Capturing our urban economic potential

Published: April 11, 2012
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The writer is a lawyer and currently chairman of LESCO. The views expressed in this article are his own.

The writer is a lawyer and currently chairman of LESCO. The views expressed in this article are his own.

The human civilisation is undergoing a profound transformation. It is, for the first time, an urban civilisation. Underpinning this transformation of human society are economic factors, such as the lure of employment and a cash economy over the gradually diminishing role of labour in increasingly mechanised farming.

It is well documented that the process of urbanisation has a positive impact on a country’s economic growth and its evolution towards a modern industrial economy. The statistical conclusions of a recent report titled Opportunities in an Urbanising World by Credit Suisse, state that: “1) per capital GDP is generally superior in urban than rural populations; 2) developed economies have comparable rural and urban per capita GDP growth rates; 3) emerging economies exhibit superior urban versus rural per capital GDP growth rates; 4) there is evidence that the larger cities in a country have superior per capital GDP; 5) rapid urbanisation is usually associated with very swift economic expansion; and 6) most importantly — there is an urbanisation sweet spot (in the 30 per cent to 50 per cent [population urbanisation range]) accompanied by peak per capital GDP growth”.

The Credit Suisse report also asks another important question. Looking at the high urbanisation but low GDP per capital in countries in South America and comparing them to the high urbanisation and high GDP per capital of the G7 countries, it asks why some regions urbanise less successfully than others? The answer is striking.

The clue lies in the disproportionate distribution of income in urbanised but lesser-developed countries. The report identified six large emerging markets and found that Korea, Malaysia and Turkey urbanised while, for the most part, their Gini coefficients declined (improving equality of income distribution), while Brazil, Mexico and South Africa urbanised while, for the most part, their Gini coefficients rose (deteriorating equality of income distribution).  In other words, urbanisation coupled with misallocation of resources will hinder economic development and the growth of GDP.

With at least 35 per cent of its population residing in urban areas, Pakistan is the most urbanised country in South Asia. Covering no more than three per cent of the country’s landmass, urban areas contribute towards 78 per cent of the GDP.  It is undeniable that the Pakistani economy is an urban economy. Urban areas in Pakistan also present better development indicators: incomes are generally higher, there are better schools and hospitals and there also exist urban consumer facilities that are unavailable elsewhere.

In the next three decades, the urban population of Pakistan is expected to exceed 50 per cent of the total population. At the same time, the total population is expected to cross 300 million. This huge shift of people and massive transformation of our society, is also an excellent opportunity to harness the economic potential of urbanisation and to ensure that wealth generated by this process is equitably distributed for the benefit of the public.

The Credit Suisse report identified challenges that governments of rapidly urbanising countries like Pakistan’s, will need to address to ensure that their growth potential is unlocked. These include investment in urban planning and infrastructure that ensures access to capital markets, land use controls and zoning that promote high density human interaction while providing affordable housing; provision of adequate fresh water, sewerage and drainage, electricity and other utilities; effective urban management; and social programs that redistribute incomes across the population and “avoid the failure of urban disintegration between affluent areas and slums”.

The Planning Commission of Pakistan has been given similar recommendations by its Task Force on Urban Development and smarter urban development and planning is at the heart of its new Framework for Economic Growth.

The provincial governments must now fulfill their obligations to devolve power to local governments and, in doing so, ensure that their cities develop in a manner that promotes, rather than hampers growth. The urban areas in Pakistan are now characterised by their degraded environment, air pollution, poor drinking water quality, lack of mobility and public transport, opaque property markets, and arcane building codes that encourage state occupation of land and discourage high density development. In their present state, Pakistani cities cannot hope to attract the human talent necessary to support a vibrant urban economy. And it is human talent — as New York’s mayor Michael Bloomberg recently tweeted — that attracts capital, rather than capital attracting talent.  And that is the secret of unlocking Pakistan’s urban economy.

Published in The Express Tribune, April 12th, 2012.

