77461 Global Monitoring Report 2013 Rural-Urban Dynamics and the Millennium Development Goals Global Monitoring Report 2013 Rural-Urban Dynamics and the Millennium Development Goals A joint publication of the World Bank and the International Monetary Fund © 2013 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 16 15 14 13 This work is a product of the staffs of The World Bank and The International Monetary Fund with exter- nal contributions. Note that The World Bank and The International Monetary Fund do not necessarily own each component of the content included in the work. The World Bank and The International Mon- etary Fund therefore do not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. 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All queries on rights and licenses should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. ISBN: 978-0-8213-9806-7 eISBN: 978-0-8213-9808-1 DOI: 10.1596/978-0-8213-9806-7 The image on the cover is a segment of a painting by Sue Hoppe, an artist based in South Africa. Titled “Conflict Resolution,” the painting explores the idea that people who seem irreversibly divided and with little in common can unite if they focus on what they have in common instead of what divides them. Hoppe’s work examines war, conflict, and the plight of children and women in Africa, but is also inspired by nature and architecture. To learn more about Sue Hoppe and her work, visit www.southafricanartists .com/home/SueHoppe. Cover design by Debra Naylor of Naylor Design Photo credits: page xvi: Caroline Suzman; clockwise for pages 20–21, beginning at top: Tran Thi Hoa / World Bank, Julio Pantoja / World Bank, Arne Hoel / World Bank and Curt Carnemark / World Bank; page 25: Jonathan Ernst / World Bank; page 31: Simone D. McCourtie / World Bank; page 33: Dana Smillie / World Bank; page 34: Arne Hoel / World Bank; page 36: Arne Hoel / World Bank; page 40: Arne ­ Hoel / World Bank; page 44: Curt Carnemark; page 84: Scott Wallace; and page 129: Gayatri Singh. Contents Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Abbreviations and Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Summary Infographic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Report Card: The Millennium Development Goals, 2013. . . . . . . . . . . . . . . . . . . . . . 19 1 Macroeconomic, Trade, and Aid Developments in Developing Countries . . . . . . . . . . . 45 2 Rural-Urban Disparities and Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 3 How Can Urbanization Accelerate Progress toward the MDGs? . . . . . . . . . . . . . . . . . 129 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 G L O B A L M O N I T O R I N G R E P O R T 2 0 1 3 v vi  CONTENTS GLOBAL MONITORING REPORT 2013 BOXES O.1 MDG 1 for extreme poverty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.1  Putting the Busan Partnership for Effective Development Cooperation into operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 1.2 World Bank performance on development cooperation . . . . . . . . . . . . . . . . . . . . . . 76 1.3 Potential uses of mobile phone surveys. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 2.1 The link between primary enrollment and completion. . . . . . . . . . . . . . . . . . . . . . . 93 2.2 Leveraging the private sector to reach the health-related MDGs. . . . . . . . . . . . . . . . 96 2.3  Water in Africa: Strong public sector leadership is key to sustainable PPPs in rural and small towns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 2.4 Is the policy agenda different for leading-lagging regions? The case of Uganda. . . . 107 2.5 Costs of coping with lack of water service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 2.6  Catalyzing citywide development though toilet design in the slums of Agra, India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 2.7  Agglomeration of collective capacity among Uganda’s slum dweller communities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 3.1 Bangalore has nurtured skills but must now tackle infrastructure. . . . . . . . . . . . . . 132 3.2 Urbanization, gender, jobs, and urban poverty. . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 3.3 Do cities need master plans?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 3.4  Publicly accessible information on urban hazard risk can improve household decision making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 3.5 Expanding access to services: A tale of two sectors . . . . . . . . . . . . . . . . . . . . . . . . 145 3.6 Using output-based aid in urban projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 3.7 Pricing and funding through ancillary services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 3.8 Key design issues of decentralization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 3.9 The complex structure of metropolitan governments. . . . . . . . . . . . . . . . . . . . . . . 157 3.10 Learning from urbanization in the BRICS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 3A.1 Tackling urban poverty in Ghana. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 3A.2  The EBRD’s integrated approach to transition challenges in Almaty’s urban transport sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 3A.3 UNFPA’s work on urbanization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 3A.4 Cities Alliance: A new business model to promote systemic change and scale. . . . . 173 FIGURES O.1 Global progress toward achieving the MDGs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 O.2 Extent of progress toward MDGs, by number of countries. . . . . . . . . . . . . . . . . . . . . 7 1.1 GDP per capita growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 1.2 Global current account imbalances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 1.3 Low-income countries: Imports, exports, and current account balance including FDI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 GLOBAL MONITORING REPORT 2013 C O N T E N T S   vii 1.4 Official reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 1.5 Commodity price indexes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 1.6  Changes in commodity prices and changes in GDP per capita, terms of trade, and inflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 1.7 Fiscal deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 1.8 Monetary policy loosening. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 1.9  Average year-on-year growth in money and the money gap in emerging market countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 1.10 Macroeconomic policy mix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 1.11 Quality of macroeconomic policies in low-income countries . . . . . . . . . . . . . . . . . . 54 1.12 Selected macroeconomic indicators for low-income countries, 2007–13. . . . . . . . . . 56 1.13 Low-income countries: Impact of a protracted slowdown in global growth. . . . . . . 57 1.14 Agglomeration and income distribution, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 1.15 Diversification spurts and growth accelerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 1.16 Sub-Saharan Africa: Sectoral output and employment, 1995–2010 . . . . . . . . . . . . . 64 1.17  Sub-Saharan Africa: Labor productivity and change in employment shares, 1995–2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 1.18  South East Asia: Labor productivity and change in employment shares, 1995–2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 1.19 Trade developments since 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 1.20 G-20’s new trade-restrictive measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 1.21  Total number of measures implemented and still in force by each G-20 country, November 2008–December 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 1.22 DAC members’ net ODA disbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 1.23 Net ODA disbursements to developing regions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 1.24 Net ODA disbursements to low- and middle-income countries. . . . . . . . . . . . . . . . . 70 1.25  Net ODA received per capita by groups of countries ranked by MDG targets met or on track to be met by 2015 (2009–11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 1.26  Net ODA received per capita by groups of countries ranked by MDG targets met or on track to be met by 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 1.27 Net ODA disbursements to fragile, small, and HIPC states. . . . . . . . . . . . . . . . . . . . 71 2.1 The world is becoming more urban . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 2.2 Overall poverty has declined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 2.3 Poverty is located along a rural-urban spectrum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 2.4 In India and Vietnam, poverty in small towns is worse than in large cities. . . . . . . . 91 2.5 Literacy rates in rural areas and smaller towns are worse than in large cities . . . . . . 94 2.6 Rural-urban differentials in infant mortality rates remain substantial. . . . . . . . . . . . 95 B2.2.1 Percent seeking care in private versus public facilities by region. . . . . . . . . . . . . . . . 96 2.7 Small towns have generally poorer service delivery than large cities . . . . . . . . . . . . . 98 2.8 Nexus between urbanization, poverty, and prosperity . . . . . . . . . . . . . . . . . . . . . . 100 2.9 Population in rural areas and employment in agriculture. . . . . . . . . . . . . . . . . . . . 104 viii  CONTENTS GLOBAL MONITORING REPORT 2013 2.10 Proportion of urban population living in slums, 1990–2010 . . . . . . . . . . . . . . . . . 110 2A.1 Poverty and under-5 mortality for base simulation. . . . . . . . . . . . . . . . . . . . . . . . . 119 2A.2 Poverty and under-5 mortality—deviations from base in 2030. . . . . . . . . . . . . . . . 120 2A.3 Macro indicators—deviations from base annual growth. . . . . . . . . . . . . . . . . . . . . 120 2A.4 Additional foreign grants to finance health spending . . . . . . . . . . . . . . . . . . . . . . . 121 2A.5 Trade-offs between more grant aid and domestic efficiency gains. . . . . . . . . . . . . . 121 3.1 A framework for urbanization policy: planning, connecting, and financing . . . . . . 133 3.2  Vietnam’s dual land price system creates problems for the assembly of large plots of land needed for industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .136 3.3 Share of population with access to piped water by country and across city size . . . 144 B3.4.1 Water services versus mobile phones in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 3.4 Ratio of public transit fares to operating costs in a sample of large cities. . . . . . . . 149 3.5 Costs of moving freight in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 3.6 Modes for commuting to work in Uganda’s urban areas . . . . . . . . . . . . . . . . . . . . 151 MAPS O.1 Shanghai’s spatial expansion as shown by average nighttime light intensity. . . . . . . 14 1.1 Do agglomeration and income differences across countries align? . . . . . . . . . . . . . . 60 2.1 Povery is becoming more urban in more urbanized regions . . . . . . . . . . . . . . . . . . . 87 2.2 Access to sanitation across regions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 2.3 The poor are mostly concentrated in less urbanized countries. . . . . . . . . . . . . . . . . 101 2.4 Level of urbanization in 1990. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 2.5 Level of urbanization in 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 2.6 Travel time to the nearest city in Nepal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 3.1 Shanghai’s spatial expansion as shown by average nighttime light intensity. . . . . . 130 3.2 New York’s density management is granular and integrated with infrastructure while Mumbai’s is coarse and uncoordinated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 TABLES BO.1.1 Poverty by region. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 O.1 Poverty rates are falling in both urban and rural areas but are lower in urban areas. . 9 1.1 Global output. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 1.2 Government revenue excluding grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 1.3 Net financial flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 1.4 IMF and World Bank member countries: Selected indicators, 2010 . . . . . . . . . . . . . 59 1.5 Average real GDP per capita growth, 2003–12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 1.6 Statistical tests for mean differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 1.7  Progress on Paris Declaration survey indicators by multilateral development banks, UN, and EU institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 GLOBAL MONITORING REPORT 2013 C O N T E N T S   ix 1.8 Mobile technology and the Millennium Development Goals . . . . . . . . . . . . . . . . . . 79 2.1  Poverty rates are falling in both urban and rural areas but are lower in urban areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 2.2 Distribution of urban population by size of urban area . . . . . . . . . . . . . . . . . . . . . . 88 2.3 The poor are disproportionately concentrated in smaller cities and towns . . . . . . . . 89 B2.1.1 Measuring primary education, selected countries. . . . . . . . . . . . . . . . . . . . . . . . . . . 93 A3.1 AfDB’s deliverables in energy, transport, and regional integration, 2010–12 . . . . . 164 A1.1 Classification of Economies by Region and Income, Fiscal 2012. . . . . . . . . . . . . . .177 A1.2 Country Classification in IMF’s World Economic Outlook, 2013. . . . . . . . . . . . . . 178 Foreword Global Monitoring Report (GMR) 2013 since the seven other goals are equally vital to gauges progress toward the Millennium improving the human condition. Development Goals (MDGs) through the lens The other targets and goals are crucial of the changing urban-rural landscape. The to human well-being, and they reinforce goals encompass and promote a universal improvements in other areas. For example, standard of being free from grinding poverty, providing access to safe drinking water and being educated and healthy, and having ready basic sanitation, part of MDG 7, is essential access to clean water and sanitation. Urban- if people are to be healthy enough to complete ization has helped reduce poverty through the school and join the job market. Improved creation of new income opportunities, and has sanitary conditions and better education help increased both access to and quality of ser- reduce infant and maternal mortality. In all vices. However, the number of people living in of these areas, women play a key role, and urban slums is also rising, and cities often con- ensuring equal opportunities for women is tribute to environmental degradation. At the absolutely essential. same time, three quarters of the poor still live Yet, continued progress toward the MDGs in rural areas, and better provision of basic will be increasingly difficult to achieve with- services in those areas is essential to open up out far better stewardship of the environ- opportunities for the rural population. With ment. Pollution can get in the way of people’s this in mind, GMR 2013 calls for complemen- health and thus their productivity, whether tary rural-urban development policies and an on the farm or in cities. Poor people are the integrated strategy of planning, connecting, least able to protect their children from the and financing. effects of pollution on health and educational Against the backdrop of this changing outcomes, which can in turn mean setbacks urban-rural landscape and the macroeconomic once they reach adulthood. Climate change is growth that it has generated, success in reduc- intensifying, putting the prosperity of future ing the proportion of people whose income generations at risk and imperiling hard-won is under $1.25 a day is a signal achievement. development achievements. This proportion fell from 43.1 percent in 1990 Global partnerships for development, to 20.6 percent in 2010. However, that still which are enshrined in MDG 8, are necessary leaves 1.2 billion people in extreme poverty. to tackle everything from supplying afford- This stark reality is only part of the story, able essential drugs in poor countries to help- G L O B A L M O N I T O R I N G R E P O R T 2 0 1 3 xi xii  FOREWORD GLOBAL MONITORING REPORT 2013 ing landlocked and small island developing through improved effectiveness, help coun- states. To ensure that such partnerships can be tries absorb aid more productively. deployed effectively, the international commu- With fewer than 1,000 days remaining until nity needs to do a better job of facilitating joint the current set of MDGs expire, it is imperative public-private partnerships and harnessing that all of us, wherever we are, make a greater technology to solve today’s development chal- effort to help more people escape poverty and lenges. For example, we need more dynamic improve their overall well-being. Accelerating innovation and more systematic sharing of progress toward the MDGs and maintaining lessons of experience. Also, resources matter. that momentum beyond 2015 is not only the Enduring development solutions can only be right thing to do, it is also in the best economic realized if donors deliver on their pledges and, interests of nations. Jim Yong Kim Christine Lagarde President Managing Director The World Bank Group International Monetary Fund Acknowledgments This report has been prepared jointly by the cado and Hazel Macadangdang assisted with staffs of the World Bank and the International the overall preparation of the report. The work Monetary Fund (IMF). In preparing the report, was carried out under the general guidance of staffs have collaborated closely with partner Kaushik Basu and Hans Timmer at the World institutions—the African Development Bank Bank. Supervision at the IMF was provided by (AfDB), the Asian Development Bank (ADB), Hugh Bredenkamp and Brad McDonald. the European Bank for Reconstruction and A number of other staff and consultants Development (EBRD), the Inter-American made valuable contributions, including the fol- Development Bank (IADB), the Organisation lowing from the World Bank: Shaida Badiee, for Economic Co-operation and Development Judy L. Baker, Grant Cameron, Asli Demirgüç- (OECD), Cities Alliance, and various nongov- Kunt, Neil Fantom, Juan Feng, Deon Filmer, ernmental institutions, such as SlumDwellers Cecile Fruman, Ejaz Ghani, Delfin Sia Go, International (SDI) and Centre for Urban and Masako Hiraga, Vivian Hon, Sergio Kurlat, Regional Excellence (CURE), India. The coop- Jeffrey Lecksell, Xiao Li, Dennis Linders, eration and support of these institutions are Johan Mistiaen, Zia Qureshi, Israel Osorio- gratefully acknowledged. Rodarte, Martin Ravallion, and Saurabh Jos Verbeek was the lead author and man- Shome. ager of the report. Lynge Nielsen led the team Contributors from other institutions include from the IMF. The principal authors and con- Suzanne Steensen and Andrzej Suchodloski tributors to the various parts of the report (OECD), Josefina J. Balane, Debra Kertzman, include Vandana Chandra, Shaohua Chen, Noriko Ogawa, Hong Wei (ADB), Amy M. Jorge Coarasa, William Cobbett, Uwe Deich- Lewis, Luis Diaz, Marcos Robles, Federico mann, Amir Fouad, Jonas Frank, Yoichiro Scodelaro Bilbao, Caroline Sipp, and Horacio Ishihara, Somik Lall, Peter Lanjouw, Hans Cristian Terraza (IADB), Murat Jadraliyev Lofgren, Mariem Malouche, Eugenia Suarez and Anita Taci (EBRD), Patricia N. Laverley, Moran, Siobhan Murray, Prem Sangraula, Nejmudin Bilal, and Lydiah Munyi (AfDB), Rachel K. Sebudde, Forhad Shilpi, Gayatri Daniel Schensul and Jose Miguel Guzman Singh, Eric V. Swanson, and Quentin Wodon (United Nations Population Fund). (World Bank) and Sibrabrata Das, Nisreen Guidance received from the Executive Farhan, Rodrigo Garcia-Verdu, Svitlana Directors of the World Bank and the IMF and Maslova, Chris Papageorgiou, and Nicolo their staffs during discussions of the draft Spatafora (IMF). Amy Guatam was the prin- report is gratefully acknowledged. The report ciple editor of the text, and Kristina Tan Mer- also benefited from many useful comments G L O B A L M O N I T O R I N G R E P O R T 2 0 1 3 xiii xiv  ACKNOWLEDGMENTS GLOBAL MONITORING REPORT 2013 and suggestions received from the Bank and S ­tephen McGroarty and Denise Bergeron. Fund management and staff in the course of its Special thanks to Marty Gottron who edited ­ preparation and review. the final draft. The World Bank’s Office of the Publisher The report’s dissemination and outreach managed the editorial services, design, produc- was coordinated by Indira Chand and Merrell tion, and printing of the report, with Susan Tuck-Primdahl, working with Vamsee Kanchi Graham anchoring the process. Others assist- and Roula Yazigi. ing with the report’s publication included Abbreviations and Acronyms ADB Asian Development Bank IMF International Monetary Fund ADF African Development Fund MAF MDG acceleration framework AfDB African Development Bank MCI Monetary Conditions Index BRICS Brazil, the Russian Federation, India, MDG Millennium Development Goals China, and South Africa NGO Nongovernmental organization CDIA Cities Development Initiative for Asia NSDFU National Slum Dwellers Federation CPA Country programmable aid of Uganda CURE Centre for Urban and Regional NWSC National Water and Sewerage Excellence (India) Corporation (Uganda) DAC Development Assistance Committee OBA Output-based aid DDA Doha Development Agenda ODA Official development assistance DEWAT Decentralized Waste Water Treatment OECD Organisation for Economic System (India) Co-operation and Development DHS Demographic and Household Surveys PARIS21 Partnership in Statistics for FDI Foreign direct investment Development in the 21st Century GDP Gross domestic product PISA Program for International Student GMR Global Monitoring Report Assessment EBRD European Bank for Reconstruction and PPP Public-private partnership Development SDI Slum/Shack Dwellers International ESCI Emerging and Sustainable Cities SNG Subnational government Initiative SUN Scaling Up Nutrition EU European Union TIMSS Trends in International Mathematics FINDETER Financiadora de Desarrollo Territorial and Science Study S.A. (Colombia) U5MR Under-five mortality rate FSI Floor space index UKP Urbanization Knowledge Platform G-8 Group of 8 UN United Nations G-20 Group of 20 UNFPA United Nations Population Fund GNI Gross national income VT Vale transporte HIPC Heavily indebted poor countries WDR 2009 World Development Report 2009: ICT Information and communication Reshaping Economic Geography technology WDR 2012 World Development Report 2012: IDB Inter-American Development Bank Gender Equality and Development IFC International Finance Corporation WDR 2013 World Development Report 2013: Jobs IFI International financial institution WTO World Trade Organization IIED International Institute for Environment and Development G L O B A L M O N I T O R I N G R E P O R T 2 0 1 3 xv Overview The Global Monitoring Report (GMR), potential to inform discussions about the jointly produced by the World Bank and post-2015 development framework in which International Monetary Fund (IMF), is an urbanization will be a major factor—96 per- annual report card on the world’s progress cent of the additional 1.4 billion people in the toward the Millennium Development Goals developing world in 2030 will live in urban (MDGs). Now in its 10th edition, the GMR areas. also outlines prospects for the attainment of Urbanization matters. In the past two the MDGs and assesses the support of the decades, developing countries have urbanized international community. Achieving as many rapidly, with the number of people living in MDGs as possible before 2015 remains an urban settlements rising from about 1.5 bil- urgent endeavor for the development com- lion in 1990 to 3.6 billion (more than half of munity. This GMR highlights those MDGs the world’s population) in 2011. The report that are lagging in progress and consequently finds that urban poverty rates are significantly need additional attention, while pointing out lower than rural poverty rates and that urban that accelerating toward attainment of one populations have far better access to the basic MDG will likely provide positive spillovers to public services defined by the MDGs, such the attainment of others. The Report shows as access to safe water and sanitation facili- that official development assistance (ODA) ties, even though within urban areas asym- and progress with aid effectiveness have been metries in access are large. If the forces of less than stellar. urbanization are not managed speedily and Each annual report has a thematic focus, efficiently, slum growth can overwhelm city an aspect of the development agenda on growth, exacerbate urban poverty, and derail which the GMR provides a more in-depth MDG achievements. As the GMR points out, assessment. The theme of GMR 2013 is however, people are located along a continu- rural-urban disparities in development and ous rural-urban spectrum, and large cities ways urbanization can better help achieve are not necessarily places where the urban the MDGs. Not only is the theme highly rel- poor are concentrated. Smaller towns matter evant for assessing progress within the cur- greatly for urban poverty reduction and ser- rent MDG framework, but it also has the vice delivery. As urban centers continue their 1 GMR 2013 Rural-Urban Dynamics and the Millennium Development Goals 50% of the increase in 96% population in developing 50% Urban countries between now and Rural 11.6% Urban population that is poor 2030 will be in urban areas of urban population 22.7% Global population that is poor 40% growth can be expected to come from migration Urban/Rural and reclassification Population Share 29.4% Rural population that is poor 2008 76% of the extreme poor live in rural areas Rural Four MDG targets have been met: MDG 1.a (halving extreme poverty), two parts of MDG 7 (access to safe water and improved lives of slum dwellers, and part of MDG 3.a (gender parity in primary education). Progress on the remaining MDGs is limited, except for MDG 3.a (gender parity in primary and secondary education), which is close to being on target. Populations are typically seen as being spatially bipolar. In reality, people and poverty are located along a spectrum from rural to urban, with many types of settlements from small to large towns. The experience is that the smaller the town, the higher the poverty rate, with less access to MDG-related services. Ma ll na we ge ed dp ag oor Man Planning ly Slums emerge; currently Better MDG there are 0.8 billion outcomes Conne people in slums 49 ing Urbanization needs c c to be managed an t 33 in 32 g Fin 15 The urbanization process matters 2010 2010 1990 1990 Urban-rural Urban-rural gaps in access gaps in access to safe water to improved sanitation Service delivery is better in urban areas, but the gaps are closing The MDGs reflect the basic needs of all citizens, and governments Urbanization by itself is no guarantee for success. If unregulated should aim to meet them fully in both urban and rural areas. and poorly planned, urbanization can lead to disproportionate But resources are scarce, and priorities must be set. Much of the increases in slums. GMR 2013 calls for an integrated strategy to sequencing will depend on local conditions regarding degree of better manage the planning-connecting-financing formula of urbanization and rural-urban differences in MDG outcomes. urbanization. 4  O V E R V I E W GLOBAL MONITORING REPORT 2013 inexorable growth over the next decades, relative to male farmers, female farmers have GMR 2013 calls for an integrated strategy lower productivity, which is directly related to to better manage the planning-connecting- their educational attainment. With 75 percent financing formula of urbanization. of the world’s poor residing in rural areas, Notwithstanding the importance of the challenge of effective rural development urbanization in poverty reduction and MDG remains daunting but achievable with com- attainment, rural areas remain a huge chal- plementary rural-urban development policies lenge—one that underscores the importance and actions. of being vigilant regarding policies that aim to improve agricultural productivity; if suc- cessful, these policies can provide positive Progress toward achieving the synergies for farm incomes and nonfarm MDGs: The report card employment. GMR 2012 highlighted the pro- With the 2015 deadline set by the interna- motion of increased yields through research, tional development community to attain the extension, and improved water management, MDGs just over two years away, only 4 of improvements in the functioning of land mar- the 21 MDG targets or subtargets have been kets, and increased integration of domestic met worldwide (figure O.1). New estimates markets with world markets as a possible set confirm the 2012 reports that MDG 1.a — of policies that would positively contribute reducing the $1.25-a-day poverty rate (2005 to increased productivity in the agricultural purchasing power parity)—was reached in sector. In addition, closing the gender gap in 2010, ­falling below half of its 1990 value education can boost rural women’s empow- (box O.1). As reported in GMR 2012, the erment by increasing agricultural incomes; world also met part of MDG 7.c to halve the FIGURE O.1  Global progress toward achieving the MDGs Developing countries, percent of total required progress between 1990 and 2015, as achieved in 2010 or 2011 100 100 100 100 100 100 90 84 84 84 84 80 80 80 80 80 Distance to 2015 goal, % 80 70 67 62 63 59 57 60 50 50 40 30 20 10 0 MDG 1.a MDG 2.a MDG 3.a MDG 3.a MDG 4.a MDG 4.a MDG 5.a MDG 7.c MDG 7.c MDG 7.d Extreme Primary Ratio of girls Ratio of girls Infant Under-5 Maternal Access to Access to basic Improve the poverty completion rate to boys in to boys in mortality mortality mortality ratio safe drinking sanitation lives of at least (population (% of relevant primary primary and rate (per 1,000 rate (modeled water (% of facilities (% of 100 million below 1.25 day, age group) education (%) secondary live births) (per 1,000) estimate, population population slum dwellers 2005 PPP) education (%) per 100,000 with access) with access) (by 2020) live births) Corresponding target Distance to the goal achieved Source:  World Bank staff estimates. Note:  Intermediate targets were calculated using a linear progression over 25 years, resulting in a needed progress of 4 percent a year. Note that the corresponding target for 2010 would equal 80 percent, and for 2011, 84 percent, to be on track to attain the MDG by 2015. Any value above those intermediate targets indicates that the world is ahead of the required pace to meet the MDG. A value of 100 percent means that the MDG has been met. PPP = purchasing power parity. GLOBAL MONITORING REPORT 2013 O V E R V I E W   5 BOX O.1  MDG 1 for extreme poverty New poverty projections for 2015 are the result of because new and more complete surveys for Sub- various updates of new and more recent household Saharan Africa have become available this year, even surveys and a new forecast of per capita consump- the 2008 poverty number had to be revised upward tion growth. Sufficient data do not exist to estimate from the 47.5 percent estimate last year to 49.2 per- progress on reducing extreme poverty in 36 develop- cent this year. This new estimate adversely affected ing countries. Consequently, the forecasts for these the projection of extreme poverty by 2015 for the countries are based on changes in income poverty in region, which is now estimated at 42.3 percent, com- the surveys of similar countries. pared to 41.2 percent at the time of last year’s GMR. Updated economic projections for developing The total projection of 970 million extremely poor countries by the World Bank indicate that an esti- people in 2015 is significantly lower than the 1.9 bil- mated 970 million people will continue in 2015 to lion people living in extreme poverty in 1990 (43.1 live below $1.25 a day, equivalent to 15.5 percent percent). of the population in the developing world. That is Except for Sub-Saharan Africa, which had the lower than the previous estimate of 1 billion people worst starting position, all regions are expected to (16.3 percent) done in 2012. New survey informa- achieve the MDG 1.a target of halving extreme pov- tion on household budgets, used to estimate the erty by 2015. The poverty reduction in the East Asia 2010 figures, shows additional improvements in all and Pacific region has been spectacular as the rate of regions except Sub-Saharan Africa compared with extreme poverty was reduced from 56.2 in 1990 to the 2012 extreme poverty estimates. Note that 12.5 in 2010. TABLE BO.1.1  Poverty by region Share of population below $1.25 a day (2005 PPP) Region 1990 2005 2008 2010 2015 (forecast) East Asia and Pacific 56.2 16.8 14.3 12.5 5.5 Europe and Central Asia 1.9 1.3 0.5 .07 0.4 Latin America and the Caribbean 12.2 8.7 6.5 5.5 4.9 Middle East and North Africa 5.8 3.5 2.7 2.4 2.6 South Asia 53.8 39.4 36.0 31.0 23.2 Sub-Saharan Africa 56.5 52.3 49.2 48.5 42.3 Total 43.1 25.0 22.7 20.6 15.5 Millions of people below $1.25 a day (2005 PPP) Region 1990 2005 2008 2010 2015 East Asia and Pacific 926.4 332.1 284.4 250.9 114.5 Europe and Central Asia 8.9 6.3 2.2 3.1 1.9 Latin America and the Caribbean 53.4 47.6 36.9 32.3 30.0 Middle East and North Africa 13.0 10.5 8.6 8.0 9.3 South Asia 617.3 598.3 570.7 506.8 406.5 Sub-Saharan Africa 289.7 394.9 399.3 413.8 408.0 Total 1,908.6 1,389.6 1,302.8 1,214.9 970.2 Source: World Bank staff calculations from PovcalNet database. See http://iresearch.worldbank.org/PovcalNet/index.htm for additional information and data. Note: PPP = purchasing power parity. proportion of people without safe access to primary education—was accomplished in drinking water. MDG 7.d—to have achieved 2010. Global progress on the full MDG 3.a (to a significant improvement in the lives of at eliminate gender disparity in primary and sec- least 100 million slum dwellers by 2020— ondary education) is close to being on track. was also achieved.1 Finally, the first part of Overall, global progress on the remaining MDG 3.a—to eliminate gender disparity in MDGs has been less than stellar, however, 6  O V E R V I E W GLOBAL MONITORING REPORT 2013 particularly on those related to education 20 countries are projected to meet this MDG (MDG 2.a) and health (MDG 4.a and 5.a), between 2015 and 2020. With a significant and a vast acceleration of progress is needed acceleration of effort, these countries could to achieve all of the goals by 2015. Acceler- achieve MDG 4.a by 2015 or shortly there- ating progress toward attainment of these after. The same holds for the reduction in MDGs is not only intrinsically desirable under-five mortality: 22 countries have made but can produce positive spillovers between progress but require an additional push to different development objectives. Reduc- achieve the target by or close to 2015. ing infant mortality and improving mater- nal health can pay additional dividends by increasing the returns to subsequent invest- Global growth and its ments in human capital. A vast literature implications for the MDGs demonstrates that human capital formation The global economy is expected to recover, is a cumulative process and that the first few but only very gradually. While the road to years in a child’s development are critical, as recovery in advanced economies will remain noted in GMR 2012. In addition, the accom- bumpy, downside risks to the global outlook plishment of the extreme poverty MDG have eased as policy intentions in developed bodes well for achievement of other MDGs, economies have become clearer and com- given the interrelationship between reduction modity price volatility has abated. Although, of extreme (income) poverty and progress important short- and medium-term down- toward the various nonpoverty MDGs. For side risks remain—including adjustment MDG 2.a (ensuring that, by 2015, children fatigue in advanced economies and over- everywhere will be able to complete a full investment and high asset prices in emerg- course of primary schooling), it is probably ing market and developing countries—such already too late, because completion rates risks are now more symmetric. A broadly depend on net enrollment rates, which have appropriate current policy stance in emerg- not reached 100 percent: in 2011, the net ing market and developing countries is sup- enrollment rate in primary education stood porting continued strong growth in these at only 88.8 percent globally. countries. Commodity prices trended down Regional progress toward achieving the through most of 2012 and are expected to MDGs is more diverse. At one end of the remain stable in 2013, providing room for a spectrum, the East Asia and Pacific region is flexible implementation of monetary policy, on target to meet most if not all of the MDGs, particularly in emerging market and devel- while at the other end, Sub-Saharan Africa is oping countries. off target on most MDGs. Those regions still Were the downside risk of a protracted lagging started from positions that required global slowdown extending through 2015 to the most absolute progress, however, and materialize, it would have a significantly neg- they have made significant progress in abso- ative impact on growth in low-income coun- lute terms, particularly on those MDGs that tries and their ability to attain the MDGs. the world as a whole is struggling to meet. Despite sustained economic growth, progress The relative nature by which many of the in rebuilding policy buffers in low-income MDGs are defined masks to a large extent countries has been modest. Indeed, with pol- these accomplishments. icy buffers not yet restored to levels preced- Evaluating progress toward attainment of ing the 2009 crisis and against the backdrop the MDGs at the country level shows even of reduced traditional sources of financing, further diversity (figure O.2). Sufficient prog- most low-income countries would likely need ress toward MDG 3.a is most prevalent, with to undertake adjustments in the face of such a 72 countries on track, while only 18 coun- shock. Differences across countries are large, tries are on track to meet MDG 4.a (reduc- however. Still-high international commodity ing infant mortality). However, an additional prices are providing commodity exporters GLOBAL MONITORING REPORT 2013 O V E R V I E W   7 FIGURE O.2  Extent of progress toward MDGs, by number of countries 2 2 17 10 19 20 25 29 30 42 30 70 24 44 43 74 71 10 4 27 7 63 11 5 12 6 8 11 22 13 14 34 9 12 26 9 9 66* 3 26 10 61 20 7 55 5 34 41 18 12 24 27 5 8 MDG 1.a MDG 1.c MDG 2.a MDG 3.a MDG 4.a MDG 4.a MDG 5.a MDG 7.c MDG 7.c Extreme poverty Prevalence Primary Ratio of Infant Under-5 Maternal Access to an Access to (% of population of under- completion rate girls to boys in mortality rate mortality rate mortality ratio, improved improved living below nourishment (% of relevant primary and (per 1,000 (per 1,000 modeled estimate water sanitation $1.25 a day) (% of population) age group) secondary live births) live births) (per 100,000 source (% of facilities (% of education (%) live births) population) population) Target met Su cient progress Insu cient progress Moderately o target Seriously o target Insu cient data Source: Estimates based on World Development Indicators database. Note: Progress is based on extrapolation of the latest five-year annual growth rates for each country, except for MDG 5, which uses the last seven years. Sufficient progress indicates that an extrapolation of the last observed data point with the growth rate over the last observable five-year period shows that the MDG can be attained. Insufficient progress is defined as being able to meet the MDG between 2016 and 2020. Moderately off target indicates that the MDG can be met between 2020 and 2030. Seriously off target indicates that the MDG will not even be met by 2030. Insufficient data points to a lack of enough data points to estimate progress or that the MDG’s starting value is missing (except for MDG 2 and MDG 3). *  Includes 11 countries for which the extreme poverty rate is below 2 percent. Measuring changes in poverty rates at such low levels (< 2 percent) cannot be disentangled from mea- surement errors. with relatively larger buffers than commod- and Development (OECD) Development ity-importing countries. Assistance Committee (DAC) donors live up to earlier promises to maintain and expand aid flows and improve their aid effective- Aid flows and effectiveness ness to strengthen the impact of that aid. The international development finance archi- Especially when the size of ODA flows rela- tecture has changed markedly since the Mil- tive to other financial flows is declining, lennium Declaration in 2000. In particular, the quality of aid flows and changes in the the relative importance of ODA as a financ- effectiveness of domestic policies that it can ing instrument for development has declined. support become paramount. With improved The main drivers of that change are the policies in developing countries, the potential increasing role of developing countries in the effectiveness of aid has increased. But if this global economy, with a massive expansion potential is to be fully exploited, donors will of net private flows to those countries, and have to follow up on aid effectiveness agree- the emergence of middle-income countries as ments and deliver on their pledges. growth poles and important sources of non- At the Gleneagles summit in 2005, DAC ODA development finance. donors agreed to increase ODA by $50 billion Even though tough economic challenges between 2004 and 2010, with at least half of have emerged in the developed world over the increase designated for Africa—both Sub- the past few years, it is important that the Saharan Africa and North Africa. The prom- Organisation for Economic Co-operation ised increase of $50 billion made in 2004 8  O V E R V I E W GLOBAL MONITORING REPORT 2013 prices and exchange rates would equal an of DAC donors, development partners, increase in ODA to a level of $152.2 billion including international financial institutions, in 2010 prices and exchange rates. In reality, continue to play an important role in assist- disbursements were only $128.5 billion in ing developing countries to implement poli- 2010, leaving a gap between initial pledges cies and programs that help improve progress and actual disbursements of more than $25 on the MDGs and other development out- billion. Africa received an additional $11.8 comes, particularly in fragile states. billion, well short of the pledged $25 billion. In its 2012 annual ODA report, the DAC estimated that only about $1.2 billion of the Rural-urban disparities, shortfall could be attributed to lower-than- urbanization, and the MDGs expected gross national income levels caused Economic aspects of agglomeration are most by the recent global economic crisis. often looked at from a microeconomic per- Improving aid effectiveness could make up spective, but broad-based changes in where for some of the shortfalls, but bilateral and people work and live obviously also have multilateral DAC donors have been unable profound macroeconomic consequences— to reach the ambitious targets set out in the for example, with regard to economic struc- Paris Declaration on Aid Effectiveness. Col- tural changes. Using an agglomeration index lectively, the multilateral development banks developed for World Development Report have reached only one of the thirteen targets 2009: Reshaping Economic Geography established in Paris (to strengthen capacity (WDR 2009),3 evidence suggests that returns by coordinated support). Disaggregating the to agglomeration are relatively higher on the data by the various multilateral development lower rungs of development. Recent research banks and other international organizations, at the IMF suggests that greater economic such as institutions of the United Nations diversification is associated with improved (UN) and the European Union (EU), yields macroeconomic performance. Another strand a more nuanced picture. For example, the of research that has benchmarked Africa’s Inter-American Development Bank (IDB) has transformation with that of Asia’s provides met four of the eight aid effectiveness indi- some optimism with regard to Africa’s eco- cators for which disaggregated data exist, nomic prospects. the World Bank three, and the EU institu- tions two. All other multilateral development Poverty is lower in urban areas banks have met one indicator.2 The new Global Partnership for Effective Cities and towns are hubs of prosperity—more Development, agreed upon in the Fourth than 80 percent of global economic activity High Level Forum on Aid Effectiveness in is produced in cities by just over half of the Busan, Republic of Korea, in 2011, represents world’s population. Economic agglomeration a window of opportunity for a more bal- increases productivity, which in turn attracts anced international dialogue among all devel- more firms and creates better-paying jobs. opment partners, including traditional DAC Urbanization provides higher incomes for and non-DAC donors such as the BRICS workers than they would earn on a farm, and it (Brazil, the Russian Federation, India, China, generates further opportunities to move up the and South Africa). The partnership provides income ladder. Between 1990 and 2008, rural space for these partners to agree on more poverty rates were, without exception, higher realistic targets for aid effectiveness and to than urban poverty rates (table O.1). Indeed, establish mutual accountability to implement more-urbanized countries have had greater suc- agreed-upon actions. To date, more than 160 cess in attaining the MDGs than less-urbanized countries and 45 organizations from around ones: countries with a degree of urbanization the world have endorsed this partnership. above 60 percent are expected to achieve 50 Notwithstanding these emerging trends in percent more MDGs than those with a degree development finance and the aid effectiveness of urbanization of 40 percent or less. GLOBAL MONITORING REPORT 2013 O V E R V I E W   9 TABLE O.1  Poverty rates are falling in both urban and rural areas but are lower in urban areas Share of the population below $1.25/day   1990 1996 2002 2008   Rural Urban Rural Urban Rural Urban Rural Urban East Asia and Pacific 67.5 24.4 45.9 13.0 39.2  6.9 20.4  4.3 Europe and Central Asia  2.2  0.9  6.3  2.8  4.4  1.1  1.2  0.2 Latin America and the Caribbean 21.0  7.4 20.3  6.3 20.3  8.3 13.2  3.1 Middle East and North Africa  9.1  1.9  5.6  0.9  7.5  1.2  4.1  0.8 South Asia 50.5 40.1 46.1 35.2 45.1 35.2 38.0 29.7 Sub-Saharan Africa 55.0 41.5 56.8 40.6 52.3 41.4 47.1 33.6 Total 52.5 20.5 43.0 17.0 39.5 15.1 29.4 11.6 Source: World Bank staff calculations. Urban poverty rates not only have been services more accessible. For example, on relatively low but have also declined in all average, the cost of providing piped water is regions between 1990 and 2008. East Asia’s $0.70–$0.80 per cubic meter in urban areas success in reducing urban and rural poverty compared with $2 in sparsely populated has been spectacular, driven to a large extent areas. South Asia and Sub-Saharan Africa by China’s achievement. East Asia in 1980 have the largest rural-urban disparities in all had an urbanization level similar to that in service delivery indicators. The poor often pay South Asia and Sub-Saharan Africa but the the highest price for the water they consume highest poverty rate of all six regions. Its suc- while having the lowest consumption levels. cess in poverty reduction over the past three For example, in Niger, the average price per decades was linked to its rapid urbanization cubic meter of water is CFAF 182 for piped rate, which more than doubled from 21.5 water from a network, CFAF 534 from a pub- percent in 1980 to 49 percent in 2010. In lic fountain, and CFAF 926 from a vendor. 1980, urbanization rates in South Asia and And poor access to basic infrastructure dis- Sub-Saharan Africa were slightly above those proportionately affects rural women, because in East Asia; by 2010 they had increased to they perform most of the domestic chores and only 37 percent. Urbanization by itself is no often walk long distances to reach clean water. guarantee of success, however. If unregulated Even in the poorest of countries, people and poorly planned, rapid urbanization can have higher expectations for service delivery lead to disproportionate increases in slums. in cities: that water will flow when a tap is The challenge of poverty reduction, how- turned on; that one will have access to a toi- ever, remains largely in rural areas and is con- let; or that one will find a doctor when a child centrated in Asia and Sub-Saharan Africa. In has malaria. In 2010, 96 percent of the urban 2008, 46 percent of Sub-Saharan Africa’s population but 81 percent of the rural popu- rural population—but only 34 percent of its lation in developing countries had access to urban population—lived on less than $1.25 safe drinking water. Disparities in access to a day. In South Asia, the share of the poor basic sanitation were greater: 80 percent of in the population was 38 percent in rural urban residents but only 50 percent of rural areas and 30 percent in urban areas in 2008. residents had access to a toilet. Three-quarters of the poor in South Asia live Schooling and health care can also be in rural areas. Even in East Asia, the share delivered with economies of scale in dense of rural poor was approximately five times environments, close to where people actually higher than in urban areas in 2008. live. Urban citizens in rich and poor countries have better access than rural citizens to basic services, including those associated with the Services are better in urban areas attainment of the MDGs. Quite often, both Apart from creating better-paying jobs, cit- access to and quality of services are better in ies also make, through their density, public urban areas. 