, good work and shopping facilities, reli-able power and water supplies and waste waterdisposal, effective air and noise pollution control,modern communication systems.

Future needs have been identified. Visionshave been defined. We have the solutions at handor have the resources to find them. It is now upto all of us to see how Chinese cities, and amongthem Shanghai, can best turn these visions intoreality.

The most effective way of achieving this, ofcourse, is finding the right partners. In urban de-velopment projects of such vast scale andimportance, there are enormous advantages increative and reliable public-private partnerships.Private partners like Siemens can develop and

offer the complex infrastructure solutions requiredby the cities of the future. These solutions includeeverything from smart information and commu-nication networks, innovative public transport andprivate traffic control systems, complete airportsan highly efficient power plants, to telemetrichealthcare services, building automation systemsand financing concepts. And they include pio-neering world-class solutions like the Transrapidtrain system that will soon connect Shanghai’sairport with the city. And each of these solutions,I should add, is backed by our strong corporatecommitment to environmental protection andsustainability.

This joint Shanghai Conference is certainlya major step toward developing “better cities forbetter life”—in the spirit of our slogan for Shang-hai EXPO 2010. it is now in our hands to do whatwe say. To move boldly and without delay to im-plement innovative solutions for tomorrow.

I wish I could join you in your searching andprovocative discussions. And I am looking for-ward to hearing—and seeing—the results of thisconference. Let me wish all of you and the eventevery possible success.

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Reinforcing EnvironmentalProtection to Promote SustainableDevelopment in Shanghai

Han Zheng, Vice Mayor of Shanghai

L adies, gentlemen, friends:

Good morning! In the first year of thenew millennium the International Symposiumon Environmental Protection and SustainableDevelopment of metropolis is convened in Shang-hai timely. On behalf of the municipal governmentI warmly welcome all guests participating the sym-posium, on this occasion please allow me tointroduce economic development and environ-mental protection in Shanghai.

National economy enters a new period ofstable development

Shanghai is the largest city and one of economi-cal centers in China, Since implementing thereformation and open policy, we firmly focus onaccelerating economical development, the soci-ety, economy and construction enter a phase ofrapid development, the unprecedented vitality isemerged in whole city. During 1992-2000yearShanghai economy holds more than 10% increas-ing rate annually. GDP in 2000year is 455.1 billionYuan, the per capita GDP increase from 2300 USdollar five years ago to 4180 US dollar last year.

The function of economic center is ever-increasing

In the ‘90s Shanghai realized the significantchange of city function. Following the deepening

of Strategic reform of industrial structure, the thirdindustry, i.e., finance, trade, transport and com-munication, real estate etc. develop rapidly, theproportion of third industry in GDP increase from31.9% in 1990 to more than 50% in 2000, Shang-hai enters a new phase of development i.e. fromprocessing industry to common development ofsecond and third industries. Especially the mar-ket of security, foreign exchange and technicalelements have certain size and radiate to wholecountry, Shanghai begins to develop the functionof the center of market utilization of resources.

Comprehensive development ofmodernization construction andreformation

Shanghai firstly perform infrastructure construc-tion, since the time of open policy and reform, totalcapital investment in infrastructure reaches morethan 300 billion Yuan, this is more than 40 timesof sum of former 30 years, among these more than90% is invested in 90’s years. A lot of majorprojects in road and transport, civil engineeringand utility areas are completed, making feature ofthe city experiences tremendous change. Thethree-dimensional main traffic framework is ba-sically constructed, also is the modernizedcommunication network. The capacities of elec-tricity supply, water supply and postcommunication are significantly increased; theeconomic development environment and livingcondition of the people are obviously improved.

Vigorous development of environmentalprotection business

In the mean time of economical development wehad facing serious challenge i.e. the environmen-

Han Zheng

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tal pollution which damages the figure of the cityand do harm to the public health, also the exhaustof resources will limit the further development,so the coordination and balance of economy, en-vironment and resource are common problems inthe development of international metropolis, thestrategy of sustainable development and environ-mental protection is the only way to realizerenovation and prosperity. The input to environ-mental protection continuously increase in ‘90syears, increasing rate of environmental input ex-ceeds the increasing rate of economy, the percentof environmental input in GDP increase from1.89% in late “eighth five-year” to 3.12% in late“ninth five-year.” Totally 50.679 billion Yuan hasinvested in five years, which is 36.628 billion morethan in “eighth five-year,” since 1998 more than10 billion Yuan is invested every year, in 2000 year14.19 billion Yuan are invested and reach the his-torically highest level, in following years theenvironmental input still will keep at more than3%, therefore, after ten years effort the environ-mental quality in Shanghai has greatly improved.

(1) Remediation of water environment—the firstand second phases of sewage confluence en-gineering are completed; the first three-yearrehabilitation task is basically completed, inrecent three years about 22 thousands water-ways has been consolidated, total lengthexceeds 15 thousands kilometers; the firstphase engineering of comprehensive reha-bilitation of Soochow creek progress steadily,in the end of last year the blackness and odour

of main stream of Soochow creek had beenbasically eliminated.