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Reader Comments (11)

  • Whats in the name.
    Apr 12, 2012 - 12:14AM

    To capture any economic potential, a country should have its citizens with clutter free mind. Just a case in point. If hatred and insecurity is always running in mind, then there will be no space in mind to think freely or rationally and absorb knowledge, deliberate on it. The insecurity and irrationality will take up the mind and body ultimately making a person behave irrational. And for this to happen the state has to play its role too. At least create an environment where hatred and venom is not injected to the masses right from schools and using proxies and non state actors to do their bidding. No wonder western countries are far far ahead by eons just because of this singular reason and this is the reason why in spite of the billion plus population, the OIC is where it is today. Agreed my comment here has nothing to do with the better part of the article but still a very good tool towards economic liberation and achieving self suffiency.
    Rgds

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  • Always Learning
    Apr 12, 2012 - 5:34AM

    “And it is human talent — that attracts capital, rather than capital attracting talent.”
    I agree whole heartedly. For it to happen, we must invest in education at all levels and disciplines. Talent does not just happen in cities. It has to be developed, nurtured and provided the environment to grow.

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  • geeko
    Apr 12, 2012 - 6:07AM

    Pakistan will never prosper, its sociological superstructure is rotten to the core, it needs political mature actors with efficient socio-economic policies like India, and the over-growing “Hafiz Saeedization” of the society just take the country to a different – if not opposite – path.

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  • Apr 12, 2012 - 6:28AM

    Rapid migration of people in Pakistan from rural to urban areas is causing massive increases in urban populations, creating more and larger urban slums, increasing the potential for environmental deterioration, and bringing tremendous pressures on city services already strained beyond limits. However, there are many benefits of rural to urban migration for migrants’ lives, including reduction in abject poverty, empowerment of women, increased access to healthcare and education and other services. Historically, cities have been driving forces in economic and social development. As centers of industry and commerce, cities have long been centers of wealth and power.

    http://www.riazhaq.com/2009/09/south-asian-slums-offer-hope.html

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  • Falcon
    Apr 12, 2012 - 9:23AM

    Very informative article. I think as you have highlighted, planning is the key. Unfortunately, that is the very problem. One of the problems that is very evident in narrative of most of the Pakistanis is lack of this strategic view of future. How will and should things look like few decades to 50 years to 100 years from now and how should Pakistan position itself based on new trends, opportunities, and threats? Unless we get into that mode, we will always be making day-to-day decisions devoid of vision.

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  • Maqbool
    Apr 12, 2012 - 3:42PM

    A thought provoking article. We would not be able to unlock potential of our cities until we innovate and invent new solutions to problems confronting our cities. But perhaps we want to stick to old remedies while living in 21st century. Heavy infrastructure is still being preferred over much needed digital and social infrastructure. There is reluctance to use perforated pavements and permit natural return of water to earth. Building practices are wasteful e.g., energy, land and cost wise. Citizens like in olden days have little voice in managing cities and are mostly treated unwise & unworthy. A collective national resolve to bring fundamental changes in cities would only pave way to unlock their economic potential.

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  • adeel759
    Apr 12, 2012 - 3:55PM

    @Mr Mayor Bloomberg’s assertion, ” Human Talent Attracts Capital”. He must have said this at NYU or any educational institution. If he was addressing a Hedge Fund he would say it otherwise that its ” Capital That Attracts Human Talent”. Case in point Pakistan, which has youth in abundance with degrees in their hands but can’t find jobs because of evaporating Capital and that is because of insecurity and ill governance. But his assertion is absolutely right too, case in point is India and China, where when int’l investors smelled Human Talent in combination with security and adequate governance they poured in Capital. So bottom line is that Capital and Human Talent go hand in hand.
    @ Capturing Urban Potential. Here, its Planning Commission which has proven to be absolute disaster, unable to devise applicable strategies and planning for infrastructure and basic services.

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  • Falcon
    Apr 12, 2012 - 6:17PM

    @adeel759:
    lolzz…about your Bloomberg comment…good one

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  • adeel759
    Apr 12, 2012 - 7:10PM

    @Falcon. Thank you Falcon.

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  • Abdul-Razak Edhy
    Apr 12, 2012 - 7:41PM

    ‘ And it is human talent — as New York’s mayor Michael Bloomberg recently tweeted — that attracts capital, rather than capital attracting talent.’
    It is both ways. USA is attracting talent from all over the world for having huge capital.

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  • Raja Islam
    Apr 13, 2012 - 8:32PM

    Increasing urbanization is a problem for Pakistan. The few true cities are overcrowded and the infrastructure is falling apart. Mafias and gangs are running the cities and there is no governance or writ of law.

    What Pakistan needs to do is to develop the infrastructure in the small towns and villages across the country to inhibit migration towards the large cities. We do not need more urbanization at this point. All we need is to ensure uniform development across the board.

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