10  O V E R V I E W GLOBAL MONITORING REPORT 2013 While good outcomes in nutrition, health, Remaining close to one’s land is an impor- and education are development goals in tant factor in migration in the absence of effi- themselves, they also combine to form cient land markets. human skills and abilities that are strongly linked to productivity growth and poverty Well-designed urbanization is needed reduction. Rural children are disadvantaged to achieve the MDGs because they have access to services of lower quality than do urban children. The inability As long as rural-urban disparities in income to attract teachers to rural schools is only one and service delivery persist, rural-to-urban of the reasons for the poor quality of school- migration will ensue. Nearly 50 percent of the ing in rural areas. population in developing countries was urban in 2011, compared with less than 30 percent in the 1980s. Urban dwellers are expected to The spectrum of urbanization is wide double between 2000 and 2030, from 2 bil- Along the spectrum from rural to urban lie lion to 4 billion people, and the number of many types of settlements from small towns Chinese urban dwellers will increase from to small cities and peri-urban areas to large more than 622 million today to over 1 billion cities. In many middle-income countries, such in 2030. This trend is not unique to develop- as India and Vietnam, the urban population ing countries—today’s high-income countries is concentrated in the largest cities, but the underwent the same transformation in the urban poor are dispersed along a continuum 20th century. In fact, virtually no country of medium, smaller, and very small towns, has graduated to a high-income status with- demonstrating that urban poverty is not just out urbanizing, and urbanization rates above a large-city phenomenon. Research in India, 70 percent are typically found in high-income for example, indicates that while poverty is countries. primarily a rural phenomenon at the aggre- For every ten people lifted out of poverty gate level, urban poverty is becoming a larger in the East Asia and Pacific region, two were problem. The poverty rate for rural areas in facilitated by the urbanization process alone. India was 28 percent in 2004–05, compared Even in Sub-Saharan Africa, half of the with 26 percent in urban areas. Among urban decline in poverty originated in urban areas areas, poverty rates were highest in small and through the urbanization process. Look- towns (population less than 50,000), at 30 per- ing at the impact of urbanization on service cent, compared with 15 percent in large cities delivery provides even stronger evidence of (population of 1 million or more). The urban the importance of the process of urbanization spectrum is less pronounced in Sub-Saharan itself: close to 30 percent of the improvement Africa, where many countries are small and in the MDG on sanitation results from the sparsely populated and where urbanization is process of urbanization, that is, the migra- still in its early stages. Urban poverty there is tion of people and the expansion of urban thus more concentrated in capital cities. areas. Small rural towns often have high con- Policies to foster migration are impor- centrations of poor people. Some poor tant to enable the poor to move from lag- want to migrate to cities to escape poverty ging to leading areas, and governments can but are reluctant to dispose of their rural help reduce rural poverty by making migra- assets. In Nepal, for example, where pov- tion more efficient. Equipping citizens with erty is extreme, migrants prefer not to move human capital assets while they are still in a too far from their rural residence but value rural area will increase the chance that their proximity to paved roads and areas with job search in the city is successful. Many higher housing premiums. Many want to developing countries have instituted land maintain links with their farms, while others market policies in rural areas that discourage fear losing their land if they migrate too far. migration to urban areas. Restrictions in the GLOBAL MONITORING REPORT 2013 O V E R V I E W   11 land market are not only detrimental to agri- are portable (such as health and education) cultural productivity growth but also hinder and that facilitate the integration of migrants diversification into nonfarm activities that seeking better opportunities in cities might have higher returns. They should be relaxed. have a higher payoff than one that indis- However important facilitating the urban- criminately tries to equalize MDG-related ization process is, it is not enough for suc- services across urban and rural areas. Early cessful development. Governments must also investments in education and health in rural improve access to basic services in rural areas areas will prove useful to those who seek jobs to achieve development goals, and they face in cities but can also contribute to higher important trade-offs in doing so. Priorities farm and nonfarm incomes for those who are not easily set, and financing local services never migrate. Such a payoff seems particu- is not straightforward. Moreover, govern- larly relevant for sparsely populated countries ments must address the problem of slums in with both low urbanization and agglomera- urban areas and mitigate the negative side tion rates, as in Sub-Saharan Africa. effects of urbanization in the form of pollu- If the prime source of urbanization is grad- tion caused by congestion or urban sprawl. ual thickening of population density, then the To benefit fully from urbanization, smart countrywide equalization of MDG-related planning of existing and new urban areas is services is more appropriate. This seems most needed. relevant for countries with a low urbanization rate but an elevated level of agglomeration, as is the case in various countries in South Asia Services in rural areas need and those countries with a high urbanization improvement rate and low expected migration. Even as numerous towns emerge in rural If people get stuck in small towns, with areas and many poor people migrate to cit- little prospect of moving on to large cities, ies to seek better jobs and services, the preva- then policies should focus on improving con- lence of a large majority of the poor in rural nectivity with other urban centers. Poverty in areas remains of great concern. Rural areas small towns is often high, and the quantity need focused policies that help raise farm and quality of services there differ little from productivity and connect rural villages to those in rural areas and lag behind those in input and output markets. Diversification of more mature urban settlements. Measures employment into nonagricultural activities to better connect the activities in those small can also reduce rural poverty. Growth of towns with economies of larger cities are nonfarm activities is often driven by growth then paramount. in agricultural productivity, at least at the In all cases, the challenges should not be initial stage of development. Roads and the underestimated. Many developing countries provision of electricity are needed to improve have been unable to provide a coordinated connectivity to markets and increase agricul- package of physical infrastructure and social tural productivity. services in rural areas. In part, that is because Because the MDGs reflect the basic needs the financing of public goods in poor areas is of all citizens, governments should aim to a daunting task, a point about which more is attain them fully in both urban and rural said below. areas. Given scarce resources, however, priorities must be set. Consequently, it is New forms of service delivery are important that decision makers take country- required in slums specific circumstances into account when allocating resources. Although poverty rates in cities are rela- For example, if the prime source of urban- tively low and declining, poverty in many ization is domestic migration, then a strategy countries is increasingly becoming an urban that focuses on MDG-related services that phenomenon as more and more people live 12  O V E R V I E W GLOBAL MONITORING REPORT 2013 in cities. Slums are the urban face of poverty that girls in grades four through eight who and emerge when cities are unable to meet have reached puberty miss six learning weeks the demand for basic services and to supply a year on average. the expected jobs. A likely 1 billion people Combined with their informal employ- live in urban slums in developing countries, ment, the inability of migrants living in slums and their numbers are projected to grow by to produce water or electricity bills or a for- nearly 500 million between now and 2020. mal rental lease to prove urban residence puts Slums are growing the fastest in Sub-Saharan them in an even more precarious situation. Africa, southeastern Asia, and western Asia. In some countries, proof of urban residence Currently, 62 percent of Africa’s urban pop- is needed to access basic services, as is the ulation lives in slums. Women and children case with health services in Kyrgyzstan, and bear a disproportionate burden of improper can sometimes lead to reverse migration. For sanitation and poor health care in slums. The example, when the quality of health services lack of urban planning by governments has is dismal or when a migrant is excluded for implications for the urban poor, especially in lack of required documentation, an illness Asia and Africa. Qualitative research, com- can push a migrant back to a rural area. munity surveys, and studies by nongovern- Additionally, the inability to provide required mental organizations show that the actions identification and proof of urban residence taken by the urban poor in response to inad- excludes the urban poor from accessing equate urban institutional support can pro- financial services, leaving them with little duce severe indirect impacts.4 means of saving for future investment or The absence of land tenure is a key factor. insurance in the event of economic shocks. In According to the UN’s MDG Report 2012, a detailed qualitative study of 176 rickshaw slum evictions without due legal process are pullers in Delhi, only 1 percent had bank the most visible violation of housing rights accounts, although 95 percent consciously confronting the urban poor. Household sur- saved daily or periodically. veys carried out in a range of cities around The most common coping strategies the globe found that slum dwellers reported for saving in the absence of bank accounts insecurity regarding possible eviction was include depositing money with a local shop- high, ranging from 20 percent in São Paolo keeper or a relative or friend (with the risk of to nearly 45 percent in Lagos. Insecure tenure being cheated); carrying savings on one’s per- in slum settlements means that governments son at all times; and burying small amounts are unwilling or unable to provide basic ser- in the ground or hiding money in perceived vices to these areas. In the absence of basic safe spots within one’s residence. Savings services, one coping strategy for the urban handled in these ways are vulnerable to theft. poor is dependence on informal provid- In the event of economic shocks from peri- ers, who offer low-quality services, often at ods of unemployment or illness, the absence higher costs than those paid by the nonpoor of savings can lead to discontinuation of chil- with access to formal services. This practice dren’s education, especially that of girls, and not only places higher economic costs on the to interruption in remittances. Remittances urban poor but also leads to increased health are also affected by the high cost of send- costs, especially in the form of child morbid- ing money by informal means, given the lack ity from unclean water. Similarly, the lack of of access to banking by both the urban and adequate sanitation facilities in low-income rural poor. settlements can lower the school attendance Impermanent, unsafe housing and the of adolescent girls and eventually increase lack of basic services in slums force some their dropout rates. This problem has been migrants to maintain split households (sep- specifically detected in Kenya’s urban slums, arating spouses and leaving children with where qualitative and quantitative data show grandparents in rural areas), thus introducing GLOBAL MONITORING REPORT 2013 O V E R V I E W   13 instability into the urban transition. This con- coordinated actions, cities will lack the tinued dependence on rural areas has several proper investments to benefit from positive negative implications, including the increased externalities generated by increased density. burden of child care on aging grandparents, Higher-quality construction material and the inability of migrants’ children to access more sophisticated buildings are required to better-quality primary education and health support greater densities, but if these higher services, and numerous other harmful psy- costs must be fully internalized by firms and chological and health consequences. Several households, underinvestment is the result. In studies from Asia and Sub-Saharan Africa addition, complementary physical infrastruc- have documented the adverse effects arising ture is critical: roads, drainage, street light- from split households. ing, electricity, water, and sewerage, together The key message is that governments with policing, waste disposal, and health should not discriminate between slum dwell- care. While a market-driven process could ers and the rural or urban poor. Slum dwell- possibly gradually increase densities through ers should be provided access to basic ser- shifting land values over time, the long-lived vices just like the poor in rural areas or cities, and lumpy nature of urban investment often although the modalities may be different. inhibits such a process. A city’s physical Where land tenure issues are pervasive, and structures, once established, may remain in services cannot be or are not connected to place for more than 150 years. informal dwellings, public connections may Under current trends, the expected be more appropriate. Alongside increased increases in the urban population in the instances of slum evictions and slum clear- developing world will be accompanied ance in the past decade, a growing number by a tripling in the built-up area of cities, of success stories of slum service provision from 200,000 to 600,000 square kilome- and upgrades are beginning to be noticed. ters. As an example, consider Shanghai, For example, in the Lao People’s Democratic which has rapidly expanded over the past Republic, the government had never given 20 years (map O.1). Such rapid popula- land on a long-term lease to a low-income tion growth accompanied by an even faster squatter community until recently, when two spatial expansion of cities is likely to lead government projects did so, thus regularizing to low-density development dominated by people’s status on public land they already individual-vehicle transportation—a largely occupied. In Vinh, Vietnam, government has irreversible pattern that runs the risk of moved to provide slums with better services dampening density-induced productivity by adjusting existing planning standards to and service delivery efficiencies. An addi- make them more realistic and to lower costs tional consequence of rapid urban growth is and make it easier for the urban poor to worsening air quality. A recent study of the develop housing that matches their needs. 189 largest cities using satellite data found that air quality worsened between 2002 and 2010, particularly in the largest cities Uncoordinated urbanization can lead to of the Indian subcontinent, parts of Africa, pollution, sprawl, and congestion the Middle East, and north China—places Urbanization is largely a natural process, experiencing rapid urban growth. driven by the opportunities cities offer. Emissions from the burning of fossil fuels Unregulated markets are unlikely to get include fine particulate matter (PM10 and densities right, however, and spontaneous PM2.5), carbon monoxide, nitric oxides, and development of cities can create negative sulfur dioxide, which can cause allergies, side effects such as congestion or, alterna- respiratory problems, cardiovascular disease, tively, excessive sprawl. The consequences and cognitive deficits. The impacts are sig- are pollution and inefficiencies. Without nificant. In Russia, a conservative estimate 14  O V E R V I E W GLOBAL MONITORING REPORT 2013 MAP O.1  Shanghai’s spatial expansion as shown by average nighttime light intensity a. 1992 b. 2000 c. 2008       Source:  China Data Center at University of Michigan. suggests that annual health damage from especially policies for using urban land and fossil-fuel burning amount to $6 billion. The expanding basic infrastructure and public social cost of transport in Beijing is equiva- services. lent to 7.5–15.0 percent of its gross domestic C onnecting— making a city’s markets •   product, with about half of that stemming (labor, goods, and services) accessible to from air pollution, including carbon emis- other neighborhoods in the city, to other sions. The largest share of these costs comes cities, and to outside export markets. from increased mortality. Financing— finding sources for large capi- •   Globally, acute respiratory infections asso- tal outlays needed to provide infrastruc- ciated with air pollution cause about 20 per- ture and services as cities grow and urban- cent of all under-five deaths. In the former ization picks up speed. Yugoslav Republic of Macedonia, a country of about 2 million people, air pollution is the These are terms that policy makers use on a cause of an estimated 1,300 premature deaths daily basis, but they often focus on financ- annually. Beijing, Cairo, Delhi, Dhaka, and ing first without fully considering the other Karachi each see an estimated 3,500 to 7,000 two dimensions. Of the three, planning for premature deaths annually from cardiovascu- land use and basic services is the most impor- lar disease caused by air pollution. Manag- tant. In fact, the key challenge for countries ing environmental quality while enhancing at all stages of urbanization is strengthening urban productivity is critical. the institutions for land management. Yet because planning must allow for people and products to be mobile, it must be coordinated An integrated strategy with and connected to all stages of a city’s Three interrelated dimensions of urban devel- growth. Financing should be city leaders’ last opment triangulate the coordinated approach concern rather than their first. needed to enable a country to take advantage In designing policies to manage the pro- of its urbanization process: planning, con- cess of urbanization, it is paramount to necting, and financing. enhance women’s empowerment and to close the gender gap in earnings, largely by P lanning — charting a course for cit- •   improving women’s access to education. ies by setting the terms of urbanization, World Development Report 2012: Gender GLOBAL MONITORING REPORT 2013 O V E R V I E W   15 Equality and Development (WDR 2012) neighborhoods. In many African cities, com- details that the emergence of agglomeration muting by public transit costs more than half economies can have disproportionate benefits of a poor household’s income. In Harare, the for women with basic education through job poor spend more than a fourth of their dis- opportunities in light manufacturing. Hence, posable income on transport. In Kampala, in addition to the importance of getting the figure is 50 percent. polices right regarding planning, connecting, To foster better living conditions, policy and financing, a priority is reducing gender makers need to coordinate land market rules gaps in human capital, specifically those that with urban infrastructure development. address women’s education. Hanoi has been able to grow without the formation of large slums because the govern- ment set prudent rules for land markets and Urbanization should start with planning infrastructure. It allowed the densification of Planning is fundamental to agglomeration former village areas. It pushed to modern- economies in three ways. First, land use ize road networks just outside the city, yet requires effective systems for land valuation. it mostly avoided demolishing older houses. Second, land use must be allocated in a way These roads have opened new land for for- that allows for infrastructure improvements mal developers while improving connections as the city grows. Third, the most basic infra- between existing village areas and the city. structure services—water, energy, sanitation, The village areas were allowed to grow and and solid waste management—need to be were integrated into the urban economy. provided for all residents, urban, peri-urban, Policy makers in Bogotá similarly suc- and rural alike; natural market mechanisms ceeded by coordinating land use with infra- are unlikely to provide those. structure development. The Programa de Lack of early planning often imposes Mejoramiento Integral de Barrios aimed to very difficult corrective measures later on. improve mobility and living conditions in Measures that could have worked well at an 26 of the poorest city areas, called Unidades early stage are much less effective once city de Planificacion Zonal. The Unidades com- structures have been locked in. For example, prised 107 neighborhoods of informal origin, to manage slum formation and reduce the with 1,440 informal settlements, 300,000 hazards faced by slum dwellers, policy mak- plots not formally titled, and about 500,000 ers often try to move people to safe environ- structurally substandard dwellings. The pro- ments or provide better housing elsewhere. gram legalized homes and neighborhoods; it Initiatives include urban upgrades, such as expanded infrastructure with roads, rainwa- community and household infrastructure ter traps, and sanitary and aqueduct trunk projects; resettlement to new housing devel- networks; and it added urban facilities (stairs, opments; housing subsidies; and land titling. parks, community rooms). Living conditions But many of these policies do not work improved for about 650,000 people. Comple- because people do not always willingly trade mentary improvements in communication a good location for a better home with more and interregional transport can make it easier modern utilities. People choose neighbor- to integrate neighboring peri-urban and rural hoods for their affordable services and ame- areas with urban economies. nities—but also for their proximity to jobs. Integrating planning, connecting, and In many developing countries’ cities, it can financing is also key to the “greening” of be difficult to live near one’s job. One con- growth and getting urbanization right. While sequence of failed land markets and restric- there is a perceived trade-off between “build- tive regulations is that the formal housing ing more cities” to accommodate rapid urban supply is low. But it may also be difficult and growth and “building cities right” to enhance costly to commute to work, because trans- social and environmental outcomes, com- port infrastructure fails to connect urban pelling evidence shows that “building cities 16  O V E R V I E W GLOBAL MONITORING REPORT 2013 right” generates co-benefits in the near term winners and losers in the short run—but in and reduces the prohibitive costs of address- the long run, thinking about priorities can ing sprawl, congestion, pollution, and climate make a vast difference for cities, surrounding change later. Integrating land use and trans- rural areas, and even countries. port plans effectively allows public transport More than building and fixing, efforts to (with its lower energy consumption and emis- improve intercity connections are about the sions) to be a major mode of transport in loca- economics of the transport sector, which tions zoned for high density. The Brazilian has a tendency toward natural monopolies. city of Curitiba has managed to concentrate If the market structure for transport service its population around public transportation provision does not promote competitive pric- lines and hubs, making it possible to maxi- ing, any cost reductions stemming from net- mize the share of trips with low-energy-con- work investments will be absorbed as profit sumption modes of transportation. Copenha- by monopolistic providers. The government gen redesigned its urban transport network regulates in large part to induce healthy to follow a transit-oriented and bike-friendly competition, limiting monopolistic behavior approach: it started with a “finger plan”— but also limiting the number, or behavior, the identification of few priority development of competitors where required. Investments areas—and then invested in five-axis transit in infrastructure are more successful when radials and corridors of new, satellite, rail- bundled with regulatory reforms that pro- served towns. mote competitive pricing while also ensuring compliance with safety standards. In Uganda, as in many other African coun- Connectivity depends on more than tries, a large gap between transport costs infrastructure and prices attests to monopolistic behavior. To benefit from the opportunities that cities Along the Uganda stretch of the Kampala– offer, commuting costs need to be low. More- Mombasa corridor, home to most of Ugan- over, if connections with the surrounding da’s industrial production, transport prices areas are well developed, urban densities can average $2.22 a kilometer—double the aver- also have a positive impact on rural areas. age price in the United States—even though Research in India has shown a growing link transport costs are about $0.35 a kilometer. between urban development and a reduction According to trucker surveys, 86 percent of rural poverty; higher demand for rural of the corridor is in good condition. So the products and more options for rural nonfarm fact that providers are making more than 85 diversification followed India’s economic lib- percent profit suggests a need for competi- eralization in the early 1990s. tion, which can be induced most effectively Connections, both between and within cit- through policy measures and regulation. ies, benefit producers and consumers, both in Within many cities, the poorest residents urban and rural areas. Connections give pro- are often deprived of affordable transport ducers access to input (including labor) and services. An extreme example is Mumbai, output markets. They give consumers options where, according to a study published in and, in many cases, better prices. And con- 2007, transport expenditures represented at nections expose cities and rural areas to new least 16 percent of income for riders in the economic opportunities. But policy makers lowest income category, even though subsi- who envision better transport connections dies covered as much as 30 percent of trans- for cities and neighborhoods face difficult port costs. While subsidies have not always choices. With limited resources, they cannot been successful, some targeted subsidies do invest in everything. It is hard to know which reach the right groups and increase access new or improved connections will yield the to jobs. For example, South Africa uses highest returns over time. Setting priorities highly subsidized weekly coupons, good for for connective investment means picking 10 journeys between black townships and GLOBAL MONITORING REPORT 2013 O V E R V I E W   17 industrial development areas, to connect approaches to address infrastructural gaps. low-income workers to jobs. Brazil requires Chile, for instance, is coordinating public formal sector employers to provide transit investment through regional investment win- tickets to employees through a system called dows, including cofinancing with municipali- vale transporte (VT); firms then deduct the ties. In addition, political decentralization VT expenditures from taxable income. The lowers the “barriers to entry” for different VT system—albeit affecting only the formal groups of society, so they can more easily sector—effectively spreads the cost of trans- and directly participate in decision mak- port subsidies between employers and the ing. An example from Mexico underscores government. the importance of decentralization: because of political resistance, federal teachers were not decentralized to the states, resulting in a Finance is the difficult final part of parallel hiring process at the state level that the puzzle blurred the lines of accountability. Having identified priorities for planning Local provision of services requires fis- and connecting, policy makers confront cal equalization across space to ensure that the problem of financing those investments. necessary resources flow toward the districts The main difficulty is the need for money most in need of them. No country starts from up front. Large capital outlays are needed to a clean slate, however, and more often than provide infrastructure and services that are not, reforms of intergovernmental transfers not fully in demand now but will become are done at the margin and incrementally. so as urbanization picks up speed. The large An example is Colombia’s current royalty capital investments that are needed in the reform, which achieves more equitable distri- construction phase, whether for transport, bution of royalty resources. water provision, solid waste management, or The financing challenges are largest in sewage removal and treatment, are likely to rural areas: they are home to the largest far exceed the budget of any city government. number of poor people, but, under grow- But financing can become more sustain- ing disparities in fiscal capacity, they are able through taxes realized with increased increasingly resource constrained. Subna- economic growth, and with the ability of tional governments in urban areas have policy makers to leverage land markets and higher fiscal capacity and are hence better approach local currency debt markets. able to influence outcomes through their own More generally, financing of all local ser- revenue decisions. Absent any convergence vices is challenging. While services are best effects, fiscal capacity in urban areas will delivered locally, the local tax base is often increase as agglomeration unfolds, putting narrow. That is true not only for cities, but rural areas at a further disadvantage. Given for all subnational governments.5 These gov- uneven advances and levels of autonomy in ernments are often better suited than agen- expenditures, rural governments are more cies of the national government to address constrained in their ability to provide a high- the challenges of service delivery. They can quality package of services to the poor or to more efficiently detect citizens’ needs given target the incidence of spending on direct ser- their informational advantage. That is par- vices where they are needed most. ticularly relevant for beneficiary identifica- tion in poverty programs. Subnational gov- Notes ernments can direct resources toward these needs (allocative efficiency) and can provide T he original target to improve the lives of at 1.  some services more efficiently than national least 100 million slum dwellers by 2020 was governments (productive efficiency). Decen- based on an estimation of close to 100 million tralized management and execution of public slum dwellers in the world. Upon measurement investment can also be strengthened by joint of slum populations using the internationally 18  O V E R V I E W GLOBAL MONITORING REPORT 2013 agreed upon UN-Habitat definition of slums (more than 150 people per square kilome- following the UN Expert Group Meeting of ter), and travel time to the nearest large city October 2002, it was learned that the global (60 minutes). estimate of the slum population was in fact T he report draws upon an in-house desktop 4.  close to 1 billion (924 million). As a result, review of qualitative research, the findings even though the slum target has been globally of community-level surveys on slum dwell- achieved, and in fact significantly surpassed 10 ers in cities of developing countries, and fresh years ahead of schedule, there is little room for inputs sought from civil society organizations complacency given the existing magnitude of across a range of developing countries. This populations currently living in slums. body of research has explored several themes As detailed in the OECD’s report “Aid Effec- 2.  affecting the urban poor, especially rural- tiveness 2005-10: Progress in Implementing urban migrants, and the strategies they apply the Paris Declaration” (2011). to remain resilient to the challenges posed by M any reasons for the occurrence of urban- 3.  urban poverty. Data and insights have been ization were discussed in WDR 2009, which drawn from countries in Asia, Sub-Saharan provided ample evidence of the benefits of Africa, and Latin America, including Bangla- agglomeration. WDR 2009 developed an desh, China, India, Indonesia, Kyrgyzstan, agglomeration index with a uniform defini- Thailand, Ghana, Kenya, South Africa, Tan- tion of what constitutes an urban or agglom- zania, Uganda, Zambia, Brazil, and Ecuador. erated area. An urban or agglomerated area T he term “subnational governments” encom- 5.  is defined by population size of a settlement passes, among other entities, regional or state (more than 50,000 people), population density governments, provinces, and municipalities. Report Card The Millennium Development Goals, 2013 17 ✔ ✔ Countries on ✔ track to meet ✔ MDG 4: 2015 4 21 targets out of are already met. 20 Countries projected to meet MDG 4: 2015–2020 Progress on MDG 4 MDG 3 Global Progress Countries Promote All met on MDGs Countries goals gender equality and empower women 72 out of 144 countries have met MDG 3 Goals and Targets from the Millennium Declaration 2 Achieve universal primary education TARGET 2.A Ensure that by 2015, 1 4 children everywhere, boys and girls alike, will be able to complete a full course of primary schooling Eradicate extreme Reduce child poverty and hunger mortality TARGET 1.A Halve, between 1990 and 2015, TARGET 4.A Reduce by two-thirds, 3 the proportion of people whose income is between 1990 and 2015, the under- less than $1.25 a day five mortality rate TARGET 1.B Achieve full and productive employment and decent work for all, including women and young people TARGET 1.C Halve, between 1990 and Promote gender 2015, the proportion of people who suffer from hunger equality and empower women TARGET 3.A Eliminate gender disparity in primary and secondary education, preferably by 2005, and at all levels of education no later than 2015 6 Combat HIV/AIDS, malaria, and other diseases 8 TARGET 6.A Have halted by 2015 Develop a global and begun to reverse the spread partnership for of HIV/AIDS TARGET 6.B Achieve by 2010 universal development access to treatment for HIV/AIDS for TARGET 8.A Develop further an open, rule- 5 all those who need it based, predictable, nondiscriminatory trading TARGET 6.C Have halted by 2015 and financial system (including a commitment and begun to reverse the incidence to good governance, development, and pov- of malaria and other major diseases erty reduction, nationally and internationally) TARGET 8.B Address the special needs of the Improve maternal least-developed countries (including tariff- and quota-free access for exports of the least- health developed countries; enhanced debt relief 7 TARGET 5.A Reduce by three- for heavily indebted poor countries and quarters, between 1990 and 2015, cancellation of official bilateral debt; and more the maternal mortality ratio generous official development assistance for TARGET 5.B Achieve by 2015 countries committed to reducing poverty) universal access to reproductive health TARGET 8.C Address the special needs of Ensure landlocked countries and small island developing states (through the Programme environmental of Action for the Sustainable Development sustainability of Small Island Developing States and the outcome of the 22nd special session of TARGET 7.A Integrate the principles of the General Assembly) sustainable development into country TARGET 8.D Deal comprehensively with policies and programs and reverse the the debt problems of developing countries loss of environmental resources through national and international measures TARGET 7.B Reduce biodiversity loss, to make debt sustainable in the long term achieving by 2010 a significant reduction TARGET 8.E In cooperation with pharmaceuti- in the rate of loss cal companies, provide access to affordable, TARGET 7.C Halve by 2015 the proportion essential drugs in developing countries of people without sustainable access TARGET 8.F In cooperation with the private to safe drinking water and basic sanitation sector, make available the benefits of new TARGET 7.D Have achieved a significant technologies, especially information and improvement by 2020 in the lives of at communications least 100 million slum dwellers Source: United Nations. 2008. Report of the Secretary-General on the Indicators for Monitoring the Millennium Development Goals. E/CN.3/2008/29. New York. Note: The Millennium Development Goals and targets come from the Millennium Declaration, signed by 189 countries, including 147 heads of state and government, in September 2000 (http://www.un.org/millennium/declaration/ares552e.htm) and from further agreement by members states at the 2005 World Summit (Resolution adopted by the General Assembly— A/RES/60/1). The goals and targets are interrelated and should be seen as a whole. They represent a partnership between the developed countries and the developing countries “to create an environment—at the national and global levels alike—which is conducive to development and the elimination of poverty.” Progress toward the MDGs Only two years away from the 2015 target set for reaching progress needs to be greatly accelerated if all of the goals the Millennium Development Goals (MDGs), progress is are to be achieved by 2015. The goal for primary school diverse across goals and regions. Global estimates indicate completion should have been within sight by 2011, but that targets such as reduction of extreme poverty (MDG only half the progress needed has been made. 1.a), gender equality in primary education (MDG 3.a), Regionally, progress toward the MDGs is more diverse, access to safe drinking water (MDG 7.c), and improved lives although most regions will likely miss health-related tar- for at least 100 million slum dwellers (MDG 7.d) have been gets. In East Asia and the Pacific, the targets on extreme reached. The proportion of people whose income is less poverty, gender parity, and access to water and sanitation than $1.25 a day fell from 43.1 percent in 1990 to below have been reached. The region is still lagging on the 20.6 percent in 2010, leaving 1.2 billion people in extreme under-five, infant, and maternal mortality goals. poverty. Gender equality in primary school enrollments In Europe and Central Asia, the goals on poverty and was also achieved in 2010. Similarly, the goal of halving the water are likely to be met. This region has managed to proportion of people without sustainable access to safe achieve only 63 percent of the progress needed to meet drinking water has already been reached. the primary completion rate goal, 84 percent of the child At the same time, progress on the remaining MDGs has mortality target, and 72 percent of the maternal mortality been lagging, especially for education- and health-related goal. The region is farthest behind on meeting the target MDGs. Global targets for infant, under-five, and maternal for access to basic sanitation. mortality (MDGs 4.a and 5.a), and to a lesser extent, access Latin America and the Caribbean have already to basic sanitation (MDG 7.c) are significantly behind, and r e a c h e d t h e t a r g e t s o n e x t r e m e p o v e r t y, FIGURE 1   Global progress toward achieving the MDGs Developing countries, percent of total required progress between 1990 and 2015, as achieved in 2010 or 2011. 100 100 100 100 100 100 90 84 84 84 84 80 80 80 80 80 Distance to 2015 goal, % 80 70 67 62 63 59 57 60 50 50 40 30 20 10 0 MDG 1.a MDG 2.a MDG 3.a MDG 3.a MDG 4.a MDG 4.a MDG 5.a MDG 7.c MDG 7.c MDG 7.d Extreme Primary Ratio of girls Ratio of girls Infant Under-5 Maternal Access to Access to Improve the poverty completion to boys in to boys in mortality mortality mortality safe drinking basic lives of at (% of popula- rate (% of primary primary and rate, rate ratio water (% of sanitation least 100 tion below relevant age education secondary (per 1,000 (per 1,000) (modeled population facilities million slum $1.25 a day, group) (%) education live births) estimate, with access) (% of dwellers 2005 PPP) (%) per 100,000 population (by 2020) live births) with access) Corresponding target Distance to the goal achieved Source: World Bank staff estimates. Note: Intermediate target calculated using a linear progression over 25 years, resulting in a needed progress of 4 percent per annum. Note that the corresponding target for 2010 would equal 80 percent, and for 2011 84 percent, to be on track to attain the MDG by 2015. Any value above those intermediate targets indicates that the world is ahead of the required pace to meet the MDG. A value of 100 percent means that the MDG has been met. PPP = purchasing power parity. 22 FIGURE 2   Starting position for each MDG by region, 1990 200 200 178 150 150 119 Number Percent 107 100 100 95 97 101 100 88 85 85 90 86 86 83 80 81 80 76 62 68 70 62 68 71 68 73 56 54 57 54 56 52 48 53 48 50 42 40 42 50 30 22 22 22 26 12 14 6 7 2 0 0 MDG 1.a MDG 2.a MDG 3.a MDG 4.a MDG 4.a MDG 5.a MDG 7.c MDG 7.c Extreme Primary Ratio of girls to Infant Under-5 Maternal Access to safe Access to basic poverty completion boys in primary mortality mortality mortality ratio drinking water sanitation (% of population rate (% of and secondary rate, rate, (modeled (population facilities below relevant age education (per 1,000 (per 1,000) estimate, per with access) (population $1.25 a day, group) (left axis) live births) (right axis) 10,000 live births) (left axis) with access) 2005 PPP) (left axis) (right axis) (right axis) (left axis) East Asia & Pacific Latin America & the Caribbean South Asia Europe & Central Asia Middle East & North Africa Sub-Saharan Africa Source: WDI and GMR. Note: Weighted by population. PPP = purchasing power parity. FIGURE 3  Global progress toward the MDGs achieved, by region 200 156 150 136 127 130 117 120 117 119 110 110 114 102 100 92 94 96 85 85 89 84 84 84 86 82 83 77 71 72 63 69 64 65 68 61 58 57 52 55 46 49 47 43 50 38 34 28 26 13 0 MDG 1.a MDG 2.a MDG 3.a MDG 4.a MDG 4.a MDG 5.a MDG 7.c MDG 7.c Extreme poverty Primary Ratio of girls Infant Under-5 Maternal Access to safe Access to basic (% of population completion rate to boys in mortality mortality mortality ratio drinking water sanitation below $1.25 a (% of relevant primary and rate, rate, (modeled (% of population facilities (% of day, 2005 PPP) age group) secondary (per 1,000 (per 1,000) estimate, per with access) population education (%) live births) 100,000 live with access) births) East Asia & Pacific Latin America & the Caribbean South Asia Europe & Central Asia Middle East & North Africa Sub-Saharan Africa Met at outset Source: WDI and GMR. Note: The corresponding target for 2010, 80 percent, and for 2011, 84 percent. Any value above those corresponding targets indicates that the region seems on track to meeting the MDG using a simple linear approximation. A value larger than 100 percent means that more progress has been made than is necessary at the year reported. A zero value indicates deterioration. PPP = purchasing power parity. 23 primary completion, and access to safe water. The region goal to close the gender disparity gap in primary and sec- stagnated on the gender equality target but is very close ondary education. The region has also made progress on to reaching it. Although the region has achieved more primary completion and child mortality rates. Progress on than 80 percent of the progress needed to reduce under- poverty reduction and access to basic sanitation has been five mortality by two-thirds, progress on maternal mor- slower, however. Faster progress is required to reduce child tality has been significantly slower than elsewhere, with and maternal mortality and improve access to sanitation the region moving only 57 percent of the distance facilities if the region is to reach these goals by 2015. needed to meet the goal. Sub-Saharan Africa is lagging behind other regions The Middle East and North Africa region has also and on most MDGs. However, this region had the furthest reached the targets on poverty and access to improved to go from the start. Currently, Sub-Saharan Africa has sanitation facilities. The region is making progress toward achieved more than 40 percent of the progress required achieving universal primary education, gender equality, to reach, by 2015, the targets for gender parity, child mor- and child mortality. However more effort is needed to tality, maternal mortality, and access to safe water. ensure access to safe drinking water. Most countries need to pay particular attention to South Asia has reached the target on access to safe the health-related MDGs if they are to reach these goals water and has already achieved nearly 85 percent of the by 2015. FIGURE 4  Number of countries making progress toward the various MDGs 2 2 17 10 19 20 30 25 29 42 30 70 24 44 74 71 43 4 10 27 7 63 11 5 12 6 8 11 22 13 14 34 9 12 26 9 9 3 26 10 66* 61 7 5 20 55 34 41 18 12 24 27 5 8 MDG 1.a MDG 1.c MDG 2.a MDG 3.a MDG 4.a MDG 4.a MDG 5.a MDG 7.c MDG 7.c Extreme Prevalence of Primary Ratio of girls Infant Under-5 Maternal Access to Access to poverty undernourish- completion to boys in mortality mortality mortality safe basic (% of popula- ment (% of rate (% of primary and rate rate ratio drinking sanitation tion below population) relevant secondary (per 1,000 (per 1,000) (modeled water (% of $1.25 a day, age group) education live briths) estimate, (% of population 2005 PPP) (%) per 100,000 population with access) live births) with access) Met Insu cient progress Seriously o target Su cient progress Moderately o target Insu cient data Source: WDI and GMR team estimates. Note: Progress is based on extrapolation of latest five-year annual growth rates for each country, except for MDG 5, which uses the last seven years. “Sufficient progress” indicates that an extrapolation of the last observed data point with the growth rate over the last observable five-year period shows that the MDG can be attained. “Insufficient progress” is defined as being able to meet the MDG between 2016 and 2020. “Moderately off target” indicates that the MDG can be met between 2020 and 2030. “Seriously off target” indicates that the MDG will not even be met by 2030. “Insufficient data” points to the fact that not enough data points are available to estimate progress or that the MDG’s starting value is missing (except for MDG 2 and MDG 3). PPP = purchasing power parity. * In the poverty target, 11 out of the 66 countries that have met the target have less than 2% of people living below $1.25 a day. 24 MDG 1 Eradicate extreme poverty and hunger The proportion of people living on less than $1.25 a day pace of poverty reduction. According to these forecasts, fell from 43.1 percent in 1990 to 20.6 percent in 2010, leav- the proportion of people living in extreme poverty will fall ing 1.2 billion people in extreme poverty. Although the from 20.6 percent in 2010 to 15.5 percent by 2015, leaving food, fuel, and financial crises over the past five years have slightly more than 1 billion people in extreme poverty. Of worsened the plight of vulnerable populations and these, 42 percent will live in South Asia and 42 percent in slowed poverty reduction in some countries, global pov- Sub-Saharan Africa. erty rates have continued to fall. Between 2005 and 2008, The pace of poverty reduction depends not just on both the poverty rate and the number of people living in the growth of GDP but also on its distribution. A common extreme poverty fell in all six developing-country regions, assumption is that growth is “distribution neutral”; that is, the first time that all regions had posted declines in growth in average income results in similar changes in poverty. Preliminary estimates for 2010 show that the the incomes of everyone, rich or poor. Although that has extreme poverty rate fell further, reaching the global tar- been the general experience over the past 20 years, there get of halving world poverty five years early, as close to 90 are notable variations: income distribution has improved million more people were lifted out of extreme poverty. in some countries, such as Brazil, while worsening in oth- Further progress is not only possible but likely before ers, such as China. To accelerate progress toward the the MDGs’ 2015 target date. Current economic forecasts elimination of extreme poverty, development strategies suggest that gross domestic product (GDP) in developing should attempt to increase not only the mean rate of economies will maintain a growth rate of 5.5–6.0 percent growth but also the share of income going to the poorest over the next three years. Economic growth will be fastest segment of the population. Sub-Saharan Africa, where in East Asia and South Asia, regions that are home to more average incomes are low and the average incomes of than half of the world’s poorest people. Growth will be those below the poverty line are even lower, will face slower in Sub-Saharan Africa, the poorest region in the great difficulties in bringing its poorest people to an ade- world, but faster than in preceding years, quickening the quate standard of living. 