(2) Atmospheric environment protection—The reg-ulation of energy structure and control oftail-gas pollution of vehicles are steadily pro-moted. The population rate of gas usagereaches 100%,more than 420 thousand fam-ilies in Pudong new area use natural gas, inrecent three years more than 3300 boilers hasbeen reformed, thus reduce coal consump-tion 171 thousand ton/year. Use of leadedgasoline is prohibited, and more than 30 thou-sand taxi and bus are use LPG and CNG. Daysof 2nd class air quality increase from 70% in1998 to 80% in 2000.

(3) Massively promote greening construction—City greening has indispensable role inimproving ecological environment and pub-lic health. According to the planning idea“circle, inserting, corridor, garden, forest” a lotof parks and public Greenlands are construct-ed: the Yan Zhong park 230 thousand m²,Hong Qiao park 130 thousand m², Da Ningpark 500 thousand m², Huang Xing park 600thousand m², the Pudong century park 1.40million m², the Lu Jia Zui central park 100thousand m², Xu Jia Hui park 80 m²,Tai PingQiao Greenland 50 m², Kai Qiao park andChang Shou park 40 thousand m²,etc. theconstruction of circular greenbelt and subur-ban forest is accelerated. The green area inShanghai greatly increased through severalyears of effort, in recent 50 years from 1949to 1997 year, the green area per capita increasefrom0.132 m² to 2.41 m² in 1997 and reaches4.6 m² in 2000,the newly constructed publicGreenland area exceeds sum of that of past50 years, greening cover rate in whole mu-nicipality reaches 22%.

It may be said that during the 90’s Shanghaieconomy experiences the fastest development,and the environmental feature of Shanghai alsohas been significantly changed.

Today, experts domestic and overseas, econ-omist and international friends meet together inShanghai to carry out discussion and exchangeunder the title “ environmental protection and sus-

Shanghai’s lovely skyline by night, featuringthe Oriental Pearl Tower, at left.

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tainable development in metropolis”, that ismeaningful. “Sustainable development” is a newthought of development, a major change in hu-man development idea. The premise ofdevelopment is not only to consider the need ofcurrent development but also the needs of nextgeneration should be considered, this is a newkind of development idea and strategy which isbased on summary of past development experi-ences and reconsideration of the economical andsocial behavior. The following 5-10 years is a veryimportant period for development of Shanghai,environmental protection will face more pressureand challenge. We must highly recognize the im-portance of environmental protection inconstructing a good investment and living envi-ronment in Shanghai, under the guidance ofsustainable development strategy, we will makeeffort to realize the coordination between eco-nomical, social and environmental benefits,further raising the competitive ability, as to theenvironmental protection work, the following fouraspects should be focused:

(1) Firmly following the path of collectivegrowth of economic growth

A new enterprises management mechanismwhich is beneficial to saving of resources, reduc-ing the energy consumption, increasing theefficiency and protecting the environment shouldbe formed through deepening of reformation andrenovation of regime; it is based on scientific andtechnical improvement. By 2005 year, the contri-bution rate of technical improvement to industrialeconomy should reach >55%. In practice we willput the saving of resources on the first position,actively promote cleaner production and basical-ly reform the past growth mode which ischaracterized by high input, high consumptionand low efficiency.

(2) Improving the industrial structure andoptimize the spatial layout, reinforcingthe comprehensive economical strength

Shanghai will rationally regulate urban spatiallayout according to the requirement of construc-

tion of an international center, in the same timeof improving function of city proper to accelerat-ing the construction of suburban township. Basedon new round of master plan the city-type indus-try which has no pollution, low consumption ofresources and energy and high additional outputas well as the high scientific and technical enter-prises will be developed, we will make effort torender the percentage of high-tech industry intotal industry reaches ~35%, the focus of the sec-ond industry will be transferred from city properto suburban area gradually, the business patternof city proper will be regulated from the pointswhich consider raising the output of land, mini-mizing the pollution and transport volume, thethird industry such as information technology, fi-nance, insurance and commerce willed beemphatically developed so as to raising the ser-vice level.

(3) Improving the ecological environmentcontinually, promoting the harmoni-zation of human and nature

Shanghai will continue to increase the input inenvironmental protection, making the environ-mental input reaches >3% of GDP annually. In1999 year th Shanghai municipal governmentcompiled the three year action plan of environ-mental protection, its focus is to increase thestrength of water pollution control and activelyoptimize the energy structure, reinforcing the con-trol of exhaust pollution of different vehicles andimproving the atmospheric environmental quali-ty. Shanghai will increase the harmless disposalrate of solid waste, actively promote classical col-lection of living rubbish and accelerating quantityminimization and recovery of solid waste. By 2000year the harmless disposal rate of living rubbishin city proper should reach 96%, realizing the clas-sical collection in 50% area. Meanwhile, thegreening construction will be greatly enhanced,by 2002 year the public green land area per capitawill exceed 6 m, greening cover rate reaches >25%,thus to create a comfortable environment for cit-izens. In spite of the hardness of environmentalprotection and construction tasks we firmly be-lieve this goal will be realized.

