Global capital and the cities of the south

By Arif Hasan

KARACHI: International capital is desperately looking for a home. Cities of South and South-East Asia are attractive destinations since they have a weak regulatory framework and have undergone structural adjustment. Here, this investment, is increasingly determining not only the shape of the city but also social and economic relations.

New terms, such as “world class cities”, “investment-friendly infrastructure”, “foreign direct investment” or “FDI” as it is called, cities as “engines of growth”, have entered the development vocabulary. All politicians and official planners in the Asian cities are using these terms and it is largely because of them that the whole approach to planning has undergone a change. Local governments are obsessed by making cities “beautiful” to visitors and investors. This means building flyovers and elevated expressways as opposed to traffic management and planning; high-rise apartments as opposed to upgraded settlements; malls as opposed to traditional markets (which are being removed); removing poverty from the centre of the city to the periphery to improve the image of the city so as to promote FDI; catering to tourism rather than supporting local commerce; seeking the support of the international corporate sector (developers, banks, suppliers of technologies and the IFIs) for all of the above.

The above agenda is an expensive one. For this, sizeable loans have been negotiated with the International Financial Institutions (IFIs) on a scale unthinkable before. For example, between 1976 and 1993, Sindh borrowed $799.64 million for urban development. Almost all of this was for Karachi. Recently, the government has borrowed $800 million for the Karachi Mega City Project. Of this, $5.33 million is being spent on technical assistance being provided by foreign consultants.

Almost all the projects designed and funded through previous loans have not met their objectives and there is evidence to show that they will again not meet their objectives as the same process for their design and implementation as before is being followed. Many of the new projects are being floated on a BOT process. It is clear that the projects have replaced planning. This is especially true of transport related projects. Cities such as Bangkok, Manila, Cairo and earlier Calcutta have made major investments in light rail and metro systems. Other Asian cities are following their example. However, these systems are far too expensive to be developed on a large enough scale to make a difference.

Manila’s light rail caters to only 8 per cent of trips and Bangkok’s sky train and metro to only 3 per cent of trips and Calcutta’s metro to even less. The light rail and metro fares are 3 to 4 times higher than bus fares. As a result, the vast majority of commuters continue to travel by rundown bus systems. In addition, there has never been more liquidity in banks and leasing companies. However, due to the freedom that these loan giving institutions have today, this liquidity is used to provide short-term high interest loans which do not bring any benefit to the city or to the majority of its residents. For example, 502 vehicles have been added to Karachi per day during the last financial year, more than half of which are cars. It is estimated that about 50 percent of these have been financed through loans from banks and leasing companies. This means that loans worth $1.125 billion were issued for this investment which could easily have been utilised for improving the public transport system or for the badly needed social housing.

The nature of investments being made in many of the Asian cities and the mindset behind them, are increasing land hording; evictions of settlements, hawkers and informal businesses; informal settlements far away from the city and from social sector facilities; exclusion (due to gentrification) of poorer communities from public spaces of recreation and entertainment; and, the ad-hoc urbanization of ecologically sensitive and agriculturally productive land. Monitoring of evictions by the Asian Coalition for Housing Rights, a Bangkok base NGO, has shown that in seven Asian countries (Bangladesh, China, India, Indonesia, Japan, Malaysia, Philippines) evictions are increasing dramatically. Between January to June 2004, 334,593 people were evicted in the urban areas of these countries. In January to June 2005, 2,084,388 people were evicted. In Karachi as well evictions have quadripiled in the last four years and an increasing number of families are now sleeping and living on pavements in the absence of an alternative. The major reason for these evictions has been the “beautification” of the city, mega projects and the land hunger of the developers backed by politicians and bureaucrats. In the majority of cases, people did not receive any compensation for the losses they incurred and where resettlement did take place it was 25 to 60 kilometres from the city centre. The current master and/or strategic plans are not giving priority (unlike in the decade of the eighties) to the socio-economic issues arising out of these trends.