25  overty rates (living on $1.25 per day) FIGURE 1a P FIGURE 1b  The decreasing gap in the urban and by region rural poverty headcount by region Forecast 2011–2015 50 60 50 40 Percentage 40 30 Percent 30 20 20 10 10 0 0 1990 1993 1996 1999 2002 2005 2008 2010 2015 1990 1993 1996 1999 2002 2005 2008 East Asia & Pacific East Asia & Pacific Europe & Central Asia Europe & Central Asia Latin America & the Caribbean Latin America & the Caribbean Middle East & North Africa Middle East & North Africa South Asia South Asia Sub-Saharan Africa Sub-Saharan Africa Total Source: World Bank Povcalnet. Sources: World Bank Staff calculations and Household Surveys. Note: Regional poverty rates are measured at US$1.25 a day (2005 purchasing power parity), with forecasts to 2015. Surveys cover less than half of the population of Sub-Saharan Africa in 1990; of South Asia in 1999; and Europe and Central Asia in both 2002 and 2008. The distribution of the poor is notable in the differ- Malnutrition, measured in children by comparing their ences between poverty rates in rural and urban areas. As weight with other children of similar age, reflects a short- global poverty declined, so did the differential between fall in food energy, poor feeding practices by mothers, and urban and rural poverty. East Asia and the Pacific nar- a lack of essential nutrients in their diets. Malnutrition in rowed the gap by almost half by 2008. In other regions, children often begins at birth, when poorly nourished such as Sub-Saharan Africa, Latin America and the Carib- mothers give birth to underweight babies. Malnourished bean, and South Asia, there was less progress in closing children develop more slowly, enter school later, and per- this gap. form less well. Based on available data, malnutrition rates Hunger and malnutrition are measured by two differ- in developing countries have dropped substantially, from ent MDG indicators. Undernourishment reflects a short- 28 percent of children under age five in 1990 to 17 percent age of food energy to sustain normal daily activities and is in 2011. Every developing region except Sub-Saharan affected both by changes in the average amount of food Africa is on track to cut child malnutrition rates in half by available and by its distribution. Undernourishment 2015. However, data collection on malnutrition using sur- declined steadily in most regions from 1991 to 2005, but veys that directly measure children’s weight and height is further improvements have stalled since, leaving 13 per- costly, and many countries lack sufficient information to cent of the world’s population, almost 900 million people, calculate time trends. without adequate daily food intake. 26 FIGURE 1c  Average daily income of the poor by FIGURE 1d  Malnutrition prevalence (weight for region, 2008 age) by region, 1990–2011 1.0 60 50 % of children under 5 0.8 U.S. dollars 0.6 40 30 0.4 20 0.2 10 0 East Asia Europe Latin Middle East South Sub-Saharan 0 & Paci c & Central America & & North Asia Africa 1990 1995 2000 2005 2010 2011 Asia the Caribbean Africa East Asia & Pacific Source: World Bank, Povcalnet. Europe & Central Asia Latin America & the Caribbean Middle East & North Africa South Asia FIGURE 1e  Undernourishment prevalence by Sub-Saharan Africa region, 1991–2011 Source: World Development Indicators database, 2013. 35 30 25 % of population 20 15 10 5 0 1991 2000 2005 2008 2011 East Asia & Pacific Europe & Central Asia Latin America & the Caribbean Middle East & North Africa South Asia Sub-Saharan Africa Source: World Development Indicators database, 2013. 27 MDG 2 Achieve universal primary education The commitment to provide primary education to every Completion rates in the Middle East and North Africa have child is the oldest of the MDGs, having been set in 1990 at stayed at 90 percent since 2008. Sub-Saharan Africa and the first Education for All conference, in Jomtien, Thailand. South Asia, which started out farthest behind, have made Achieving this goal has often seemed tantalizingly near, substantial progress in absolute terms: South Asia has but it has been reached only in Latin America and the reached 88 percent but progress has been slow, while Caribbean, although Europe and Central Asia is close. (This Sub-Saharan Africa lags far behind, at 70 percent. Even if goal had been reached at the outset by East Asia and the schools in these regions were to begin now to enroll every Pacific; then there was some backtracking, but the region eligible child in the first grade, those children would not is now close to reaching the goal again.) Progress among be able to achieve a full course of primary education by the poorest countries, slow in the 1990s, has accelerated 2015. But they would at least be on their way. since 2000, particularly in South Asia and Sub-Saharan Many children enroll in primary school but attend Africa, but full enrollment remains elusive. Many children intermittently or drop out entirely. This is particularly true start school but drop out before completing the primary for girls. Almost all school systems with low enrollment stage, discouraged by cost, distance, physical danger, and rates show underenrollment of girls in primary school. failure to progress. Even as countries approach the MDG In rural areas, the work of children of both sexes may be target, the education demands of modern economies needed during planting and harvest. Other obstacles, are expanding. In the 21st century, more than ever before, including school fees, lack of suitable facilities, and primary education is a critical stepping stone in building absence of teachers, discourage parents from sending the human skills necessary for continued growth and their children to school. The problem is worst in South prosperity. Asia and Sub-Saharan Africa, where more than 48 million In most developing regions, school enrollment rates children of primary school age are not in school. picked up after the MDGs were promulgated in 2000, Urban and rural primary completion rates are very when the completion rate was 80 percent. By 2009, that similar in many countries around the world. The quality of rate had climbed to nearly 90 percent but has stalled since. primary education, however, differs more substantially, as FIGURE 2a  Progress toward achieving complete FIGURE 2b  More girls than boys remain out of primary education by region school by region, 2010 120 30 Girls % of relevant age group 25 Boys 100 20 Percent 80 15 60 10 40 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2015 5 East Asia & Pacific Europe & Central Asia 0 Latin America & the Caribbean East Asia Europe & Latin Middle East South Sub-Saharan Middle East & North Africa & Paci c Central America & & North Asia Africa South Asia Asia the Caribbean Africa Sub-Saharan Africa Source: UNESCO Institute of Statistics and World Development Indicators database. Source: UNESCO Institute of Statistics and World Development Indicators database. Note: Dotted lines show path to goal. Note: Progress assessment in East Asia and Pacific does not include China, which is believed to have completion rates close to 100 percent. 28 evidenced by the notable differences in the percentage FIGURE 2c  Urban and rural primary completion of pupils reaching competency levels in reading in urban rates are not very different worldwide versus rural areas. Mozambique (2009) In Ghana, for example, enrollment in basic education Urban São Tomé and Príncipe (2010) Rural nearly doubled by 2011, to 7 million pupils, and govern- Malawi (2010) ment expenditures on basic education more than tripled Uganda (2010) in real terms. More children are accessing basic educa- Côte d’Ivoire (2008) tion, graduating from junior high school, and enrolling Cameroon (2007) in senior high school than at any time in Ghana’s history. Zambia (2010) Despite these achievements in access to basic edu- Guyana (2009) cation, inequity remains a persistent feature of Ghana’s Ukraine (2007) education service delivery and its most critical challenge. Turkey (2003) The primary net enrollment ratio has remained close to Albania (2008) 80 percent over the past five years, meaning that nearly Egypt, Arab Rep. (2008) 1 million primary school-age children are not in school. India (2005) These students are disproportionately from poor house- Philippines (2003) holds and rural or marginalized areas or language groups Cambodia (2005) (including the three northern regions) or are living in fos- Dominican Republic (2007) ter situations. Instead of compensating for deprivation, Nepal (2006) public expenditures appear to exacerbate the inequal- Peru (2007) ity by allocating fewer resources per child to the regions Bolivia (2008) with the majority of deprived districts. Such a system Timor-Leste (2009) perpetuates poverty and inequality. This picture of inequity is mirrored in data on Gha- Nicaragua (2001) naian children’s primary learning outcomes, primary Moldova (2005) completion rates, and access to senior high school. Nota- Colombia (2005) bly, although the Ministry of Education has introduced Azerbaijan (2006) several equity-improving initiatives, challenges with pro- Armenia (2005) gram design, targeting, and implementation have not Haiti (2005) been overcome, and the initiatives disproportionately Maldives (2009) benefit individuals from wealthier populations. Hence, 0 30 60 90 120 150 Ghana’s scores in the Trends in International Mathemat- Primary completion rate ics and Science Study (TIMSS) 2003 were lower than any Sources: Demographic and Health Surveys; World Bank 2012; and other African country evaluated, including Botswana, the staff calculations. Arab Republic of Egypt, Morocco, South Africa, and Tuni- sia. Ghana’s scores on the TIMSS 2007 were better but still among the lowest among African countries whose FIGURE 2d   eading competency levels (4-8) in R students took the tests. urban and rural areas, 2007 100 80 Rural (%) 60 40 20 0 0 20 40 60 80 100 Urban (%) Source: Southern and Eastern Africa Consortium for Monitoring Educational Quality (SACMEQ). 29 MDG 3 Promote gender equality and empower women Women make important contributions to economic and boys. But averages can obscure large differences between social development. Expanding opportunities for them in countries: overenrollment of girls in one country does not the public and private sectors is a core development strat- counterbalance underenrollment in another. At the end of egy. Education is the starting point. By enrolling and stay- the 2011 school year, 31 upper-middle-income countries ing in school, girls gain the skills they need to enter the and 23 lower-middle-income countries had reached or labor market, care for families, and make decisions for exceeded equal enrollment of girls in primary and second- themselves. Achieving gender equity in education is an ary education, but only 9 low-income countries had done important demonstration that young women are full, con- so. Two regions lag behind: South Asia and Sub-Saharan tributing members of society. Africa. The differences are also notable for urban-rural Girls have made substantial gains in primary and sec- areas. For several African countries, the gap between male ondary school enrollment. In 1990, the primary school and female enrollment remains large, especially for sec- enrollment rate of girls in developing countries was only ondary enrollment. Only a few countries in Sub-Saharan 86 percent that of boys. By 2011, the average was 97 per- Africa have higher enrollment rates for girls (Niger, cent.1 Similar improvements have been made in second- Rwanda, and Senegal in urban areas). However, most of ary schooling, where girls’ enrollments have risen from 78 the countries included in figure 3b show that boys have percent to 96 percent of that of boys. Progress has been higher enrollment rates compared with girls. greatest in richer countries. In countries classified by the More women are participating in public life at the World Bank as upper-middle-income, girls’ enrollments in highest levels. The proportion of parliamentary seats held primary and secondary schools now exceed those of by women continues to increase. The Latin America and Caribbean region, where women now hold 23 percent of all parliamentary seats, remains in the lead. The most impressive gains have been made in South Asia, where FIGURE 3a   Gender parity in primary, secondary, and tertiary education by region, 2011 the number of seats held by women more than tripled between 1999 and 2010. In Nepal, women held one-third of parliamentary seats in 2011. In Sub-Saharan Africa, East Asia & Pacific Rwanda leads the way: since 2008, 56 percent of its parlia- Europe & Central Asia mentary seats have been held by women. The Middle East and North Africa lag far behind. Latin America & the Caribbean Full economic empowerment of women remains a Middle East & distant goal. While many women work long hours and North Africa make important contributions to their families’ welfare, South Asia they often work in the informal sector, typically as unpaid family workers. Women’s share in paid employment in the Sub-Saharan Africa nonagricultural sector has risen marginally but remains 0 30 60 90 120 150 less than 20 percent in South Asia and in the Middle East Ratio of female to male enrollment and North Africa. The largest proportion of working Primary Secondary Tertiary women is found in Europe and Central Asia, where in recent years, 47–48 percent of nonagricultural wage Source: UNESCO Institute of Statistics and World Development Indicators employees were women. database. 1. The ratio between the enrollment rate of girls and boys (gender parity ratio) increased from 91 in 1999 to 97 in 2010 for the developing regions as a whole—falling within the plus-or-minus 3-point margin of 100 percent that is the accepted measure for parity. 30 GLOBAL MONITORING REPORT 2012 O V E R V I E W   31 FIGURE 3b   Gap in male-female enrollment ratios 30 25 20 15 10 5 0 Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Ethiopia Niger Burkina Faso Mozambique São Tomé Senegal Uganda Ghana Sierra Leone Côte d’Iviore Rwanda Cameroon Zambia Kenya Nigeria –5 2004 2007 2010 2008 & Príncipe 2005 2010 2005 2003 2008 2010 2007 2010 2005 2004 2010 –10 Primary Senior secondary Source: World Development Indicators database. 31 MDG 4 Reduce child mortality In most countries around the world, most children’s As a country urbanizes, children in urban areas tend to deaths occur in the first year. In developing countries, the have access to better health services and thus lower rates of under-five mortality rate fell from 87 per 1,000 live births in child mortality than children in rural areas. In addition, as 1990 to 51 in 2011. This progress is not sufficient to meet countries become more urbanized, the proportion of chil- the health-related MDG target of a two-thirds reduction dren in rural areas declines, further narrowing the difference by 2015. Only 25 countries have achieved this target, and between the mortality rates of rural and urban children. only an additional 26 have made enough progress to be Notably, the highest rates of child mortality are in Sub-Saha- able to meet the target by 2015. ran Africa, whose countries are the least urbanized. For the infant mortality rate, the numbers are worse: The disparities between urban and rural infant mortal- only 5 countries met the target of reducing the infant ity rates display a similar pattern. Higher infant mortality mortality rate by two-thirds between 1990 and 2015, and rates in rural areas are in part attributable to the disadvan- only 13 countries are making enough progress to reach it tages faced by rural households, such as lack of access to a by 2015. More than 120 countries still have not made suffi- safe source of drinking water and electricity. As discussed cient progress to meet the goal on time. Overall, the MDG in chapter 2 of the Global Monitoring Report (GMR), govern- health indicators have seen the least progress of all the ments need to provide basic services in rural areas as well MDGs. as in urban ones to correct such deficiencies, to the extent possible. FIGURE 4a  Urban versus rural child mortality gap 250 Rural Urban Log (rural) 200 Child deaths (per 1,000) TCD.04 SLE.08 MLI.06 150 MOZ.03 NER.06 GIN.05 ZMB.07 LBR.07 CAF.94 COD.07 CIV.98 SDN.90 NGA.08 BEN.06 MWI.10 COG.05 100 SWZ.06 BFA.10 TGO.98 YEM.97 MRT.00 TZA.10 CMR.11 LSO.09 GAB.00 ETH.11 ERI.02 BDI.10 UGA.11 RWA.10 COM.96 PAK.06 ZWE.10 HTI.06 BOL.03 KEN.08 TKM.00 GHA.08 STP.08 TLS.09 BGD.07 MDG.08 IND.06 KGZ.97 NAM.06 SEN.10 TUN.88 50 UZB.96 KAZ.99 AZE.06 BWA.88 CPV.98 TUR.98 MEX.87 BRA.96 NPL.11 ZAF.98 GUY.09 IDN.07 MAR.03 THA.87 GTM.08 NIC.06 ECU.04 DOM.07 TTO.87 KHM.10 EGY.08 PHL.08 HND.05 GEO.05 ROU.99 PRY.08 JOR.09 MDV.09 MDA.05 JAM.08 COL.10 PER.07 VNM.02 ARM.10 SLV.08 UKR.07 ALB.08 0 0 25 50 75 100 % of urban population Source: Demographic and Health Surveys (DHS). 32 FIGURE 4b  Urban versus rural infant mortality gap 140 Mozambique (2003) Mali (2006) Guinea (2005) 120 Sierra Leone (2008) Congo, Dem. Rep. (2007) Liberia (2009) Niger (2006) Nigeria (2008) 100 Rural deaths (per 1,000 live births) Congo, Rep. (2005) Lesotho (2009) Burundi (2010) Zambia (2007) Bolivia (2008) 80 India (2006) Malawi (2010) Cambodia (2010) Eritrea (2002) Mauritania (2000) Senegal (2010) Kenya_2008 Morocco (2003) 60 Namibia (2006) Indonesia (2007) Guatemala (2008) 40 Guyana (2009) Vietnam (2002) Albania (2008) Jordan (2009) Colombia (2010) 20 0 0 20 40 60 80 100 120 140 Urban deaths (per 1,000 live births) Source: Demographic and Health Surveys (DHS). 33 MDG 5 Reduce maternal mortality MDG 5 centers on improving maternal health, with a The starting point for the maternal mortality ratio in target of reducing the maternal mortality ratio by three- middle-income countries in 1990 was nearly half that of quarters between 1990 and 2015. With only two years low-income countries (370 deaths per 100,000 live births remaining before the target date, progress on maternal compared to 810). However, neither group of countries is health is still lagging. Despite some notable exceptions close to achieving the goal on time . Although they will such as Sri Lanka and Malaysia, the level of maternal mor- miss the 2015 target date, middle-income countries could tality remains high in much of the developing world. reach the maternal mortality goal by 2016 if they doubled Although on the aggregate the rate of progress has dou- their effort. The low-income group will need even longer bled across the globe from 2005 to 2010, it is unlikely that Despite this bad news, there are some bright spots. this MDG will be achieved by 2015. Fragile states as a group started with a similar number South Asia is the only region on track to reach the tar- of maternal deaths to Sub-Saharan Africa (780 deaths get for reducing maternal mortality, assuming the region per 100,000 live births in 1990), but several of them continues at the same rate of progress made from 2005 have managed, or are on track, to achieve this particu- to 2010. The Middle East and North Africa might also be lar MDG. Nepal reduced its maternal mortality rate from able to reach the MDG target if it doubles the effort it 770 deaths per 100,000 live births in 1990 to 170 in 2010, made from 2005 to 2010. The starting point in the level earning it the MDG Millennium Award in 2010. Nepal has of maternal mortality obviously affects progress made in also made extraordinary progress in reducing its propor- achieving the target but is not the only factor. Europe and tion of poor people in recent years. Other fragile states Central Asia started with 70 maternal deaths per 100,000 such as Afghanistan, Angola, Eritrea, Timor-Leste, and the live births in 1990, while Sub-Saharan Africa started with Republic of Yemen are still on track to meet the MDG, 850. However, if Sub-Saharan Africa doubles the progress some with acceleration, and others following their cur- made during 2005 to 2010, it will be able to reach its goal rent growth trend. by 2016—just a year past the target, while Europe and The issue of teenage pregnancy still requires signifi- Central Asia would need to more than double its effort to cant attention, especially in rural areas, where the rate of meet the goal in 2015. teen pregnancy is higher than in urban areas. 34 FIGURE 5a  Expected year when maternal FIGURE 5b  E  xpected year when maternal mortality mortality goal will be met, by region goal will be met, by income level and by fragile and small states Middle East & 2014 2018 North Africaa 2017 Small states 2025 Latin America & 2026 the Caribbeana 2041 2016 Fragile states 2022 Europe & 2020 Central Asiaa 2030 Middle-income 2016 East Asia & 2014 countries 2022 Pacifica 2018 2015 Low- and middle- 2012 income countries 2020 South Asia 2014 Lower-middle- 2014 Sub-Saharan 2016 2019 2021 income countries Africaa 2016 Low-income 2014 World 2021 2019 countries 2011 2016 2021 2026 2031 2036 2041 2011 Doubling of effort made, 2005–10 Doubling of effort made, 2005–10 Extrapolating absolute progress made, 2005–10 Extrapolating absolute progress made, 2005–10 Source: World Development Indicators database, 2013. Source: World Development Indicators database, 2013. a. Developing countries only. FIGURE 5c  The percentage of teenagers who had children or are currently pregnant is higher in rural areas than in urban ones MOZ.03 50 NER.06 SLE.08 45 MLI.06 CIV.98 GAB.00 GIN.05 40 TCD.04 CAF.94 MDG.08 BGD.07 35 CMR.11 STP.08 NIC.06 BWA.88 Rural (percentage) 30 BEN.06 COD.07 MWI.10 TZA.10 SEN.10 UGA.11 25 LSO.09 SWZ.06 GUY.09 PER.07 ECU.04 IND.06 CPV.98 20 NAM.06 KEN.08 MRT.00 ETH.11 JAM.08 15 SDN.90 EGY.08 TTO.87 GEO.05 AZE.06 BDI.10 10 ARM.10 UKR.07 ALB.08 5 MDV.09 0 0 5 10 15 20 25 30 35 40 45 50 Urban (percentage) Source: Demographic and Health Surveys (DHS). 35 MDG 6 Combat HIV/AIDS, malaria, and other diseases Epidemic diseases exact a huge toll in human suffering retroviral drugs. That represented the largest one-year and lost opportunities for development. Poverty, armed increase in coverage but fell far short of the target of conflict, and natural disasters contribute to the spread of universal access. In Africa, 58 percent of adults with HIV/ disease and are made worse by it. In Africa, the spread of AIDS are women; among youth aged 15–24, the preva- HIV/AIDS has reversed decades of improvement in life lence rate among women is more than twice that of expectancy and left millions of children orphaned. It is men. The second highest prevalence rate is in Latin draining the supply of teachers and eroding the quality America and the Caribbean, where 0.5 percent of adults of education. Malaria takes a large toll on young children are infected. and weakens adults at great cost to their productivity. The prevalence of HIV infection in urban and rural Tuberculosis caused the deaths of some 1 million peo- areas varies significantly from country to country. For ple in 2011, most of them aged 15–45, and sickened mil- most Sub-Saharan Africa countries, the rates of HIV lions more. Tuberculosis is one of the principal causes of infection are higher in urban areas than in rural ones. adult death from a single infectious agent in developing Because evidence from health surveys confirms that a countries. prominent decline in prevalence is associated with Some 34 million people were living with HIV/AIDS in higher education, increased condom use, and a reduced 2011, and 2.5 million people acquired the disease during number of sexual partners, most of the effort to prevent the year. Sub-Saharan Africa remains the center of the HIV/AIDS should continue to be concentrated in urban epidemic, but the proportion of adults living with AIDS areas. has begun to fall as the survival rate of those with access In 2011, 8.7 million people were newly diagnosed to antiretroviral drugs has increased. By the end of 2010, with tuberculosis, but its incidence, prevalence, and 6.5 million people worldwide were receiving anti- death rates are all falling. The global incidence rate 36 FIGURE 6a  Population infected with HIV, ages 14-49 FIGURE 6b  Tuberculosis-infected population in low- and middle-income countries 70 350 60 300 50 Rate per 1,000 people 250 40 Percent 200 30 150 20 100 10 50 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Sub-Saharan Africa High-income countries Death rate Prevalence rate Incidence rate Latin America & the Caribbean Other developing regions Source: UNAIDS and World Development Indicators database. Source: UNICEF and World Development Indicators database. FIGURE 6c  Millions of people still afflicted FIGURE 6d  Urban versus rural children under age 5 who with HIV/AIDS sleep under insecticide-treated bed nets India (2006) Angola (2006)) Burkina Faso (2010) Benin (2006)) Cambodia (2005) Urban Burkina Faso (2010) Urban Ethiopia (2011) Rural Burkina Faso (2003) Rural Senegal (2005) Burundi (2010) Vietnam (2005) Cameroon (2011) Senegal (2010) Cameroon (2004) Ethiopia (2005) Congo, Rep. (2005) Dominican Republic (2007) Congo, Dem. Rep. (2007) Burundi (2010) Côte d’Ivoire (1998) Ethiopia (2005) Niger (2006) Ghana (2008) Rwanda (2005) Ghana (2003) Congo, Dem. Rep. (2007) Guinea (2005) Liberia (2007) Kenya (2008) Sierra Leone (2008) Kenya (2003) Burkina Faso (2003) Liberia (2009) Haiti (2006) Madagascar (2008) Rwanda (2010) Malawi (2010) Dominican Republic (2002) Malawi (2004) Ghana (2003) Mali (2006) Mali (2006) Namibia (2006) Côte d’Ivoire (2005) Niger (2006) Guinea (2005) Nigeria (2008) Mali (2001) Nigeria (2003) São Tomé & Príncipe (2008) Rwanda (2010) Congo, Rep. (2009) Rwanda (2008) Rwanda (2005) Cameroon (2011) São Tomé & Príncipe (2008) Tanzania (2007) Senegal (2008) Tanzania (2003) Senegal (2005) Uganda (2004) Sierra Leone (2008) Cameroon (2004) Swaziland (2006) Malawi (2010) Tanzania (2010) Kenya (2008) Tanzania (2004) Kenya (2003) Uganda (2006) Zambia (2007) Zambia (2007) Zimbabwe (2010) Zambia (2002) Zambia (2002) Zimbabwe (2010) Mozambique (2009) Zimbabwe (2005) Zimbabwe (2005) Cambodia (2005) Lesotho (2009) Indonesia (2007) Lesotho (2004) Timor-Leste (2009) Swaziland (2006) Guyana (2009) 0 10 20 30 40 50 60 70 80 0 2 4 6 8 10 12 14 16 18 20 Percent Percent Source: Demographic and Health Surveys (DHS). Source: Demographic and Health Surveys (DHS). 37 FIGURE 6e  Children under age 5 who use insecticide-treated bed nets Mauritania (2004) Congo, Rep. (2005) Mali Rwanda Niger Tanzania Togo São Tomé & Príncipe Gabon Zambia Eritrea Burkina Faso Kenya Madagascar Burundi Uganda Malawi Ghana Congo, Dem Rep. Liberia Central African Republic Guinea-Bissau Senegal Namibia Gambia, The Ethiopia Sierra Leone Nigeria Angola Sudan Cameroon Benin First observation (2000 or earlier) Mozambique Most recent observation (2006 or later) Somalia Chad Zimbabwe Comoros Guinea Côte d’Ivoire Swaziland 0 10 20 30 40 50 60 70 80 Under-5 population (%) Sources: UNICEF and World Development Indicators database. peaked in 2002; the prevalence rate—the proportion of most abundant, is the epicenter. Prevention and control people living with the disease—began to fall in 1997. If measures, such as the use of insecticide-treated mos- these trends are sustained, the world could achieve the quito bed nets, have proven effective and their use is target of halting and reversing the spread of tuberculo- spreading. In Sub-Saharan Africa, the use of treated nets sis by 2015. People living with HIV/AIDS, which reduces is estimated to have grown from 2 percent in 2000 to 39 resistance to tuberculosis, are particularly vulnerable, as percent in 2010. Better testing and the use of combina- are refugees, displaced persons, and prisoners living in tion therapies with artemisinin-based drugs are improv- close quarters and unsanitary conditions. Well-managed ing the treatment of at-risk populations. But malaria is a medical intervention using appropriate drug therapy is difficult disease to control. Emerging resistance to arte- the key to stopping the spread of tuberculosis. misinins and to the pyrethroid insecticides used to treat There are 300 million–500 million cases of malaria mosquito nets has been detected. each year, leading to more than 1 million deaths. The differences in the rate of use of treated mosquito Encouraging progress against the disease is being nets between rural and urban areas are minor. The cost made. In 2011, Armenia was added to the list of coun- of distributing nets is lower in urban areas thanks to tries certified free of the disease. Malaria, a disease of agglomeration effects, likely contributing to the typically poverty, occurs in all regions, but Sub-Saharan Africa, higher usage there. where the most lethal form of the malaria parasite is 38 MDG 7 Ensure environmental sustainability As part of the MDGs, most countries have agreed on the all sanitation-related deaths occur in the rural areas of principles of sustainable development, and there is interna- developing countries, where sanitation problems are tional consensus to protect the environment. To this end, more severe (and access to adequate health care is less MDG 7 includes a target of halving the proportion of the available). Some regions have made more progress than population without access to improved sanitation and others, but even though most regions have improved water sources by 2015. For many people in developing access to sanitation by more than 20 percentage points, countries, however, access to safe water and sanitation dif ferences between urban and rural areas are remains a problem. considerable. Fifty-six countries have still not made enough progress South Asia and Sub-Saharan Africa are the only regions to reach the target of improved water sources on time; where progress has not been significant, with an increase in moreover, 20 countries do not have enough data to mea- access of only 17 percentage points in South Asia and 4 per- sure their progress on this target. Sub-Saharan Africa is lag- centage points in Sub-Saharan Africa from 1990 to 2010. ging the most, although it has improved access to clean These regions also had the worst starting positions. water in rural areas from 35 percent in 1990 to 49 percent in The increase in access to improved sanitation has not 2010; access in urban areas has not changed and remains at been impressive in urban areas either. The biggest advance 83 percent. East Asia and Pacific made impressive improve- came in the East Asia and Pacific region, where access ments in rural areas, from a starting position of only 58 per- increased about 22 percent during 1990–2010. cent in 1990 to 84 percent in 2010; in urban areas access was Although the gap between urban and rural access to nearing 100 percent. In general, the other regions have sanitation is still wide, it has decreased in all regions. already managed to reach access rates of more than 80 per- Between 1990 and 2010, for example, the gap narrowed cent in urban and rural areas. from 42 percent to 25 percent in Latin America and the Poor sanitation causes millions of people worldwide Caribbean, and from 44 percent to 31 percent in South Asia. to contract illnesses. Around 1.7 million people die each Most striking, in Europe and Central Asia, the gap narrowed year because of unsafe water and sanitation, and 90 per- from 20 percent in 1990 to 7 percent in 2010, suggesting cent of those are children under age five. Almost that even though progress is slow, it does reach under- served rural populations. FIGURE 7a    Access to water by region, 1990 and 2010 100 80 Percentage 60 40 20 0 Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban East Asia & Europe & Latin America & Middle East & Sub-Saharan South Asia Pacific Central Asia the Caribbean North Africa Africa Starting position (1990) Latest position (2010) Source: World Development Indicators database, 2013. 39 FIGURE 7b  Access to sanitation by region, 1990 and 2010 100 80 60 Percentage 40 20 0 Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban East Asia & Europe & Latin America & Middle East & Sub-Saharan South Asia Pacific Central Asia the Caribbean North Africa Africa Starting position (1990) Latest position (2010) Source: World Development Indicators database, 2013. FIGURE 7c  Urban-rural gap in access to sanitation by region 50 40 30 Percent 20 10 0 East Asia & Europe & Latin America Middle East & Sub-Saharan South Asia Pacific Central Asia & the North Africa Africa Caribbean 1990 2010 Source: World Development Indicators database, 2013. 40 MDG 8 Develop a global partnership for development The use of information and communication technology the growth in the number of fixed telephone lines has (ICT) for economic development is part of the MDG 8 stagnated. Remarkable increases have also taken place in indicator, which focuses on the deepening of a global Internet usage, although here progress is more diverse, partnership for development. A specific description of with stronger growth in high-income countries than in this specific target was chosen and indicators identi- low- and middle-income countries. Even though access fied. Target 8.F states that, in cooperation with the pri- challenges remain, particularly in low-income countries, vate sector, the benefits of new technologies, especially the spectacular rise in mobile phone penetration has led those related to information and communications, will to the emergence of a variety of innovations that allow be made available. The indicators measuring this prog- citizens, governments, and international organizations to ress are the number of fixed telephone lines, cellular sub- be more engaged and better informed, and that enable scribers, and Internet users. aid providers to identify and communicate more directly These indicators show that mobile phone subscrip- with beneficiaries. tions have risen impressively across the world, while FIGURE 8a  Use of information and communication technology by region and income group Telephone lines Mobile cellular subscriptions 30 150 25 20 100 Per 100 people Per 100 people 15 10 50 5 0 0 1990 1995 2000 2005 2010 1990 1995 2000 2005 2010 East Asia & Pacific (developing only) East Asia & Pacific (developing only) Europe & Central Asia (developing only) Europe & Central Asia (developing only) Latin America & the Caribbean (developing only) Latin America & the Caribbean (developing only) Middle East & North Africa (developing only) Middle East & North Africa (developing only) South Asia South Asia Sub-Saharan Africa (developing only) Sub-Saharan Africa (developing only) World World Source: World Development Indicators database, 2013. Source: World Development Indicators database, 2013. 41 Improving the measurement of development goals The Millennium Development Goals (MDGs) provide a for filling the gaps in child and maternal mortality series. yardstick against which to measure development However, they inevitably result in data series that differ outcomes. They have also stimulated demand for better from nationally reported data and international assess- statistics and new programs to increase the capacity of ments of country progress that differ from those pro- developing countries to produce and use statistics. The duced by the countries. United Nations and its specialized agencies, including the When the MDGs were adopted, few developing World Bank and the International Monetary Fund, and the countries had the capacity or resources to produce sta- Organisation for Economic Co-operation and Develop- tistics of the requisite quality or frequency. Many coun- ment responded to these demands by creating new part- tries had not conducted a recent census or a household nerships and mobilizing additional resources to provide survey capable of producing information on income, support for statistics in developing countries. The result consumption, or health status. Values for many indicators has been a marked improvement in the quality and avail- disseminated by international agencies were based on ability of statistics on core development outcomes: poverty unverified reports from national authorities. Statistical and income distribution, school enrollments, mortality and activities sponsored by bilateral donors and multilateral morbidity rates, and environmental conditions. agencies often focused narrowly on securing data of The MDGs posed three challenges: the selection of interest to them but doing little to increase the capacity appropriate targets and indicators with which to monitor of the national statistical system to serve the needs of them; the construction of an international database to local decision makers or citizens. use for global monitoring; and the need for significant The early efforts to monitor the MDGs revealed large improvements in the quality, frequency, and availability gaps in both the international database and in many of the relevant statistics, especially at the national level. national databases. In 2003–04, the Partnership in Statis- The selection of goals and targets was determined by tics for Development in the 21st Century (PARIS21) con- the Millennium Declaration adopted unanimously by the ducted six case studies of developing-country statistical member states of the United Nations. Building the data- systems. The studies found that the countries generally base and strengthening the statistic systems of develop- had very limited capacity to manage their own statistical ing countries has required the efforts of many partners programs. over many years. When countries produce statistics to Although the developing world has made some monitor their own development programs, differences headway in improving its data collection and reporting, in definition and methodology often limit comparability the systems are characterized by underfunding, reliance across countries. Whether monitored at the national, on donor support, particularly for household surveys, regional, or global level, international monitoring of the and very weak administrative data systems. The basic MDGs requires indicators that are comparable across demographic information needed to underpin key indi- countries and over time. cators is out of date in some countries, and funding for To produce harmonized statistics suitable for interna- major activities, such as population censuses, is particu- tional comparisons, agencies often revise national data larly difficult to secure. Overall, there continues to be a or recompile data using different reference periods or shortfall in funding for core statistical systems required standards, such as the “dollar a day” poverty indicator. to provide information both for economic management They may also impute values for missing data or use sta- and for monitoring the MDGs. tistical models to combine multiple estimates. Inter- The proportion of countries with two or more data agency efforts such as these have been very important points (the bare minimum needed for assessing trends) 42 TABLE 1  Proportion of countries with two or more observations 2005 database 2013 database Selected MDG indicators with two or more Number of Number of Population Population Number of Number of Population Population observations in period show countries countries covered (%) covered (%) countries countries covered (%) covered (%) 1990–2000 2001–12 1990–2000 2001–12 1990–2000 2001–12 1990–2000 2001–12 MDG 1.a Extreme poverty (% of population below 63 — 40.9 — 67 75 65.7 85.8 $1.25 a day, 2005 PPP ) MDG 1.c Malnutrition prevalence, weight for age 77 — 88.9 — 77 72 83.6 61.5 (% of children under age 5) MDG 2.a Primary completion rate (% of relevant 111 83 88.5 54.6 110 123 86.1 70.9 age group) MDG 3.a Ratio of girls to boys in primary and 105 62 86.3 17.7 116 126 89.5 95.5 secondary education (%) MDG 4.a Infant mortality rate (per 1,000 live births) 135 2 99.0 0.3 141 141 99.9 99.9 MDG 4.a Under-5 mortality rate (per 1,000) 135 1 99.0 0.2 141 141 99.9 99.9 MDG 5.b Births attended by skilled health staff 86 1 63.4 4.2 108 119 90.6 94.8 (% of total) MDG 6.c Immunization, measles (% of children, 134 135 99.5 99.6 137 139 99.7 99.7 ages 12–23 months) MDG 7.c Improved sanitation facilities (% of — — — — 136 138 99.6 99.8 population with access) MDG 7.c Improved water source (% of population — — — — 138 137 99.8 99.6 with access) Source: World Development Indicators. Note: — = not available; PPP = purchasing power parity. for selected MDG indicators in 2005 and 2013 is shown in in data quality and availability. The high-priority domains table 1. For some indicators, the improvement has been include agricultural statistics, poverty statistics and house- much more dramatic. But for other less prominent indica- hold surveys, gender statistics, labor force statistics, envi- tors, progress has been slower. ronmental accounting and the system of national Despite the progress made in the past decade, accounts, and vital registration systems. The Busan Action national systems face immense difficulties on many fronts Plan for Statistics provides an agreed framework for including funding, sectoral shortcomings, and poor data addressing capacity limitations in developing countries access, and the development of skills needed to use statis- and work is already under way in some domains. tics effectively in planning and management. In 2011, the Resources are limited, however, and even with greater High Level Forum on Aid Effectiveness meeting in Busan, resources, capacity building is a slow, deliberate process. Republic of Korea, endorsed a new action plan for statis- The MDGs have contributed to the development of a sta- tics. Several statistical domains have been identified as tistical infrastructure that is increasingly capable of pro- priorities for international action because of large deficits ducing reliable statistics on a variety of topics. 43 1 Macroeconomic, Trade, and Aid Developments in Developing Countries Growth and macroeconomic Despite sustained economic growth, adjustment in developing progress in rebuilding policy buffers in low- countries income countries has been modest. There are large differences across countries, however. The global economy is expected to recover, Still-high international commodity prices are but only very gradually. While the road to providing commodity exporters with rela- recovery in advanced economies will remain tively larger buffers than commodity-import- bumpy, downside risks to the outlook have ing countries. The downside risk of a pro- eased as policy intentions in advanced econo- tracted global growth slowdown extending mies have become clearer and commodity through 2015 would have a significantly neg- price volatility has abated. Although impor- ative impact on growth in low-income coun- tant downside risks remain—including adjustment fatigue in advanced economies tries. With policy buffers not yet restored to and overinvestment and high asset prices in levels preceding the 2009 crisis and against emerging market and developing countries— the backdrop of reduced traditional sources overall risks are now more symmetric. In of financing, most low-income countries emerging market and developing countries, would likely need to undertake adjustments economic activity is picking up. A broadly in the face of such a shock. appropriate current policy stance in emerging This year’s Global Monitoring Report market and developing countries is support- (GMR) focuses on agglomeration as an ing continued strong growth in these coun- important driver of development. As fac- tries, but some tightening of the policy stance tors of production agglomerate, they become appears appropriate over the medium term, more productive because it becomes easier beginning with monetary policy and pru- to exploit economies of scale and scope. dential measures. Commodity prices trended These economic aspects of agglomeration down through most of 2012 and are expected are most often looked at from a microeco- to remain stable in 2013, providing room for nomic perspective, but broad-based changes a flexible implementation of monetary policy, in where people work and live also have pro- particularly in emerging market and develop- found macroeconomic consequences. Using a ing countries. World Bank agglomeration index, evidence 45 46  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 is presented below suggesting that there are percent, respectively).1 The low and falling relatively higher returns to agglomeration growth in the global economy was accompa- on the lower rungs of development. Recent nied by low consumer price inflation in most research at the International Monetary Fund countries. (IMF) suggests that greater economic diver- There were large regional differences in sification is associated with improved mac- growth performance across emerging mar- roeconomic performance. Another strand of ket and developing countries in 2012. The research, which has benchmarked structural recession in the euro area weighed heavily on transformation in Africa with that of Asia’s, central and eastern European countries. With provides some optimism with regard to Afri- Poland and Turkey tightening policies and ca’s economic prospects. several southeastern European countries fall- ing back into recession, growth in this region fell to just 1.6 percent. As in previous years, Growth should rebound by 2014, growth in emerging market and developing but risks remain countries was led by those in Asia (6.6 per- Global economic growth continued to slow cent). Growth in the Middle East and North in 2012 to 3.2 percent, from 4.0 percent in Africa countries recovered to 4.8 percent 2011 (table 1.1). Growth slowed in advanced (from 4.0 percent in 2011), as these countries economies as well as in emerging market and progressed in their political and social tran- developing countries, but the former group sitions, in particular in Libya, where gross of countries grew significantly less than the domestic product (GDP) more than doubled latter group (1.2 percent and 5.1 percent after the economic collapse the year before. respectively). The growth slowdown in 2012 In Sub-Saharan Africa, robust growth contin- was more pronounced than foreseen in GMR ued in 2012, but the average growth rate of 2012. Importantly, however, the two coun- 4.8 percent masks large cross-country differ- try groupings most challenged in meeting the ences. Whereas conflicts negatively affected Millennium Development Goals (MDGs)— growth in Guinea-Bissau and Mali, growth low-income countries and fragile states— in Côte d’Ivoire rebounded following elec- both grew broadly as expected (5.5 and 5.8 tion-related disturbances in 2011. Despite the TABLE 1.1  Global output Annual % change         Projections   2010 2011 2012 2013 2014 2015 World 5.2 4.0 3.2 3.3 4.0 4.4 Advanced economies 3.0 1.6 1.2 1.2 2.2 2.6 Emerging market and developing countries 7.6 6.4 5.1 5.3 5.7 6.0 Central and Eastern Europe 4.6 5.2 1.6 2.2 2.8 3.3 Commonwealth of Independent States 4.9 4.8 3.4 3.4 4.0 4.0 Developing Asia 9.9 8.1 6.6 7.1 7.3 7.6 Middle East and North Africa 5.5 4.0 4.8 3.1 3.7 4.5 Sub-Saharan Africa 5.4 5.3 4.8 5.6 6.1 5.9 Western Hemisphere 6.1 4.6 3.0 3.4 3.9 3.9 Low-income countriesa 6.4 5.7 5.5 6.0 6.2 6.6 Emerging market countriesb 7.7 6.4 5.0 5.2 5.7 5.9 Fragile statesc 5.0 3.6 5.8 6.4 6.8 7.3 Source:  World Economic Outlook. a. Low-income countries are those eligible for financial assistance under IMF’s Poverty Reduction and Growth Trust, and Zimbabwe. b. Emerging market countries are emerging market and developing countries that are not low-income countries. c. A subset of emerging market and developing countries included in the World Bank’s list of Fragile and Conflict-Affected States.  GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    47 weaker overall economic outcome, per capita FIGURE 1.1  GDP per capita growth incomes rose in most countries (figure 1.1). The IMF’s World Economic Outlook proj- 3.5 ects 3.3 percent global growth in 2013. The 3.0 expected growth is subdued as the underly- % change, median country ing fragilities that caused the slowdown in 2.5 2012 take time to unwind. The ongoing fiscal 2.0 consolidation and financial sector deleverag- 1.5 ing will continue to weigh on the euro area, 1.0 and its economy is projected to contract for a second year in a row. Other advanced econo- 0.5 mies are projected to expand, but growth 0 will be held back by headwinds that include 2010 2011 2012 2013 2014 2015 subdued external demand in, and financial projected spillover effects from, the euro area, and fis- Low-income Emerging Advanced cal consolidation (for example, in the United countries market countries economies States). Overall, advanced economies are pro- jected to grow 1.2 percent as in 2012. Source: World Economic Outlook. In the emerging market and developing countries, prospects are for a strengthening of growth to 5.3 percent in 2013. Growth developing countries having the resources is being supported by appropriate policies needed to address their development chal- for the most part, but held back by weak lenges, including enhancing infrastructure demand in advanced economies. Lower provision and achieving the Millennium commodity prices will also lead to terms- Development Goals (MDGs). In that regard, of-trade losses for commodity exporters, the 2009 global crisis was a major setback as with knock-on effects on growth. Dimin- the crisis led to a drop in revenues of 3 per- ished policy space, policy uncertainty, and centage points of GDP. Since then, revenues supply bottlenecks hamper growth in some have recovered somewhat, but not fully, and countries (for example, India). As in 2012, are expected to remain below pre-crisis levels the countries in central and eastern Europe through 2015 (table 1.2). and the Asian countries would be the slowest Global current account imbalances— and fastest growing groups of countries (pro- which widened in the run-up to the crisis— jected to grow by 2.2 and 7.1 percent respec- narrowed as the crisis hit and have since tively). The countries in central and eastern remained broadly stable (figure 1.2). Robust Europe—with their deep trade and financial net financial flows to emerging market and links to western Europe—will continue to developing countries have also remained be negatively affected by spillovers from the fairly constant from 2009 onward, with pros- euro area, while the strong growth in Asia is pects of no major changes for 2013 (table 1.3). predicated on continued expansion in China Emerging market countries receive on average and a strong recovery in India. Growth in about 8 percent of GDP in net financial flows, the Middle East and North Africa will be with most of these flows being private sector modest, reflecting ongoing political transi- financial flows (including transfers). Relative tions and a slowdown among the region’s to GDP, low-income countries receive net oil exporters. Notwithstanding a somewhat financial inflows that are about twice as high, weaker outlook for commodity prices, Sub- averaging 14 percent of GDP in recent years. Saharan African economies are expected to Relative to emerging market countries, low- expand by 5.6 percent. income countries receive more private capital Strong domestic government revenue flows and private transfers, but the main fac- mobilization is key to emerging market and tor behind the higher inflows to low-income 48  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 TABLE 1.2  Government revenue excluding grants Weighted averages, % of GDP             Projections   2008 2009 2010 2011 2012 2013 2014 2015 Emerging market and developing countries 29 26 27 28 28 28 27 27 Central and Eastern Europe 36 35 35 37 37 37 37 36 Commonwealth of Independent States 39 35 35 37 37 36 35 34 Developing Asia 20 20 20 21 22 21 21 22 Middle East and North Africa 43 33 34 38 38 37 37 35 Sub-Saharan Africa 28 23 24 28 27 26 26 25 Western Hemisphere 30 28 30 30 31 31 31 30 Low-income countriesa 24 19 21 23 23 23 22 22   Of which: Fragile statesb 22 17 19 20 20 21 20 20 Emerging market countriesc 30 26 27 28 28 28 28 27 Source:  World Economic Outlook. Note:  General government. a. Low-income countries are those eligible for financial assistance under IMF’s Poverty Reduction and Growth Trust, and Zimbabwe.   