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(4) Further enhancing the all peopleconsciousness of sustainable development

The environmental protection and sustainabledevelopment need the support and participationof all people. In following years Shanghai will fol-low the “ renovation through science andeducation strategy “ widely develop scientific pop-ulation work, optimize the distribution ofeducational resources, enhancing the input in ed-ucation and training. To enhancing people’sconsciousness of participating sustainable devel-opment action through many types of activitiessuch as the annual “Shanghai science and tech-

nology festival” and the confirmation of ISO-14000 work, etc.

Keeping and constructing a beautiful envi-ronment is the common will of all peoples so isthe goal of pursuing of Shanghai people. This sym-posium is an opportunity of learning of successfulinternational experiences, it will expand the viewscope of construction of a sustainable developingmetropolis of 21st century. I sincerely hope all ofyou to offer your knowledge and good opinion.

Finally let me wish the success of this sym-posium!

Sincerely wish all guests a pleasant life inShanghai! Thank you!

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Urban Development in the 21st

Century — Can the EnvironmentWait?

Kristalina Georgieva,Director, Environment Department

The World Bank

Honorable Mr. Xu Kuangdi,Mr. Han Zheng,Ladies and gentlemen:

Introduction

I am sure other visitors to Shanghai have the samereaction I do—it is breathtaking to witness thechanges that have taken place in the city over thepast ten years. There have been tremendous im-provements in physical infrastructure andstandard of living in Shanghai. As impressive asthe changes one can see—such as the high-risebuildings, the transit system, the flow of traffic—are those not so apparent—like the improvementsin the quality of the water, the quality of the ur-ban air, and the management of solid wastes.Besides producing above 5 percent of the coun-try’s GDP, and raising real per capita incomes morethan 4 times over the past decade, Shanghai hasrelocated or reformed many of its polluting en-terprises; constructed sewerage and sanitationfacilities for 80 percent of its waste water; insti-tuted a ban on coal use in the central city that isreducing both soot and sulfur concentrations inthe air; piloted China’s program to phase out lead-ed gasoline, which was accomplished nationwidelast year; and set new standards of urbanplanning in the Pudong Special Economic Devel-

opment Zone. As all of you, I received as a sou-venir from the conference organizers a beautifulmagnolia, the city flower of Shanghai—and Ithought it fits very well with Shanghai’s strongcommitment to the environment. We in the WorldBank are proud to have been Shanghai’s partnerin some of the city’s environmental actions, andhonored to join the organizers of this importantconference.

My remarks today will concentrate on the keyurban environment challenges that China andother countries face. I would like to begin by pos-ing a question that the World Bank is often askedby our developing country partners: “Can’t theenvironment wait? Shouldn’t countries follow thegrow first, clean up later development path—firstraise income levels and then address environmen-tal concerns?” The simple answer to this questionis that good environmental conditions are not aluxury and can not wait—they are an important

Kristalina Georgieva

Mr. Wu Chengjian of the Shanghai EPB,Mr. George Zhu of Austin AUSINO, Ms. Vellet

Fernandes and Mr. David Shaman, bothof the World Bank, discuss recent research on

industrial pollution control.

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contributor to quality of life and to economic com-petitiveness.

While maintaining and accelerating econom-ic growth stands out as the most important goalfor developing countries, environmental qualityis rapidly becoming a top-of-mind concern, es-pecially in Asia. Increasingly, ordinary people andpolitical leaders in the developing world recog-nize the need to bridge the “environmental divide”with the industrialized countries at the same timeand as a part of the process of closing the devel-opment gap. This is particularly important forurban areas, where most of the national incomeis generated. Cities can not any longer be justengines of growth: they also have to be livable,and competitive both locally and globally in pro-viding proper environmental services – safedrinking water, sewerage, waste management,clean air.

Urban growth and environmentalchallenges

Major cities are home to more than 50 percent ofthe world’s population today, compared with only14 percent a century ago. The highest rates of in-crease are observed in the poorest regions of theworld. In East Asia, Sub-Saharan Africa, and theMiddle East and North Africa, urbanization is pro-ceeding rapidly, with urban growth exceeding 4percent a year. By 2025, it is estimated that almost65 percent of the world’s population (and an evenlarger share of total national economic wealth) willbe concentrated in cities and towns, making it anenormous challenge to ensure that such growthis managed without seriously damaging the ur-ban environment or the health of urban residents.

The combination of increasing urban popu-lation and growing economic activities place highdemands on the natural environment and the pro-vision of basic environmental services. Many citiesand towns in the developing world are alreadycharacterized by high levels of air and water pol-lution, slums, deteriorating infrastructure, andpoor waste management systems. The economiclosses caused by environmental degradation areoften substantial, reaching in some cases between5 and 10 percent of the city’s GDP.

Population growth and physical expansionrequire comprehensive city development whichintegrates environmental management and pol-lution control to achieve two equally importantand inter-related objectives:

♦ Arrest and reverse negative environmentaltrends to protect urban population, and es-pecially low-income groups, from environ-mental health risks, and

♦ Ensure the capability of the cities to providebasic environmental services in order to com-pete successfully nationally and interna-tionally for resources (financial and humancapital, technologies, income from tourism).

