The current ongoing urbanisation is considered to be the second wave of urbanisation, with the first having occurred in North America and Europe from 1750 to 1950. In the 19th Century, London was the only city with a population of more than 5 million. Moving back to the present day, there are now 54 cities that share that distinction, with most of them located in Asia. Between 2010 and 2020, 411 million people will be added to Asian cities, which is 60% of the growth in the worlds urban population. The urban population of developing countries is expected to double between 2000 and 2030, while the built-up area of their cities can be expected to triple. By 2020, of the 4.2 billion urban population of the world, approximately 2.2 billion will be located in Asia. The urban environmental infrastructure investment needed in the Asia-Pacific region is estimated to be in the region of about $100 billion per year.
Looking at current urbanisation speed and scale in Asian cities, this clearly indicates infrastructure requirement is more urgent than ever before. Failure to address the issue would likely cause the blocking of growth and could heighten poverty levels in Asian countries.
Tackling current and future infrastructure in the Asian region needs provides a number of challenges, including:
it is imperative for city governments to look for alternative financing options to supplement their own sources of financing. The increasing gap between the funds available to city governments and the funds required for infrastructure development has prompted city governments to source private financing, typically through initiatives like public private partnerships (PPPs) and joint ventures (JVs) with private entities.
Over the years - and contrary to this requirement - the large amount of urban infrastructure investment project finance in the form of PPPs has remained predominantly a vehicle for a developed countries, and is most widely used in countries that already have regulatory frameworks in place and project task forces in action. Nations such as the UK, Italy, Spain, France followed by Germany and Portugal are the markets that account for the largest portion where project finance is most common and where laws exist that specifically regulate its use, in particular in the context of PPPs and techniques applied in a large number of sectors. Moreover the public administration in these countries plays an active role in promoting the use of PPPs.
On the other hand Project finance within the developing countries is highly concentrated in the power, natural resource and telecoms areas, rather than infrastructure of a PPP nature. The different level of dissemination of PPPs in Europe and Central Asia/Asia Pacific is worth observing. PPPs account for around 25% of total loans granted in Central Asia/Asia Pacific, whereas in Europe this figure is over 36% . The monetary value of all PPP projects financed is however 3 times more in Europe than in Asia. This clearly indicates, considering the fast migration to cities, that many urban infrastructure projects are delayed or ill-maintained and most critically are running behind demand.
Urban areas are becoming increasingly dominant contributors to their country's gross domestic product (GDP). In 2004, 40 percent of the urban population contributed approximately 80 percent of the GDP in Asia. In China, for example, cities are expected to contribute about 75 percent of GDP by 2025. Examining the role of urban infrastructure in the development of Asian region, a UN survey reports shows that 72 percent of developing countries have adopted policies designed to stem the tide of migration to their cities. It's a mistake to see urbanization itself as evil rather than as an inevitable part of development. Instead of developing restrictive policies towards rapid growth towards cities, the policies avoiding bottlenecks in financing urban infrastructure projects and nurturing and channelling private initiatives with partnering public sector in the forms of PFI, PPP will all assist in solving the problems facing Asia.
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