b. A subset of low-income countries included in the World Bank’s list of Fragile and Conflict-Affected States. c. Emerging market countries are emerging and developing countries that are not low-income countries. FIGURE 1.2  Global current account imbalances 3 2 1 % of world GDP 0 –1 –2 –3 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (projected) Low-income countries with surplus Other advanced economies with de cit Emerging market countries with surplus Emerging market countries with de cit Advanced economies with surplus Low-income countries with de cit United States Source: World Economic Outlook. countries is the significantly higher level of World trade was stagnant in 2012, reflect- official inflows (capital and transfers). Fragile ing weak import demand in advanced econo- states receive significantly higher net inflows mies and relatively stable international com- (relative to their GDP). In 2012, fragile states modity prices. Trade in emerging market and received net inflows that averaged 16 percent developing countries expanded by 4 percent, of GDP and the prospects are for a similar down sharply from 25 percent the previous level of inflows in 2013. year (in nominal U.S. dollars). In contrast, GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    49 TABLE 1.3  Net financial flows % of GDP a 2013   2008 2009 2010 2011 2012 Projected Emerging market countries 9.6 7.3 7.7 7.3 7.0 7.0 Private capital flows, net 6.0 1.4 2.7 3.1 2.9 2.6 Of which: private direct investment 5.1 3.8 3.2 3.3 3.0 3.0 Private portfolio flows –1.2 –1.0 0.4 0.4 0.4 0.5 Private current transfers 3.5 3.5 3.5 3.3 3.4 3.3               Official capital flows and transfers (net) 0.1 2.5 1.6 0.9 0.8 1.1               Memorandum item:             Change in reserve assets (–, accumulation) –1.7 –2.8 –2.0 –1.2 –0.6 –1.0               Low-income countries 14.9 13.6 12.4 14.7 13.2 13.1 Private capital flows, net 4.7 2.7 3.4 4.0 2.3 2.4 Of which: private direct investment 6.6 5.2 5.9 6.7 5.7 5.4 Private portfolio flows –1.0 –1.2 –1.0 –0.7 –0.9 –0.9 Private current transfers 5.0 4.6 4.5 4.7 4.8 4.5               Official capital flows and transfers (net) 5.2 6.3 4.5 6.1 6.0 6.2               Memorandum item:             Change in reserve assets (–, accumulation) –2.1 –1.9 –1.9 –1.9 –1.2 –1.2               Fragile statesb 16.3 13.0 9.9 19.0 15.9 16.6 Private capital flows, net 6.3 2.3 3.0 5.3 2.4 4.5 Of which: private direct investment 4.4 3.3 3.7 5.4 4.5 4.3 Private portfolio flows 0.1 –0.3 –0.1 –0.4 –0.4 –0.5 Private current transfers 5.6 5.8 5.6 5.6 5.9 5.3               Official capital flows and transfers (net) 4.4 4.9 1.4 8.1 7.6 6.8               Memorandum item:             Change in reserve assets (–, accumulation) –1.6 –1.7 –1.8 –2.1 –0.3 –1.1 Source: World Economic Outlook.             a. Equally weighted.             b. A subset of emerging market and developing countries included in the World Bank’s list of Fragile and Conflict-Affected States. advanced economies’ trade contracted by 2 emerging market and developing countries percent. The typical low-income country is maintain reserves of less than three months highly integrated into the world economy imports. with import and export shares of GDP of about 50 and 30 percent, respectively (figure Macroeconomic policies 1.3). The current account deficits (including foreign direct investments) in these coun- In 2012, the continuing challenge for policy tries remain higher than before the 2009 makers in most advanced economies was how crisis and little change is expected for 2013. concurrently to support a feeble recovery and Official reserves, in months of imports—a address concerns about medium-term fiscal standard measure of reserve adequacy for an sustainability. With inflation expectations emerging market or low-income country— well-anchored, monetary policy continued changed little in 2012, reflecting modest to remain supportive, while firm expendi- increases in both imports and reserve accu- ture controls allowed room for a narrowing mulation (figure 1.4). About a quarter of all of fiscal deficits. Food and other commodity 50  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 FIGURE 1.3  Low-income countries: Imports, exports, and current making in emerging market and developing account balance including FDI countries. Fiscal deficits in 2012 remained broadly 55 0 stable in both emerging market and low- Simple averages, % of GDP 50 –1 income countries (figure 1.7). Thus, the trend 45 toward reinforcing fiscal buffers has stalled. –2 40 In the 2009 crisis, large buffers made pos- 35 –3 sible an unprecedented countercyclical fiscal 30 –4 response on the order of about 3 percent- age points of GDP, but three years after the 25 –5 2013 crisis, less than half of this buffer has been 2008 2009 2010 2011 2012 (projected) reconstituted. Slightly more than half of all emerging Imports Exports Current account balance, (left axis) (left axis) including FDI (right axis) market countries continued to tighten mon- etary policy in 2012 (figure 1.8). Among the Source:  World Economic Outlook. countries that loosened monetary policy, the Note:  Median country. FDI = foreign direct investment. loosening took the form of reduced nominal short-term interest rates and depreciation of the currency in about equal measure. In low- income countries, a significant majority of FIGURE 1.4  Official reserves countries loosened monetary policy in 2012, in sharp contrast to 2011. In these countries, 9 the monetary loosening mostly took the form 8 of currency depreciation although the number Reserves (months of imports) 7 of countries using the interest rate instrument 6 increased significantly from 2011 to 2012. 5 Against this background, growth in monetary 4 aggregates relative to GDP in emerging mar- 3 ket countries broadly reverted to trends pre- 2 vailing before the 2009 crisis (figure 1.9). 1 The macroeconomic policy mix varied 0 sharply across emerging market countries 2008 2009 2010 2011 2012 2013 and low-income countries in 2012; the mix (projected) also changed appreciably from 2011 to 2012 Emerging market countries (figure 1.10). Among emerging market coun- Median, emerging market countries tries, twice as many countries (close to 40 Low-income countries Median, low-income countries percent) loosened both monetary and fiscal policy than tightened both policies. Among Source:  World Economic Outlook. low-income countries, more countries tight- Note:  Bars represent the range between the 25th and 75th percentiles. ened than loosened both type of policies. Emerging market countries shifted markedly toward relaxing fiscal policy in 2012, with prices in global markets rose sharply from an offsetting tightening of monetary policy. late 2010 to late 2011, followed by some In low-income countries, the trend was in the pull-back through most of 2012 (figures 1.5 opposite direction. and 1.6). In emerging market and develop- ing countries, commodity price movements Quality of macroeconomic policies in impact consumer prices, terms of trade, and low-income countries income to a larger extent than in advanced economies. For that reason, commodity price economic Since 2003, the quality of macro­ volatility complicates macroeconomic policy policies in low-income countries has been GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    51 FIGURE 1.5  Commodity price indexes 400 350 300 Index (2003Q1 = 100) 250 200 150 100 50 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (projected) Quarter, year Fuel All commodities Cereals Nonfuel Food Source:  World Economic Outlook. Note:  Indexes are in U.S. dollars. FIGURE 1.6  Changes in commodity prices and changes in GDP per capita, terms of trade, and inflation a. Changes in commodity prices b. Changes in GDP per capita, terms of trade, and in ation in emerging market and developing countriesa 40 12 8 20 4 Percent Percent 0 0 –4 –20 –8 –40 –12 2007–08 2009 2010–11 2012 2013 2007–08 2009 2010–11 2012 2013 (projected) (projected) Food Fuel Metal Agricultural raw materials Real GDP per capita Median, real GDP per capita growth Terms of trade Median, terms of trade growth In ation Median, in ation Source:  World Economic Outlook. Note:  Bars represent the range between the 25th and 75th percentiles. a. Annual changes in percent; for 2007–08 and 2010–11, it is the average of annual changes in percent. 52  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 FIGURE 1.7  Fiscal deficit with concerns typically focusing on fiscal issues (figure 1.11). In 2012, the share of Emerging market countries Low-income countries countries rated positively on the composition 0 of public spending—an important driver for the attainment of the MDGs—reversed some % of GDP, median country –1 of the modest gains achieved since 2005. In fiscal transparency, a number of relatively –2 strong-performing countries scored higher in 2012 than they did in 2011, while the num- –3 ber of countries with unsatisfactory policies relating to governance in the public sector –4 declined. Monetary policy and governance in 2008 2009 2010 2011 2012 monetary and financial institutions continue to remain relatively strong areas of macroeco- Source:  World Economic Outlook. nomic policies. The assessment of consistency Note:  General government balance (net lending/net borrowing) as defined in IMF Government Finance Statistics Manual 2001. of macroeconomic policies remains mixed. From 2011 to 2012, the number of countries with unsatisfactory policies increased slightly assessed through annual surveys of IMF while the number of relatively strong-per- country desks. 2 Over the years, significant forming countries fell. progress has been made in several areas of economic policy. Low-income countries in Managing macroeconomic risks in Sub-Saharan Africa have registered relatively low-income countries higher improvements. The number of coun- tries with unsatisfactory policies has declined Most low-income countries recovered quickly substantially since 2005 in most categories. from the 2009 crisis and have experienced However, the quality of policies differs con- strong growth since early 2010. 3 The con- siderably across the different policy areas, tinuing recovery was helped by deepening FIGURE 1.8  Monetary policy loosening a. Emerging market countries b. Low-income countries 80 80 70 81 70 in 2009 Share of countries (%) Share of countries (%) 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Monetary Discount rate Exchange rate Monetary Discount rate Exchange rate Conditions Index Conditions Index 2008 2009 2010 2011 2012 Source:  World Economic Outlook. Note:  Monetary policy loosening is based on Monetary Conditions Index (MCI) calculations. MCI is a linear combination of nominal short-term interest rates and the nominal effective exchange rate (with a one-third weight for the latter). GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    53 FIGURE 1.9  Average year-on-year growth in money and the money gap in emerging market countries 25 20 15 Percent 10 5 0 –5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Quarter, year Money gap Money supply (M2) Source:  International Financial Statistics. Note:  The money gap is the difference between year-on-year growth rates of the money supply (M2) and nominal GDP. The sample includes emerging market economies that have data on both for the whole sample period shown. FIGURE 1.10  Macroeconomic policy mix a. Emerging market countries b. Low-income countries 50 50 72 40 in 2009 40 % of countries % of countries 30 30 20 20 10 10 0 0 Monetary Monetary Monetary Fiscal Monetary Monetary Monetary Fiscal and scal and scal loosening loosening and scal and scal loosening loosening loosening tightening and scal and monetary loosening tightening and scal and monetary tightening tightening tightening tightening 2008 2009 2010 2011 2012 Source:  International Financial Statistics. Note:  Fiscal conditions are defined based on annual change in the government balance (net lending/net borrowing) as a percent of GDP in 2008, 2009, 2010, 2011, and 2012. Monetary conditions are based on the change in the Monetary Conditions Index (MCI); changes are calculated Q4 over Q4. MCI is a linear combination of nominal short-term interest rates and the nominal effective exchange rate (with a one-third weight for the latter). 54  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 FIGURE 1.11  Quality of macroeconomic policies in low-income countries a. Fiscal policy b. Composition of public spending Share of countries in each category (%) Share of countries in each category (%) 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Unsatisfactory Adequate Good Unsatisfactory Adequate Good c. Fiscal transparency d. Monetary policy Share of countries in each category (%) Share of countries in each category (%) 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Unsatisfactory Adequate Good Unsatisfactory Adequate Good e. Consistency of macroeconomic policy f. Governance in monetary and nancial institutions Share of countries in each category (%) Share of countries in each category (%) 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Unsatisfactory Adequate Good Unsatisfactory Adequate Good g. Governance in the public sector h. Access to foreign exchange Share of countries in each category (%) Share of countries in each category (%) 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Unsatisfactory Adequate Good Unsatisfactory Adequate Good 2005 2009 2010 2011 2012 Source:  IMF staff estimates. Note:  IMF staff have assessed each low-income country according to a common set of criteria. Policies are assessed as unsatisfactory, adequate, and good for this purpose. For example, a country with an unsustainable level of public debt and a large deficit would be judged to have an unsatisfactory fiscal policy. GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    55 links with emerging markets, which com- markets. The cumulative output loss in plemented traditional export demand from 2013–15 in the median low-income coun- advanced economies. In addition to the tradi- try could reach 3.2 percentage points, with tional trade channels, low-income countries output losses ranging from 1.9 to 5.7 points have become linked to emerging markets across all low-income countries.5 though remittances and financial linkages Under such a scenario, and before tak- (IMF 2011). ing account of potential policy responses, Despite sustained economic growth, how- fiscal and external buffers in low-income ever, the recent progress in rebuilding policy countries would progressively weaken as buffers has been modest for most low-income the permanent output loss accumulates over countries and has been partially reversed time (figure 1.13). The cumulative widening in some others over the past two years. in fiscal balances in 2013–15 in the median The situation varies widely across different low-income country could increase by 1.9 country groups (figure 1.12). For example, percentage points of GDP. This in turn could commodity-exporting countries have relatively lead to significant public debt accumula- high external and fiscal buffers, while small tion, compared to the gradual improvement countries seem to be in a somewhat worse in debt ratios projected in the baseline over position than the rest.4 Greater emphasis on the same period. Also, the cumulative dete- rebuilding buffers would position low-income rioration in external balances would increase countries better to protect spending levels and by 5.1 percentage points of GDP, resulting growth in the event of future shocks. At the in sharp declines in reserve coverage across same time, the rebuilding of buffers has to be many low-income countries. Such imbalances balanced with the need to maintain adequate could not be financed indefinitely. Additional space for development-enhancing expendi- cumulative financing needs could be as large tures, particularly for infrastructure and other as $26 billion by the end of 2014, and about expenditures aimed at achieving the MDGs. $61 billion by the end of 2015. This comes An analytical framework developed by against the backdrop of reduced access to the IMF that assesses low-income countries’ traditional sources of financing, reflect- vulnerabilities to global risks was used to ing budgetary pressures in donor countries. simulate the impact of a protracted growth Therefore, most low-income countries would downturn—a low probability event driven by most likely need to undertake medium-term a slowdown in potential growth in advanced adjustment in the face of such a protracted and emerging markets (IMF 2012a). Under shock to global growth, while at the same this scenario, global growth is assumed to be time the IMF would likely be called upon to lower than the baseline projection by 0.5 per- provide additional financial assistance. centage point in 2013, 1.7 percentage points If the risk of a protracted global downturn in 2014, and 2.0 percentage points in 2015. materializes, the appropriate policy response The weaker global growth is assumed to lead would need to reflect the permanent nature to weaker demand for commodities, which of the shock and the existing magnitude of would depress oil and non-oil commodity policy buffers: prices. The protracted global growth slowdown T he magnitude of the required fiscal •   scenario is estimated to have a large negative adjustment would depend on available impact on growth in low-income countries, fiscal space and debt sustainability. Frag- which would get progressively worse over ile low-income countries and those in time. The impact stems from below-trend Latin America and the Caribbean—espe- demand for low-income-country exports, cially small states that suffer from high as well as a reduction in remittances and debt and little, if any, fiscal space—may inflows of foreign direct investment to low- not have room for accommodative fiscal income countries, particularly from emerging policy. Low-income countries in Asia and 56  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 FIGURE 1.12  Selected macroeconomic indicators for low-income countries, 2007–13 a. Growth b. In ation 8 14 7 12 6 10 Median (%) Median (%) 5 8 4 6 3 4 2 2 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 (projected) (projected) Commodities exporters All low-income countries Floating exchange rate All low-income countries Non-commodities exporters Fixed exchange rate c. Fiscal balance d. Public debt 3 80 2 1 70 0 Median (% of GDP) Median (% of GDP) –1 60 –2 –3 50 –4 –5 40 –6 –7 30 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 (projected) (projected) Net oil exporters All low-income countries Small economies All low-income countries Net oil importers Low-income countries, excluding small economies e. Current account balance + FDI f. Reserve coverage 7 4.5 Median (months of next year’s imports) 5 3 4.0 Median (% of GDP) 1 –1 3.5 –3 –5 –7 3.0 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 (projected) (projected) Net oil exporters All low-income countries Fixed exchange rate All low-income countries Net oil importers Floating exchange rate Source:  World Economic Outlook. Note:  FDI = foreign direct investment. GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    57 FIGURE 1.13  Low-income countries: Impact of a protracted slowdown in global growth a. Real GDP growth b. Fiscal balance 9.0 2 7.5 1 0 6.0 –1 % of GDP 4.5 Percent –2 3.0 –3 –4 1.5 –5 0 –6 –1.5 –7 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 projected projected c. Current account balance, including FDI d. Reserve coverage 6 8 Months of next year’s imports 4 7 2 6 0 5 % of GDP –2 4 –4 3 –6 2 –8 1 –10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 projected projected 25th percentile Median 75th percentile Baseline Protracted Source:  World Economic Outlook; and IMF staff estimates. Note:  FDI = foreign direct investment. the Pacific would have room for a small and avoiding ad hoc tax reductions would increase in deficits to accommodate the help limit the burden of adjustment fall- shock, given their stronger macroeconomic ing excessively on the expenditure side and positions.6 protect high-priority expenditures (such as •   The magnitude and timing of adjustment infrastructure and social sector spending). would also depend on growth prospects. Making budgetary spending more growth Countries with strong cyclical positions friendly (by reallocating spending from (high growth) but weaker macroeconomic untargeted subsidies to productive invest- positions would benefit from immediate ments, for example) would improve the adjustment. In contrast, a more gradual quality of adjustment and support domes- adjustment would be desirable in countries tic demand. with a weak cyclical position (low growth), because rapid consolidation could depress Optimally, fiscal adjustment should also growth and further weaken the fiscal be complemented by adjustment in monetary position. and exchange rate policies and include some •   The composition of the adjustment would important structural measures. The major- also need to strike a balance between rev- ity of low-income countries would have suf- enue mobilization and expenditure mea - ficient policy space to reduce interest rates sures. Strengthening tax administration in response to a protracted global growth 58  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 slowdown, because weaker domestic demand macro­ economic outcomes such as growth. and commodity prices would lead to modera- The ­latter two address economic diversifica- tion in inflation. Some external adjustment tion in low-income countries and structural could be also implemented, in particular in transformation in Sub-Saharan Africa. countries with overvalued exchange rates. In addition, some adjustment in private sector Macroeconomic performance and behavior would help to partially offset the agglomeration impact of lower external demand by reducing imports consistent with the new weaker eco- For World Development Report 2009: nomic growth path and lower relative prices. Reshaping Economic Geography (WDR The implementation of structural reforms 2009), Bank staff developed an index that could include measures to deepen the finan- measures on a uniform basis country-specific cial sector and develop domestic debt mar- levels of agglomeration.7 A recent update of kets, coupled with strengthening the super- the index provides a snapshot of the degree visory framework, as well as better-targeted of agglomeration in 162 countries in 2010. investments in infrastructure to increase pro- The combined population of the countries ductivity and living standards. for which data are available is 6.8 billion (98 percent of the world’s population). The index ranges from a 7 percent urban population Economic diversification and share in Papua New Guinea to a 100 percent structural transformation urban population share in Singapore. The The theme of this year’s GMR is “Rural- population-weighted average urban popula- Urban Dynamics and the Millennium Devel- tion share is 54 percent.8 opment Goals.” Agglomeration is an impor- The distribution of the degree of agglom- tant driver of development: as factors of eration across countries is highly uneven, but production agglomerate—that is, become geo- less so than that of income because the share graphically more concentrated—they become of population living in urban areas cannot more productive because it becomes easier to exceed 100 percent whereas there is no upper exploit economies of scale and scope (Com- limit to income levels (figure 1.14). As would mission on Growth and Development 2008). be expected, there is a positive and statisti- Network effects and other positive externali- cally significant correlation between the ties in turn also positively impact productivity degree of agglomeration and the level of per and economic growth. While agglomeration capita income. The Pearson and Spearman can be immensely beneficial, there are con- rank correlation coefficients between the two straints: increasing congestion costs can pro- variables are 0.52 and 0.72 respectively (both vide a powerful check on productivity gains. statistically significant at the 5 percent level). Agglomeration is part of a broader set This positive correlation should, of course, of changes—including, for example, the not be interpreted to mean that there is a demographic transition—that together con- causal link from agglomeration to income (or stitute the transformation of traditional vice versa), but rather that a broader under- low-productivity economies into modern high- lying development process impacts both productivity economies. This transformation agglomeration and income outcomes. also typically encompasses the structural To further explore the interrelationship shift to manufacturing and service activi- between countries’ level of agglomeration ties from agriculture. This section includes and level of income, countries are divided three different takes on the agglomeration into low-, medium-, and high-agglomeration/ process through a macroeconomic prism. income countries using the methodology of The first explores to what extent differences Nielsen (2011 and forthcoming).9 Countries in the degree of agglomeration across coun- with an agglomeration share of 40 percent or tries can provide insights into differences in lower (64 percent or higher) are designated GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    59 as low-agglomeration (high-agglomeration) FIGURE 1.14  Agglomeration and income distribution, 2010 countries. Medium-agglomeration coun- tries are those with an agglomeration share 1 between 40 percent and 64 percent. Using the same method, countries with a per ­ capita 0.8 income of $6,500 or lower ($27,000 or higher) are designated as low-income (high- Cumulative shares 0.6 income) countries. Medium-income countries are those with a per capita income between $6,500 and $27,000 (map 1.1). 0.4 There is a large degree of overlap between Agglomerationa Incomeb the categorization of countries as low-, 0.2 medium-, and high-agglomeration countries and the analytical country categorization of low-income, emerging market, and advanced 0 0 0.2 0.4 0.6 0.8 1 economies (table 1.4).10 Most low-income Cumulative shares of countries countries are low-agglomeration countries and most advanced economies are high- Low Medium High agglomeration economies. Among emerging Source:  World Economic Outlook. market countries about half are medium- Note:  The Lorenz-curves show the same colors as in Map 1.1. a.  Agglomeration shares are calculated from World Bank agglomeration index data. agglomeration countries. The correlation b.  Income is measured by GDP per capita in U.S. dollars. between the two country classification sys- tems is statistically significant.11 Per capita income increases with the level of agglom- geographical areas. For example, growth in eration for both low-income and emerging low- and medium-agglomeration emerging market countries, but the relative increases market and developing countries in Europe are more pronounced for low-income coun- and Asia has been higher than growth in tries. Among advanced economies, there is no “return” to agglomeration (the higher TABLE 1.4  IMF and World Bank member countries: per capita income level of the small group Selected indicators, 2010 of medium-agglomeration advanced econo- Low- Emerging Advanced mies is because most Nordic countries are   income market market countries countries economies Total included here). These findings suggest that the positive correlation between agglomera- Number of countries tion and development is more strongly felt in Low-agglomeration countries 44 13 0 57 the poorer countries that are most challenged Medium-agglomeration countries 20 42 9 71 High-agglomeration countries 9 28 23 60 in attaining the MDGs. Total 73 83 32 188 Looking at economic growth over the last 10 years through the prism of agglom- Population (in millions)         eration, growth in medium-agglomeration Low-agglomeration countries 710 104 0 815 countries has outpaced that of both low- and Medium-agglomeration countries 525 3,917 57 4,499 high-agglomeration countries (table 1.5). High-agglomeration countries 33 477 962 1,473 Given the large degree of overlap between Total 1,268 4,499 1,019 6,787 countries categorized according to their level           of agglomeration or development, this is not GDP per capita (in U.S. dollars)         Low-agglomeration countries 1,083 6,020 0 1,954 a surprising result (compare table 1.5 with Medium-agglomeration countries 1,415 6,957 43,516 10,263 table 1.1 and figure 1.1). High-agglomeration countries 4,491 15,258 39,409 23,171 Of more interest, therefore, is a com- Total 1,608 9,984 40,529 12,306 parison of macroeconomic outcomes across Source:  World Economic Outlook. levels of agglomeration within different Note:  Numbers may not add to totals because of rounding. 60  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 MAP 1.1  Do agglomeration and income differences across countries align?  a. Agglomeration Agglomeration Index ibrd 39941 < 41% 41% – 64% april 2013 > 64% No data b. Income GDP per capita (US$), 2012 < $6,500 $6,500 – $27,000 > $27,000 No data GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    61 TABLE 1.5  Average real GDP per capita growth, 2003–12 Medium-   Low-agglomeration agglomeration High-agglomeration countries countries countries All countries World 3.0 3.5 2.4 3.0 Advanced economies n.a. 1.2 1.3 1.2 Emerging and developing countries 3.0 3.9 3.2 3.4 Central and Eastern Europe n.a. 3.8 3.0 3.7 Commonwealth of Independent States n.a. 6.5 6.5 6.5 Developing Asia 4.7 5.7 3.2 5.0 Middle East and North Africa 0.7 2.5 3.4 2.9 Sub-Saharan Africa 2.6 2.0 3.6 2.5 Western Hemisphere 1.5 3.1 2.3 2.6 Low-income countriesa 3.0 2.8 5.6 3.1 Of which: Fragile statesb 1.8 0.7 n.a. 1.7 Emerging market countriesc 3.2 4.5 3.0 3.8 Source:  World Economic Outlook. Note: For 162 countries for which data on the agglomeration index are available. n.a. = Not applicable. a. Low-income countries are those eligible for financial assistance under IMF’s Poverty Reduction and Growth Trust, and Zimbabwe. b. A subset of low-income countries included in the World Bank’s list of Fragile and Conflict-Affected States. c. Emerging market countries are emerging market and developing countries that are not low-income countries. high-agglomeration countries in Europe and returns to agglomeration, particularly for Asia. For emerging market and developing countries on the lower rung of development. countries in Africa and the Middle-East, the For countries on higher rungs, the relative opposite result holds. In these regions, high- benefits and costs of concentrating people growth countries were for the most part and other economic factors of production in high-agglomeration countries. urban settings is less clear. Turning to low-income countries, average annual per capita economic growth in 2003– Economic diversification in 12 in high-agglomeration countries was 5.6 low-income countries percent annually, compared with 3.0 per- cent and 2.8 percent respectively in low- and Limited diversification in production is medium-agglomeration countries. The large an underlying characteristic of many low- differences in growth outcomes between income countries. As countries grow, their high-agglomeration low-income countries, economies often become more diverse, but on the one hand, and low- and medium- only up to a point: at higher income levels agglomeration low-income countries, on the economies again become less diverse. Low other hand, are statistically significant (table levels of diversity in low-income economies 1.6). In contrast, the difference in growth outcomes between low- and medium-agglom- eration low-income countries (0.2 percent) is TABLE 1.6  Statistical tests for mean differences not statistically significant. Low- Emerging Advanced Agglomeration is an important aspect of income market market development, but it is usually looked at from Mean differences between countries countries economies Total a microeconomic perspective. Looking at Low/high-agglomeration countries S N n.a. N agglomeration differences across countries, Low/medium-agglomeration countries N N n.a. N High/medium-agglomeration countries S S N S however, can provide additional insights into Source:  IMF staff estimates. macroeconomic performance. The evidence Note:  n.a. = Not applicable. presented here suggests that there are high S = statistically significant; N = not statistically significant. 62  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 can reflect a broad range of market and gov- particular, Sub-Saharan Africa is far less ernment failures, and the result can be con- diversified and produces relatively lower- centration in sectors with limited scope for quality goods than Asia. productivity growth and quality upgrading, Greater diversification is associated with such as primary commodities. In turn, this improved macroeconomic performance, can lead to less broad-based and sustain- including both lower volatility and higher able growth, as well as increased exposure to growth. “Diversification spurts,” that is, epi- adverse external shocks and macroeconomic sodes of rapid, sustained diversification, are instability. associated with a 17 percent average reduc- A recent IMF Staff Discussion Note tion in the volatility of output growth in (Papageorgiou and Spatafora 2012) sheds emerging market and developing countries, more light on the role of diversification in the and a 30 percent decrease in output volatility macroeconomic performance of low-income in low-income countries. countries, examining diversification not Analogously, diversification spurts are just in trade but also in the broader domes- associated with sharp subsequent accelera- tic economy. Using existing data, as well as tions in growth. This is especially true for a new IMF cross-country dataset covering nonfragile low-income countries (figure 1.15). output in 12 sectors and several new country More broadly, initial diversification is, on case studies, this work reviews and extends average, positively associated with subsequent the evidence pointing to diversification as a growth, although there is much cross-country crucial aspect of the development process. heterogeneity. For an extended period, many low-income These findings raise a key policy ques- countries enjoyed little success in diversify- tion: What factors can spur or, alternatively, ing exports and production. The situation impede diversification? Both policy and insti- broadly improved after the mid-1990s, with tutional factors can influence the transition significant changes in both the type and qual- to more diverse production structures and ity of goods produced and exported. Regions thereby affect the pace at which growth can and countries differed greatly, however, in be sustained. For instance, policy barriers the degree to which they succeeded in carry­ and structural rigidities in labor and prod- ing out this economic transformation. In uct markets, or underdeveloped financial systems, may hamper the process of diversi- fication. Likewise, insufficient or low-quality FIGURE 1.15  Diversification spurts and growth accelerations public infrastructure may retard the develop- ment of those sectors that rely disproportion- 5 ately upon it; this factor may prove especially Real GDP per capita growth rates 4 important in low-income countries, where a 3 large portion of investment stems from the 2 public sector. 1 Case studies provide some tentative evi- 0 dence in support of findings. First, diversi- –1 fication and structural transformation are –2 often underpinned by reforms and policy –3 measures that are general in scope. Macro- –4 –3 –2 –1 0 1 2 3 4 economic stabilization is a clear example. Years before and after diversi cation breaks But even microeconomic measures are often Nonfragile low-income countries broad-based, focusing on improving the Fragile low-income countries quantity and quality of infrastructure or essential business services, or on setting up a Sources:  COMTRADE, World Economic Outlook; and IMF staff estimates. welcoming environment for foreign investors. GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    63 It remains an open issue to what extent typically involves increasing the productiv- industry-focused and narrowly targeted mea- ity of the agricultural sector, which frees up sures have historically helped underpin diver- labor, allowing the shift of agricultural work- sification efforts. ers to industry and services. Second, effective policy measures come Using data from 1995 to 2010 on agricul- in “waves” and aim at exploiting the evolv- tural output from the Food and Agricultural ing comparative advantages of the economy Organization (FAO) of the United Nations, in changing external conditions. The types GDP by sector from the IMF, and employ- of reforms underpinning diversification and ment by sector from household surveys, the structural transformation in the early stages analysis of average labor productivity and of development are different from those the shift of workers across sectors shows that required at later stages. In general, reforms most countries in the region have experienced need to be adapted to the external environ- some degree of structural transformation, ment faced by the economy. although there has been significant variation Finally, the frequency with which new in its speed and type. In particular, trans- products are introduced and the rate at which formation in Sub-Saharan Africa has been they grow can point to potential policy- slower than that experienced by several coun- driven bottlenecks. Little entry may indicate tries in Asia: many of the African countries that barriers deter firms from exporting or have experienced relatively slow productivity experimenting. If survival rates are low, firms growth in agriculture and a less pronounced may face more obstacles than expected. If shift from agriculture to services and, to an surviving firms cannot expand, they may even lesser extent, to manufacturing. have inadequate access to finance. Figure 1.16 compares a sample of Sub- Saharan African countries (Cameroon, Ghana, Mauritius, South Africa, and Tan­ Structural transformation in zania) with a group of low- and middle- Sub-Saharan Africa income Asian economies that have experi- Sub-Saharan Africa has been experiencing an enced rapid structural transformation and episode of high growth since the mid-1990s. started their growth takeoffs with similar or Many of the countries of the region have ben- lower levels of GDP per capita than the aver- efited from relatively high commodity prices. age African country at the time. As can be One key question is whether higher growth seen, Ghana and Tanzania have experienced has been accompanied by structural transfor- declines in agricultural output and employ- mation, defined as the pattern of change in ment shares over time, with Tanzania match- economic activity across sectors—from the ing the experience of the comparator Asian primary to secondary and tertiary sectors— economies quite closely. Middle-income and across space—from rural to urban areas. countries have experienced declining manu- The IMF’s Regional Economic Outlook: facturing ratios for the past two decades, Sub-Saharan Africa (2012) analyzes one of consistent with the process in more advanced the dimensions of structural transformation, Asian countries, where services play an ever- namely, whether growth has been accompa- increasing role in the economy. Relatively few nied by a shift of workers from low to high low-income countries in Sub-Saharan Africa average productivity activities and sectors. have been able to raise their manufacturing Since on average more than half of the labor output and employment shares on a sus- force is employed in agriculture in these econ- tained basis. omies, and agriculture accounts for about An alternative presentation of the data on one-third of output, average labor produc- employment shares shows broad increases in tivity in the sector is very low. Thus, struc- employment in sectors with higher produc- tural transformation in Sub-Saharan Africa tivity. Figures 1.17 and 1.18 depict annual 64  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 FIGURE 1.16  Sub-Saharan Africa: Sectoral output and employment, 1995–2010 a. Agriculture output ratio b. Agriculture employment ratio 35 90 80 30 70 25 60 20 % of GDP % of GDP 50 15 40 30 10 20 5 10 0 0 1995 1998 2001 2004 2007 2010 1995 1998 2001 2004 2007 2010 c. Industry output ratio d. Industry employment ratio 35 35 30 30 25 25 20 20 % of GDP % of GDP 15 15 10 10 5 5 0 0 1995 1998 2001 2004 2007 2010 1995 1998 2001 2004 2007 2010 e. Services output ratio f. Services employment ratio 80 80 70 70 60 60 50 50 % of GDP % of GDP 40 40 30 30 20 20 10 10 0 0 1995 1998 2001 2004 2007 2010 1995 1998 2001 2004 2007 2010 South Africa Mauritius South Asia (median) Cameroon Tanzania Ghana Sources:  CEIC database and Haver Analytics database. GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    65 FIGURE 1.17  Sub-Saharan Africa: Labor FIGURE 1.18  South East Asia: Labor productivity productivity and change in employment shares, and change in employment shares, 1995–2010 1995–2010 3 1.5 Change in employment share (% per year) Change in employment share (% per year) 2 MUS 1.0 KHM SEN PHL 0.5 KHM RWA IDN VNM 1 CMR GHATZA SEN VTM BGDIDNBNGKHM ZAF UGA IDN VNMIDN BNG PHL VTM ZMB MLI UGA CMR MOZ 0 KHM KHM PHL BDH VNM PHL IDN 0 RWA MOZ GHA ZAF MLIZMB MOZ TZA ZMBTZA RWA SEN UGA BGD ZAF ZMB MOZ BGD MUS TZA MLI MUS –0.5 PHL UGA ZAF –1 GHA CMR IDN –1.0 SEN VNM –2 RWA –1.5 KHM –3 –2.0 –3 –2 –1 0 1 2 3 –2 –1 0 1 2 3 Sectoral labor productivity relative to average Sectoral labor productivity relative to average (log di erence) (log di erence) Agriculture Manufacturing Agriculture Mining Manufacturing Mining Tertiary Construction Government Other services Source:  IMF staff estimates. Source:  IMF staff estimates. be reversed when considering a broader set of changes in employment shares against aver- countries through 2010. age relative productivity levels for agricul- Country groups within Sub-Saharan ture, manufacturing, mining, and the ter- Africa display important differences. Most tiary sector for Sub-Saharan African and oil exporters, middle-income, and nonfrag- Southeast Asian countries, respectively.12 ile low-income countries have seen sustained Points in the lower left quadrants indicate increases in average labor productivity, often sectors with below average productivity and underpinned by rising productivity in agri- declining employment shares, while those in culture and resulting in a declining share the upper right quadrants indicate sectors of GDP from that sector. Fragile countries, with above average productivity and rising in contrast, have generally experienced low employment shares. and irregular growth, largely as a result of Structural transformation has taken place conflict; this poor growth is reflected in the to the extent that the observations for manu- absence of significant structural transforma- facturing and services in most countries are tion in most of these countries. located in the upper right quadrant, corre- Most countries in Sub-Saharan Africa sponding to movements from low to high aver- that have been growing faster than in the age labor productivity sectors. In fact, only past have not experienced an increase in the Cameroon and Zambia show change in the share of manufacturing in employment or employment share in the opposite direction, GDP, in contrast to the experience in Asia. namely, from high to low average labor pro- This pattern is not necessarily surprising. To ductivity sectors. In all the other Sub-Saharan some extent, it is what would be expected African countries, workers have moved out given the differences between the two regions of the agricultural sector. This suggests that in resource endowments and in compara- the findings of McMillan and Rodrik (2011), tive advantage: when Asia started its take- whose analysis of a smaller subset of coun- off, most countries were abundant in labor, tries through 2005 found workers moving whereas Sub-Saharan Africa is abundant into low-productivity sectors, may actually in natural resources. The challenge is that 66  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 many of those natural resource sectors, such have led to a steady decline in exports since as mining, are capital intensive and will not late 2011. Meanwhile, other regions have provide the jobs needed to accommodate the adjusted with more success. The East Asia rapidly growing working-age population in and Pacific region has experienced steady the region. positive real export growth, fueled not only The recent growth in real wage levels in by China, but also by smaller economies such China, together with Sub-Saharan Africa’s as Cambodia, Vietnam, Thailand, and the demographic dividend—implying declining Lao People’s Democratic Republic. In South dependency ratios in the future—suggest that Asia, positive real export growth in Ban- manufacturing in Sub-Saharan Africa could gladesh and India helped the region experi- become increasingly competitive. But irre- ence the strongest export recovery, peaking spective of whether economies grow through in December 2010 at a level one and a half strengthening the manufacturing sector times higher than pre-crisis levels. Since then, (Mozambique, Tanzania) or services (Kenya, however, South Asia’s export performance Mauritius), it is unlikely that they can do so has been lackluster. without first experiencing a major accelera- Global trade in 2012 was hampered by tion of agricultural productivity growth. a mid-year slump in global imports and steadily contracting import demand on the part of high income countries, with the Update on trade trends and Euro area at the epicenter. Growth rates for trade policy developments world imports of industrial goods during the first half of 2012, year-over-year, were Post-crisis recovery in trade has been negative (World Bank 2013). At the same uneven time, increased import demand in develop- Since the outbreak of the financial crisis over ing countries helped mitigate the dearth of four years ago, global interdependency has demand in high income economies. Devel- been underscored by the largely synchronized oping countries’ real exports also fluctuated nature of trade trends between high-income considerably in 2012, with differences across and developing countries. As of November countries and regions. 2012, neither the United States nor the Euro- pean Union had surpassed pre-crisis levels Protectionist outbreak avoided despite of imports, although their combined share uncertain future for global economy of world imports remains sizable, at roughly one-quarter of the total. On the other hand, According to the World Trade Organization’s Japan and large emerging economies like (WTO) monitoring of trade protectionist Brazil, the Russian Federation, India, China, measures, 190 new trade-restrictive measures and South Africa (BRICS) have seen their were introduced by Group of 20 (G-20) coun- import levels rise steadily above pre-crisis lev- tries between mid-October 2011 and mid- els, a trend that began in early 2009 (figure October 2012 (figure 1.20). While this rep- 1.19). These divergent recovery trends have resents a slowdown compared with previous translated into weak trade performance in years, the new measures add to the stock of regions that have traditionally relied on U.S. restrictions put in place since the outbreak of and EU markets. Exports from Europe and the crisis. The growing accumulation of trade Central Asia, Latin America and the Carib- restrictions is of concern not only because it bean, and Sub-Saharan Africa all hover only undermines the benefits of trade openness, slightly above pre-crisis levels. The situation but it also exacerbates the combined effects of is especially dire for countries in the Middle the new measures with pre-crisis restrictions East and North Africa that are not members and distortions, such as agriculture subsidies of the Gulf Cooperation Council; in these and tariff peaks. Nevertheless, in the five nonmember countries, political developments months leading up to October 2012, the pace combined with external economic factors of removal of previous measures was better GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    67 FIGURE 1.19  Trade developments since 2008 a. Merchandise imports b. Merchandise export growth 175 175 Index (100 = import value in Jan. 2008 Index (100 = import value in Jan. 2008 150 150 125 125 100 100 75 75 50 50 M1 M6 M11 M4 M9 M2 M7 M12 M05 M10 M03 M11 M1 M6 M11 M4 M9 M2 M7 M12 M05 M10 M03 M11 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Month, year Month, year BRICs European Union East Asia and Paci c Europe and Central Asia Japan United States Latin America and Middle East and the Caribbean North Africa South Asia Sub-Saharan Africa Source:  World Bank Datastream. Note:  Data are in constant U.S. dollars, Jan. 2008–Nov. 2012. BRIC = Brazil, Russian Federation, India, China, and South Africa. FIGURE 1.20  G-20’s new trade-restrictive trade-restrictive measures, now account for measures an increasing share of those measures: 74 percent in 2012, up from 60 percent in 2009 250 according to the Global Trade Alert (GTA),13 48 71 which provides broader coverage than the 200 40 WTO in terms of both countries and policy 50 150 46 measures included in the database. Argen- 23 100 tina, Brazil, the European Union, India, and 151 129 Russia are among the countries that have 50 117 implemented the highest number. Globally, 0 the most frequently used trade-restrictive M8 2009– M9 2010– M10 2011– measures are state aids and antidumping, M8 2010 M9 2011 M10 2012 followed by import tariff increases and non- Month, year tariff measures. Initially, restrictive measures Trade Tari s Nontari were seen as policy responses to mitigate the remedy measures temporary effects of the global financial cri- sis. However, recent measures appear to be Source:  World Trade Organization. Note:  Different methods of codification may lead to small discrepancies more embedded in national industrial plans, between these and other tallies of trade-restrictive measures. and hence longer term in nature (World Bank 2013). G-20 countries are simultaneously than in previous periods (21 percent overall responsible for a majority (66 percent) of all have been removed since October 2008). trade-liberalizing measures. However, trade- G -20 countries, which have repeat- liberalizing measures represent only a quarter edly committed to refrain from adopting of all measures enacted to date (figure 1.21). 