Environmental healthRecent estimates suggest that premature deathand illness due to major environmental healthrisks account for 20 percent of the total burden ofdisease in the developing world (18.5 percent inChina)—larger than any other preventable riskfactors and groups of disease. Environmentalhealth risks fall into two broad categories:

♦ The first category includes traditional hazards,related to poverty and lack of development—lackof safe water, inadequate sanitation and wastedisposal, indoor air pollution, and vector-borne diseases such as malaria.• Worldwide, an estimated 3 million peo-

ple in developing countries die every yearfrom water-related diseases caused byexposure to microbiological pathogensresulting from inadequate sanitation andwaste disposal, water supply inadequatefor personal hygiene, exposure to unsafedrinking water, and bacteriological con-tamination through a variety of otherwater uses, such as cooking and bathing.The majority of fatalities are children un-der age 5. Water-related diseases imposean especially large health burden in theAfrica, Asia, and Pacific regions. In Indiaalone, nearly 1 million people die annu-ally as a result of water-related diseases.

• More than half of the world’s householdsuse unprocessed solid fuels, particularly

13

biomass (crop residues, wood, and dung)for cooking and heating, in inefficientstoves without proper ventilation; theoutcome is that people—mainly poorwomen and children in rural areas andurban slums—are exposed to high levelsof indoor air pollution. It is estimated thatnearly 2 million children and women dieevery year in developing countries as aresult. About half of these deaths occurin India and China.

• Vector-borne diseases are affected by arange of environmental conditions andfactors, including inadequate drainagefrom drinking water and from irrigation;polluted and standing water; cloggedstorm drains; floods; and open sewersand certain types of sanitation. In Africaalone, malaria is responsible for about800,000 deaths annually.

♦ The second category includes modern hazardscaused by development without environmentalsafeguards—urban (outdoor) air pollution andoccupational and other exposure to agroin-dustrial chemicals and waste.

Traditional environmental hazards affect de-veloping countries most. Their impact exceeds thatof modern health hazards by a ratio of more than10 for Africa, 5 for Asian countries (except forChina), and 2.5 for Latin America. Modern threatsto human health prevail in rich countries and theEuropean economies in transition.

Inadequate water supply and sanitation posethe largest threat to human health in most of theBank’s client countries except for China and thetransition economies of Europe, where air pollu-tion causes the most damage. Indoor air pollutionis highest in Asia and Africa.

Are environmental health risks in urban ar-eas significant enough to warren the attention ofcity leaders? Data suggests that a significant partof the environment health problems is related tothe rapid growth of urban areas in Asia, LatinAmerica and Africa, which is changing the land-scape of environmental health concerns, especiallyfor the urban and semi urban poor. These groupsare increasingly exposed to transition risk—both

traditional hazards, such as dirty cooking fuels,primitive stoves, crowding, and poor access towater and sanitation, and risks associated withmodern transport and industrial pollution. Fur-thermore, in some parts of the world malaria isbecoming an urban issue, in part because of in-frastructure failures. Climate change is likely toworsen this situation, and globalization and theliberalization of trade may exacerbate the trans-mission of some diseases.

Urban environmental services andeconomic competitiveness

Clearly, in many cities action to improve the ur-ban environment is justified on health grounds.In addition, environmental services are needed toprovide the necessary infrastructure, includingwater supply and sanitation, waste management,roads, and energy supplies, which allow the citiesto function properly as socio-economic systems.Throughout today and tomorrow we will shareexperience from around the world about how cit-ies in both developed and developing countrieshandle the environmental challenges of urbandevelopment in each of these areas to providehigher quality of life to their citizens and positionthemselves for rapid and sustainable growth.

In light of these upcoming discussions, I willlimit my comments to two aspects of urban envi-ronment services: first, the provision of watersupply, sewerage and waste water treatment andtheir growing interdependence; and, second, theemerging new environmental challenge to devel-opment planners in many cities, stemming fromthe impacts of climate change.

Let me start with water supply and waste wa-ter treatment. Worldwide, water use grew at morethan twice the rate of population during the twen-tieth century, and many regions are chronicallyshort of water. About one third of the world’s pop-ulation lives in countries experiencing moderateto high water stress, and by 2025 as much as twothirds of the world’s population is expected to beunder water stress. For cities to grow, availabilityof accessible and reliable water supply for indus-trial and domestic use is absolutely essential.Around the world in developed and developing

14


countries alike city planners are shifting theirthinking of water supply systems from purely in-frastructure projects in the urban setting to morecomprehensive watershed management pro-grams, integrating all competing uses of water toensure efficient allocation and sustainable use ofthe resource. In Ecuador the municipal water au-thorities in Quito and Cuenca are allocating partof their revenues to finance protection activitiesin the watersheds from which they receive the bulkof their water. In the US, the city of New York hasscrapped a $3–8 billion water filtration system, andopted for a $1.5 billion watershed protection pro-gram to surround the city’s two main waterreservoirs.

This integrated watershed approach warrensattention also here, in China, where water is keyfor development for most of the country. Fresh-water resources per capita are about 2,000 cubicmeters—only one-quarter the world average, andone-third that of countries with similar incomelevels. However, per capita water resources innorthern China are only 750 cubic meters, orroughly one-third of China as a whole. While ag-riculture is the largest user of water in China, thedemand for water by industrial and municipalwater users has been growing rapidly. Water ex-traction in much of northern China exceedssustainable levels and water supply is often di-rectly impacted by levels of water pollution.Contamination of surface and ground water pos-es immediate economic losses for productivesectors (agriculture, industry), and health impactson people. Growth of urban areas requires sub-stantial investments in municipal waste watercollection and treatment—to reduce pollution andprevent contamination of fresh water supplies.Research around the world, including a study inDalian in the mid-1990s, shows that wastewatertreatment in some cases may be a more cost-effective option than securing new sources of wa-ter. Thus, a comprehensive approach to waterresource management is needed to ensure thelong-term sustainability of water supply, especiallyfor dynamic urban development.

