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A report on urban infrastructure development in the APEC region: best practice policy framework and proposed action plans

18 Jul 2016

 As urbanisation continues at an unprecedented rate across APEC, effective and sustainable urban infrastructure policy, planning and implementation stand as a key priority and major development challenge for national and sub-national policy makers.

In its report to APEC Leaders in 2014, the APEC Business Advisory Council (ABAC) recommended the formation of the Asia Pacific Urban Infrastructure Network (UIN) and development of a Best Practice Policy Framework and Action Plans to help drive sustainable urban infrastructure development.

The purpose of this paper is to set out the elements of the Best Practice Policy Framework and associated Action Plans. They are offered as tools for APEC policymakers at national and sub-national levels of government responsible for infrastructure development.

In formulating these tools, the UIN consulted widely to ensure that practical experience of policy makers was combined with expertise in urban development, planning and financing from a wide range of participating institutions. The supporting analysis by key project consultants of the economic, political, social and environmental challenges related to urban development, and of the varying capacities of APEC economies to plan, develop and finance the infrastructure of liveable cities is attached to this report. The analysis highlighted the following considerations:

The requirement for essential and enabling infrastructure – both ‘hard’ and ‘soft’ – to stay up with needs across APEC has reached unprecedented levels. The scale of the challenge is huge. The McKinsey Global Institute (MGI) estimates $57 trillion in infrastructure investment will be needed between now and 2030 to keep up with projected global GDP growth. Of this, approximately $17 trillion will be needed for the Asia Pacific region. This figure includes the infrastructure investment needed for transport (road, rail, ports, and airports), power, water, housing, sanitation, education and telecommunications.

Within APEC there is a range of prospects and capacity to improve the condition of domestic infrastructure. Whilst some APEC economies have invested heavily in infrastructure, others are dealing with significant infrastructure deficits. The Asian Development Bank (ADB) estimates the urban infrastructure deficit in Asia to be at least $60 billion per year.

Many of these economies are grappling with rapid population growth and unregulated urbanisation, featuring megacities, growing second tier cities, sprawling peri-urban fringes, and urbanised clusters merging in corridors between cities. These trends demand significant investment in new infrastructure and types of infrastructure, but these new spatial patterns are overwhelming existing policy, planning and implementation systems as cities extend beyond historic jurisdictions, institutional arrangements, and planning mandates.

Urban infrastructure is key in underpinning local, regional and national economic growth. The IMF estimates 80 per cent of GDP is produced in urban areas. Urban infrastructure determines outcomes not just for city economies but for those of regions and nations. Inefficient and uncompetitive cities are a drag on economic growth at all levels, as well as an impediment to inclusive development. Unmanaged infrastructure gaps are sources of exclusion, limit access to opportunity, cause social displacement and environmental degradation.

At a local level, issues need to be managed in a responsive and inclusive fashion to maintain social conditions for growth. Well-designed, sustainable and resilient infrastructure enhances the liveability of urban dwellers and their social and cultural environment. It can enhance economic growth and increase productivity and provide significant positive flow-on effects including improved access to markets, job creation and manufacturing growth. It is critical for the resolution of the once-rural poverty that is now concentrating within city boundaries on marginal land. UN-HABITAT in its better option to squatting are not implemented, the number of people living in slums will grow to an estimated one billion by 2020.

Rapid unmanaged development in cities also comes at an environmental cost with a rise in environmental risks. Without coordinated policies of responsible industrial development and the development of environmental infrastructure, the natural environment is significantly impacted. Cities occupy only 2 per cent of the world’s land, but consume 75 per cent of its resources. They produce a similar percentage of the world’s waste with devastating results on the environment and the health of citizens. The ambient air concentration of particulate matter in most Asian cities now exceeds World Health Organisation (WHO) health and safety norms, often by dramatic margins. Many, perhaps most, of APEC’s cities do not have effective wastewater treatment systems. About 75 per cent of solid waste generated in urban areas in Asia is collected, according to estimates, and less than 60 per cent finds its way to a disposal site. For most cities, disposal remains a serious problem, since finding suitable sites, appropriate technology, and finance for a citywide facility is difficult. Such cities are increasingly vulnerable to natural disasters.

Contemporary cities require the capacity to respond to global issues such as climate change. Asian cities are likely to contribute more than half the rise in Green House Gases (GHGs) over the next 20 years. They are highly vulnerable to the consequences of climate change, including flooding, landslides, heat waves, and shortages of water. Design approaches need to enhance resilience to withstand natural disasters and deal effectively with carbon emissions. Investing in infrastructure which builds resilience, or at the very least does not create additional vulnerability, should be a critical decision making factor in any investment evaluation.

At a regional level, well managed cities can be the locus of regional development, fostering rural-urban linkages. Almost all economic activity relies on inputs or outputs that travel through a city at some point and as economies are increasingly interconnected by trade and technology, infrastructure projects become integral nodes in much larger networks.

National economic development is heavily reliant on a competition system of cities that are balanced, well connected managed and have efficient urban systems. Infrastructure investment is likely to have a significant impact on gross domestic product (GDP). The World Bank estimates that a 10 per cent increase in infrastructure provision raises growth by 1 per cent in the long-term.

Meeting the above issues and challenges requires action across three fronts: planning, project implementation and financing, with rigorous governance across all three. Identifying Best Practice Policy in these areas, alongside an analysis of current practice within APEC can assist in identifying the way forward.

The Best Practice Policy Framework presented in Chapter 1 of this report collates principles categorised around the themes of:

• policy development and planning processes;

• project development, management and implementation systems

• financing; and overall governance of all these categories of activity.

These principles are offered as a reference, rather than prescription, for stakeholders in the field of urban development, with potential application to promote the development of effective and strategic urban plans, more capable local institutions, improved financing and better oversight arrangements. They offer a guide for APEC and regional policymakers as they devise new approaches to meet the mounting challenges of urban infrastructure development and investment.

In the development of the proposed Action Plans in Chapter 2, APEC economies were assessed to identify a number of actions that could potentially enhance the quality and delivery of infrastructure. The assessment criteria and results are presented in Appendix 2. Like all work of this nature, and while the criteria and assessments have been carried out in an objective and rigorous analytical manner, there is a degree of subjectivity in interpreting the data which was derived from public sources and UIN experts. UIN welcomes any clarifications regarding practice in any economy.

Where relevant, support from international agencies and specialist organisations that would be beneficial have been indicated in the Action Plans. In this way the Action Plans seek to complement existing urban and infrastructure activities underway in international organisations such as the Multilateral Development Banks (MDBs) and United Nations urban programs.

In June 2016 APEC member economies announced the adoption of the Ningbo Initiative at the APEC High-Level Urbanization Forum, seeking region-wide partnerships to promote inclusive and sustainable urbanization policies. Delivering concrete outcomes of practical value for cities to meet the most important needs of our region will require action by policy makers in APEC economies on many fronts in coming years. The Ningbo Initiative calls for sharing experiences and best practices to address challenges by urbanization. In the development of the Best Practice Policy Framework and Action Plans presented in this report the UIN will contribute to realising the goals of Ningbo Initiative and continue to be a forum for APEC economies to collectively, frankly, and objectively address contemporary issues related to urban infrastructure.

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