68  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 FIGURE 1.21  Total number of measures is costly. In terms of the market access dimen- implemented and still in force by each G-20 sion of what has been negotiated to date, country, November 2008–December 2012 there is a potential global welfare boost of some $160 billion at stake (Hoekman 2011). Saudi Arabia But often overlooked is the opportunity cost Mexico of the WTO not being able to deliver on its Japan “legislative” function as an arbiter of new Korea, Rep. rules of the game in policy matters outside Australia the framework of the DDA. These include Canada “green” industrial policy measures, natural South Africa resource- and climate-related trade policies Turkey United States (such as carbon border adjustments), and Indonesia export restrictions on food products to insu- Italy late domestic markets. DDA paralysis car- Brazil ries the risk of countries pursuing unilateral, Germany potentially damaging, responses to the exter- France nalities of these policies. United Kingdom According to experts, much could be India gained if a critical mass of the 15–20 or so China largest WTO members were to agree to Argentina reduce applied barriers to trade and bind Russian Federation current levels of openness, but currently EU-27 some large countries want more than other 0 50 100 150 200 250 300 large countries are willing to offer (Hoek- Total man 2011). Over the course of 2012, topics Liberalizing or transparency improving measures including trade facilitation, agriculture, spe- Likely to be restrictive and discriminatory against cial and differential treatment, least devel- foreign commercial interests oped country issues, and dispute settlement Restrictive and discriminatory against foreign commercial interest were advanced—according to the chairs of the various Doha negotiating groups—while Source:  Global Trade Alert database. others, like services, barely moved at all, and Note:  Individual measures may cover a very large portion of trade or just one product—these data are therefore not necessarily reflective of trade are unlikely to move forward in the months coverage. For example, Mexico reduced tariffs on 5,000 tariff lines, but this ahead. Successful negotiations at the upcom- is reflected in just a few “measures.” ing December 2013 ninth ministerial con- ference in Bali are being viewed as a pivotal stepping stone—and necessary precondi- tion—for ending the Doha Round, though Limited progress in Doha Round there is little optimism that the conference negotiations at the WTO itself will end the round (ICTSD 2012). At The need for multilateral agreement remains the most recent World Economic Forum in critical to mitigate the use of trade restrictive Davos, trade ministers from over 20 WTO measures and promote trade openness. How- member countries gathered informally and ever, the prospects for successfully concluding imposed an unofficial Easter deadline for the Doha Development Agenda (DDA) nego- taking stock of whether “meaningful results” tiations—now entering their twelfth year— in Bali will be possible. They agreed that suc- remain dim, with recent reports that WTO cess at the conference would have to include members have turned their attention in 2013 gains in the areas of trade facilitation, least- to “realistic” deliverables,14 rather than a developed country issues, and agriculture conclusion to the whole round. The deadlock (ICTSD 2013). GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    69 Aid and international financial FIGURE 1.22  DAC members’ net ODA disbursements institutions 140,000 0.35 Over the past decade, official development 2012 current US$, millions 120,000 0.30 assistance (ODA) steadily increased, reach- 100,000 0.25 ing its peak in 2010. The general trend of Percent 80,000 0.20 rising annual flows during the 2000s slowed 60,000 0.15 only after the global financial crisis at the 40,000 0.10 end of 2008, with a 1 percent deceleration 20,000 0.5 in growth in 2009. Official development 0 0 assistance continued to be a stable source of 2000 2003 2006 2009 2012 development financing even after the global Total ODA (left axis) financial crisis, helping to alleviate the imme- Total ODA to low-income countries (left axis) diate impact of previous financial crises. In ODA as % of donors’ GNI (right axis) 2011 and 2012, however, as the effects of the recession hit donors’ aid budgets, the recipi- Sources:  OECD DAC and World Bank. Note:  GNI = gross national income; ODA = official development assistance. ents of ODA suffered the first two consecu- tive years of lower aid disbursements since 1997 (excluding fluctuations affected by DAC, multi-bilateral ODA increased from exceptional debt relief). $9 billion to $16.7 billion between 2007 and 2010, representing 12 percent of gross ODA Bilateral and multilateral aid excluding debt relief. The World Bank chan- nels over a quarter of such multi-bilateral Members of the Development Assistance ODA, becoming the single largest multilat- Committee (DAC) of the Organisation for eral channel for trust funds. Economic Co-operation and Development (OECD) disbursed $128.3 billion (in con- stant 2011 dollars and exchange rates) in Gleneagles 2012, compared with $133.7 billion the pre- At the Group of Eight (G-8) summit in Glen­ vious year, a decrease in real terms of 4 per- eagles, Scotland, in 2005, important commit- cent. In current prices, ODA in 2012 equaled ments related to ODA and external debt for- $125.5 billion, down from $133.7 billion in giveness were made. Indeed, the international 2011 a decline of 6 percent. As a percentage agreement on debt relief (Multilateral Debt of donors’ combined gross national income Relief Initiative, or MDRI) canceled $56.5 (GNI), ODA continued to slip from 0.32 per- billion in loans owed to the World Bank, the cent in 2010 to 0.31 percent in 2011, to end African Development Bank, and the IMF. up at 0.29 in 2012 (figure 1.22). The current In addition, DAC donors agreed to increase situation represents some concern, because ODA by $50 billion between 2004 and 2010, developing countries have also been affected at least half of which would be designated for by the crisis. Within total net ODA, the bilat- Sub-Saharan and North Africa. This prom- eral share of net ODA decreased from 70 per- ised increase was made in 2004 prices and cent in 2011 to 65 percent in 2012, indicating exchange rates, and the targeted level of ODA an increase in the share of multilateral aid to in 2010 prices was estimated to be $152.2 close to 35 percent. One of the broad trends billion. Given the actual amount of $128.5 in the recent international aid architecture is billion available, a gap of more than $25 bil- the rapid increase of “multi-bilateral” ODA, lion remains. The DAC’s 2012 annual ODA which is defined as bilateral ODA earmarked report shows that only a little more than $1.2 for a specific purpose and channeled through billion of the shortfall can be attributed to the multilateral system. According to OECD lower than expected GNI levels stemming 70  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 from the economic crisis (OECD 2012b). At FIGURE 1.24  Net ODA disbursements to low- Gleneagles, the G-8 donors also envisaged an and middle-income countries increase in total ODA to Africa of $25 billion in 2004 prices and exchange rates. In cur- 350,000 rent prices and exchange rates, that translates 300,000 into an increase of an estimated $29 billion US$ millions (2010 prices) in 2010. Yet estimates show that Africa only 250,000 received an additional $11.8 billion in 2010. 200,000 Given the decline in ODA in 2011 and 2012, 150,000 it is clear that this situation has not improved. 100,000 Regional aid 50,000 Although ODA disbursements were lower in 0 Low-income Lower- Upper- Low-income Middle- 2011 than in 2010, the trend in regional ODA countries middle- middle- countries, income income income excluding countries, remained stable. Aid is mainly concentrated countries countries Afghanistan excluding in Sub-Saharan Africa, which received 43 Iraq percent of net ODA disbursements in 2011, 1990–2000 2001–11 South Asia (21 percent), and the Middle East and North Africa (11 percent) (figure 1.23). Source:  OECD DAC 2012. While Sub-Saharan Africa still received most of the aid, this region suffered a further decrease in 2012, with flows of $26.2 billion, percent as the region made strong gains or a decline of 7.9 percent in real terms com- toward poverty alleviation. Latin America pared with 2011. Europe and Central Asia sustained a decrease of 3 percent in 2011, also saw a fall in net bilateral ODA flows of while South Asia registered a shortfall of 2 17 percent in real terms from 2010; between percent. The only region with an increase in 2010 and 2011, the decline was around 6 net ODA disbursements was the Middle East and North Africa, with the revolutions in this region triggering more aid. FIGURE 1.23  Net ODA disbursements to developing regions Special groups 50 Low-income countries received 3 percent 45 more aid in 2011 compared with 2010. 40 Middle-income countries, on the other hand, 35 suffered a decline of 17.2 percent from 2010. 30 For lower-middle-income countries, net ODA Percent 25 disbursements decreased 8.9 percent from 20 2010, to $5.7 billion (figure 1.24). 15 When all developing countries are con- 10 sidered, ODA disbursements per capita have 5 increased for countries with no more than 0 two of the MDGs achieved (figure 1.25). East Asia Europe Latin Middle South Sub- and and America East and Asia Saharan Even though aid fell in 2011, the flows Paci c Central and the North Africa are still being directed to those countries Asia Caribbean Africa lagging the most (that is, the countries 1990–2000 2001–10 2011 furthest from achieving the MDGs). For example, the group of countries in a fragile Source:  OECD DAC 2012. situation that have met or are currently on GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    71 FIGURE 1.25  Net ODA received per capita by FIGURE 1.26  Net ODA received per capita by groups of countries ranked by MDG targets met or groups of countries ranked by MDG targets met or on track to be met by 2015 (2009–11) on track to be met by 2015 450 413 20 19 400 18 17 350 16 US$ (constant 2010) 14 US$ (constant 2010) 300 14 250 12 10 9 200 8 7 150 98 6 5 4 100 64 70 4 4 56 39 4 50 7 16 26 2 0 0 Fragile states Small Heavily indebted 1990–92 2000–02 2009–11 states poor countries 0–2 MDG targets met or on track to be met 0–2 MDG targets met or on track by 2015 (23 countries FSC, 33 SST, 24 HIPC ) to be met by 2015 (114 countries) 3–5 MDG targets met or on track to be met 3–5 MDG targets met or on track by 2015 (1 country FSC, 1 SST, 4 HIPC) to be met by 2015 (12 countries) 6–10 MDG targets met or on track to be met 6–10 MDG targets met or on track by 2015 (1 country FSC, 1 SST, 3 HIPC) to be met by 2015 (8 countries) Source:  OECD DAC 2012. Source:  OECD DAC 2012. Note:  FSC = fragile states; SST = small states; HIPC = Heavily indebted Note:  FSC = fragile; SST = small states; poor countries. HIPC = Heavily indebted poor countries. track to achieve no more than two MDGs FIGURE 1.27  Net ODA disbursements to fragile, small, and HIPC states received an annual average of $64 per capita in 2009–11 (figure 1.26). Fragile, small, and heavily indebted poor 0.14 US$ millions per capita (2010 prices) countries (HIPCs) also suffered the conse- 0.12 quences of a smaller amount of ODA dis- 0.10 bursements from 2010 to 2011 (figure 1.27). Fragile states and small states received 6 per- 0.08 cent less in ODA disbursements than they did 0.06 in 2010; and the flow to HIPCs decreased by 4.1 percent. 0.04 Fragile states—those countries often in 0.02 internal conflict or with severe political insta- 0.00 bility—are the developing countries most 1990 1994 1998 2002 2006 2010 challenged in meeting the Millennium Devel- opment Goals. These countries are typically Fragile Small HIPC states states characterized by weak institutions and mac- roeconomic instability. For obvious reasons, Source:  OECD DAC 2012. peace- or state-building activities take prior- Note:  HIPC = Heavily indebted poor countries. ity over economic policy making. Macroeco- nomic policy advice and implementation are and large financing needs of these fragile hampered by lack of timely and reliable sta- countries. tistics. Effective engagement by international Fragile states are vulnerable countries organizations and development partners with few if any resources available with requires a recognition of the limited capacity which to address vulnerabilities. In a possible 72  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 protracted slowdown of global growth, these Looking forward: ODA flows through countries would be hard pressed to coun- 2015 teract the accompanying negative shocks to their economies, either by depleting avail- For the ODA flow to developing countries able policy buffers or adjusting macroeco- to remain constant in per capita terms, an nomic policies. With domestic policy space increase in total ODA by 2015 of $6.6 billion severely limited, these countries would have in 2011 prices and exchange rates is needed. to turn to the international community for Given the ongoing fragility of the economic additional assistance if such a downside risk recovery in most of the developed world, this scenario were to materialize. The decline in increase might be quite a difficult undertak- ODA for these countries is thus especially ing to accomplish at a time when any addi- worrisome because well-targeted external tional assistance to facilitate the attainment financial aid can be effective in support- of the MDGs could prove critical. Continu- ing countries exiting from fragile situations ing at the current level of ODA would result (World Bank 2011). in a fall of 1.3 percent annually until 2015. Country programmable aid (CPA) is a core subset of ODA, representing about 67 BRICS percent of total DAC ODA, with 95 per- ODA DAC resources are not the only cent of multilateral agencies and 45 percent resources that countries can use to attain the of bilateral aid agencies reporting on their MDGs; various new donors and philanthro- programmable aid flows. CPA data provide pists have become part of the development information about the forward spending community, providing resources to coun- plans by DAC donors on development.15 A tries to use in progressing toward the MDGs reliable predictor of actual disbursements, and for development in general. In particu- CPA had predictability ratios of 103, 95, and lar, South-South cooperation has become 92 percent in 2009, 2010, and 2011, respec- increasingly important, with estimates of tively. A ratio of 92 percent means that, on financial aid flows from the so-called BRICS average, donors disbursed 8 percent less than to developing countries of up to $4 billion planned the year before. in 2009 (Adugna et al. 2011). These aid vol- The 2013 DAC report on predictability umes do not fully capture the significance presents the results of the 2013 DAC survey and impact of BRICS on the financial inflows on forward spending plans for 2013 to 2016, of low-income countries, however. For exam- including the final year by which the current ple, since 2000, trade between BRICS and set of MDGs should be achieved. The survey Sub-Saharan Africa has increased 25 percent annually, reaching $206 billion in 2011. data indicate that the annual amount of CPA Trade, foreign direct investment, and in 2013 is anticipated to jump by 9 percent development aid are often intertwined and in real terms compared with 2012. It is then come as a package based on the idea of South- projected to remain constant for the period South solidarity, shared experiences, and self- 2014–16. The result is a slight decline in per reliance (based on the meeting in Yamous- capita CPA from $18.18 in 2013 to $17.78 soukro, Côte d’Ivoire, 2008). Even though in 2015 (in 2012 prices and exchange rates). foreign assistance is diverse among BRICS, The implications of this decline are more development cooperation focuses on trade pronounced in Sub-Saharan Africa, which partners, and consequently, often on neigh- received $47.70 per capita CPA in 2012 and boring countries and regional integration, to will see its allocation decline to $45.08 per stimulate trade, investments, and growth as capita by 2015. Although the initial recov- the main vehicles for improvement in develop- ery bodes well for the availability of ODA to ment outcomes. It also focuses aid on techni- assist with the attainment of the MDGs, the cal rather than financial assistance (EU 2012). downturn in the outer years does not. GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    73 Aid effectiveness are to maintain and strengthen political sup- port for more effective development coopera- Since the Fourth High Level Forum on Aid tion; to monitor the implementation of the Effectiveness in Busan, Republic of Korea, in Busan commitments; to facilitate knowledge late 2011, the international community has exchange and lesson learning; and to support shifted from concentrating on aid effective- the implementation of the Busan commit- ness to a broader focus on effective develop- ments at the country level (box 1.1) To date, ment cooperation. Although the aid effective- more than 160 countries and 45 organiza- ness agenda remains important, this shift tions from around the world have endorsed reflects a recent evolution of the development the Partnership. landscape that includes: Notwithstanding the changes that will potentially emerge from the new Global Part- Support for country-led management of •   nership, monitoring of the promised progress development with a focus on results, in lieu by the DAC donor community should con- of the traditional discussion focused on tinue as a means to improve aid effectiveness donor harmonization and alignment. as set forth in the Paris Declaration on Aid The expanding role in development of new •   Effectiveness. The Paris Declaration, which partners, such as middle-income coun- placed country ownership of policies and tries, the private sector, and civil society programs at the center of a reform agenda to organizations. make aid more effective, committed donors T he growing importance of aid as a •   and developing countries to be mutually resource for catalytic change and institu- accountable for implementing the declaration tional development. through a set of thirteen measurable targets T he changing global financial base for •   (OECD 2012a). By the 2010 deadline, only development, with private financing play- one of the targets had been met: to strengthen ing a growing developmental role. capacity by coordinated support (target 4). T he emergence of new technologies to •   Disaggregating the data for the vari- increase global connectivity and transpar- ous multilateral development banks and ency and accountability. other international organizations, such as the United Nations and the EU institutions, The Busan Partnership for Effective Devel- yields a more nuanced picture, however (table opment Co-operation calls for the establish- 1.7). For example, the Inter-American Devel- ment of a “new, inclusive, and representative opment Bank has met four of the eight indi- Global Partnership for Effective Develop- cators for which disaggregated data exist, the ment Co-operation to support and ensure World Bank three (see box 1.2 for additional accountability for the implementation of information about World Bank performance commitments at the political level.” At its in development cooperation), and the EU most recent meeting in June 2012, the Work- institutions two. All other multilateral devel- ing Party on Aid Effectiveness (which has led opment banks have met one indicator. the aid effectiveness agenda at the global level Table 1.7 also shows that individual inter- since the Paris Declaration on Aid Effective- national organizations have made progress in ness in 2005) formally agreed to establish this many areas, but each of them has also fallen Global Partnership. Operational since late back on at least one target. The African 2012, the Partnership brings together devel- Development Bank and the Asian Develop- oping countries, including major providers ment Bank show deteriorations in four of the of South-South cooperation such as BRICS, eight indicators analyzed. The World Bank together with donor countries, civil society is closest to reaching all indicators, with organizations, and private funders, serving as an average gap of 17 percent remaining on a forum for knowledge exchange and regular five of its unmet indicators, while the Inter- monitoring of progress. Its main functions American Development Bank has an average 74  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 BOX 1.1  Putting the Busan Partnership for Effective Development Cooperation into operation During the Fourth High Level Forum, the interna- indicators are from the Paris Declaration Monitoring tional community renewed its commitment to mov- Survey (such as use of countries’ public financial man- ing the effective development cooperation agenda agement and procurement systems), which ensures forward while keeping its focus on the unfinished aid continuity with the unfinished aid effectiveness effectiveness agenda. Three key vehicles used to bring agenda. The remaining five indicators are new and these agendas forward are the Global Partnership reflect the evolution of the development landscape by for Effective Development Co-operation, the Global including civil society and private sector engagement. Monitoring Mechanism, and Building Blocks for The Building Blocks launched at the Busan forum are Post-Busan Implementation. initiatives to help further progress in eight key areas: To follow up, the international community estab- conflict and fragility; South-South cooperation; the lished the Post-Busan Interim Group, which held sev- private sector; climate finance; transparency; effective eral meetings in the first half of 2012 and agreed on institutions and policies; results and mutual account- the Global Partnership mandate and the global moni- ability; and management of diversity and reduction of toring framework. The Global Partnership mandate fragmentation. focuses on maintaining and strengthening political To date, 3 minister-level cochairs and 18 steer- momentum for more effective development coopera- ing committee members have been appointed from tion; ensuring accountability for implementing the partner countries, development partners, the private Busan commitments; facilitating knowledge exchange sector, and civil service organizations. The first steer- and sharing lessons learned; and supporting imple- ing committee meeting to discuss focus areas of the mentation of the Busan commitments at the country Global Partnership was held in December 2012. The level. global monitoring framework is being finalized. Given The indicators and associated targets of the global their voluntary nature, the progress on the Building monitoring framework (successor to the 2005–10 Blocks varies across initiatives. Going forward, a key Paris Declaration Monitoring Survey) intend to pro- challenge for the Global Partnership is to connect with mote international accountability for implementing other international forums and initiatives, most nota- the Busan Global Partnership agreement. Five of the bly the discussion on the post-2015 MDG goals. TABLE 1.7  Progress on Paris Declaration survey indicators by multilateral development banks, UN, and EU institutions Global Overall Multilateral target result Development Banks World Bank African Development Bank Progress Progress Progress % 2010 (%) 2010 (%) since 2005 2010 (%) Gap since 2005 2010 (%) Gap since 2005 Aid flows are aligned with 3– national priorities 85 72 36 = 79 7% + 59 31% + Strengthen capacity by 4– coordinating support 50 58 50 + 73 Met + 69 Met + How much aid for the 5– government sectors uses 55 35 20 + 55 Met + 32 42% – country systems Strenghten capacity by 6– avoiding parallel PIUs –67 –32 –49 + –80 Met + –65 3% + 7 – Aid is more predictable 71 43 29 – 51 28% – 50 30% + Use of common arrangements 9– or procedures 66 45 32 + 59 11% + 35 47% – 10.a – Joint missions 40 19 18 + 29 28% + 14 65% – 10.b – Joint country analytical work 66 43 32 = 59 11% + 50 24% – Source:  OECD DAC 2012. Note:  PIU = project implementation unit; + = improvement, – = deterioration. GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    75 remaining gap of well over 60 percent on service and nongovernmental organizations. its remaining four indicators. The United Of critical importance for the countries them- Nations was only halfway toward reaching selves is actual implementation of the agreed- its remaining targets in 2010. upon MDG action plan, which includes ensuring that gaps in institutional capacity and sector governance are addressed, that the Acceleration toward the MDGs MDG action plan is adequately incorporated Various other mechanisms exist to acceler- into annual or multiyear partner support ate progress toward the MDGs in addition plans, and that both intermediate and final to improvements in aid effectiveness. For indicators of MDG achievement are regularly example, in 2010, the United Nations Devel- monitored, all to ensure that efforts are yield- opment Programme (UNDP) developed an ing the desired results. MDG acceleration framework (MAF) to pro- Various other initiatives have been put vide a systematic way of identifying bottle- in place to accelerate progress toward the necks and possible high-impact solutions that MDGs such as the Sanitation and Water could assist countries to pick up the pace on for All initiative. This is a global partner- attaining the MDGs. The framework was ship between developing countries, donors, rolled out in 10 countries across a range of multi-lateral agencies, civil society, and other MDGs in 2010 and has been used since then development partners working together to to assist 44 countries across almost all of the achieve universal and sustainable access to MDGs. This work has led to concrete plans sanitation and safe drinking water, with of action with coordinated roles for govern- an immediate focus on achieving the Mil- ments and all development partners involved lennium Development Goals in the most in achieving countries’ MDG priorities. off-track countries.16 To accelerate progress The results from the MAFs completed on MDG 1c (reduction of underweight in to date are encouraging and have led to children under five), the Scaling Up Nutri- increased collaboration between the World tion (SUN) global movement was set up to Bank and the UN in this area. The initial les- support nutrition sensitive interactions in 33 sons learned include the importance of strong SUN countries. Investments are supported national ownership, facilitation of cross-sec- that are aligned to national nutrition plans toral collaboration, and participation by civil and contribute directly to the process of Asian Development Bank Inter American Development Bank United Nations EU institutions Progress Progress Progress Progress 2010 (%) Gap since 2005 2010 (%) Gap since 2005 2010 (%) Gap since 2005 2010 (%) Gap since 2005 64 25% – 48 44% + 31 64% – 51 40% + 44 12% + 65 Met + 67 Met + 50 Met + 29 47% – 5 91% + 12 78% + 47 15% + –95 Met + –7 90% = 1 102% – –71 Met + 54 24% – 48 32% – 23 68% + 48 32% + 50 24% + 80 Met – 45 32% + 52 21% + 15 63% + 67 Met + 38 5% + 19 53% – 39 41% – 75 Met + 61 8% = 57 14% + 76  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 BOX 1.2  World Bank performance on development cooperation The World Bank’s performance on development Supporting country capacity to implement results- •   cooperation has continuously improved and is among based approaches; building country statistical the strongest of all development partners. Evidence capacity to support enhanced and rigorous moni- from international assessments, including the Paris toring and evaluation; and working with regional Declaration Monitoring Survey, confirms the Bank’s Communities of Practice for cross-country knowl- sustained commitment to improving its own effective- edge exchange and capacity development on results ness in support of stronger development outcomes. management. With the Global Partnership for Effective Develop- Using innovative tools such as geo-mapping, benefi- •   ment Co-operation in mind, the Bank focuses on the ciary feedback, third-party monitoring, and other following priorities: mechanisms to enhance social accountability and improve service delivery. Partner Country Leadership and Ownership. The Bank promotes better development cooperation and Transparency. The Bank has made great strides in the more effective institutions by: area of transparency by: •   A ligning its support with each country’s develop - L aunching an Access to Information Policy, the •   ment priorities. Open Data and Open Knowledge initiatives, and •   Focusing on capacity development, investing in the Open Access Repository. These initiatives human capital, and strengthening stakeholder own- encourage public access, help improve accountabil- ership to facilitate achievement of national develop- ity, and link funding to development outcomes and ment goals. results. •   Supporting public sector institutions and systems B eing identified as a global leader on transpar - •   through better diagnostic, analytical, and measure- ency by the Aid Transparency Index from Publish ment tools. What You Fund and the transparency component •   Enabling stronger government-led management of of the Center for Global Development’s QuODA development support and greater integration of aid assessment. and other support into national budgets. Demonstrating leadership as an active proponent •   •   S trengthening and using country systems—for and implementer of the International Aid Transpar- budget and project management, procurement, ency Initiative (IATI), which sets a common stan- financial management, environmental and social dard for all development partners to share aid data. safeguards, and results measurement—with the Supporting recipient country Open Government •   ultimate objective of transforming development initiatives and efforts to improve budget manage- support into sustainable results. ment and transparency for domestic accountability. Promoting aid predictability to facilitate greater •   Results. The Bank adopts results-orientation imple- transparency. mentation by: Maintaining AidFlows (http://www.aidflows.org/), •   a publicly available web-based source of informa- I mplementing a Corporate Scorecard, an institu- •   tion about aid flows that seeks to better inform tional-level IDA Results Measurement System, and the global conversation about development fund- an Annual Results Report. ing. AidFlows began as a partnership between M ainstreaming a results culture with systematic •   the OECD-DAC and the World Bank. AidFlows results frameworks for all lending projects, pro- provides easy access to country-by-country infor- grams, and country assistance strategies, as well mation in an intuitive visual format. The site has as adopting new results-oriented financing instru- been well received by a range of users, including ments such as the Program for Results (P4R); and government officials in donor and recipient coun- increasing impact evaluations and evidence-based tries, aid agencies, MDBs, NGOs, and civil society decision making through the collaborative Bank– organizations. partner country Development Impact Evaluation Initiative (DIME). (box continues next page) GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    77 BOX 1.2  World Bank performance on development cooperation (continued) Development partnerships beyond aid. The Bank conflict-affected countries. The Bank is spearheading integrates key themes and opportunities presented by efforts in several key areas critical to successful imple- the evolving development landscape through: mentation of the New Deal, such as supporting tech- nical capacity in the g7+ (the country-owned and -led Partnering with lower- and middle-income devel- •   global mechanism to monitor, report, and draw atten- oping countries to facilitate support through tion to the unique challenges faced by fragile states), South-South cooperation, including knowledge piloting peace-building and state-building Indicators exchanges, technology transfers, investment, trade, for partner countries, and actively supporting forums and financial support. for strengthening partnerships among partner coun- Leveraging funding from middle-income countries, •   tries, donors, MDBs, civil society organizations, and the private sector, foundations, global funds and the private sector. programs, and other sources that contribute signifi- Recognizing that progress on development coop- cantly to development. eration at the global, institutional, and country levels is interlinked, the World Bank continues its engage- Countries in fragile and conflict situations face ment and leadership in international platforms, initia- complex development challenges and are a special tives, and partnerships; leads and innovates through area of focus for the Bank. The New Deal for Engage- institutional reforms, policies, and practices; and pro- ment in Fragile States sets out a collective vision and motes support for country-led and -owned develop- principles for engagement with these fragile and ment efforts. achieving high coverage of vulnerable target as results-based financing, these projects are populations (pregnant women and children showing promising results. For example, in up to age 24 months) with evidence-based Burundi, support from the Burundi Health direct nutrition services.17 Sector Development Support Project for the Another example of a special focus to nationwide results-based financing (RBF)18 improve achievement of the MDGs is in this program has helped to increase utilization of case a World Bank initiative. The World maternal and child health services including: Bank’s five-year (2010–2015) Reproductive (a) a rise in births at health facilities by 25 Health Action Plan (RHAP) is accelerating percent; (b) an increase in prenatal consulta- progress on maternal and child health by tar- tions by 20 percent; (c) a 35 percent increase geting 57 high priority countries, mostly in in curative care consultations for pregnant Africa and South Asia, with the highest bur- women; and (d) a 27 percent increase in den of maternal and neonatal deaths, high family planning services obtained through prevalence of sexually transmitted infec- health facilities—during the just first year of tions, and high fertility rates. Projects include implementation. increasing skilled attendance at births, train- ing health care workers, and expanding girls’ education. As of March 2013, more than half Using ICT to improve the (56) of the World Bank’s 102 active health effectiveness of projects projects address high fertility and mater- The use of information and communication nal mortality, and 52 projects address child technology (ICT) for economic development health. Focusing on health system strength- was recognized when the official list of MDG ening and targeting the poor and vulner- indicators was adopted as part of MDG 8, able through innovative mechanisms, such which focuses on the deepening of a global 78  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 partnership for development. A specific economic development in general. The wide- description of this sub-MDG was chosen and spread availability of ICT and mobile phone indicators identified. Target 8F states that, usage has created opportunities for govern- in cooperation with the private sector, the ments to strengthen service delivery and benefits of new technologies, especially those enhance governance. related to information and communications, An evaluation of initial experiences sug- will be made available. gests that the benefits accrue to those coun- An evaluation of these indicators shows tries that put in place policies and programs that mobile phone subscriptions have risen that not only enable technological transfor- exponentially across the globe, while growth mation but also support institutional reforms in the number of fixed telephone lines has and process redesign through which services stagnated. Impressive increases have also are delivered (World Bank 2012). Fostering taken place in Internet usage, although an accelerated diffusion of ICT in develop- here progress is more diverse, with stron- ing countries requires undertaking country- ger growth in high-income countries than specific analysis to take into account local in low- and middle-income countries. Even conditions and translating these findings though access challenges remain, particularly into policy actions that enable and encour- in low-income countries, the extraordinary age development of the demand and supply rise in mobile phone penetration has led to sides of ICT. On the demand side, afford- the emergence of a variety of innovations ability of mobile devices and services is a that allow citizens, governments, and inter- concern, while on the supply side, common national organizations to be more engaged bottlenecks such as spectrum and backbone and better informed, and that enable aid networks must be addressed. providers to identify and communicate more directly with beneficiaries. What can international organizations In addition to the various business oppor- do to foster ICT for aid effectiveness? tunities it has made possible, the evolution of ICT has also opened up a range of opportu- International agencies have been increas- nities to improve the effectiveness of govern- ingly interested in leveraging the rapid spread ment programs and associated aid financing, of ICT such as mobile phones to better hear consequently accelerating attainment of the the voices of beneficiaries in developing MDGs. Table 1.8 illustrates how mobile tele- countries. By reducing barriers to accessing phone technology has assisted countries in information, technology can facilitate trans- making progress toward each MDG. Many parency and contribute to accountability. more examples demonstrate how ICT can Information and communication technology facilitate service delivery. Indeed many gov- can help solicit, provide, and respond to feed- ernments around the globe, in varying stages back regarding projects and programs for of development, are adopting ICT, particu- development. In addition, ICT can also help larly mobile communication technologies, to reduce the transaction costs of, for exam- assist in this endeavor. At the same time, var- ple, payment systems and improve access to ious international aid agencies are exploring finance. opportunities to deliver aid more effectively Introducing new technologies to improve using ICT (for example, the Swiss Agency for citizens’ feedback has significantly reduced Development and Cooperation). the barriers of cost, time, and space that have historically constrained direct interac- tions with citizens (box 1.3). By using these What can governments do to foster ICT ever-evolving tools, governments and inter- for development? national aid agencies can improve the success Numerous studies have found a positive of feedback mechanisms to increase the effec- relationship between ICT adoption and tiveness of development programs. GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    79 TABLE 1.8  Mobile technology and the Millennium Development Goals  MDG Example Poverty and  A study of grain traders in Niger found that cell phones improved consumer welfare (Aker and Mbiti hunger  2008). Access to cell phones allowed traders to obtain better information about grain prices across the country without the high cost of having to travel to different markets. On average, grain traders with cell phones had 29 percent higher profits than those without cell phones. In Niger, demand for cell phones sprang up organically rather than through a specific program. Universal  According to a survey of teachers in villages in four African countries, one-quarter reported that the education use of mobile phones helped increase student attendance. A main factor was that teachers could contact parents to enquire about their child’s whereabouts (Puri et al. n.d.). Mobile phones have also been used in Uganda to track school attendance and detect patterns in attendance, for instance by village, by day of the week, and by season. Tracking pupils’ attendance also indirectly tracks absenteeism among teachers (Twaweza 2010). Gender equality A study looking at gender differences in the availability and use of mobile phones in developing countries reported that 93 percent of women who had mobile phones felt safer because of having the phone, 85 percent felt more independent, and 41 percent had increased income or professional opportunities (GSM Association 2011). Child health A program using text messaging to identify malnutrition among rural children in Malawi is notable for its impact on the speed and quality of data flows.a Using a system called RapidSMS, health workers in rural areas were able to transmit weight and height information in two minutes—it took two months with the previous system. The data entry error rate was significantly improved, to just 2.8 percent from 14.2 percent in the old system. The improved information flow enabled experts to analyze data more quickly and accurately, identify children at risk, and provide treatment information to health staff in the field. Maternal health One of the earliest uses of mobile technology to improve maternal health took place in rural districts of Uganda in the late 1990s. Traditional birth attendants were provided with walkie-talkies, allowing them to stay in contact with health centers and obtain advice. An assessment of the program found that it cut maternal mortality roughly in half (Musoke 2002). HIV/AIDS In Kenya, weekly text messages were sent to AIDS patients to remind them to take their antiretroviral drugs (Lester et al. 2010). Those who received the text messages had significantly higher rates of taking the drugs than those who did not. The study noted that text messaging intervention was less expensive than in-person community adherence interventions on the basis of travel costs alone and could theoretically translate into huge health and economic benefits if scaled up. Environment According to one forecast, mobile technology could lower greenhouse gas emissions 2 percent by the year 2020 (GSM Association 2009). This reduction could be met, among other ways, through widespread adoption of various mobile-enabled technologies such as smart transportation and logistics, smart grids and meters, smart buildings, and “dematerialization” (or replacing the physical movement of goods and services with online transmission). Mobile phones can also be used as tools for environmental monitoring. For example, cab drivers in Accra, Ghana, were outfitted with mobile phones with GPS and a tube containing a carbon monoxide sensor to test pollution levels.b Partnership