Let me now address one of the new envi-ronmental risks for which many cities will needto prepare—the impacts of climate change. The

projections of the Intergovernmental Panel onClimate Change indicate that most developingcountries are likely to be negatively impacted bychanging precipitation, weather patterns and sealevel and need to take actions to adapt to today’sclimate variability and to long-term climatechange. This means strengthening the commit-ment to improve health conditions, especiallythrough the provision of water and sanitation,taking measures to reduce the impact of naturaldisasters through appropriate infrastructure plan-ning, and applying sound land use and waterresource management.

Risk management in the context of climatechange is particularly important for coastal areas.Today, sixty percent of the world’s population liveswithin 100 kilometers of the coast, an area thataccounts for only about 25 percent of the landmass. By 2025, over 80 percent of the largest 30cities in the world will be in developing countries,and the majority will be coastal mega cities. Sea-level rise will increase the vulnerability of thecoastal system and impact the economic situationof entire regions (fisheries, water resources, agri-cultural production, infrastructure and humanhealth). In every case, it is the poor who will suf-fer the worst consequences, as they are least ableto protect themselves from the effects of naturaldisasters. Disasters can cause significant life loss,undermine social capital and destroy infrastruc-ture and livelihoods on a large scale. City plannersin areas likely to be significantly impacted by cli-mate change need to adopt risk assessmentapproaches, especially for their long-term infra-structure investments.

Enabling environment for sustainableurban development

What are the right conditions for cities to providehealthy environment and competitive environ-mental services? Experience around the worldsuggests that realistic, predictable and systemati-cally enforced regulations, combined with marketincentives for compliance and public “right-to-know,” define the ingredients of good environ-mental management. First, the government mustdevelop a legal and regulatory framework for pro-

15

tecting common resources such as the water andthe air. Second, the public must be informed aboutthe state of the environment and of the responsi-bilities to protect it, and should be willing todemand products from companies with good en-vironmental performance. Third, the financialsector must be aware the short- and long-termrisks associated with polluting industries and tech-nologies, as well as the positive financial returnsto companies with good environmental practices.Finally, the private sector itself must recognize thatbeing good environmental stewards is good busi-ness. The so-called “triple bottom line,” meaningfinancial, environmental, and social responsibili-ty, is increasingly becoming the standard of goodglobal business. Given the right incentives, theprivate sector will find innovative and cost-effec-tive ways to protect the environment, includingthe development of technologies to save water,reduce biological pollution from wastewater, andproduce energy with few air pollution emissions.

What role should agencies like the WorldBank play?

Let me end with a couple of words about the com-mitment of my institution, the World Bank, toenvironmentally sustainable urban development.During the last decade we have invested morethan $18 billion in environmental projects, as wellas in environmental components and objectivesin our non-environmental portfolio. Nearly halfof these resources went into lending for environ-mental improvements in urban areas. The World

Bank has been involved in a number of urbanenvironment projects in China, including severalwaste water treatment plants in Shanghai, whichsome of you will visit on Friday.

We believe the Bank’s comparative advan-tage in the environment area lies, first, in ourability to leverage policy dialogue; second, in ourbroad sectoral coverage; third, in our extensiveproject development skills; and, forth, in our con-vening power and global presence. We must usethese strengths to:

♦ Encourage countries to adopt policies thatcreate appropriate incentives for the propermanagement and efficient use of environ-mental and natural resources—for example,by reducing energy subsidies or adjusting tax-es that encourage the use of dirty fuels, or bypricing water to reflect its scarcity.

♦ Work across sectors to enhance the environ-mental benefits of projects and programs thatprovide access to infrastructure and basic ser-vices in a sustainable manner—for example,by combining good management of waterresources to benefit both upstream and down-stream users, or adjusting the design of waterand sanitation projects to increase their healthbenefits.

♦ Help countries develop and implementprojects that focus on critical environmentalproblems that can be substantially improvedor resolved through specific investments andpolicy reforms—for example, by promotingthe use of clean fuels for heating to improveurban air quality.

♦ Bring together groups of countries and stake-holders to tackle common problems andissues of global importance such as phase outof ozone-depleting substances, persistent or-ganic pollutants or climate change, in acoordinated manner that draws on worldwidelessons of experience.

In China, we will continue to fund priorityurban environment projects where returns on in-vestments can be sufficient to pay back loans. Butmost of the objectives I listed above are not aboutlending money; they are about knowledge man-

Urban Air Quality Management Sessionattendees listen and learn.

16


agement and human resources developmentwhich, in my view, are the key to China’s objec-tive of achieving environmentally sustainabledevelopment.