The rich-poor divide has increased as a result of these policies. Subsidies for the social sectors and increase in inflation and price of utilities, especially in countries which have undergone structural adjustment, has multiplied this divide. The economic survey of Pakistan 2006-07 concedes that the gap between the rich and the poor is widening. It says that the share of consumption of the richest 20 per cent stands at 39.4 while it is 9.5 for the bottom 20 per cent population.

The survey further states that the gap is growing in spite of a 7 per cent GDP growth. However, the most serious repercussion of this new development paradigm is that the overwhelming power of international capital and consultants and their local partners has weakened government institutions and the democratic political process.

Governments have become deaf to the concerns of the environmental and dissenting academic lobbies. And all this in an age where the media is freer than before and “consultations” are the order of the day. NGOs and community activists and academics in most Asian cities in which I have worked have the same complaint. They claim that consultations are an eyewash and environmental assessments are rubber stamps. Meanwhile, successful NGO projects, the result of the populism of the ‘80s, have now in most cases become “respectable” and are in partnership with governments. Also, the NGO movement has undergone a change. It is increasingly an industry manned by “development professionals” and no longer by populist altruism. Most of these “development professionals” have been trained at special courses in First World universities who have turned exploratory Third World practices into development theory!

If this Trend Continues

If the present trend continues then the rich-poor divide, evictions, informal settlements and exclusion will increase with not only the poor but also the rich living in ghettos surrounded by armed guards and security systems (this is already happening).

Governance issues will increasingly become law and order related and not justice and equity related. This will increase fragmentation for the only thing that will hold the city together will be an aggressively upwardly mobile middle class which by its very nature is not interested in issues of justice and equity. In addition, development will take place where the investor is happy and so the other regions will become the backwaters (again this is also happening). The continuation of the current process is a recipe for conflict.

How can this be changed?

Foreign capital (and local liquidity) has its benefits and must be encouraged. However, it has to fit into a larger development plan based on development principles so that an inclusive and an environmentally friendly urban environment can be created. These principles could be: one, planning should respect the ecology of the areas in which the urban centres are located; two, landuse should be determined on the basis of social and environmental considerations and not on the basis of land value or potential land value alone; three, planning should give priority to the needs of the majority of population which in the case of Asia are low- and lower-middle income communities, hawkers, informal businesses, pedestrians and commuters; and four, planning must respect and promote the tangible and intangible cultural heritage of the communities that live in the city. Zoning byelaws should be developed on the basis of these principles so that they are pedestrian friendly and street friendly, pro-dissolved space and pro-mixed landuse.

If South-Asian cities are to be taken as examples, then what is required is: one, a heavy non-utilisation fee on land so as to bring horded land into the market; two, a cut-off date for the regularisation of informal settlements and an end to evictions (where relocation is required, market rate compensation should be paid); three, planned squatting for five years during which programmes for closing the demand-supply gap for low income housing takes place; four, initiation of programmes for built units and plots which successfully solve the issues related to targeting and speculation (apart from the small scale of social housing, the failure to respond to these issues is the main reason for the failure of social housing attempts all over the Third World); five, development of rules, regulations and procedures to guarantee that the natural, entertainment and recreational assets of the city will not be in the exclusive use of the elite or the middle classes; six, a regime for privatisation backed by institutional arrangements that guarantees provision of sustainable employment and development; and seven, an understanding that all programmes and projects will be advertised at their conceptual stage, subject to public hearings before finalisation, supervised by a steering committee of interest groups, have their accounts published regularly, and overseen by one government official from the beginning to the end.

The major question is how can the above agenda be achieved in an age where social and political evolution is in a flux and the economy is controlled globally by undemocratic international organisations? For example, the UN is controlled by five members who won the Second World War; the IMF and the World Bank function on the principle of one dollar one vote; the WTO was created out of the green room negotiations that produced GATT. Not much democracy in global institutions in an age of globalisation! Civil society organisations in many countries have come together to challenge the new urban development paradigm. However, most of them are funded by bilateral agencies and international NGOs who, or the governments they represent, are the promoters of this paradigm. Maybe because of this their success has been limited. There are also international movements seeking to modify the inequities in global relations of trade and aid. Over the last few years they have become weaker. The only viable option seems to be to make this important issue a part of the larger political process within countries. How this can be done effectively is the big question.