 MDG target 8F states: “In cooperation with the private sector, make available benefits of new technologies, especially information and communications.” Mobile phone penetration in low- income economies grew from less than one per 100 people in 2000 to almost one per every three in 2010—largely as a result of private sector investment. Of some 800 telecommunications projects in developing countries with private sector participation between 1990 and 2009, almost three-quarters involved greenfield operations, primarily in mobile telephony.c Source:  World Bank 2012. a. “Malawi—Nutritional Surveillance” on the RapidSMS web site: http://www.rapidsms.org/case-studies/malawi-nutritional-surviellence/. b. http://www.globalproblems-globalsolutions-files.org/unf_website/PDF/vodafone/tech_social_change/Environmental_Conservation_case3.pdf. c. World Bank and PPIAF, PPI Project Database. http://ppi.worldbank.org. Date: 04/03/2011. 80  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 BOX 1.3  Potential uses of mobile phone surveys As mobile phone ownership rates have risen dramati- The cost per interview in each round in Tanzania cally in Africa, interest has increased in using mobile ranged between $4.10 and $7.30, or about $0.42 a telephones as a data collection platform. Face-to-face question (plus $50–$150 for a baseline interview). household surveys are usually expensive and time Thus for long surveys, face-to-face interviews may consuming, and mobile phone surveys are proving to be more cost-effective. However, the evidence from be a cost-effective, flexible, and rapid way to collect South Sudan and Tanzania suggests that mobile sur- data on a wide range of topics and over time. veys can collect quality data in a timely manner that South Sudan and Tanzania have both piloted is of use to a wide range of data users. Attrition and mobile phone surveys, with reasonable success. In nonresponse need to be dealt with at implementation, South Sudan, 1,000 respondents in 10 urban areas but the ability to modify surveys easily in subsequent were given cell phones in 2010 and surveyed on a survey rounds is a key benefit. monthly basis. In Tanzania, 550 households were Last, the data collected in Tanzania were widely administered a baseline survey in 2010, and an adult disseminated through a dedicated website, with addi- respondent was selected for a weekly mobile phone tional help from a local television journalist who survey (for 25 weeks), later administered every 2 ensured that information was widely publicized. weeks (for 8 weeks). Both surveys collected informa- Accountability for public services has reportedly tion on a wide variety of issues, including health, edu- increased, suggesting that results need to be dissemi- cation, water, security, nutrition, travel times, prices, nated systematically to civil society, the media, and electricity, and governance. The surveys also asked the government to be fully effective. respondents for their perceptions on the most press- ing problems to be addressed by the city government Source: Croke et al. 2013. and their opinion about a draft constitution, and col- lected baseline information for large-scale programs on food fortification. Notes E ach low-income country has been assessed   2.  according to a common set of criteria. For   1.  The classification of countries is the one used example, a country with a large fiscal defi- in the IMF’s World Economic Outlook . cit and an unsustainable level of public debt Emerging market and developing countries would be judged to have an unsatisfactory fis- are those countries that are not designated cal policy stance. as advanced countries. Countries that are eli- Somalia and South Sudan have been excluded   3.  gible for financial assistance under the IMF’s from the IMF’s vulnerability exercise for low- Poverty Reduction and Growth Trust consti- income countries, because of lack of data. tute a subset of emerging market and devel- Small low-income countries are those with a   4.  oping countries; these countries are denoted population less than 1.5 million. low-income countries although eligibility is based on other considerations in addition to All data under the vulnerability exercise refer   5.  income levels. Emerging market and develop- to the median observation for 72 low-income ing countries that are not eligible for financial countries, unless otherwise noted. assistance under the Poverty Reduction and Fiscal consolidation would also be needed in   6.  Growth Trust are designated as emerging some resource-rich countries to build buffers market countries. Fragile states are countries over time that would help manage challenges included in the World Bank’s list of Fragile arising from volatility and exhaustibility of and Conflict-Affected States as of early 2013. natural resources. Appendix table A1.2 includes the list of all T he index uses a globally consistent defi-   7.  countries and economies. nition of settlement concentration based GLOBAL MONITORING REPORT 2013 M A C R O E C O N O M I C , T R A D E , A N D A I D D E V E L O P M E N T S    81 on population density, the population of a use is determined through dialogue between “large” urban center, and travel time to that the donor agency and partner government. large urban center. In addition, loan repayments are netted out I n comparison, the United Nations World   8.  because they are not normally part of aid allo- Urbanization Prospects, the 2011 Revision, cation decisions by donor governments (OECD (April 2012) estimates the average urban 2010). population share to be 52 percent in 2010. 16. See http://www.sanitationandwaterforall.org The United Nations database is a more com- for more information. prehensive and detailed data source; however, 17. S ee http://scalingupnutrition.org/ and the the definition of urbanization is not necessar- 2012 Global Monitoring Report for more ily the same across countries. information. The methodology provides a way to construct   9.  18. S ee http://www.rbfhealth.org / for more a linear approximation of a Lorenz curve that information. minimizes the difference between the linear approximation and the actual Lorenz curve. The linear segments represent different cat- References egories of countries. In this application, these Adugna, Abebe, et al. 2011. “Finance for linear segments represent low-, medium-, and Development: Trends and Opportunities in a high-agglomeration or -income countries. Changing Landscape.” CFP Working Paper 8, 10.  World Bank and IMF member countries as of World Bank, Washington, DC. early 2013. For the 26 countries for which no Aker, Jenny C., and M. Isaac Mbiti. 2008. agglomeration data are available, countries “Mobile Phones and Economic Development were assigned agglomeration status based in Africa.” Journal of Economic Perspectives on heuristic comparisons with like countries. 24 (3). GDP per capita income estimates exclude ten Croke, K., A. Dabalen, G. Demombynes, M. countries owing to lack of data. Giugale, and J. Hoogeveen, 2013. “Collecting 11. T he Spearman rank correlation coefficient is High-Frequency Data Using Mobile Phones: 0.58 (statistically significant at the 5 percent Do Timely Data Lead to Accountability?”, level). Economic Premise Notes Series, World Bank, 12.  T he initials appearing in the graphs corre- Washington, DC. spond to the following countries: Bangla- Commission on Growth and Development. 2008. desh (BGD), Cambodia (KHM), Cameroon (CMR), Ghana (GHA), Guinea (GIN),  Indo- The Growth Report: Strategies for Sustained nesia (IDN), Mali (MLI), Mauritius (MUS), Growth and Inclusive Development. Wash- Mozambique (MOZ), Namibia (NAM), ington, DC: World Bank. Philippines (PHL), Rwanda (RWA), Senegal GSM Association. 2009. “Mobile’s Green Mani- (SEN), South Africa (ZAF), Tanzania (TZA), festo” (November). http://www.gsmworld Uganda (UGA), Vietnam (VNM), and Zam- .com/our-work/mobile_planet/mobile_environ bia (ZMB). ment/green_manifesto.htm. 13.  w ww.globaltradealert.org ———. 2011. “Women & Mobile: A Global 14. The realistic deliverables refer to the topics in Opportunity.” http://www.vitalwaveconsult which negotiations saw progress over the past ing.com/pdf/Women-Mobile.pdf. 12 months, including trade facilitation, agri- Hoekman, Bernard. 2011. “The WTO and the culture, special and differential treatment, Doha Round: Walking on Two Legs.” Eco - least-developed country issues, and dispute nomic Premise 68, World Bank, Washington, settlement. DC (October). 15. Country programmable aid is total ODA cor- ICTSD. (International Centre for Trade and Sus- rected for aid that is inherently unpredictable tainable Development). 2012. “WTO Mem- (humanitarian and disaster relief aid); that bers Aim for ‘Realistic’ Doha Deliverables for entails no flows to the recipient country (such 2013.” Bridges Weekly Trade News Digest 16 as donor administrative cost); and whose (43). 82  MACROECONOMIC, TRADE, AND AID DEVELOPMENTS GLOBAL MONITORING REPORT 2013 ———. 2013. “Trade Ministers at Davos Press for ———. 2012a. “Aid effectiveness 2005–2010: ‘Meaningful Results’ in Bali.” Bridges Weekly Progress in Implementing the Paris Declara- Trade News Digest 17 (3). tion.” OECD, Paris. International Monetary Fund. 2011. “New ———. 2012b. “Development: Aid to Developing Growth Drivers for Low-Income Countries— Countries Falls Because of Global Recession.” The Role of BRICs.” Washington, DC: IMF. 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Uyen K im Huynh, Nadi Kaonga, S eth Lester, R., et al. 2010. “Effects of a Mobile Ohemeng-Dapaah, Maurice Baraza, Afolayan Phone Short Message Service on Antiretro- Emmanuel, and Sia Lyimo. n.d. “A Study of viral Treatment Adherence in Kenya (WelTel Connectivity in Millennium Villages in Africa.” Kenya1): A Randomized Trial.” Lancet 376 http://www.mobileactive.org/files/file_uploads/ (9755, November):1838– 45. doi:10.1016/ ICTD2010%20Puri%20et%20al.pdf. S0140-6736(10)61997-6. Twaweza. 2010. “CU Tracking School Atten- McMillan, M. and D. Rodrik. 2011. Globaliza- dance in Uganda.” http://twaweza.org/index. tion, Structural Change and Productivity php?i=221. Growth. NBER Working Paper No. 17143. World Bank. 2011. Global Development Hori - Musoke, M. 2002. “Maternal health care in zons 2011 Multipolarity: The New Global Uganda: leveraging traditional and modern Economy. Washington, DC: World Bank. knowledge systems.” IK Notes World Bank. ———. 2012. 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OECD, Paris. 2 Rural-Urban Disparities and Dynamics In 2011, nearly 50 percent of the population According to various estimates, 40 per- in developing countries lived in areas classi- cent of the increase in the urban population fied as urban, compared with less than 30 in developing countries comes from migration percent in the 1980s (figure 2.1). Urbaniza- or reclassification of rural to urban (Chen tion has implications for attaining the Mil- et al. 1998; UN-Habitat 2008). In China lennium Development Goals (MDGs). Man- and Indonesia, however, rural-urban migra- aged with care, it can benefit residents of tion and reclassification of rural and urban both urban and rural areas; managed poorly, boundaries are estimated to account for more urbanization can marginalize the poor in than 70 percent of urban growth in the 1980s both areas. Slums are a symptom of the mar- and about 80 percent in the 1990s.1 These ginalization of the urban poor. Close to 1 bil- migration patterns have vital consequences lion people live in urban slums in developing for the effect of urbanization on poverty as countries, including middle-income countries well as implications for policies that can make like Brazil and emerging countries like China urbanization a force for poverty reduction. and India (UN-Habitat 2010). To better understand these rural-urban Location remains important at all stages dynamics, this chapter looks first at the dis- of development, but it matters less in rich parities in attaining the MDGs between rural countries than in poor ones. Estimates from and urban areas, including small towns and more than 100 Living Standard Surveys indi- peri-urban areas. The chapter continues with cate that households in the most prosperous an overview of the pace and causes of urban- areas of developing countries such as Bra- ization, the role of rural-to-urban migration zil, Bulgaria, Ghana, Indonesia, Morocco, dynamics, and the consequences for attain- and Sri Lanka have an average consumption ment of the eight MDGs discussed in this almost 75 percent higher than that of simi- report. lar households in the lagging areas of these countries. In comparison, the disparity is less than 25 percent in developed countries Trends in rural-urban poverty such as Canada, Japan, and the United States Of the 1.3 billion poor in developing coun- (World Bank 2009). tries in 2008, 76 percent resided in rural areas 85 86  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 FIGURE 2.1  The world is becoming more urban 90 Share of urban population (% of total population) 80 70 60 50 40 30 20 10 0 East Asia Europe and Latin America Middle East and South Sub-Saharan World Developing Developed and Paci c Central Asia and the North Africa Asia Africa countries countries Caribbean 1960 1980 2000 2011 Source:  World Bank 2012c. (figure 2.2). In South Asia, which had the 2008. In 1990, East Asia had almost 1 bil- largest number of poor in 2008, poverty was lion poor and the highest rural poverty rate of high in rural and urban areas (table 2.1). A ten about 67 percent. Its achievement in reducing percentage point difference between rural and rural poverty to 20 percent by 2008 is spec- urban poverty rates in 1990 persisted until tacular. East Asia has an equally impressive record in eradicating urban poverty from 24 percent in 1990 to 4 percent in 2008. Sub- FIGURE 2.2  Overall poverty has declined Saharan Africa remains the last frontier in the fight to reduce poverty. Nearly half of the 100 2,500 rural and one third of the urban population lived on less than $1.25 a day in 2008. For Number of people living on less than $1.25 a day 90 each poor person in an urban area, there were % of poor people in total population 80 2,000 2.5 as many in rural areas. In South Asia, for 70 each poor person in an urban area, there were 60 1,500 three poor ones in rural areas (map 2.1). 50 40 1,000 Unveiling the face of urban poverty 30 Urban poverty is not uniformly distributed 20 500 across a country’s cities and towns. Popula- 10 tions are typically conceptualized as being 0 0 spatially bipolar: people live in either rural 1990 1993 1996 1999 2002 2005 2008 or urban places. Poverty, too, is typically Rural (left axis) Urban (left axis) seen from this perspective. In reality, people Number of poor people (right axis) and poverty are located along a continuous “settlement” spectrum ranging from sparsely Source:  GMR team 2013. populated rural areas, to small towns to GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    87 TABLE 2.1  Poverty rates are falling in both urban and rural areas but are lower in urban areas Share of the population below $1.25 a day ibrd 39872   1990 1996 2002 20082013 april   rural urban rural urban rural urban rural urban East Asia and Pacific 67.5 24.4 45.9 13.0 39.2  6.9 20.4  4.3 Europe and Central Asia  2.2  0.9  6.3  2.8  4.4  1.1  1.2  0.2 Latin America and the Caribbean 21.0  7.4 20.3  6.3 20.3  8.3 13.2  3.1 Middle East and North Africa  9.1  1.9  5.6  0.9  7.5  1.2  4.1  0.8 South Asia 50.5 40.1 46.1 35.2 45.1 35.2 38.0 29.7 Sub-Saharan Africa 55.0 41.5 56.8 40.6 52.3 41.4 47.1 33.6 Total 52.5 20.5 43.0 17.0 39.5 15.1 29.4 11.6 Source: World Bank staff calculations. MAP 2.1  Povery is becoming more urban in more urbanized regions % people living in an agglomerated area Rural poor Urban poor 0 40 50 55 60 100 Source:  GMR 2013 team. Note:  The agglomeration index was developed by the WDR 2009 team. They define an agglomerated area as having these metrics: a settlement’s population size (more than 50,000 people); population density (more than 150 people per square kilometer); and travel time to the nearest large city (60 minutes). The graduated circles are roughly proportional to the total poor population and show the relative share of rural and urban poor. small cities, to megacities (figure 2.3). In distribution of the urban poor follows a simi- 2010, some 17.5 percent of the urban popu- lar pattern, with the smallest share living in lation in developing countries lived in cities megacities and larger shares living in medium of 5 million or more; 31 percent lived in cit- and small towns. Indeed, the large cities are ies of 0.5 to 5 million, and 51 percent lived not necessarily places where the poor are also in smaller towns (table 2.2) (UN 2011). The concentrated (table 2.3). 88  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 FIGURE 2.3  Poverty is located along a rural-urban spectrum the share of the urban poor residing in small- and medium-size towns exceeds that in the a. The simpli ed area economy b. And a more realistic representation largest cities. In Brazil, one of the most urban- ized developing countries, 83 percent of the Urban Metropolis population is settled relatively evenly along Rural Urban Rural Towns Large city the urban spatial spectrum—22 percent in Villages Secondary cities megacities, 33 percent in intermediate-size cities, and 28 percent in the smallest towns. Brazilian poverty has a predominantly urban face, though not in its megacities: 72 percent Source:  Adapted from World Bank 2009. of the poor live in urban areas, but surpris- ingly, only 9 percent reside in the megacities With the aid of new analytical techniques of Rio de Janeiro and São Paulo. The rest of that combine census and household survey the poor are concentrated in medium (17 per- data, researchers have constructed ­ “poverty– cent) and very small towns (39 percent). In city size gradients” that reveal interesting Thailand, the share of the urban poor is 17 insights on the relationship between poverty percent, of which 76 percent resides in extra and city size (Elbers, Lanjouw, and Lan- small towns. jouw 2002, 2003). Recent research for a Findings from a study of eight develop- large number of countries shows that urban ing countries show that with the exception poverty is clearly lowest in the largest cities of Mexico, the urban population was con- (Ferré, Ferreira, and Lanjouw 2012). In the centrated in the largest cities but the urban 1970s and 1980s, better provision of services poor were dispersed along a continuum in urban areas of developing countries led of medium, small, and extra small towns to the perception that governments had an (table 2.3). Lower rates of poverty in large “urban bias” (Lipton 1977). In recent years, cities are consistent with the hypotheses of researchers who have analyzed the poverty– urban growth being driven by agglomeration city size gradient have raised similar ques- externalities. tions: Is there a “metropolitan bias” in the Many small countries do not have a mega- allocation of resources to larger cities at the city, and nearly all large countries have many expense of smaller towns?2 large cities of various sizes as well as one or In a fairly large number of developing several megacities. Similarly, the small towns countries, not only is the incidence of poverty in small countries are significantly smaller higher in small cities and towns than in the than the small towns in large countries. In large urban areas, but these smaller urban addition, while official boundaries rarely centers also account for a larger share of the demarcate them as “slums,” the size of urban urban poor. In such countries as Brazil and cityscapes that can be considered slums is Thailand, with well-known megacities such significant. Almost by definition, slums are as São Paulo, Rio de Janeiro, and Bangkok, home to many of the urban poor. Asia is TABLE 2.2  Distribution of urban population by size of urban area   Number of agglomerations   Population in urban areas (in 1,000s)   Percentage of urban population   City size class 1975 2005 2010   1975 2005 2010   1975 2005 2010 10 million or more 3 19 23   53,185 284,943 352,465   3.5 8.9 9.9 5 to 10 million 14 33 38   109,426 229,718 266,078   7.1 7.2 7.5 1 to 5 million 144 340 388   291,663 667,652 759,919   19.0 20.9 21.4 500,000 to 1 million 224 463 513   155,770 317,166 353,802   10.1 9.9 9.9 Fewer than 500,000 — — —   927,625 1,698,055 1,826,313   60.3 53.1 51.3 Source: UN 2011. Note:  — = not available. GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    89 TABLE 2.3  The poor are disproportionately concentrated in smaller cities and towns Percent  Country  Urban XL L M S XS Albania           Population share 42  — —  15 13 14 Share of the poor 31 —   — 11 9 11 Brazil      —       Population share 83 22 7 24 1 28 Share of the poor 72 9 6 17 1 39 Kazakhstan             Population share 57 8  — 29 5 15 Share of the poor 43 1  — 21 5 15 Kenya             Population share 19 7 2 3 2 4 Share of the poor 16 6 2 3 2 4 Mexico             Population share 6 27 13 11 4 6 Share of the poor 39 16 6 7 3 7 Morocco             Population share 51 12 9 27 3 1 Share of the poor 34 3 7 2 3 1 Sri Lanka             Population share 12  — 3 3 2 4 Share of the poor 5  — 1 1 1 2 Thailand             Population share 31 12  — 3 2 14 Share of the poor 17 1  — 1 1 13 Source: Ferré, Ferreira and Lanjouw 2012. Note: Population share = percent of the population living in each category; share of the poor = percent of the country’s poor living in each category. XL = > 1m; L = 500k–1m; M = 100k–500k; S = 50k–100k; XS = < 50k. — = not available. home to 61 percent of the world’s nearly 1 100 million slum dwellers), were self-evident, billion slum dwellers; Africa 25.5 percent; with some 227 million people moving out of and Latin America, 13.4 percent. The num- slum conditions.4 ber of slum dwellers is projected to grow by The effects of urban poverty can be as nearly 500 million between now and 2020 dehumanizing and intense as those associated (UN-Habitat 2010). The proportion of urban with rural poverty. Various MDG indicators residents living in slums is already about 62 showed remarkable similarities between slum percent in Africa. Between 2000 and 2010, and rural areas. For instance, in low-income the increase in the absolute number of slum countries such as Bangladesh, Ethiopia, dwellers was greatest in Sub-Saharan Africa, Haiti, India, Nepal, and Niger—countries southeastern Asia, southern Asia, and west- where poverty is seen as primarily a rural ern Asia.3 While southern Asia, southeastern phenomenon—4 of every 10 slum children Asia, and eastern Asia have made impressive are malnourished, a rate comparable to that progress in moving people out of slums, the found in the rural areas of these countries. most significant reductions have occurred Likewise, in cities such as Khartoum and in North Africa. During 2000–10, regional Nairobi, the prevalence of diarrhea is much differences in the success of addressing the higher among slum children than among MDG 7.d slum target (achieve, by 2020, a children in the rural areas of Kenya and significant improvement in the lives of at least Sudan. In slums, child deaths result less from 90  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 infectious diseases and more from unhealthy especially agro-industry, and related service living conditions, such as indoor air pollution sectors account for only 10 percent of the or lack of access to safe water and sanitation, economy in the region, and industries related which lead to water-borne and respiratory ill- to them generally locate in the largest city. nesses among children (UN-Habitat 2008). South and East Asia: High urban poverty Sub-Saharan Africa: Low urban poverty concentrated in small towns concentrated in the largest cities Despite their megacities and sprawling slums, An ongoing study of 12 Sub-Saharan Afri- urban poverty in South and East Asia is can countries shows that although the pov- firmly located in smaller towns, not in big erty–city size gradient observed in African c ities. The majority of the poor in South ­ countries is similar to that seen in developing Asia reside in rural areas where the poverty countries elsewhere, the African experience rate was 38 percent in 2008. At 30 percent, is different (Coulombe and Lanjouw 2013). the urban poverty rate was only 4 percent- Not surprising, poverty is a rural phenom- age points below that in Sub-Saharan Africa enon in the region, with the share of the in the same year. But unlike Africa, poverty poor in rural areas ranging from 68 percent rates in smaller towns are significantly higher in the Central African Republic to 90 per- than in megacities. cent in Mali and Swaziland to 95 percent in Recent research in India, for example, Malawi. The urban poor are a small share of indicates that poverty is still primarily a rural the total urban population, but unlike other phenomenon at the aggregate level, but that regions, they are concentrated in large cities. urban poverty is growing and, within urban Sub-Saharan Africa thus reflects a “largest areas, is concentrated in smaller towns. The city” model: the largest city accounts for a poverty rate in India in 2004–05 was 28 per- disproportionately large share of the total cent in rural areas and 26 percent in urban urban population and hence also for the bulk areas. As figure 2.4a shows, among urban of the urban poor. For example, in the Cen- areas, the poverty rate in small towns (popu- tral African Republic, Gabon, and Malawi, lation less than 50,000) was double the rate more than half of each country’s urban poor in large towns with a population of 1 million live in the largest city, which is usually the or more (30 percent to 15 percent) (World capital. In Guinea, Niger, Senegal, Sierra Bank 2011; Lanjouw and Marra 2012). Leone, and Swaziland, 40 percent of the The poverty–city size gradient is steep urban poor live in the largest city. In most in India, however, so even a “medium” city African countries, “urban” is synonymous has close to 1 million residents. In Vietnam, with “largest city.” In Malawi, Mali, and in contrast, the population of an average Togo, the combined population of the towns medium-size town is about 85,000. In Viet- with 5,000–100,000 inhabitants account nam, the nexus between urban population for just 2–6 percent of the total population. and urban poverty is mirrored in a remark- This pattern is different from other predomi- able U-shape (figure 2.4b). Two megacities, nantly “rural” developing countries such Hanoi and Ho Chi Minh, with a population as India and Vietnam. The primary reason of over 4 million each, are home to about for urban poverty’s relative concentration in 30 percent of urban residents but only about the capital city is the paucity of better-pay- 10 percent of the poor. In comparison, the 634 ing, nonfarm jobs in smaller towns. Rural smallest Vietnamese towns, with an average migration to urban areas in Sub-Saharan population of about 10,000, are home to more Africa has stalled in large part because the than 55 percent of the urban poor (World structural transformation from agriculture Bank 2011; Lanjouw and Marra 2012). to industry (manufacturing and services) Small towns can play an important role has been slow to emerge. Manufacturing, in arresting the “urbanization” of poverty if GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    91 FIGURE 2.4  In India and Vietnam, poverty in small towns is worse than in large cities a. India: Poverty rate in small towns is higher b. Vietnam: Urban poor are concentrated in the than in rural areas extra-small towns 60 60 Share of urban population that is poor (%) 50 50 40 40 Poverty rate (%) 30 30 20 20 10 10 0 0 Rural Urban Small Medium Large XS S M L XL areas areas towns towns towns Share of urban population Share of urban poor 1983 1993–94 2004–05 Source:  World Bank 2011. Source:  Lanjouw and Marra 2012. Note:  Poverty rates based on Uniform Recall Period (URP) and official Note:  XS = > 4k – 50k; S = 50k – 300k; M = 300k – 500k; L = 1m–5m for poverty lines. centrally governed and 0.5m–1m for locally governed; XL = > 5m. policies that nurture economic activity and followed by smaller towns and cities (38 per- improve residents’ access to basic services cent), and then metropolitan areas (26 per- are implemented. The reality of the poverty– cent) (Deichmann, Shilpi, and Vakis 2009). city-size gradient shows that policies that improve service delivery and foster nonfarm job creation in small towns and peri-urban The MDGs, human capital, and areas can offer rural migrants better liveli- disparities along the rural-urban hoods, thus helping to reduce both urban and spectrum rural poverty. In countries where population Not all MDG-related services have simi- density is high in smaller towns, the scale lar characteristics. Investments in primary economies may be sufficiently large to make education, nutrition, and health care lay the service delivery, including infrastructure- foundations for the human capital endowed related services, cost-effective. in individuals, who can carry it with them More than 200 cities and towns dot Ban- when they move and add to it if they migrate gladesh and Pakistan, yet urbanization in to places where related secondary and ter- both of these countries is dominated by a few tiary services are available. In this sense, pri- large metropolitan cities with a population of mary education and health care are portable. more than 1 million. Chittagong and Dhaka Together, education, nutrition, and health account for 43 percent of Bangladesh’s urban care, combine to form human skills and population; in Pakistan, eight cities each with abilities that have been powerfully linked a population of more than 1 million account to productivity growth and poverty reduc- for 58 percent of the urban population. tion in the medium to longer run (Hanushek Another 24 percent of the urban population and Woessmann 2008; Commander and in Pakistan resides in 48 cities with popula- Svejnar 2011). As such, human capital is a tions of 100,000 to 1 million. Evidence from fundamental ingredient for desirable job out- these countries reveals that the incidence of comes, in both rural and urban areas (World poverty is highest in rural areas (43 percent), Bank 2013). 92  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 Primary education improves an indi- areas have a higher percentage of pupils vidual’s opportunity to join the workforce, reaching reading competency than do rural regardless of location. An additional year areas. of schooling can raise wage earnings sub- As with poverty, learning also varies along stantially, reflecting the higher productivity the rural-urban spectrum. A comprehensive of more educated workers (Psacharopoulos study in 2007 in 15 Sub-Saharan countries and Patrinos 2004; Montenegro and Patrinos recorded considerable rural-urban differen- 2012). Education is also positively associated tials in the share of sixth-grade pupils reach- with farm productivity. And rural migrants ing competency levels in reading and math- who have had at least a primary education ematics relative to national scores. Several are better prepared to take advantage of job findings of the study were both noteworthy opportunities in urban areas. For many rural and worrisome. First, the rural-urban differ- migrants, the basic education acquired in entials were vast. On average, only 57 per- the village can be the turning point between cent of rural students reached competency in being prepared for a better-paying job upon reading levels 4–8 compared with 75 percent arrival in a city or remaining in poverty once of urban students. In Malawi and Zambia, in the city. Better health leads directly to the corresponding figures were under 25 per- higher labor productivity. Gender differen- cent in rural schools and 40 percent in urban tials in primary enrollments erode the human schools. Competency in mathematics at level capital foundations of women, putting them 4 was discouragingly low: only 18 percent at a disadvantage compared with men in of children in rural schools and 24 percent all aspects of human welfare but especially in urban schools reached this level. Worse, economic empowerment. Lack of gender only 1.2 percent of all pupils reached com- equality in one dimension can multiply the petency in mathematics level 8. Clearly, gov- negative effects on other dimensions. World ernments need to pay as much, if not more, Development Report 2012: Gender Equality attention to the quality of schooling in Sub- and Development (WDR 2012) noted that in Saharan Africa as they do to completion rates Mozambique low levels of maternal educa- (SACMEQ 2010). tion are strongly related to high levels of child Poor literacy (reading and writing) scores malnutrition and low use of health services. in rural Sub-Saharan Africa highlight the risk of overestimating the schooling benefits asso- ciated with urban living (figure 2.5). In a study Quality of primary education matters of 12 Sub-Saharan African countries, the dif- East Asia and Pacific, Europe and Central ferentials in urban-rural literacy rates range Asia, and Latin America and the Caribbean from 32 percent–39 percent in 7 countries, have either already achieved or are close to and around 22 percent in another 2 countries. achieving the MDG target of universal pri- The differences between the small towns and mary school completion by 2015. The dif- large cities are small in several countries ferentials in primary school completion rates and are explained by the fact that the pov- in rural and urban areas are surprisingly low erty city-size gradient is not as pronounced across these regions (based on data from 46 in Sub-Saharan Africa as in other regions countries) but mask enrollment shortfalls (Coulombe and Lanjouw, 2013). (see box 2.1). Gender differences in educa- Children attending primary school in tion, however, are also large in rural areas. In rural areas are often disadvantaged because Sub-Saharan Africa, where rural enrollments it is difficult to attract teachers to rural areas. are already low, gender differentials of 8–15 One study finds that many parents in rural percentage points prevail in Cameroon, Côte schools complain that the schools do not d’Ivoire, Kenya, and Zambia. have enough teachers. Parents also com- The differentials in the quality of educa- plain about high rates of teacher absenteeism tion, on the other hand, are greater: Urban (Wodon 2013a). GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    93 BOX 2.1  The link between primary enrollment and completion A recent study permits a closer examination of prog- TABLE B2.1.1  Measuring primary education, ress toward primary school completion (Nguyen and selected countries Wodon 2013a). It demonstrates that completion rates Share of children Share of starting need to be evaluated with more care. One way to look who start primary children who complete  Country school primary school at differentials in education attainment structures between various households consists in calculating an Bangladesh     Urban 90 84 attainment ratio for the completion of primary school, Rural 84 75 which is itself the result of a two-step process: start- India     ing primary school, and completing primary school Urban 92 96 for those who started it. This type of simple decom- Rural 79 90 position helps in assessing where exactly differences Nepal     in attainment between gender, quintiles of well-being, Urban 93 93 or urban and rural areas take place. Rural-urban Rural 83 86 ratios estimated at each step of the process help to Pakistan     identify exactly where the main attrition takes place Urban 82 95 in the education system. The decomposition has been Rural 59 87 applied to a large number of African countries and in Source: Nguyen and Wodon 2013b. South Asia using Demographic and Household Survey (DHS) data (Nguyen and Wodon 2013b, 2013c). Data for urban-rural enrollment in Bangladesh, child population started school. The actual propor- India, Nepal, and Pakistan are set out in table B2.1. tion of rural children completing primary school is The share of those starting primary education is 51 percent (0.59 x 0.87). Of the two steps that relate higher in urban areas, and the gap widens for the to primary education completion, which matters the completion of primary school. As an example, the most for disparities between urban and rural areas? completion rate in rural Pakistan is 87 percent of the Data on Indian states show that in about half of the proportion of students who actually started primary states, the largest determinant of the gap is fewer stu- school. This number may not seem overly worrisome dents starting primary school in rural areas, while in until one considers that only 59 percent of the rural the other half, completion is the issue. Source: Nguyen and Wodon 2013b. Rural-urban differentials in health 1,000 days,” from conception to two years indicators of age (World Bank 2012a). While many factors underlie the differ- “Successful development is so intimately ences in rural and urban mortality rates, related to health—to measures that directly including differences in income, consump- or indirectly help individuals, households, tion, and wealth between urban and rural or communities avoid or prevent disease, households, fertility rates and access to safe injury, and inadequate food intake” (Sat- water, sanitation, and health services play a terthwaite 2011). The foundations of good critical role. health start even before birth. Like basic Rural-urban differentials in access to pri- education, the human capital formation of mary health care are significant across all good health is cumulative and continues to regions. Evidence from DHS surveys for a be formed throughout childhood and young large number of developing countries indi- adulthood. Of crucial importance are ade- cates that urban infant mortality rates are quate health and nutrition during “the first 8–9 percentage points lower than the rural 94  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 FIGURE 2.5  Literacy rates in rural areas and smaller towns are worse than in large cities 100 90 80 70 60 Percent 50 40 30 20 10 0 Niger Guinea Côte Mali Central Sierra Mauritania Senegal Togo Malawi Gabon Swaziland d’Ivoire African Leone Republic XXS XS S M L XXL Rural XL Source:  Coulombe and Lanjouw 2013. rates in Latin America, Europe and Central methods) suggests that the prevalence of Asia, and 10–16 percentage points in the child stunting in Mexico tends to be higher Middle East and North Africa, South Asia, in small towns than in the largest cities and Sub-Saharan Africa. East Asia has the (Ferre, Ferreira, and Lanjouw 2012). This highest differential, at 21 percentage points. corresponds with findings regarding poverty, Individual country differences are more which is more pronounced in smaller cities informative (figure 2.6). than in larger cities. A study of 40 Sub-Saharan African coun- tries based on DHS data indicates that the Understanding the broader economic infant mortality rate is 65 (per 1,000 live consequences of closing health gaps in births) in urban areas and 80 in rural areas. low-income countries The percentage of deliveries in health facilities in urban areas is about 78 percent Most countries are lagging behind in all three on average across the countries, compared health-related MDGs. It is therefore useful to with 43 percent in rural areas, in a sample of quantitatively evaluate the broader economic 28 Sub-Saharan Africa countries. The larg- consequences of closing health gaps in low- est rural-urban differences are in some of the income countries. In a simulation exercise poorest countries (Wodon 2013b). Similar conducted for this report, the broader eco- patterns are observed for measures of child nomic consequences of closing health gaps malnutrition. Countries with the worst indi- in low-income countries were explored by cators for infant and child mortality also adapting maquette for MDG simulations have the largest absolute differences between (MAMS), a computable general equilibrium rural and urban areas. The average share of (CGE) model for country strategy analysis, stunting in children is 42 percent in rural to address the rural-urban aspects of MDG areas compared to 30 percent in urban areas achievement (Lofgren 2013). The database (Wodon 2013b). used was designed to capture characteris- It is sometimes argued that other dimen- tics typical of low-income countries, includ- sions of poverty—health outcomes, for ing their MDG outcomes, sectoral shares in example—tend to be better in large cities. value-added of agriculture, manufacturing Analysis of anthropometric health outcomes and services, degree of urbanization, and for children across cities of different sizes population growth. Annex 2A.1 presents in Mexico (based on small-area estimation the results of this exercise. The main results GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    95 FIGURE 2.6  Rural-urban differentials in infant other MDGs. These trade-offs are especially mortality rates remain substantial difficult for governments in low-income countries. Guyana (2009) Increasingly, governments are becoming Romania (1999) interested in collaborating with the private Tanzania (2010) sector or nongovernmental organizations Maldives (2009) (NGOs) to deliver services to the poor. Such Ukraine (2007) partnerships can be instrumental in improv- Uzbekistan (1996) ing the delivery of health care, especially in Ecuador (2004) South Asia, East Asia and Pacific, and Sub- Armenia (2010) Saharan Africa, where over 90 percent of the Georgia (2005) poor live (box 2.2). Rwanda (2010) São Tomé and Principe (2008) Affordable access to sanitation and Namibia (2006) water: Infrastructure needs scale Guatemala (2008) economies Eritrea (2002) Pakistan (2006) In comparison to basic education and health care whose benefits are embedded in an indi- Vietnam (2002) vidual’s human capital, infrastructure needed Nepal (2011) to increase access to safe water and sanita- Uganda (2006) tion must be provided at a fixed spatial loca- South Africa (1998) tion. New or old connections in a rural area Burkina Faso (2010) cannot be moved costlessly to an urban area. Turkmenistan (2000) The initial fixed costs of establishing these Cameroon (2004) services are high; routine maintenance is also Comoros (1996) costly. Because sparsely populated areas do Bolivia (2008) not have sufficient population density, they Central African Republic (1994) are unable to benefit from scale economies Côte d’Ivoire (1998) that reduce the unit costs of network infra- Cambodia (2010) structure services. As a result, residents in –20 –10 0 10 20 30 40 50 less agglomerated areas (typically, rural pop- Di erence between rural and urban ulations, very small towns, and less densely infant mortality (%) populated peri-urban areas) often receive a Source:  GMR team 2013. lower level of service (map 2.2). The greatest rural-urban disparities in the delivery of MDG-related infrastructure indicate that if the government can finance services are in South Asia and Sub-Saharan increased access to rural health care through Africa. In these two regions, access to sani- a combination of borrowing and greater effi- tation among the rural population, which ciency in health sector spending, it can con- accounts for between 60–80 percent of the siderably reduce rural under-five mortality. If total population, is significantly lower than the financing is a combination of grants and in most urban areas. This disparity would greater efficiency in health sector spending, appear to be a combination of extreme pov- government can do even more—it can reduce erty in the rural areas combined with the rural under-five mortality and contribute to lack of network scale economies. In regions other MDGs, including poverty reduction. If with higher proportions of their populations the government has to rely solely on domes- in urban areas, access to sanitation is higher tic resources, however, then the trade-off is in both urban and rural areas and the rural- lower poverty reduction and less progress in urban differentials are much smaller. 96  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 BOX 2.2  Leveraging the private sector to reach the health-related MDGs More than 90 percent of the poor live in South Asia, governments to contract services from faith-based East Asia and Pacific, and Sub-Saharan Africa. In organizations and other nongovernmental organi- these three regions, the private sector provides at zations located in the hardest-to-reach areas of the least 50 percent of the health services that the poor country. receive. Furthermore, delivery of priority health ser- P ublic-private partnerships that tap the capital, •   vices by the private sector has been growing rapidly. management capacity, and creativity of the private For example, the proportion of women who delivered sector to improve public services. In India, the IFC children in private facilities increased from 8 percent helped the state of Meghalaya design an innova- in 1990 to 22 percent in 2008.a Indeed, the private tive insurance scheme whereby the government, a sector already plays and must continue to play an private sector insurer, and hundreds of surveyed important role in many countries if they are to meet public and private health care providers cooperated their health-related MDGs. in a large-scale partnership to enhance financial Some of the innovative mechanisms being pio- protection and access to quality health care for the neered around the world to leverage the private sector population of one of the lowest-income states in the are: country. Capital finance that fuels expansion of access to •   S mart policies and regulations with a dual •   quality health services and products from the pri- approach to reaching the poor. On one hand, vate sector. The IFC is investing in and advising marketwide reforms such as simplifying licensing health care companies seeking to expand access of health facilities and establishing enforceable to quality health services and products to those at patient safety and quality standards are expected the “bottom of the pyramid.”b In Africa, the IFC to disproportionately benefit the poor. On the helped establish an innovative private equity fund other, interventions explicitly target the poor and that not only focuses on health but is also given those private providers that serve them. In Kenya, explicit incentives to finance companies that serve for example, the World Bank and the International the poorest. One such company is the Nairobi Finance Corporation (IFC) are helping the National Women’s Hospital. An independent assessment Health Insurance Fund introduce poverty-targeted shows that about three-fifths of its patients are at subsidized coverage. They are also working with the bottom of the pyramid. In India, IFC investee the Ministry of Health to introduce the legal and Apollo Hospitals is seeking to expand its top qual- regulatory framework for newly established local ity services to smaller cities and rural areas. FIGURE B2.2.1  Percent seeking care in private versus public facilities by region 23 56 52 63 Percent 80 78 44 48 37 20 South Asia Southeast Asia Middle East and Africa Latin America North Africa + Europe and the Caribbean and Central Asia Private facilities Public facilities Source:  Demographic and Health surveys. Note:  The figure shows the shares of health care facilities funded by public and private providers for the poorest quintile. a.  Karen Grepin, http://ps4h.org/ihea2011. b. The bottom of the pyramid is defined as those with an annual household income of less than $3,000. GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    97 MAP 2.2  Access to sanitation across regions Share of population with % people living in an agglomerated area access to sanitation 0 40 50 55 60 100 Urban Rural 50% Source:  GMR team 2013. Note:  The bars show the percent of regional urban and rural populations (developing countries only) with access to sanitation; the bars are not proportional to population size. For a definition of agglomeration, please see the note to map 2.1. To the extent that infrastructure avail- follows the overview). In 2010, 96 percent of ability acts as a determinant of urban growth the urban population in developing countries and poverty reduction, the imbalance of had access to safe drinking water compared service availability could help explain lower to 81 percent of the rural population. In gen- welfare outcomes in smaller towns. For eral, the rural-urban differentials in access many of the 12 Sub-Saharan African coun- to water diminish with the level of urbaniza- tries shown in figure 2.7, the differences in tion in most regions. The largest differentials access to sanitation between the largest cit- (about 70 percent or higher) are in Ethiopia, ies and smaller towns are as stark as those Gambia, Niger, and Sierra Leone, which are between urban areas as a whole and rural mostly rural. areas. In Côte d’Ivoire, Guinea, Mauritania, Through their density, urban areas make and Sierra Leone, access to sanitation in the public services more accessible and afford- smallest towns is significantly lower than able. For example, on average a cubic meter in larger cities. In Gabon, Malawi, Niger, of piped water costs $0.70–$0.80 to provide and Swaziland, access in smaller towns is as in urban areas compared with $2 in sparsely good as it is in larger towns (Coulombe and populated areas (Kariuki and Schwartz Lanjouwe 2013). 2005). As a result, the poor often pay the All regions offer better access to safe highest price for the water they consume drinking water in urban than in rural areas, while having the lowest consumption levels. although rural-urban differentials are shrink- For example, in Niger, the average price of a ing (see MDG 7 in the report card, which cubic meter of water cost CFAF 182 when it 98  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 FIGURE 2.7  Small towns have generally poorer service delivery than large cities City–size gradient: larger towns have better access to sanitation (%) 120 Population with access to sanitation (%) 100 80 60 40 20 0 Malawi Niger Guinea Mauritania Togo Côte Gabon Sierra Central Senegal Swaziland Mali d’Ivoire Leone African Republic XXS XS S M XL XXL L Rural Source:  Coulombe and Lanjouw 2013. Note: XXS = < 5k; XS = 5k–10k; S = 10k–25k; M = 25k–50k; L = 50k–100k; XL = 100k–1m; XXL = > 1m. was piped from a network, CFAF 534 when have been designed to leverage innovative it came from a public fountain, and CFAF means for delivering safe water (box 2.3). 926 when it came from a vendor (Bardasi and Wodon 2008). This means that the urban poor without access to the network often pay Why urbanization matters the highest price for the water they consume for the MDGs while having the lowest consumption levels. Urbanization matters for the MDGs. It can More than 55 percent of households did not facilitate several factors that play an impor- have access to piped water in their dwelling. tant role in attaining those goals. It can Having a private connection was strongly reduce poverty in two main ways: through correlated with wealth: among the poorest the benefits of agglomeration, cities poten- 20 percent of households, none had a private tially generate higher living standards for connection, while 65 percent of households all their residents and reduce urban poverty; in the top quintile were connected. and through the benefits of scale economies, Poor access to basic infrastructure dispro- public services, including those related to portionately affects rural women by directly the MDGs can be provided in urban areas reducing the time they have available for at a lower fixed unit cost. Cities are also a income generating activities because they per- source of revenues that governments need form most of the domestic chores and often to foster agglomeration economies for firms walk long distances to reach clean water. and households, and to finance services for WDR 2012 on gender noted that in rural rural and urban migrants. But when the posi- Guinea, women spend three and a half times tive forces driving cities are strained by urban more than men in fetching water. In several congestion, service delivery is unable to keep rural and small towns in Sub-Saharan Africa, pace with demand and slums can emerge. An where network connections are often not eco- important negative externality of excessive nomically viable, public private partnerships urban congestion is pollution. GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    99 BOX 2.3  Water in Africa: Strong public sector leadership is key to sustainable PPPs in rural and small towns Public-Private Partnerships (PPPs) in nontraditional determinant of financial cost recovery. More active markets. Nontraditional markets, such as those in connections translate to higher volumes of water sold, sparsely populated and dispersed settlements, present given that consumption tends to be higher from pri- a challenge to making private sector participation a vate house connections than standpipes. This obser- commercially viable proposition because of econo- vation captures the common issues across countries: mies of scale and affordability issues. The experiences the price of water and connections, rates of consump- of Cambodia, Mali, Mozambique, the Philippines, tion, and economies of scale. In rural growth centers Rwanda, Senegal, and Uganda have shown, how- outside of small towns, the cost of service tends to be ever, that given the right allocation of risks among higher than in urban areas. Lowering the cost of ser- participants in the PPP, interest can be generated in vice requires approaches that are usually not easy to the private sector. In many African countries, the coordinate or navigate politically and hence, they are private sector’s role is mostly confined to operat- typically not undertaken. These include subsidizing ing rural water supply schemes, and generally small the densification of standpipes to bring them closer to piped water schemes, serving households through a household settlements or subsidizing the cost of house combination of private connections and standpipes. connections; and clustering schemes across different In India, the private sector is involved in higher political/administrative boundaries to be managed by value-added services, such as processing and dis- a single operator. posal of solid waste. Success comes not just by help- ing develop PPP arrangements but also by strength- Holding local institutions accountable matters for the ening the enabling legal, regulatory, financial, and success of the partnership and for rehabilitation. Pri- institutional environment. In Sub-Saharan Africa, a vate sector participation in Africa is often an accom- number of governments have explicit policies for the paniment to political devolution, which saw the delegation of water supply services to private opera- responsibility for water services decentralized to the tors, as in Benin, Burkina Faso, Mali, Mauritania, local level. This is the case in Benin, Burkina Faso, Mozambique, Niger, Rwanda, Senegal, and Uganda. Mali, and Uganda. The role of local governments as Lease and management contracts are the most com- the focal point between the state, consumers, and the mon types of contract today, whereby operators take private sector is critical. Often, however, transfer of commercial and operational responsibility, including authority for water services is incomplete and not for small repairs. well thought out. Uganda is unique as it has set up a dedicated and autonomous local body that represents Key lessons from the field: Financial viability suggests the public sector in water services delivery. In con- the need to lower the cost of services in rural areas to trast, most West African countries, such as Benin and drive consumption. Evidence suggests that a growing Burkina Faso, expect the local communes (mayors) to number of privately operated schemes are just able to take on oversight for water services as an additional achieve operating cost recovery, with a few making mandate. comfortable margins. What separates financial win- ners and losers? Analysis in Uganda found that the Source: Water and Sanitation Program, http://www.wsp number of active connections was a strong positive .org/topics. Agglomeration economies arise when 26 countries across all regions, more than there is a confluence of people, or population 50 percent of the reduction in poverty can density, and firms, or economic density. The be attributed to an increase in labor income main outcome is the creation of jobs, which (World Bank 2013). are central to poverty reduction and reach- Higher economic and population densities ing MDG 1. According to the World Devel- of urban areas are also good for governments. opment Report 2013: Jobs (WDR 2013), in They generate tax revenues that are essential 100  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 for financing the public goods necessary for the differences in living standards between poverty reduction. countries were minimal. England’s Industrial Successful urbanization is reflected in Revolution unleashed a wave of industrializa- dynamic cities that foster agglomeration tion that was necessarily grounded in cities or economies. The latter thrive on large numbers urban spaces. The mechanization of produc- of businesses and create plenty of jobs. Urban- tion was powered by economies of scale and ization is a “win-win” recipe for poverty a concentration of population available only reduction when it generates higher incomes in cities. Rapid industrialization was accom- than workers would earn elsewhere, provides panied by increasing urbanization, which, in access to services essential for a decent liveli- turn, nurtured agglomeration economies. hood, and creates opportunities for workers There is a nexus between urbanization, to enjoy higher standards of living. poverty, and prosperity (figure 2.8). Urban- ization in developing countries can offer similar benefits to its citizens. Income per The effects of urbanization on capita tends to rise as the share of the urban prosperity and poverty population rises. Urbanization rates above 70 According to World Development Report percent are typically found in high-income 2009: Reshaping Economic Geography countries, whereas those in poorer countries, (WDR 2009), it is not a coincidence that such as Chad Ethiopia, Laos, and Uganda, the high-income countries are more urban- are closer to 20–30 percent. ized: “Place is the most important correlate The relationship between the level of of a person’s welfare. . . . The best predic- urbanization and poverty is negative. Coun- tor of income in the world today is not what tries with low levels of urbanization have sig- or whom you know, but where you work.” nificantly higher poverty rates than countries Economic history shows that this has always with high levels of urbanization (map 2.3). been true. Before the Industrial Revolu- Rising urbanization is also positively related tion, the world was a “rural” place, where to increases in the share of gross domestic FIGURE 2.8  Nexus between urbanization, poverty, and prosperity a. More urbanized countries have lower poverty rates b. Urbanization goes hand in hand with more prosperity % of population living on less than $1.25 (PPP) per day 90 ZAR 100 SGP HK, SAR, CHN LBR TZA KOR NLD 80 90 JPN MDG RWA 80 ITA BEL 70 NGA ZMB MWI VEN ARG Agglomeration index 2010 MYS LUX 70 ECU MEX ARG AUS 60 COG MOZ IDN PRT FRA COL AGO MLI KEN 60 VNM BRA CHL DEN 50 COM IND BOL GAB GHA PER GAB GIN LSO BFANER 50 PAK PRY FIN BGD 40 GHA BGD BEN LKA CHN ZAF GMB SEN TGO SWZKHM ETH UGA 40 KEN NIG IND THA SLE 30 PHL MRT ZMB CIV NAM NPL 30 UGA KHM 20 SUR BOL ZAF IDN HND PAK 20 MOZ BFA VEN CHN VNM MDG SWA IRN GEO MWI LAO NIC NAM 10 CHL CST PER SLV FJI TJK 10 TCD BRA GAB ECU PRY AZE MDA KGZ LKA ETH LSO ARG MEX DOM IRQARM MAR ALB EGY THA IRN CRIKAZ 0 URY WBG RUS BLR JOR URK LVA TUN MKD TUR POL SVK SRB IRV JAM 0 100 90 80 70 60 50 40 30 20 10 0 5 6 7 8 9 10 11 12 Share of urban population in total population (%) Log of GDP per capita (2005 constant US$) Source:  GMR team 2013. Note:  PPP = purchasing power parity. GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    101 MAP 2.3  The poor are mostly concentrated in less urbanized countries % people living in an agglomerated area, by country Number of poor people in the region > 300 million 100–300 million 0 40 50 55 60 100 10–100 milllion < 10 million Source:  GMR team 2013. Note:  For a definition of agglomeration, please see the note for map 2.1. product (GDP) generated by industry and through large-scale job opportunities in services as well as with the share of the labor light manufacturing. The feminization force working in those sectors (Satterthwaite of export industries that produce labor- 2007). Indeed, together with complementary intensive goods is prolific in countries such macroeconomic policies and an investment as Bangladesh, Cambodia, China, India, and business-friendly climate, urbaniza- Laos, Lesotho, Nepal, and Vietnam. While tion is one of the important ingredients of a the average share of female employment in policy mix that fosters economic growth and manufacturing is 30 percent, it is as high as prosperity. 