China’s environmental challenges are signif-icant and even top experts are sometimesoverwhelmed by their scale and complexity. I don’tthink this should be the case. I see a different pic-ture. I see a country that first and foremostunderstands that it has a serious challenge on itshands. I see a country that has the advantage ofeconomic growth and development unprecedent-

ed in recorded history. I see a country in whichenvironmental awareness is spreading beyondpolitical leaders and intellectuals to include ordi-nary people; not only workers in large andsophisticated cities like Shanghai, but farmers inremote counties who face, every day, the prob-lems of environmental degradation. In short, Isee a country that will get on top of this challenge.It won’t be easy and it won’t happen overnight,but it is a worthy goal of a worthy people.

I wish great success to the work of this con-ference. Thank you.

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17

Living in the Century of Cities

Mr. Ernst H. BehrensPresident and Chief Executive Officer

Siemens Limited China

It is a great honor for me to address the Shang-hai International Urban Environment andSustainable Development Conference. The

theme of this conference is very well defined forShanghai, which is transforming itself into a worldclass mega-city at a breathtaking pace.

I like Shanghai. I feel inspired each time Ivisit, not just because of the rapid changes thathave taken place, but in particular by its promisefor a sustainable and well-planned growth. As weare entering the 21st century, sustainable urbandevelopment has become extremely importantbecause, like it or not, we will be Living in theCentury of Cities.

Shanghai has made remarkable progressover recent years. This progress reflects the aspi-ration for and the momentum of economic growththat China is going through. When I, as head of adelegation of German entrepreneurs, visited Ger-many in March to promote China among Germanbusiness circles, Shanghai always remained at thefront of my mind as a reference for the achieve-ments that China has made. Indeed, far-reachingeconomic and social changes have fundamental-ly transformed the country, opening it up to theworld and ushering in an era of unprecedentedstability and prosperity.

China has become an economic powerhousein the region. It has managed an average of eight-percent GDP growth for a number of years in aroll, and has succeeded in attracting a major share

of direct foreign investments flowing into Asia.China’s upcoming accession to the WTO under-scores the wisdom and effectiveness of thecountry’s long-term development program. Thismove into the world organization will substan-tially accelerate the country’s development andtighten vital links to the global community.

It is only a question of time before Chinabecomes the world’s largest economy. Whetherthat will occur in ten years or twenty is irrelevant.What matters is the trend. Yet this trend, as out-standing and promising as it is, will obviouslybring major challenges as well. One is the inevi-table and highly problematic process ofurbanization, particularly when it assumes mega-city dimensions like in Shanghai.

As early as in the 1960s, the noted Americanarchitect historian and city planner Lewis Mum-ford summarized the process and impact of theglobal urbanization in his book The City in Histo-ry. He said “Once upon a time, the city was asymbol of a whole world; today the world itself isbecoming a city.” Mr. Mumford was right. In thelast century, the number of people living in citiesgrew from 200 million to around 3 billion. These3 billion urban dwellers will soon be joined by anadditional 2 billion in 2025 and the figure willclimb 10 billion by 2050.

Without a doubt, cities are models of suc-cess. They are the financial, political and culturalcenters that set the pace of life. Cities are perfectmeeting points of goods, services and ideas of allkinds. Here, cultural diversity provides inspira-tion, and the “critical mass” of new ideas, productsand innovative people creates a breeding groundin which both technological progress and socialchange can thrive.

Mr. Ernst H. Behrens

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But cities are also problem zones of the firstorder. In many cities around the world, as manyas 60 percent of the people living there suffer un-der extremely high occupant densities.

Such population density has lead to multi-ple social and infrastructural problems for themunicipal authorities to provide sufficient andadequate accommodation, employment, publicmobility, drinking water, sanitary services, cleanair as well as public safety and education.

One does not need much of an imaginationto picture this development leading to “the cityas a social time bomb,” a horror scenario manyexperts are already warning of. So, for all of us,the primary challenge is to ensure continued “sus-tainable development,” which means meeting theneeds of a growing urban population without con-demning future generations to unacceptablepollution, disastrous climatic disturbances anddepleted resources. It means finding financiallymanageable solutions for providing adequatepower, water, mobility, communications, healthcare, and waste disposal for millions of people indensely packed urban centers.

The task of meeting all of these requirementsis formidable. So formidable, in fact, that no mu-nicipality and no central government can hope tomaster it alone. All stakeholders in the future—from the government, municipal authorities andbusiness to the broad general public—must workconstructively, dynamically and synergisticallytoward this goal.

This is where the advantages of strong pub-lic-private partnerships are most apparent. Suchsystemic co-operations between the public andprivate sectors can share risks, responsibilities andrewards while generating net benefit to both part-ners. We believe the future will belong to partnercompanies that can—and will—assume such re-sponsibilities.

Siemens, one of the world’s largest electron-ics and electrical engineering companies and aleading provider of infrastructure throughout theworld, has long been committed to public-privatepartnerships. We see ourselves as an integral partof the societies which we serve, as an active andinfluential voice in environmental matters, and asa good corporate citizen in the global community

as well as in each of the 190 countries where weoperate.

Our deepest commitment is to help shapesocial development by providing viable and ben-eficial solutions that ensure sustainable urbandevelopment. In short, we see ourselves as an ar-chitect of the future.

Our solutions include:

♦ Affordable, efficient and environmentallycompatible power supplies;

♦ Fully integrated and networked public trans-portation systems that are fast, intelligent, safeand comfortable;

♦ Modern information and communicationsinfrastructure designed to keep people, busi-nesses and institutions connected across thecity, throughout the country and around theworld;

♦ Health care equipment, systems and servicesthat ensure the well-being of the general pub-lic and improve the quality of life; and

♦ Lighting that keeps consumption and coststo a minimum while helping keep a city func-tional, attractive and safe around the clock.

Such solutions cannot simply be exportedfrom some part of the world to China. Nor canthey be pieced together on the spot without long-term commitments and strategies.

I wholly agree with Mr. Kofi Annan, Secre-tary General of the United Nations, who said atthis year’s World Economic Forum: “The fragilityof globalization poses a direct challenge to theself-interest of the corporate sector, and a centralpart of the solution is the need for companies toaccept the obligations—not merely the opportu-nities—of global citizenship.”

For all of us at Siemens, accepting these ob-ligations increasingly means building strong andlasting public-private partnerships.

In doing so, I think it is essential that all in-volved realize that each partnership is unique inits membership, objectives, specific role of thepartners, framework, innovation, outcome, bene-fits and transferability. But they also share certaincharacteristics: they bring together the public andprivate sector around shared objectives; each part-

19

ner contributes time, money, expertise or someother resources; the partners work toward com-monly defined goals; and they share decisionmaking and management responsibility.

Before heading into any partnership, it isnecessary to establish a clear governance struc-ture that defines the roles and responsibilities ofeach partner. This may involve setting up neworganizational forms, agreeing on the fine printregarding how each will work, defining guidelinesfor processes and communications, or providinga mechanism to resolve possible differences. Allsuccessful public-private partnerships maximizethe two sectors’ respective strengths and contri-

butions.

Based on the experiences gath-ered from Siemens’ more than 50companies, 28 regional offices andnumerous projects throughout Chi-na over the years, we have observedthat the private sector often has thefinancial, technological and manage-ment resources, the operationalhistory, and a proven track record oflowering production costs and ensur-ing efficient delivery. The privatesector can also create economic op-portunities, invest in human capital,promote environmental sustainabil-ity and enhance social cohesion.

The typical strengths of our mu-nicipal partners are their legitimizedlegal commitment towards the pub-lic, their administrative continuity,their social concerns, and their legalability to enhance the performance ofa partnership by easing the introduc-tion of new technologies andapplications, paving the way forprojects, and by smoothing out bu-reaucratic hurdles.

Public-private partnerships areinstrumental in setting new standardsand introducing innovations. Partic-ularly in Shanghai, which is beingtransformed into a world-class city ata breathtaking pace, we have the op-

portunity to address issues that will helpdetermine the quality of urban life well into thefuture.

This includes implementing highly efficientwater treatment systems and waste managementsystems such as garbage collecting, separating andrecycling; designing more energy-efficient build-ings, and controlling air pollution. And this alsoincludes the critical theme of infrastructure: pro-viding sufficient affordable capacities in areas suchas communications, power supplies and transpor-tation to benefit as many people as possible.

While these end-of-pipe technologies andsolutions are being put in place, expanded andmodernized, one can focus on a new generationof preventative environmental protection policies.

The old and the new coexist in Shanghai, as this roofline shows.

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In practice this means preventing waste, reduc-ing CO

2 emissions, taking a serious look at feasible

renewable energy technologies or building entiredistricts of low energy consumption buildings.

As Shanghai is being transformed, I think itis crucial to keep three primary points in mind.Cities like Paris, New York or Shanghai need threethings: identity, diversity and stability.

As far as identity is concerned, Shanghai isuniquely fascinating. I hope that the city’s greatcharacter and flavor will not be homogenized tothe point where it becomes just one of many in-terchangeable global urban centers. Culturalheritage is so immensely important in China, itmust continue to be reflected in its cities. Citiesthroughout large parts of the world have longsince discovered that heritage protection adds thatcritical touch of identity, that indefinable “spirit”so essential to a great city. The message here is:modernity, yes, but certainly not at any price.

The need for diversity is self-evident. It isemblematic of any world-class metropolis. Chi-na is making enormous progress in opening upto the world, and cultural diversity is the auto-matic product of this process.

The same is true for stability, a condition thatis critically important for long-term progress andprosperity.

I am convinced that China’s accession to theWTO will usher in an era of intensified interna-

tional co-operation and partnership. And, as weall know, solid trade relations are one of the mosteffective ways to solving conflicts and preventingmisunderstandings.

The more closely China is integrated into theglobal economy, the greater its opportunities foreconomic growth. Economic growth is the mostimportant basis for social stability. Siemens, alongwith many other companies from around theworld, is eager to make lasting contributions tothis growth. We feel our broad spectrum of infra-structure competence, our generations ofexperience in helping develop other cities in oth-er countries, our readiness to transfer tech-nologies, build up local partnerships and train lo-cal employees, make us the kind of good corporatecitizen China needs.

We are proud of our strengths in China, andintend to leverage them as best we can to makean optimal contribution to the country’s develop-ment.