56–66 percent in apparel and accessories, The potential of urbanization to close leather tanning and finishing, retail baker- the gender gap in earnings and enhance ies, and garments (Do, Levchenko and Rad- women’s empowerment is enormous and datz 2011) that are also less skill intensive. rests to a large extent on women’s access In Bangladesh, Kabeer and Mahnud (2004) to education. Women earn less than men find that 1.5 million of the 1.8 million jobs everywhere—in the informal sector, paid created in export-oriented garment indus- work, and farm and nonfarm jobs. WDR tries in 2000 went to women. According 2012 reports that wage differences by gen- to WDR 2013, in the urban areas of India, der range from 20 percent in Mozambique the abundance of call center jobs for women and Pakistan to more than 80 percent in is another source of women’s economic Jordan, Latvia, and the Slovak Republic. empowerment but more than primary edu- The emergence of agglomeration economies cation is required for these jobs (World benefits poor women with basic education Bank 2012d). South Africa provides similar 102  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 evidence (Levinsohn 2007). On average, the population lives in rural areas and 5 per- women are more reliable remitters than men cent is dependent on agriculture for employ- and form the backbone of rural household ment. In South Asia and Sub-Saharan Africa, support in many cases (Vullnetari and King more than half the labor force is employed in 2011; Piotrowski and Rindfuss 2006; Tacoli agriculture, mostly as unpaid family workers and Mabala 2010). (figure 2.9). Indeed, in the absence of ade- ­ Urbanization has not always led to pov- quate safety nets, agriculture is an important erty reduction. In most countries, structural fallback option for family members who lose transformation from agriculture to manufac- their job to economic shocks or other crises. turing and services has been in lockstep with A consequence of limited job opportunities urbanization. Industrialization often begins outside agriculture in low-income countries in a light manufacturing export sector and is that agriculture, by default, absorbs extra has created large numbers of better-paying labor, which leads to underemployment, jobs, stimulating the urbanization process by low labor productivity, and thus low farm attracting rural migrants to the urban areas incomes. (Chandra, Lin, and Wang 2013). In Latin Economic growth is another link between America, where the share of the urban popu- rural and urban areas, where what happens lation is over 80 percent, quantitative analy- in one area affects the other. Rural growth sis confirms that in 10 of 18 Latin American contributes to urban growth and vice versa, countries, changes in labor income explain but rural growth cannot occur without more than half the reduction in poverty, and good access to (urban) markets and vibrant in another five countries, more than a third farm and nonfarm activities. Successful land (World Bank 2013). reforms and the green revolution in agricul- Sub-Saharan Africa’s higher poverty rates ture preceded East Asia’s rapid population and lower income levels have created a per- and economic growth in urban areas (with ception that African cities have grown larger some exceptions, such as the Republic of without enjoying the attendant benefits of Korea) (Gollin 2009; Mellor 1996). Rural urbanization—better-paying jobs, prosper- growth helped to lower food prices and real ity, and higher standards of living. It appears wages for urban areas and created demand that the advantages of urbanization set in for urban goods. Rising income in rural areas only after it has reached a critical level: coun- allowed rural households to invest in their tries with urbanization rates of 40 percent own businesses and in their children’s health or less have distinctly lower income levels and education, better preparing them for and higher poverty rates (maps 2.4 and 2.5). their future. This cycle is not happening as They also have the largest rural-urban differ- fast in Sub-Saharan Africa and South Asia, entials, especially in access to basic services. where rural poverty is most pervasive. A large literature documents how lack of market access adversely affects agricultural Links between urbanization and productivity as well as commercialization rural poverty and specialization. Da Mata et al. (2007) Urbanization and poverty reduction are found that the growth of cities in Brazil was linked in numerous ways. Rural-urban positively associated with market potential in migration and nonfarm economic activity are surrounding rural areas (measured by rural two of them. Other intricate links between per capita income weighted by distance). rural and urban sources of growth generate Using household data from Nepal, Emran additional potential for poverty reduction. and Shilpi (2012) analyzed the relationship The concentration of the rural popula- between market size, defined as the size of the tion in agriculture has gone hand in hand population in a certain area, and the distance with poverty in most developing countries. of that area to the closest market. They found In developed countries, about 20 percent of that the crop portfolio of a village becomes GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    103 MAP 2.4  Level of urbanization in 1990 ibrd 39874 april 2013 % population that was urban in 1990 0 40 50 55 60 100 Source:  GMR team 2013. Note:  For the definition of “urban” please see UN 2011. MAP 2.5  Level of urbanization in 2010 % population that was urban in 2010 0 40 50 55 60 100 Source:  GMR team 2013. Note:  For the definition of “urban” please see UN 2011. 104  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 FIGURE 2.9  Population in rural areas and employment in agriculture a. Rural population, 2011 b. Employed in agriculture, 2008 80 80 60 60 Percent Percent 40 40 20 20 0 0 East Asia Europe Latin Middle Sub- South OECD East Asia Europe Latin Middle Sub- South OECD and and Central America East and Saharan Asia countries and and Central America East and Saharan Asia countries Paci c Asia and the North Africa Paci c Asia and the North Africa Caribbean Africa Caribbean Africa Source:  GMR team 2013. Note:  OECD = Organisation for Economic Co-operation and Development. more diversified with a decrease in the size alleviates rural poverty depends upon a vari- of the market up to a threshold, after which ety of factors. it becomes specialized. They also found that In Sub-Saharan Africa, poverty remains agricultural commercialization increased for now a predominantly rural phenomenon, with a decline in the distance to a market. but rural to urban migration is playing a prominent role in reducing overall poverty. In Kagera, a region in northwestern Tanzania, Rural-urban migration between 1991–94 and 2010, more than 50 In most developing countries, especially low- percent of the rural population migrated to income ones, urban areas symbolize many urban areas (Beegle, De Weerdt, and Dercon good things. They offer better jobs, sufficient 2011). For more than 45 percent of male but food for children, a respite from toiling on a only 15 percent of female migrants, the main farm without a decent income, safe drink- motivation was to find better-paying work. In ing water, and shorter distances to doctors the same study, Beegle, De Weerdt, and Der- and other health care facilities. These attri- con (2011) looked at consumption levels of butes explain why people from rural areas residents of the Kagera region, where agricul- are “pulled” to cities. The “pull” effects, tural production of food and a few cash crops which work through the dynamics of rural- are the mainstay for more than 80 percent of urban migration, are an important source rural residents. On average, they found that of reductions in rural poverty. Through the over 19 years, consumption increased by more natural movement of people, migration has than 40 percent for residents who remained the potential to move large numbers of poor in Kagera, but for those who left, consump- people to urban areas where they have better tion tripled. Nearly all migrants escaped pov- economic opportunities and access to basic erty, but poverty declined only modestly for services. In countries where urban areas have those who remained in rural Kagera. benefited from structural transformation, Several studies have estimated the mag- rural-urban migration has been instrumental nitude of rural-urban migration for one or in moving large numbers of the rural poor more regions but a global study that provides to the cities. The extent to which migration consistent estimates for all regions is not GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    105 available. Demographic and Health Surveys of origin strongly discourage migration in indicate that in 26 of the 46 countries with India. Much of the migration in India is from data on female migrants, rural-rural migra- rural to rural areas because more than half tion is the most common type and tends to the migrants are women who move primar- be highest in Africa. Rural-rural migration ily for family reasons (marriage). Work is the is also most common among male migrants primary reported motivation for migration in another seven countries, mostly located in for men. In some countries, higher costs of Africa (UN-Habitat 2008). These results are living in the larger cities can be a deterrent. supported by the Kagera region study, which Two important factors that can facilitate puts a 50 percent estimate on rural-urban rural-urban migration, as well as benefit the migration. New research from long-term overall economy, are investment in educa- longitudinal data for India finds evidence of tion and health and the removal of direct and migration rates of about 34 percent in com- indirect restrictions on labor mobility. Edu- parison to rates of 55–80 percent in the past cation helps give workers the skills they need 20 years for China (Dercon, Krishnan, and to compete for well-paying jobs; good health Krutikova forthcoming). helps workers be their most productive; and Poor people are willing to move to gain labor mobility helps balance the supply of access to basic services. Poor people already and demand for labor. Other factors that can pay for access to services in rural areas, and encourage migration include proximity to they are also willing to pay for them in urban paved roads and areas with higher housing areas. Their desire to access better educa- prices or rents which reflect a premium for tion and health services to enrich their fami- the provision of better services. lies’ human capital and future income is a When migrants move to cities primarily motivation for moving to urban areas. Lall, for better access to services (“push effects”), Timmins, and Yu (2009) combined a rich congestion in cities can worsen urban pov- data set of public services at the municipal- erty, and lead to the creation or expansion ity level with individual records from four of slums. Migrants who move in the hope decades of Brazilian census data to evaluate of finding better jobs (“pull factors”), and the relative importance of wage differences who have the human capital necessary to and public services in migrants’ decisions to find a better job make a positive contribution move. Their findings showed a clear distinc- to the process of urbanization. In this con- tion in preferences according to income level: text, if people are migrating from villages to for relatively well-off people, basic public ser- gain access to services (such as electricity or vices were not important in the decision to sanitation), policy makers can prioritize pro- move, but for the poor, differences in access vision of these services in areas where it is to basic public services did matter. In fact, less costly to provide them. In Nepal, where Brazilian minimum wage workers earning limited agricultural potential in the hills and an average R$7 an hour (about US$2.30 in mountains makes migration an important February 2008), for example, were willing livelihood strategy, migrants also value prox- to pay R$420 a year to have access to better imity to paved roads because it is easier for health services, R$87 for a better water sup- them to travel back and forth between their ply, and R$42 for electricity. families in rural areas and their jobs in urban One reason for not migrating or migrating areas (map 2.6). Paved roads reduce the time only to the nearest small town is the desire and costs of accessing schools, health facili- to remain close to rural support systems. ties, and markets. Migrants are willing to Informal barriers such as language, ethnicity, accept lower wages to get access to better and religious differences also impede migra- services (Fafchamps and Shilpi forthcoming; tion. For example, Munshi and Rosenzweig Lall, Timmins, and Yu 2009). (2009) found that strong mutual assistance Many governments have placed restric- networks among subcaste groups in the place tions on rural-urban migration in an effort 106  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 MAP 2.6  Travel time to the nearest city in Nepal welfare differences between rural and urban Estimated travel time to cities areas for unskilled and poorer workers and from these rural areas households (Dudwick et al. 2011). Many Up to 1 hour developing countries have in place land 1–4 hours market policies in rural areas to discour- 4–7 hours age migration to urban areas but these tend 7–15 hours to worsen poverty. Migration is officially restricted in a large number of developing Humla Darchula 15 hours or more countries, including Ethiopia and Vietnam. Bajhang Mugu Bajura Baitadi No data Dadeldhura Doti Kalikot Jumla Dolpa In China, the free movement of people from Cities Achham the countryside to the city was restricted Mustang Kanchanpur Dailekh Jajarkot Kailali Pokhara Rukum under the hukou system that was established Manang Surkhet Myagdi Bardiya Salyan Rolpa Baglung Kaski KATHMANDU in 1958 (Au and Henderson 2006a, 2006b). Lamjung Gorkha Banke Pyuthan Gulmi Parbat Syangja Rasuwa Lalitpur In 2012, restrictions on migration to all Dang Tanahu Dhading Sindhupalchok Arghakhanchi Nuwakot Palpa Dolakha Kathmandu Solukhumbu Bhaktapur Kapilbastu Nawalparasi urban areas except the large cities of China Rupandehi Kavrepalanchok Sankhuwasabha Taplejung Chitawan Lalitpur Makwanpur Ramechhap Okhaldhunga were abolished. To discourage migration Parsa Sindhuli Bhojpur Khotang Terhathum Panchthar Bara Sarlahi Dhankuta Birganj Rautahat Udayapur Ilam from rural areas, many countries simply do Mahottari Dhanusa Siraha Sunsari Morang Saptari Jhapa Biratnagar not provide basic water and sanitation ser- Source:  GMR team 2013. vices to poorer urban areas, often the first Note:  Migrants in villages and small towns (population less than 100,000; orange, red, and bur- destination of rural migrants. For example, gundy) migrate to markets in cities (population greater than 100,000, marked with a black circle). The map shows the travel time to the closest city; travel time is calculated using the existing road governments in the richer and larger locali- network (travel speed can vary by road type and terrain). When there are no roads, informal tracks ties in an urban area in Brazil reduce provi- or trails are used for foot travel. sion of water and sewerage connections to the smaller houses in which poorer migrants would live to discourage in-migration and to preempt overcrowding in cities. These deflect migrants to other localities (Feler and restrictions prevent the rural poor from ben- Henderson 2011). efiting from the advantages of urbanization. Economic growth is often concentrated However, migration cannot be leveraged geographically and described as being located uniformly by policy makers to equalize the in a leading region complemented with a benefits of urbanization between rural and lagging region where growth is stagnant. urban areas in every country. Higher popu- MDGs’ related issues in leading and lagging lation density in cities can accelerate scale regions are quite similar to those for rural economies that make the extension of basic and urban areas. In Uganda, where the lead- network services (piped water, sewers) more ing lagging region issue surfaces in policy dis- affordable for resource-constrained govern- cussions, the test the government faces is to ments. However, in countries in South Asia, allow, if not encourage, the concentration of where rural-urban migration is low, its equal- economic activity while achieving a conver- izing potential will be limited. gence of living standards and delivery of basic The removal of official direct and indi- services like the MDGs across a geographical rect restrictions on labor mobility can help area (box 2.4). to reduce poverty and improve access to the basic services emphasized in the MDGs. Nonfarm employment and rural poverty Restrictions in the land market are detri- mental not only to agricultural productivity Rural areas also undergo profound transfor- growth but also hinder diversification into mation as rural workers move out of agricul- nonfarm activities that have higher returns. ture to nonfarm activities. Indeed, through- Evidence from Mozambique and Uganda sug- out the developing world, nonfarm sectors gests that free mobility of labor can eliminate have been becoming increasingly important GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    107 BOX 2.4  Is the policy agenda different for leading-lagging regions? The case of Uganda Economic growth, often concentrated geographically, improved connectivity, which allows for improved can lead to specialization, and can induce migration. mobility of people, products, and technology. Iso- Certain regions thus lead economically, while other lation can confine producers to small markets and regions lag, creating a challenge for economic and restrict them to inputs available in their geographic social development. Governments face a test to allow, location. By enhancing connectivity, producers and if not encourage, the concentration of economic activ- firms can increase market size and consequently their ity while achieving a convergence of living standards ability to exploit economies of scale, draw from a and delivery of basic services like the MDGs across larger pool of workers, and have greater access to raw space. materials and equipment. Finally, underpinning effec- Uganda realized that its development path is domi- tiveness of these areas of focus is broadening cover- nated by these types of challenges. Uganda has made age, quality, and accessibility of MDG-related social commendable progress in reducing income poverty at services across leading and lagging regions. This will the national level, but there are gaps with some geo- empower people seeking economic opportunity and graphical pockets (lagging regions) not improving reduce congestion costs resulting from migration in as much as others (leading regions). The Midnorth, search of access to social services in leading areas. Northeast, and West Nile regions are lagging behind Not surprisingly, the expected impact of public in the incidence of poverty compared to the national expenditure on development needs to guide Uganda’s average. Kampala is well ahead of other regions, with policy makers in their decisions on prioritizing and the poverty head count declining from 14 percent to 4 sequencing the various policies competing for the lim- percent between 1992 and 2010. Similar differentials ited resources available. For instance, geographical are observed for other measures of welfare. Conse- prioritization of investments in (social and physical) quently, in collaboration with the World Bank, the infrastructure is complicated if the trade-offs between government of Uganda is trying to prioritize policies economic efficiency and welfare gains are taken into that generate the highest payoff for economic effi- account. On one hand, economic returns suggest ciency and provide geographic equity at the same time that investing in physical- or place-specific economic (World Bank 2012b). infrastructure should be prioritized in leading areas to The process began by identifying four policy areas exploit economies of scale and agglomeration, build that can make possible the integration of lagging density, and accelerate growth. As in many other and leading regions. The first is facilitating integra- countries, Uganda firms locate where they can ben- tion through better labor mobility, which emphasizes efit from agglomeration economies, suggesting priori- equipping people with a minimum level of educa- tization of investments in infrastructure where these tion and skills so they are able to take on the more clusters are already forming in the southern-eastern demanding jobs in the leading regions. The second corridor of Uganda. On the other hand, investments one is making land, a physically immobile asset, more in social infrastructure yield positive returns across fluid and its tenure more secure, allowing farmers to all regions, emphasizing the need for equitable provi- raise productivity within agriculture and to facilitate sions of social services across geographical space. labor movement from agriculture to nonagricultural This policy focus is not much different from the activities, as leasing and renting of land becomes policy agenda advocated in this GMR; that agenda feasible. One important policy action identified in facilitates progress toward the MDGs through bet- Uganda is the development of a well-functioning sys- ter use of policies that assist the urbanization process tem of conflict and dispute resolution through a clear given the advantages that urban areas have regarding legal and institutional framework to promote security income and thus poverty and MDG-related outcomes and encourage development of the rental market. The that are linked to better service delivery in urban third policy area is to support integration through areas. 108  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 sources of employment and income in rural agricultural linkages). Other factors that fos- areas (Lanjouw and Lanjouw 2001; Hagg- ter nonfarm activity include education (Lan- blade, Hazell, and Dorosh 2007). The non- jouw and Lanjouw 2001; World Bank 2007; farm sector accounts for 25–50 percent of Haggblade, Hazell, and Reardon 2007; Fox rural employment in South Asian countries. and Sohnesen 2012) and access and reliabil- In eight Sub-Saharan African countries, Fox ity of electricity. Lack of reliable electricity is and Sohnesen (2012) estimated that the non- found to be among the topmost constraints farm sector accounted for 20–33 percent of to nonfarm activity in rural areas and small total rural employment. towns in Bangladesh, Indonesia, Sri Lanka, On average, returns to labor are higher Tanzania, and many more countries, accord- from nonfarm activities than from farming, ing to the World Bank–International Finance and the incidence of poverty is lower among Corporation Investment Climate Surveys. households with access to nonfarm employ- Closing the gender gap in basic education ment than among households wholly depen- can boost rural women’s empowerment by dent on agriculture (for an example, see Fos- increasing agricultural incomes. Farm pro- ter and Rosenzweig 2004). ductivity rises when farms are managed by The agglomeration economies associated more educated and experienced individu- with urbanization strongly affect the location als (Alene and others 2008; Kumar 1994; of nonfarm activities. Manufacturing and Moock 1976; Saito, Mekonnen, and Spurl- salaried nonfarm jobs in developing coun- ing 1994). WDR 2012 indicates that the tries usually follow specialization patterns potential to leverage women’s education to (von Thunen 1966). Salaried and wage jobs, boost productivity on female-managed farms including administrative work (such as clerks is large. Relative to male farmers, female and managers), are concentrated within and farmers have lower productivity which can around large cities and decline precipitously be measured in crop yield gaps that aver- within 3–4 hours travel time from the city age around 20–30 percent in Benin, Ethio- (Fafchamps and Shilpi 2003, 2005). The con- pia, Ghana, Kenya, Malawi, and Nigeria. In centration of better paid nonfarm activities Europe and Central Asia and Latin America near larger cities is confirmed for Bangladesh and the Caribbean, productivity differentials (Deichmann, Shilpi, and Vakis 2009) and of about 34 percent between female- and Indonesia (Yamauchi et al. 2011). male-managed farms prevail. Growth of nonfarm activities is often Land market restrictions deter diversifi- driven by growth in agricultural productiv- cation into nonfarm activities. Do and Iyer ity in the initial stage because of produc- (2008) reported that land reforms in Viet- tion, consumption, and labor market links nam had a positive and significant effect on between the farm and nonfarm sectors (Hag- long-term investment in agriculture and on gblade, Hazell, and Dorosh 2007). Smaller the time devoted to nonfarm activities. Ethi- towns in the vicinity of rural areas are usu- opia (Deininger et al. 2003) and Sri Lanka ally the most popular locations for nonfarm (Emran and Shilpi 2011) are examples of activities. However, nonfarm economic countries where land sales are restricted and opportunities that can alleviate rural and where rural employment has not diversified small town poverty fail to emerge if access to into nonfarm activities. markets in large urban centers do not exist. Research in India suggests that urban- Deichmann, Shilpi, and Vakis (2009) found ization is associated with rural nonfarm that lack of connectivity is doubly damaging employment and thereby with rural poverty for areas with higher agricultural potentials reduction. Earlier studies showed that urban in Bangladesh. It not only depresses growth growth had an impact on urban poverty in agricultural productivity but also dis- but no discernible impact on rural poverty courages growth of better-paying nonfarm (Datt and Ravallion 1996). A recent study activities directly and indirectly (because of found that while rural growth remains vital GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    109 for rural poverty reduction, urban economic are not homogenous and the advantages and growth has also been good for rural and disadvantages of urbanization are not dis- hence aggregate poverty reduction since tributed evenly: some city locations are bet- 1991 (Datt and Ravallion 2009; Cali and ter served than others. In general, megacities Menon 2012). Multiple mechanisms can and large cities offer the best services, smaller account for this link. The first and obvious towns have the next best, and slums and rural channel is the first-round effects of urban areas tend to have the worst access as well as growth that induce migration of poor people the lowest quality of services. Both slums and in rural areas to urban areas. A second chan- small towns contribute to the urbanization nel is that in rural areas population density of poverty. Attention to the small town-large can increase such that they become classi- city differentials in urban poverty has shed fied as urban. If these rural areas had sig- light on small town poverty as a critical chal- nificant concentrations of poor people before lenge to poverty reduction. reclassification, then rural poverty becomes The presumption has long been that pov- automatically urban poverty. The incidence erty-reducing policies should focus on urban of rural poverty in a district decreases growth in cities. However, if urban poverty by some 2–3 percent with an increase of is more concentrated in smaller towns, then 200,000 urban residents in the district (Cali the singular use of poverty-alleviating mea- and Menon 2012). This effect stems from sures in larger towns may be neutralized or reclassification, not migration. Numer- even overwhelmed by worsening poverty in ous other second-round effects are possible smaller towns. The places where the poor live when urban growth increases the demand may not necessarily be the least-cost loca- for rural goods or leads to growth in mar- tions for extending coverage of piped water keting, transport, and agricultural trade or and sanitation, or for building a school or to remittance incomes from urban to rural hospital or health clinic. These differen- areas. Diversification out of agriculture in tials can play a pivotal role in determining rural areas may also raise agricultural wages the coverage, efficiency, and costs of MDG as rural labor markets tighten. The World related service delivery. Bank (2011) reports that growth in per capita consumption in urban areas in India is associated with growth in rural nonfarm Urbanization, congestion, employment. and slums Policy makers can leverage nonfarm activi- Typically, slums emerge in cities when the ties that typically connect rural areas to small demand for services outpaces supply. That towns to reduce poverty in both. For this, can happen through natural increases in the they need to focus on the provision of con- urban population, in rural-urban migration, nectivity between rural areas, small towns or both. Slums can be a transient home for and large cities, electricity provision in rural some, and a permanent one for others. areas and small towns, and establishment of There is no technical definition of a slum, an efficient land market. but in 2002, the UN-Habitat Expert Group put forth a description of slums that included several indicators: “a group of individu- Small towns and delivery of als living under the same roof in an urban MDG-related services area with at least one of the following four The role of small towns in urbanization is of basic shelter deprivations: lack of access importance in achieving progress toward the to improved water supply; lack of access to MDGs. Urbanization is usually equated with improved sanitation; overcrowding (three or better access to basic services that enable more persons per room); and dwellings made the poor to have a decent livelihood. But, as of nondurable material.” A fifth indicator discussed earlier in this chapter, urban areas is insecurity of tenure, but insufficient data 110  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 FIGURE 2.10  Proportion of urban population living in slums, 1990–2010 80 70 60 % of slum population 50 40 30 20 10 0 Developing North Sub-Saharan Latin America Eastern Sourthern South-Eastern Western Oceania regions Africa Africa and the Asia Asia Asia Asia Caribbean 1990 2000 2010 Source:  UN-Habitat 2010. prevents this dimension from being formally the basis for self-employment and operation included in estimates of slums.5 of small home-based businesses. In developing countries, where all five Lack of basic services in cities is often tied indicators are often found together, extreme to insecure tenure. According to the United deprivation occurs. Given that the two poor- Nation’s MDG Report 2012, slum evictions est regions, Sub-Saharan Africa and South without due legal process are the most visible Asia, are the farthest behind on access to violation of housing rights confronted by the safe water and sanitation, it is no surprise urban poor. Slum evictions have increased that they also house a large proportion of significantly since 2000. For example, in their urban population in slums (figure 2.10). Jakarta in 2003/04 more than 100,000 peo- Poorly functioning land and housing mar- ple were either evicted or threatened with kets, lack of urban planning, and exclusion- eviction as part of an effort to clear various ary attitudes toward the urban poor are the areas of informal occupation. In Beijing, an main reasons why the urban poor are forced estimated 300,000 people lost their homes as to reside in low-quality housing on insecure a result of preparations for the 2008 Olympic land with few or no basic services (Baker Games (Du Plessis 2005). 2008). Insecurity of tenure takes on complex While slum and informal settlements may forms in situations where slum populations provide an entry point into cities in the short represent a mix of owners, squatters, and run, they are likely to have negative impacts renters. on the conditions of the urban poor in the Slum settlements may have differing medium and long term. A lack of govern- degrees of marginalization depending on the ment intention to provide basic services in recognition of their status by the government. slum settlements does not necessarily deter Slums may actually serve the urban poor by urban poor and rural migrants for whom offering low-cost housing and potential prox- slums are the only entry point into urban imity to work. Slum settlements can also be areas. It does, however, negatively affect their GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    111 BOX 2.5  Costs of coping with lack of water service In Bangladesh, in the absence of state-provided ser- that the average water prices charged by private ven- vices, a parallel network of service providers known dors compared with the public network were four and as mastaans provides the needed services for high a half times higher for point sources (ranging from a fees, with patronage from politicians and law enforce- simple connection to a standpost or kiosk and tap to a ment agencies. Based on interviews with government borehole with tank, pipe and tap) that are most com- agencies and nongovernmental organizations, a monly found in peri-urban or unplanned settlements World Bank (2007) report noted that the mastaans with unclear tenure. exploited slum residents not only by demanding high These higher costs of access to water associated rates for the provision of basic services but also by with the use of informal providers not only increase using physical force and threats of eviction when pay- expenditures of slum households but may also increase offs were not made. costs related to ill health. In Indonesia, the use of low- Such instances are not limited to Bangladesh. priced drinking water of lesser quality from informal Water sold at water kiosks in informal settlements providers by slum families was associated with con- in Eldoret, Kenya, costs more than five times what siderably higher infant and under-five mortality as residents in the formal urban areas of Eldoret pay well as child morbidity (Semba et al. 2009). The lack the municipal council for water (Kimani-Murage and of safe water provision in urban slums has far-reach- Ngindu 2007). Karuiki and Schwartz (2005) ana- ing implications and threatens the progress of MDGs lyzed data from 47 countries (93 locations) and found related to poverty eradication and child health. economic situation if they have no choice but Sub-Saharan Africa lack access to sanitation to rely on private and informal providers for services (UN-Habitat 2010). In the slums provision of basic services at higher cost than of Nairobi, there is one toilet for every 500 those provided by the government to other people on average. (There are, however, some strata of the society (box 2.5). Eviction from encouraging though rare examples to redress slums can drastically affect the livelihood the lack of toilets, including an initiative in of the residents by spatially displacing them Agra, India, described in box 2.6). Govern- from the proximity of their livelihoods, cre- ments are reluctant to provide basic services ating higher transportation costs. Because to slum settlements with insecure tenure, slums are also sites of economic production for fear such actions will encourage further for small business enterprises, slum evictions urban poor settlement on unoccupied lands and demolitions can also destroy livelihoods and invite rural migrants to migrate to cities (Mehra, Maik, and Rudolf 2012; Du Ples- in expectation of better services (Durand- sis 2005). Given the lack of access to insur- Lasserve 2006). According to the World Pop- ance or secure savings, such losses can create ulation Policies Report (UN 2011), in 1976, dire economic conditions for the urban poor. 44 percent of developing countries reported Slum dwellers often cope with these problems having implemented policies to restrict or by discontinuing the education of children, retard rural-urban migration; by 2011, that especially girls. proportion had increased to 72 percent. More significantly, the lack of legal rec- Further, the inability of migrants to prove ognition of slum settlements translates into urban residence via water or electricity bills poor access to basic services, especially water or formal rental leases in slums, along with and sanitation, for those living in slums. For their informal employment, makes their situ- example, more than 50 percent of the slum ation even more precarious. In some coun- population in South Asia and 40 percent in tries, proof of urban residence is needed to 112  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 BOX 2.6  Catalyzing citywide development though toilet design in the slums of Agra, India The city of Agra is making news with a community- from less permanent materials to save costs. State per- driven, nongovernmental organization (NGO)-facili- missions and reformed local bylaws are encouraging tated, and local government-supported initiative that more families to invest in toilets. has made toilets an entry point for catalyzing hous- Toilet designs were customized to suit the slum ing, slum, and city development. In the slums of Agra, environment; for example, septic tanks were retrofit- the user-toilet ratio is as high as one seat for every ted and strengthened in partnership with a local man- 345 to 1,000 users. Personal toilets are a luxury for ufacturer that was also trained to install the full toilet several reasons. Poor families with little savings or on a turnkey basis for long-term sustainability. Sur- access to affordable formal credit are unable to invest face drains were improved to convey septic tank over- in building a toilet (the initial investment is estimated flows to the city drain, where the city’s first Decen- to be equivalent to up to six months of a poor house- tralized Waste Water Treatment System (DEWAT) hold’s earnings in Agra). Lack of space in small and was built with support from international donors and temporary slum structures makes it impossible to the Agra Municipal Corporation. This model is being construct a toilet using conventional technology. Plus, replicated in the Savda Ghevra resettlement colony technical knowhow is lacking to make the connection in Delhi. To simultaneously ensure environmental to a sewer line (usually far away from a slum) or to safety and convey toilet waste away from homes, clus- a safe underground septic tank connected to a con- ter septic tanks were designed below neighborhood veyance system. Women, who are disproportionately parks and linked to DEWAT to treat the water, which affected by the lack of toilets, have little influence on could then be recycled for flushing. The community in spending decisions to construct a toilet. But the big- Savda Ghevra contributes a small monthly amount to gest constraint is the insecure tenure of slums. Local pay for annual maintenance of common septic tanks bodies are reluctant to permit construction of perma- but also profit by way of sale of composted sludge, nent structures for the fear of legitimizing their stay. money that is reinvested in the community. The Centre for Urban and Regional Excellence The success of these toilets in Agra has begun to (CURE), an Indian NGO, has approached the lack catalyze housing upgrades. For temporary shacks, of private toilets for slum dwellers using a four- a core house design using columns is enabling the cornered strategy: enabling women to be the deci- poorest to have a toilet and build a stable structure sion makers; creating access to credit and technical around it incrementally from small savings or hous- knowhow; designing, improving, customizing, and ing finance. Local government in Agra has seen this stabilizing the technology with last mile connections; as an opportunity to improve the city’s overall sani- and enhancing local capacities to address organiza- tation and has developed an inclusive city develop- tional, governance, and scaling-up restraints. Toilet ment strategy to help build and retrofit 4,000 slum Savings Groups of CURE enable women to save and toilets, intercepting their direct sewage discharge into set aside money for construction. The balance comes drains, and transporting it through appropriate chan- from a Community Credit Fund, repaid in small nels. Ultimately, this will restore Agra’s now sewage- installments, and the money revolves to other toilet- choked storm water drainage system. less families. While the plumbing and collection and conveyance system is mandatory, women can choose Source: Dr. Renu Khosla, Director, Centre for Urban and to make the housing, such as walls, roof, and doors, Regional Excellence (CURE), India. access basic services. A qualitative study health services assuming that they will not be of the Kyrgyz Republic found that with- treated (Nasritdinov 2007). out proof of urban registration status, rural Substandard housing or illegal and inad- migrants faced difficulty accessing treatment equate building structures are another hous- at health clinics, and many no longer seek ing-related marker of slums. Overcrowding GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    113 and high density worsen service delivery surprising given that children in slums have when the one tap or toilet supplied to a dwell- exceptionally low levels of vaccination—only ing has to be shared by many. Overcrowding 44 percent are fully immunized) (Mutua and is associated with a low space per person, Kimani-Murage 2011). These slum children high occupancy rates, cohabitation by dif- were also found to have exceptionally high ferent families, and a high number of single- levels of malnutrition and a high prevalence of room units. Many slum dwelling units have infectious diseases, with little access to cura- five or more persons sharing one room used tive health care (Ndugwa and Zulu 2008). for cooking, sleeping, and living. In overcrowded and underserviced urban Slums dwellings may be built in haz- slums, the lack of basic sanitation and safe ardous locations or on land unsuitable for water is an acute problem for women and settlement, such as floodplains, in proxim- girls. Migration from rural to urban areas ity to industrial plants with toxic emissions can increase women’s opportunities to access or waste disposal sites, or in areas subject better reproductive health care, education, to landslides. The layout of the settlement and livelihoods, but these benefits need to be may be hazardous because of a lack of access weighed against the negative consequences ways and high densities of dilapidated struc- of the possibility of living in a slum (Mora tures. Lack of basic services is manifested 2008). Many wait until dark to relieve them- by visible, open sewers, a lack of pathways, selves, often confronting harassment and uncontrolled dumping of waste, and polluted even sexual assault when defecating in pub- environments. lic. Because women carry a heavier burden of Slums and child morbidity and mortal- household chores (including cleaning, wash- ity go hand in hand. A slum household can ing, and caring for children), the lack of water be one or two times more at risk when it is and sanitation provision in slums affects them extremely deprived than when it is affected disproportionately more than men (Tacoli by only one deprivation. For example, in and Mabala 2012). Ouagadougou, the proportion of children This disproportionate burden on women with diarrhea in slum areas is 20 percent, has important implications for attaining the whereas those children living with three shel- MDGs. A recent study of 5,033 migrant ter deprivations are two times more exposed women living in makeshift slum settlements (37 percent) and those with four shelter depri- in India found a strong relationship between vations are two and a half times more at risk. reproductive tract infections and lack of Likewise in Harare, the capital of Zimbabwe, access to proper sanitation (Singh, Kandpal, children in slum households suffering from and Roy 2011). A lack of gender-balanced two shelter deprivations are five times more approaches to sanitation also has significant exposed to diarrhea than children in slum impact on MDGs related to the education of households with only one shelter deprivation adolescent girls. Poor sanitation is a leading (UN-Habitat 2008). determinant of adolescent girl dropouts (MoE A Nairobi Urban Health and Demographic Kenya 2011; FAWE 2006; Obonyo 2003). A Surveillance Site study indicates that slum UNICEF study in urban Bangladesh found children bear the biggest burden of poor envi- that a simple school sanitation intervention ronmental sanitation and housing conditions to provide separate facilities for boys and and poor quality health services. Data from girls helped boost girls’ school attendance this study show that diarrhea and pneumonia 11 percent a year, on average, from 1992 to are the leading causes of death among chil- 1999 (UNICEF 2003a). Similar results were dren under five and that the mortality burden found in Mozambique (UNICEF 2003b). among these children is four times higher Slums often surface on the periphery of a than in the rest of the population (Kyobutungi city, but the problems are the same as those et al. 2008). High mortality levels are not in the city center. As Satterthwaite (2007) 114  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 observes, settlements are formed on the dense settlements, resettling slum dwellers, urban periphery of many cities including and undertaking slum clearance projects. megacities like Buenos Aires, Delhi, Manila, In a few countries disillusioned with gov- Mumbai, Phnom Penh, Santiago, and Seoul, ernment’s lack of interest in their plight, when evicted inhabitants were forced out to slum dwellers are taking the initiative to these areas by local government slum clear- make their voices heard. Two examples are ance schemes. The social and environmen- insightful and encouraging. In Agra, India, a tal consequences include the segregation of community-driven initiative has made toilets low-income groups in the worst located and an entry point for catalyzing housing, slum, often most dangerous areas as well as a lack and city development (box 2.5). In Uganda, of access to water, sanitation, health services, where more that 60 percent of the country’s and educational facilities. That is particu- urban population lives in slum communities, larly the case for recent rural-urban migrants the purported benefits of urban agglomera- who may not be able to afford rentals within tion are not being felt. Rather than waiting a slum, and have to squat on sites that may passively for better service provision, Ugan- not be