Above all, we believe we are an ideal part-ner for helping cities like Shanghai find the rightanswers to the challenges of achieving sustain-able urban development, which is a shared goalfor all of us. As we are entering the new millen-nium, achieving this goal has become ever morecrucial because we will be Living in the Century ofCities.

Thank you.

Chapter

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21

Salient Points Underlying KeynoteAddress

Mr. Ravi ParthasarathyVice Chairman & Managing Director

IL&FS LIMITED

I. Posing the challenge

♦ Globalization has irrevocably changed theeconomies of Nation States• China’s imminent accession to the WTO

is testimony to the foregoing• Consumer interest has become para-

mount, including in environmental issues

♦ Local economies will have to chart their owndestinies within national and regional con-straints• Rust belt cities have

decayed• Textile cities have re-

duced in importance

♦ Competitiveness will bedetermined by• Infrastructure• Quality of life, espe-

cially environmental• Capacity to absorb rel-

evant technologies

♦ The urban agenda cannotbe addressed without at-tracting capital• Financial capital• Intellectual capital• And increasingly, a

multi-cultural diversity

II. The urban conundrum

♦ In developing economies with a large popu-lation, success in urban initiatives canfrequently lead to failure• For example, Bangalore attracted skilled

labour, and is today bursting at the seams• Relentless immigration is the norm• In India, 50% of population would live in

urban areas in the medium term

♦ Rapid urbanization can strain and cause thecollapse of existing levels of infrastructure• Bombay has 14 million people—its infra-

structure has been designed for less thanhalf that population

• Environmental degradation has ensued:it is nobody’s case that development has

Mr. Ravi Parthasarathy

Reward for a hard day’s work — Delegates are treated to anevening concert at the Shanghai Opera House.

Chapter

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22


a higher priority than environmentalawareness. However, environmental deg-radation is a by-product of growth indeveloping economies

♦ Disaggregation is clearly necessary, and is typ-ically undertaken with directed satellitegrowth centers• The process is expensive• It is time-consuming, not always a suc-

cess

♦ In the ultimate analysis, there is only one last-ing solution—to recognize the strengths ofthe local economy, and to build around it.Thus we need a two fold focus:• Management of major cities, and• Sustainable development of catchment

areas

III. Service sector and urban productivity

♦ Around the globe, the character of major cit-ies continues to undergo change—acontributing factor is the way technology im-pacts our economic processes

♦ Most major cities in India have changed dra-matically

♦ Cities are increasingly service sector orient-ed; knowledge worker intensive, and with ademographic skew towards younger agegroups• Cotton mills of Bombay have closed

down• Fewer blue collar workers

♦ The fundamental paradigm of urban planningneeds to be revisited to cater to such popula-tions

♦ We talked earlier of intelligent buildings—weare now talking of productive, intelligent cit-ies—an intelligence that goes well beyondmere broad band connectivity

IV. The four principal questions

♦ How do we plan for urban knowledge cen-tres?

♦ How do we sustain suburban communitiesto alleviate continuing pressure in mega cit-ies?

♦ How do we integrate the urban environmen-tal agenda with the urban planning agenda?

♦ What frameworks do we utilise to catalyse therequired investment?• Public Private Partnerships—almost a cli-

ché today• We must take care that we do not replace

an inefficient public sector with an ex-pensive private sector

V. The fifth primordial question

♦ How do we channelise the required funds forthe urban sector?

♦ While some authorities have greater clarityin relation to the urban agenda, our experi-ence is that neither vision nor an action planis lacking in almost every local authority

♦ The problem is funding—and unless this is-sue is addressed, a generalized debate onother factors would not prove very meaning-ful.

VI. Financing urban infrastructure

♦ At the macro level:• Government share of financing has been

declining• World Bank has been all but absent in the

urban sector in India

♦ We have attempted diverse prototypes of fi-nancing including:• Municipal Bond issues with an escrow of

property taxes and octroi

23

• Green field water supply projects withuser charges borne by industry

♦ Paradox of constraints• Budgetary support is infeasible• Excess liquidity prevails in the banking

system• Financial instruments for investors are

simply not available

♦ Given inadequacy of budgetary support, Cap-ital Market solutions are a must• Bankability must be engineered and be

demonstrable• Project Development expertise is essen-

tial• Need for a broader based program cater-

ing to:– Smaller projects– Projects entailing managerial solu-

tions– Projects relating to simple procure-

ment only– Multi-disciplinary projects– More complex projects including

multi-modal transportation

♦ It is in the above context that we have initiat-ed with the World Bank discussions relatingto the possibility of establishing a NationalUrban Infrastructure Development Fund• Could be administered by one or more

private sector Asset Management Com-panies

• Could be accessible to any consortium ofdevelopers, sponsors and financiers

• Would standardise the template for fi-nancing

• It would be up to the Governmental au-thorities to consider targeted subsidiariesat the project level to ensure bankability

♦ World Bank projects are typically complex,time consuming and bundle in multiple fac-ets of financing:• Unbundling of IDA and TA is very desir-

able• Directed TA and IDA could then be

brought in to support individual projectstaken up by the proposed Funds on a tar-geted basis

Chapter

I

Documents

EAST ASIA AND PACIFIC URBAN DEVELOPMENT SECTOR