fit for habitation. Unfortunately, these da’s slum dwellers have adopted a proactive sites are also prone to significant environ- strategy that is harnessing the potential of mental risks. collective action to drive a shared agenda for Heath, Parker, and Weatherhead (2012) better service delivery in slums (box 2.7). used Rapid Climate Adaptation Assessment methods to assess how changes to the cli- mate interact with existing vulnerabilities in Policy challenges and peri-urban and informal areas in a manner implications that is likely to affect safe water and sanita- The MDGs are about meeting the basic needs tion supplies for the urban poor. The model of all citizens in developing countries. The was tested in Naivasha (Kenya); Antanana- two facets of urbanization that matter the rivo (Madagascar), and Lusaka (Zambia) in most for attainment of the MDGs in general the eleven communities studied, eight were and poverty reduction in particular are man- found to be vulnerable to flooding and four aging the factors that affect urban population to water shortages, with especially severe growth and expand the boundaries of urban negative effects for the peripheral sites prone areas; and understanding the spatial location to flooding. For example, in the peri-urban of poverty. Because these facets vary signifi- slum settlement of Kanyama on the outskirts cantly between countries, country specific- of Lusaka, the 2009/10 flood lasted for three ity should not be ignored in the design of months, causing water kiosks and buildings to any country policies aimed at attaining the collapse, contaminating water supplies (par- MDGs. ticularly the shallow wells used in the areas The key relevant factors identified in this unserved by the kiosks), and affecting liveli- report that can inform policy makers and hoods, education, and health. Satterthwaite others addressing these challenging facets (2007) argues that in several cities, extreme are: overcrowding in informal settlements (includ- ing the unserviced ones on urban peripheries) The natural increase in the urban popula- •   is viewed as a result of serious housing short- tion accounts for approximately 60 percent ages and acute shortages of infrastructure of urban population growth in all coun- and services in particular areas. Yet large tries. Urban population growth is also amounts of land in cities are often left vacant affected by the reclassification of rural or only partially developed; planning for low- boundaries. Migration is a third factor in income housing with proper basic services urban population growth. The weight of and infrastructure could result in lower costs each of these factors in affecting urbaniza- than those incurred in upgrading existing tion depends on country circumstances. GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    115 BOX 2.7  Agglomeration of collective capacity among Uganda’s slum dweller communities In the slum dweller communities of Uganda, where The positive externalities of this agglomeration of over 60 percent of the urban population lives, the collective capacity are not hard to see. The NSDFU purported benefits of urban agglomeration are not is the key community mobilizer in the government being felt and many urban areas are characterized by of Uganda’s Transforming Settlements of the Urban rising unemployment and inadequate access to basic Poor in Uganda (TSUPU) program. The NSDFU services. Rather than waiting passively for the benefits has capitalized on the opportunities of this Cities of urban agglomeration, Uganda’s slum dwellers have Alliance–funded program to expand from Jinja and adopted a proactive strategy that is harnessing the Kampala to Arua, Kabale, Mbale, and Mbarara. potential of collective action. The strategy is one that Within this national program, the NSDFU has dem- has evolved within the Shack/Slum Dwellers Interna- onstrated that organized communities can improve tional (SDI) network. It involves the clustering, or fed- urban governance by organizing citizens to demand erating, of community saving groups into urban poor accountability; improve urban planning by generat- federations. The National Slum Dwellers Federation ing information on slum populations; improve liv- of Uganda (NSDFU) is one of 33 federations in the ing conditions for members and nonmembers alike SDI network. Founded in 2002, the NSDFU today through slum upgrading projects; and improve the comprises almost 500 savings groups and approxi- environment by upholding their responsibilities to mately 38,000 members. Savings are used to bring keep cities clean and maintain public services. Over people together, build their capacity to act as a col- the past 10 years, the NSDFU has constructed sanita- lective, and build organizational capacity and trust. tion units and community halls in slums throughout When savings groups begin, they often focus the country. Last year the NSDFU began extending solely on livelihood issues and income generation. But clean water and improving drainage, while in Jina it with time and greater exposure to SDI rituals such has begun construction of a low-cost housing project. as enumeration and peer-to-peer exchange, commu- In almost every case, projects were built upon land nities formulate an urban agenda that looks beyond provided by municipal councils, demonstrating true group members and toward transforming the settle- partnership. ments in which they live. This is when benefits to ser- The increasing returns to scale for the agglomera- vice delivery begin to accrue as part of a collective tion of collective capacity are also evident. The more upgrading agenda. The spatial proximity of urban the federation grows, the easier it becomes to negoti- savings groups allows for the agglomeration of col- ate with government, mobilize members and savings, lective capacity necessary to create a critical mass of leverage funds, and implement projects. Because the urban poor to hold public officials accountable and NSDFU is part of SDI, the returns to scale also ben- to collaborate with municipalities and leverage their efit tremendously from the growth of the global urban savings. This critical mass is required to make com- poor movement. munity participation more than a platitude and aid more effective, and it is uniquely possible in the urban Source: Skye Dobson, Uganda Program Officer, Shack/Slum setting. Dwellers International. All else being equal, rural-urban migration •   facilitate migration. Whether rural-urban can lead to a reduction in rural poverty, migration increases or reduces urban pov- but migration is not uniform across regions erty depends on whether migrants contrib- or countries. It is highest in Latin America ute to the positive or negative aspects of and East Asia and lowest in South Asia; urbanization. Sub-Saharan Africa falls somewhere in Poverty is not spatially bipolar but distrib- •   between. Governments play an important uted along a spectrum. Rural areas are the role in urban poverty reduction when they poorest; megacities and large cities are the 116  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 richest, and smaller towns of varied sizes rural residents; removal of land market dis- and slums in larger cities lie in between. tortions; improved connectivity with urban The implications of the spatial location of markets; and a fostering of nonfarm activ- poverty along a spectrum are nontrivial. ity and rural-urban migration. The challenge for the MDGs is to design At least seven of the MDGs are related •   poverty-reducing and service delivery strat- directly to the delivery of basic services, egies that take into account the spectrum and the poverty–city size gradient is a along which poverty is located. strong marker of access to services. Invari- In a large number of countries, the major- •   ably, rural areas are the worst off and ity of the urban population resides in the smaller towns and slums have poorer larger cities, as for example in India and access to basic amenities than do larger cit- Vietnam, but the majority of the urban ies. Problems in service delivery are related poor lives in smaller towns that are often to both quantity and quality. as poor as rural areas. Ignoring the growth To shrink persisting gender differentials in •   of urban poverty in smaller towns can educational attainment and earnings, dis- undermine efforts to reduce overall urban crete policies need to improve girls’ access poverty as well as overall poverty. to education when poverty, ethnicity, or T he spatial distribution of poverty in •   location (rural, small town) excludes them. Sub-Saharan Africa is distinct from that WDR 2012 notes that economic develop- of other regions. This region’s poor are ment is not enough to shrink all gender dis- disproportionately concentrated in rural parities. It recommends that corrective pol- areas. Most of the small proportion located icies focused on persistent gender gaps are in urban areas live in the largest city, usu- essential. A priority is reducing the gender ally the capital. Population density in Sub- gaps in human capital, specifically those Saharan Africa is sparse, making it diffi- regarding female mortality and education. cult and costly to deliver network-based Conditional cash transfers to encourage services that benefit from scale economies. girls to attend school have been successful Rural poverty is distinct from urban pov- •   in increasing primary school enrollments erty, but there is a strong interdependence in various countries. between rural and urban economies. Other policies that have a disproportion- •   Three-fourths of the poor worldwide still ately positive impact on women’s economic reside in rural areas, making the role of empowerment are ones that improve rural rural poverty-reducing policies central to livelihoods by increasing female farmers’ any policy approaches aimed at attaining access to markets. Policies that increase the MDGs. rural women’s access to water reduce the T he necessary ingredients for strong and •   time they spend in fetching water and free sustainable links between rural areas and up the time they can spend in income-gen- smaller towns are a rich rural hinterland erating work that increases their economic that can supply urban areas and that has empowerment. There is also a clear need access to urban markets where rural house- for policy that prioritizes not only the pro- holds can trade. In short, rural-urban vision of sanitation in slums on the whole, migration can be an equalizer with the but mainstreams gendered needs in the potential to bridge rural-urban disparities design of sanitation policies. in incomes and access to basic services, alleviating rural poverty, as illustrated in The implications of urbanization for the Tanzania. Rural growth also has a positive provision of MDG-related services to all impact on urban poverty reduction. Policies individuals in developing countries are com- that spur this process include an increase plex and need to be considered in a frame- in rural productivity through the introduc- work that appropriately recognizes the fac- tion of new farm technologies and invest- tors described here. Governments have two ment in the human capital development of main policy levers with which to achieve the GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    117 MDGs: the suite of macroeconomic policy would make large cities more attractive instruments that spur agglomeration econo- and would motivate rural-urban migra- mies and job creation; and public investment tion. Migrants would enjoy the benefits of in MDG-related services. urban living and would presumably step The first-best solution is to facilitate access out of poverty and toward greater pros- to all MDG-related services for all poor perity. For this to happen, poor migrants through expert management of the urbaniza- need human capital—that is, they need tion process. This implies either accelerating to be healthy and have a basic education. investments in the factors that fuel the urban- Thus public investment in primary educa- ization process (the subject of chapter 3) and tion and health care should be directed to attract the poor to cities; or equalizing ser- the poor both in small towns and in rural vice delivery wherever the poor are located— areas. that is, in rural areas and small towns as I n countries where migration is limited •   well as slums. The implications are differ- and reclassification and natural popula- ent, however, in highly urbanized countries tion growth dominate the expansion of such as in Latin America, where, compared urban boundaries, where population den- with other regions, rural areas offer greater sity is high, and where the poverty–city income-earning opportunities. Indeed, recent size gradient is dominant, the poverty experience in Latin America shows that when differentials between poorly served areas agricultural production (via higher prices, and larger cities are unlikely to shrink suf- higher productivity, and the like) allows rural ficiently to foster the attainment of the workers to obtain decent incomes, the pro- MDGs. In these situations, policies that pensity to migrate fades. However, because encourage migration will help. Progress rural-urban poverty differentials remain toward the MDGs would be accelerated large, Latin America continues to register one by delivering services wherever the poor of the highest migration rates. are concentrated, otherwise both rural Not surprisingly, the first-best solution is and urban poverty will remain grounded unviable for several reasons: Resource and wherever it is. capacity constraints must be overcome. Not I n situations where poor people are con- •   all of the rural poor who want to move to centrated in small towns, policies should urban areas can migrate to cities at once, and focus on improving connectivity with other even if they could, congestion effects would urban centers. Poverty in small towns is likely worsen urban poverty and undermine often high, and the quantity and quality the urbanization process. Even if ideal cities of services in these places differ little from were created, not all of the rural poor would those in rural areas and lag behind those be willing to forgo their rural assets and in more mature urban settlements. In these migrate. Finally, it is unrealistic to presume cases, measures to better connect the activ- that the rural poor who do want to migrate ities in small towns with the economies of would be able to find productive jobs if they larger cities become paramount. did not arrive endowed with at least some basic human capital. In all three cases, investment in portable The second-best approach is to prioritize services (education and health care) would the type of services provided, their delivery optimally be provided wherever the poor are. location, and their timing. Three types of But in countries with high migration and low policies could be leveraged: population density in rural areas, delivery of nonportable infrastructure services in larger I n areas where migration is significant •   cities would be more cost-effective and more and poverty is more bipolar, boosting the supportive of urbanization and industrializa- urbanization process in large cities through tion and could be prioritized as such. Coun- better delivery of MDG-related services tries in Sub-Saharan Africa would typically and provision of incentives for job creation fall in this group. 118  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 Finally, a reduction in the number of slum Take advantage of slums’ proximity to •   dwellers is a dedicated MDG and needs a the city so that the unit costs of extending dedicated approach. To address the unique access to basic health and education ser- challenges associated with slums, policy solu- vices to slum dwellers are relatively low. tions must: E xpand the supply of public toilets and •   water to slum dwellers in creative ways Tie land tenure policies for slums to those •   (such as putting water fountains in public of the city as a whole, particularly in terms places) in the short term, recognizing that of land pricing, connectivity of residential permanent solutions to water and sanita- and commercial urban space, and, above tion provision is tied to the land issue. all, the appropriate balance between eco- M ake use of the fact that in most cases, •   nomic and population density. A “silo” slum dwellers are willing to pay a small fee approach will lead to a lose-lose solution to access basic services. for cities and their slums. GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    119 Annex 2A.1  Equalization of health service delivery and its expected impacts on the MDGs: A simulation exercise Closing the rural-urban MDG and service is realized for both poverty and the U5MR, gaps may represent a major challenge for while the rural-urban gaps narrow but still many countries, especially if these gaps are remain substantial. large and the unit costs of services for rural In the first simulation (denoted mdg4u+fg), populations are higher than for their urban the government gradually raises per capita compatriots. In the simulation exercise pre- rural health services to the urban level while sented in this annex, the broader economic maintaining a growth rate for urban services consequences of closing health gaps in low- that is sufficient to maintain the same reduc- income countries are explored by adapting tion in the urban U5MR as under the base; MAMS, a CGE model for country strategy in other words, the improvement in the rural analysis, to address rural-urban aspects of population does not come at the expense of MDGs. The database used was designed to the health outcome of the urban population; capture characteristics typical of low-income additional foreign grant aid provides needed countries, including their MDG outcomes, financing. As shown in figure 2A.2, this set sectoral shares in value-added. of actions reduces the 2030 rural U5MR by The base simulation assumes an annual slightly more than 5 points, closing roughly growth rate of 5.6 percent, following the half of the rural-urban gap. Both rural and trend of low-income countries since 2000; urban poverty rates are virtually unchanged. and “business as usual” in government poli- At the macro level, growth in government cies and spending, including borrowing that consumption increases by 0.6 percentage is consistent with debt sustainability. In points (Figure 2A.3), accompanied by a simi- the comparator simulations, for the period lar increase for government investment, with 2014–30, it is assumed that the government the increases directed to the health sector gradually scales up its health services, either and financed by foreign grant aid; by 2030, by closing the gap in the levels of per capita health services reaching rural and urban resi- dents, or by closing the rural-urban gap in the FIGURE 2A.1  Poverty and under-5 mortality for base simulation under-five mortality rate (U5MR), the out- come indicator of interest here. These efforts 100 90 are undertaken using alternative sources for 80 required additional financing (foreign grant 70 aid, domestic borrowing, taxes, and reduced 60 Percent spending on infrastructure). 50 40 Under the base scenario, the major mac- 30 roeconomic indicators (GDP, government 20 and private consumption, and investment) 10 all grow at annual rates of around 5 percent; 0 in per capita terms, household consump- 2013 2015 2017 2019 2021 2023 2025 2027 2029 tion grows at an annual rate of around 3.1 Under-5 mortality rate, rural Poverty rate, rural percent, with a slightly more rapid rate for Under-5 mortality rate, urban Poverty rate, urban rural households (3.2 versus 3.0 percent). As shown in figure 2A.1, significant progress Source:  Lofgren 2013. 120  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 FIGURE 2A.2  Poverty and under-5 mortality—deviations from by turning to domestic resources, including base in 2030 borrowing or higher taxes (scenarios denoted as mdg4u+db, and mdg4u+tx, respectively). While the outcomes are very similar or 2 the same in terms of the rural and urban 0 U5MRs, these scenarios lead to higher urban and rural poverty rates (see figure 2A.2), Percentage points –2 accompanied by slower growth in private –4 consumption; for the borrowing scenario, –6 the poverty reduction and consumption –8 outcomes are more negative, and GDP and absorption growth rates also decline, because –10 the private sector is deprived of investment mdg4u+fg mdg4u+db mdg4u+tx mdg4r+fg mdg4r+tx mdg4r+fg6 funding (see figure 2A.3). For both scenarios, Under-5 mortality rate, rural Poverty rate, rural the macro slowdown reflects the opportunity Under-5 mortality rate, urban Poverty rate, urban costs of reallocating resources to government health spending: less funding for domestic Source:  Lofgren 2013. private investment and capital accumula- tion (mdg4u+db), or reduced real dispos- able income for households, leading to losses FIGURE 2A.3  Macro indicators—deviations from base annual spread over private consumption, investment, growth and capital stock growth (mdg4u+tx).6 Under the preceding scenarios, the rural U5MR remains above the urban level, indi- 2.5 cating that lack of government health services 2.0 is only one factor behind the gap between Percentage points rural and urban health outcomes. Alter- 1.5 natively, the government may decide to be 1.0 more ambitious and gradually raise govern- 0.5 ment health services in rural areas to such an extent that by 2030 the U5MR of the rural 0 population will have declined to the urban –0.5 U5MR level in 2030 simulated under the mdg4u+fg mdg4u+db mdg4u+tx mdg4r+fg mdg4r+tx mdg4r+fg6 base scenario; that is, the government would Absorption Consumption, private try to make up for the other gaps suffered by Consumption, government GDP the rural population by providing them with additional targeted health services while, Source:  Lofgren 2013. at the same time, maintaining the same per capita real health spending for the urban population as under the base scenario. On foreign grant aid would increase by 1.2 per- the margin, the increase in real services per cent of GDP, to 5.1 percent (Figure 2A.4). If capita (or per avoided death) is higher under the financing gap instead were met by con- this scenario, reflecting the need to reach cessional foreign borrowing, then the foreign more disadvantaged population groups and debt of the government would reach 43 per- to turn to more costly interventions, in effect cent of GDP in 2030 compared with 32 per- reversing the initial discrimination against cent for the base scenario. the rural population in health service provi- Instead of relying on foreign resources, sion. If foreign grants provide the marginal the government may create the fiscal space financing (mdg4r+fg), then in 2030, these needed for this increase in health spending will have to increase by 5.6 percent of GDP GLOBAL MONITORING REPORT 2013 R U R A L - U R B A N D I S P A R I T I E S A N D D Y N A M I C S    121 compared to the base, to 9.7 percent of GDP. FIGURE 2A.4  Additional foreign grants to finance health spending Compared with the base outcome in 2030, the intended reduction in the rural U5MR 7 is realized, together with small reductions in 6 the urban U5MR and poverty in both rural 5 and urban areas (see figure 2A.2). A strong 4 % of GDP growth increase is recorded for govern- 3 ment consumption, along with more modest 2 increases for private consumption, GDP, and 1 absorption, the latter enlarged by the increase 0 in grant aid (see figure 2A.3). –1 It is difficult to reallocate this amount of 2013 2015 2017 2019 2021 2023 2025 2027 2029 resources to government health spending without negative repercussions. If the gov- mdg4r+fg mdg4u+fgv ernment relies on higher taxes (mdg4r+tx), the increases in which reach 7.6 percent Source:  Lofgren 2013. of GDP in 2030 compared with the base, these repercussions are felt in the form of a grant aid would be eliminated if efficiency slightly higher urban U5MR and higher pov- grew by an additional 6.2 percent a year. erty rates, especially in rural areas (see figure While such rapid gains may be infeasible, 2A.2), as well as in slower growth for private additional growth of at least 1–2 percent a consumption (see Figure 2A.3). The rea- year may be within the realm of possibil- son behind a relatively strong rural poverty ity.8 Interestingly, the gains in reduced aid increase (for this and some of the preceding per additional percentage point of efficiency scenarios) is that government services, which growth are diminishing—that is due to real were scaled up, are relatively intensive in the exchange rate effects: at high levels, grant aid use of the more educated labor supplied by leads to strong marginal appreciation, with urban households, whereas private spend- strongly reduced domestic purchasing power ing, which was scaled down, disproportion- as the result. ately reduces the demand for land and less educated labor, factors that provide a rela- tively large share of the incomes of the rural FIGURE 2A.5  Trade-offs between more grant aid population.7 and domestic efficiency gains From a different angle, given inefficien- cies in the government health sector in many Grant increase per capita, average year (US$ 2009) low-income countries, it is possible to reduce 30 the need for extra financing by raising effi- ciency. For a set of scenarios that raise the 25 rural U5MR to the urban level by 2030, fig- 20 ure 2A.5 maps out combinations of average per capita foreign grant increases (in constant 15 2009 dollars) for 2014–30 and additional annual growth in government health service 10 efficiency (covering efficiency of new invest- 5 ments, as well as of labor and capital use but excluding material inputs such as medicines). 0 In the absence of a gain in efficiency, the 0 1 2 3 4 5 6 7 grant increase in an average year is around Health service e ciency gain (% per year) $26 per capita (at 2009 prices; from the sce- nario mdg4r+fg). The need for additional Source:  Lofgren 2013. 122  RURAL-URBAN D I S PA R I T I E S A N D DYN AM I C S GLOBAL MONITORING REPORT 2013 In sum, these simulations explore the con- are “drilled down” to examine the underlying sequences of providing and financing govern- changes in real conditions in individual cities. ment health services to reduce the U5MR of 4. T he original target to improve the lives of at the rural population. The results suggest that least 100 million slum dwellers by 2020 was if, by either mobilizing required resources or based on an estimation of close to 100 million raising its own efficiency in the health sec- slum dwellers in the world. Upon measurement tor, or both, a government manages to raise of the slum population using the internation- the level of real health services reaching the ally agreed upon UN-Habitat definition of rural population, then it is possible to reduce slums following the UN Expert Group Meet- the rural U5MR considerably. If the bulk of ing of October 2002, it was learned that the resources come in the form of foreign grants global estimate of the slum population was in or efficiency gains, then progress in the form fact close to 1 billion (924 million). As a result, of a lower U5MR can come with broader even though the slum target has been globally repercussions that have a positive impact achieved, and in fact significantly surpassed 10 on other development indicators, including years ahead of schedule, there is little room for poverty reduction. But if most additional complacency given the existing magnitude of resources have to be mobilized from domes- populations currently living in slums. tic sources, then progress on reducing U5MR 5. I n April 2011, however, the UN Habitat Gov- would threaten to come at the expense of erning Council adopted a resolution to improve less progress in poverty reduction and other the measurement of tenure security and to gen- indicators, illustrating the difficult trade- erate globally comparable estimates. Observa- offs facing low-income countries and their tions using this method are being implemented governments. in 25 cities around the world. 6. As a result of more rapid private consumption growth for mdg4u+fg than for the other sce- Notes narios, the health objectives can be achieved 1.  B ecause the estimates are derived from cen- with a slightly smaller acceleration in govern- sus information and because the definitions ment health spending and government con- of “urban” used in the Chinese censuses have sumption growth for mdg4u+fg. been changing, this finding should be inter- Additional simulations showed that the domes- 7.  preted with caution. Estimates for Indone- tic resources that could be mobilized through sia indicate that the contribution of natural increased government borrowing were insuffi- increase to urban growth declined steadily, cient to finance the health policy of the last two from nearly 70 percent in the 1960s to 32 per- scenarios (mdg4r+fg and mdg4r+tx). cent in the 1990s (UN 2011). 8. For example, on the basis of surveys in six low- 2.  Ferré, Ferreira, and Lanjouw (2012) suggest and middle-income countries, Chaudhury et al. that while “urban bias” was a much discussed (2006) found that, on average, primary health concern during the 1970s and 1980s, follow- workers were absent 35 percent of the time. ing Lipton (1977), the idea of a “metropolitan Other things being equal, a moderate gradual bias” has not been widely emphasized in the reduction in their absenteeism to 17.5 percent poverty measurement literature. 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World Development Report: Gen- don: Earthscan. der Equality and Development, Washington, United Nations Children Fund (UNICEF). 2003a. DC: World Bank. “Sanitation for All.” United Nations: New ———. 2013. World Development Report: Jobs. York. Washington, DC: World Bank. ———. 2003b. “At a glance: Mozambique.” See: Yamauchi, F., M. Muto, S.Chowdhury, R. http://www.unicef.org/infobycountry/mozam- Dewina, and S. Sumaryanto. 2011. “Are bique_2231.html. Schooling and Roads Complementary? Evi- United Nations. 2011. “World Urbanization dence from Income Dynamics in Rural Indo- Prospects: The 2011 Revision .” United nesia.” World Development 39 (12): 2232–44. 3 How Can Urbanization Accelerate Progress toward the MDGs? Summary and messages Nor will urban growth be limited to the megacities of today. Secondary cities such as Urbanization matters. In the past two Huambo in Angola, Fushun in China, and decades, developing countries have urbanized Surat in India—cities that few would be able rapidly, with the number of people living in to pinpoint on a map—are likely to grow rap- urban settlements rising from about 1.5 bil- idly into large cities in their own right. The lion in 1990 to 3.6 billion (more than half good news is that many of these emerging of the world’s population) in 2011. Some 2.7 urban centers are still taking shape, provid- billion people in the developing world now ing policy makers with a unique but rapidly live in urban areas. Citizens in urban areas closing window of opportunity to get their have an advantage over their rural brethren cities “right” to enhance economic, social, in that urban poverty rates are significantly lower than rural poverty rates and urban and environmental outcomes. populations also have far better access to the In many respects, the move to cities is basic public services defined by the Millen- entirely rational. Cities are the hubs of pros- nium Development Goals (MDGs), including perity—more than 80 percent of global access to safe water and sanitation facilities economic activity is concentrated in cities (chapter 2). (McKinsey Global Institute 2011). The den- In the next two decades, developing coun- sities that cities offer can create scale econ- tries will become even more urbanized. omies that enhance job opportunities and Between 2011 and 2030, the population of productivity, as well as make it cheaper to the developing world is expected to grow expand services. Cities, through their den- by 1.4 billion—and 96 percent of them will sity, make public services more accessible. live in urban areas. If the forces of urban- For example, providing piped water costs ization are not managed speedily and effi- $0.70–$0.80 per cubic meter in urban areas, ciently, slum growth can overwhelm city but $2 in sparsely populated areas (Kariuki growth, exacerbate urban poverty, derail and Schwartz 2005). Schooling and health MDG achievements and reduce, if not elimi- care can be delivered at scale in dense envi- nate, cities’ comparative advantage regarding ronments, close to where people actually attainment of the MDGs. live. 129 130  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 Urban densities can pull up rural areas. deliver are not overwhelmed by crime, dis- Research in India has shown a growing link ease, and squalor. between urban development and a reduction While a fully market-driven process could of rural poverty following India’s economic possibly gradually increase densities through liberalization in the early 1990s, with urban land values over time, the long-lived and development linked to higher demand for lumpy nature of urban investment inhibits rural products and more options for rural such a process. A city’s physical structures, nonfarm diversification (World Bank 2013b). once established, may remain in place for Unregulated markets are unlikely to get more than 150 years (Hallegatte 2009). The densities “right,” however, because the pro- alarming news is that the doubling of the ductivity of firms and the job-opportunity- urban population in the developing world generating aspects of increased density are will be accompanied by a tripling in the built- positive externalities accruing freely to all, up area of cities, from 200,000 to 600,000 whereas the increased costs of construction, square kilometers. As an example, consider such as buildings, roads, and network utili- map 3.1, which shows Shanghai’s spatial ties, necessary for higher density to remain expansion over the past 20 years. Such rapid efficient are not often fully internalized by population growth accompanied by an even firms and households. This situation leads faster spatial expansion of cities is likely to to lower levels of investment than would be lead to low-density development dominated optimal and ultimately to less productivity by individual-vehicle transportation—a improvement, less job creation, and lower largely irreversible pattern (World Bank wages (Collier and Venables forthcoming). 2012b). Low-density expansions run the risk Yet, higher-quality construction material and of dampening density-induced productivity more sophisticated buildings are required to and service delivery efficiencies. An addi- support greater densities, and complemen- tional consequence of rapid urban growth is tary physical infrastructure is critical: roads, worsening air quality; a recent study of the drainage, street lighting, electricity, water, 189 largest cities using satellite data found and sewerage, together with policing, waste that air quality worsened between 2002 disposal, and health care. More, not less, and 2010, particularly in the largest cities public policy is needed to ensure that the of the Indian subcontinent, parts of Africa, productivity gains and services that cities can the Middle East, and north China, all places MAP 3.1  Shanghai’s spatial expansion as shown by average nighttime light intensity a. 1992 b. 2000 c. 2008       Source:  China Data Center at University of Michigan. GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    131 experiencing rapid urban growth (Alpert, and infrastructure (World Bank 2013b). Shvainshtein, and Kishcha 2012). Urbanization generates an increase in the Emissions from burning fossil fuel include demand for land, and a clear definition of fine particulate matter (PM10 and PM2.5), property rights along with robust systems carbon monoxide, nitric oxides, and sulfur for assessing land values is key for land dioxide, which can cause allergies, respira- redevelopment. Urbanization has to be tory problems, cardiovascular disease, and combined with the development of reliable cognitive deficits. The impacts are signifi- and affordable public transit to physically cant. In the Russian Federation, a conser- connect people with jobs. Complemen- vative estimate suggests that annual health tary improvements in communication and damages from fossil-fuel burning amount to interregional transport can make it easier $6 billion (Markandya and Golub 2012). The to integrate neighboring rural areas into social cost of transport in Beijing is equiva- the urban economy. lent to 7.5–15 percent of its gross domes- Expansion of basic services, such as those •   tic product (GDP), with about half of that reflected by the MDGs, across cities and stemming from air pollution (Creutzig and rural areas, so that people are “pulled” He 2009). The largest share of these costs to cities by the opportunities there, rather comes from increased mortality. Globally, than being pushed from the countryside acute respiratory infections associated with in search of basic services they have been air pollution cause about 20 percent of all denied. Improvements in basic services under-five mortality (Mehta et al. 2011). In such as water, sanitation, education, and the former Yugoslav Republic of Macedonia, health are essential for improving living a country of about 2 million people, an esti- standards and workers’ health and educa- mated 1,300 premature deaths are caused by tion everywhere, as Colombia did when air pollution every year. Beijing, Cairo, Delhi, it systematically improved basic service Dhaka, and Karachi each see an estimated levels across the country in rural and urban 3,500 to 7,000 premature deaths annually areas alike. In 1964, only half the residents from cardiovascular disease stemming from of Bogotá and other large cities had access air pollution (Gurjar et al. 2010). Karachi has to water, electricity, and sanitation; today the highest overall mortality related to air there is nearly universal access in cities pollution, at 15,000 a year. That is close to of all sizes, a convergence that took more the excess mortality of 13,000 deaths caused than 40 years (Samad, Lozano-Gracia, and by the “Great Smog” in London in 1952, evi- Panman 2012). dence that many cities in today’s advanced countries have gone through similar stages of Many developing countries have been excessive pollution. Managing environmental unable to provide a coordinated package of quality alongside enhancing urban productiv- physical infrastructure and social services ity is critical as a means of avoiding signifi- (box 3.1). In part, that is because many of cant costs down the road. these services are network goods that house- Cities can accelerate both economic holds and communities cannot provide on and social progress when complementary their own. Even where the service can be sup- improvements are made along two fronts: plied by each individual household or a com- munity, as with sanitation, there are substan- Job creation, investment, and growth, •   tial externalities, where the benefits of service which depend on the density of cities improvements spread beyond the household and their links with the rural economy. or community that made the investment. Enhancing job opportunities in cities As a consequence, individual households requires careful thought about coordinat- and communities are likely to underinvest ing improvements in land management, in these services, setting up a classic role for housing, transport, communications, public policy of ensuring that basic services 132  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 BOX 3.1  Bangalore has nurtured skills but must now tackle infrastructure Bangalore’s economic growth has been rapid and Bangalore’s economic success is creating infra- successful. In 1998, the Indian city’s incomes were structure problems, however, including poor water 24 percent higher than the national average. In 2005, quality, traffic congestion, and housing shortages. The they were nearly 70 percent higher. water system is strained—30 percent of city residents An analysis shows that the skills of the city’s resi- use polluted groundwater; the sewer system does not dents are the bedrock of that success. These skills reach a large part of the city; and average commute have long been valued in Bangalore, with the mahara- times are more than 40 minutes because jobs are dis- jas of the princely state of Mysore instituting compul- persed from the city core. If the water problems or sory education and building the University of Mysore commuting times get worse, skilled people—the city’s and Bangalore’s engineering college. This was the main asset—will leave for cities that offer better ame- starting point for the cluster of educated engineers nities. How Bangalore improves the quality of life for that persists to this day. Building on an initial corpus its residents will have a considerable bearing on how of engineering expertise, firms such as Infosys were bright Bangalore continues to shine. attracted to Bangalore, jumpstarting a virtuous circle where smart companies and smart workers came to Source: Glaeser 2010. Bangalore to be close to one another. are adequately provided. While each infra- enabling vast economic gains. Second, invest- structure sector and service can be addressed ments should respond to the needs of resi- by appropriate government policies, address- dents and businesses, especially for basic and ing only one or two of them has little payoff connective infrastructure. Third, targeted if the others remain unresolved (Collier and interventions should respond to the needs of Venables forthcoming). Getting the highest the poor and people in marginal locations or level of political support to enable cross-sec- address individual behaviors that endanger toral and intergovernmental coordination is health, safety, or the environment. Apply- critical for getting urbanization right. ing this policy framework, the World Bank’s Urbanization Reviews offer policy makers diagnostic tools to identify policy distortions Framework for urbanization and analyze investment priorities. policy Each review starts by assessing a country The policy framework used here draws or region’s spatial transformation: how the heavily on the World Development Report urban economy is evolving; how urbanization 2009: Reshaping Economic Geography is changing the demand for services within (WDR 2009) (World Bank 2008) and sub- the city; the pace of new arrivals; and where sequent country level diagnostics under the these new arrivals are finding places to live World Bank’s Urbanization Review Program, and how they are commuting to their jobs. whose lessons are synthesized in Planning, It then compares the city’s observed patterns Connecting, and Financing Cities—Now with benchmarks in other cities or with past (World Bank 2013a). WDR 2009 looked at conditions. Such comparisons help reveal urbanization trends and policies worldwide how policy distortions constrain urbaniza- and proposed a three-part policy framework tion and how investment shortfalls limit the for urbanization. First, institutions should benefits from it. Once the review has identi- provide the foundations for liberalizing the fied the possible constraints and shortfalls, movement of people and goods and easing it proposes policy options. It aims to show the exchange and redevelopment of land, how a city can harness economic and social GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    133 FIGURE 3.1  A framework for urbanization policy: planning, connecting, and financing Plan Connect Finance Value land use Value the city’s Value and through transparent external and internal develop the city’s assessment connections creditworthiness Coordinate land use Coordinate among Coordinate public- with infrastructure, transport options and private finance using natural resources, and with land use clear, consistent rules hazard risk Leverage investments Leverage existing Leverage competitive that will generate assets to develop new markets alongside the largest returns— ones, and link both to regulation to expand individually and land use planning basic services collectively This framework Source: Urbanization Source: draws Review on World Bank 2013a and the findings from various country pilots under the Urbanization Reviews. team. Note: This framework draws on World Bank (2012a) and the findings from various country pilots under the Urbanization Reviews. benefits not just today, but in the future as in the city, as well as to outside export economies grow, technologies change, and markets. institutions are strengthened. Urbanization Financing— finding sources for large capi- •   Reviews have been piloted in some dozen tal outlays needed to provide infrastruc- countries at varying stages of urbanization, ture and services as cities grow and urban- including Sri Lanka and Uganda (where ization picks up speed. urbanization is nascent), China, India, Indo- nesia, and Vietnam (where it is rapid), and Planning, connecting, financing—these Brazil, Colombia, the Republic of Korea, and are terms that policy makers use on a daily Turkey (where it is mature). basis. Of the three, a major finding from the At the heart of the diagnostic approach Urbanization Reviews is that regardless of used in the Urbanization Reviews are three the level or speed of urbanization, planning main dimensions of urban development (fig- for land use management must be the top ure 3.1): priority. By clearly defining property rights, and putting in place effective systems for land Planning— charting a course for cities by •   use that are coordinated with infrastructure, setting the terms of urbanization, espe- transport, and natural resources, policy mak- cially policies for using urban land and ers can help their cities attract private invest- expanding basic infrastructure and public ment, connect people with jobs, and reduce services. environmental, social, and natural hazard C onnecting— making a city’s markets •   risks. With much of urban growth in devel- (labor, goods, and services) accessible to oping countries likely to take place in second- other cities and to other neighborhoods ary cities, strengthening land management 134  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 provides a unique, albeit rapidly closing, to coordinate their land use policies, or plan opportunity to shape urban design in these for strategic investments, at the metropolitan cities so that people do not have to spend a or regional scale that is demanded by a grow- significant part of their day traveling to and ing urban economy. from work. Uganda’s 1995 constitution created private Of course financing rapid urban growth land ownership and abolished land leases is challenging, because large up-front capital vested with local urban bodies. As a result, investments are needed to build systems for local governments were fiscally starved, transport and water, solid waste manage- unable to acquire land or protect rights of ment, and sewage removal and treatment. way for infrastructure improvement. And But financing can become more sustainable land transactions generally were hampered through taxes that come with increased by poor tenure security (only 18 percent of economic growth, and also with the abil- land is registered and titled); the lack of a ity of mayors to leverage land markets and credible system for valuing land; low incen- approach local currency debt markets. An tives for landowners to rent their land; and important point is that financing should be high entry costs for land development ven- closely integrated with a city’s plans for man- tures. To remedy the situation, especially in aging growth. The process of urban man- the metropolis of Kampala, Uganda urgently agement should also involve as many private needs a credible system for documenting actors as necessary, as well as address wom- and valuing land. To be sure, local urban en’s empowerment, to ensure that the city bodies also need financing support—to buy becomes or remains competitive and conse- land and pay for infrastructure. But with- quently an engine of growth and well-being out sound planning, no amount of financing for all (box 3.2). alone will solve Uganda’s problems (World Policy makers, however, often place Bank 2012c). financing first without fully considering a city’s plans and connections. And the lack of such coordination will be regretted by later Planning cities urban generations. For example, in Hanoi, Planning is fundamental to agglomeration a projected new mass transit system will economies in three ways. First, land use extend in several directions from today’s requires effective systems for land valua- central business district, but it will not reach tion. Second, land use must be allocated in a an emerging second central business district way that allows for infrastructure improve- southwest of the city, where dense housing ments. Third, the most basic infrastructure developments called New Urban Zones are services—water, energy, sanitation, and solid already being built (World Bank 2011). waste management—need to be provided for Similarly, Colombia’s urban development all residents, urban, peri-urban, and rural challenges arise from problems of policy alike. and planning. One of Latin America’s most decentralized countries, Colombia has more Set up systematic and transparent than 1,000 municipal governments with par- systems for valuing land allel responsibilities—basic infrastructure and service delivery, land use and economic The use and reuse of land is central to a development, and social service provision. city’s expansion and development. For eco- Urban areas comprise multiple municipali- nomic efficiency, land should be able to shift ties: Bogotá, for example, contains seven. among various uses; in some cases, public These municipalities lack mechanisms to intervention may be required to offset mar- coordinate policy and planning across their ket failures (Henderson and Wang 2007). boundaries. As a result, Colombia’s metro- Urban land markets should efficiently allo- politan areas are crippled by inertia—unable cate land between urban and rural uses (with GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    135 BOX 3.2  Urbanization, gender, jobs, and urban poverty Women’s labor, paid and unpaid, is crucial to the jobs with long working hours. Poverty generated by prosperity of cities. In turn, for women, urbaniza- these factors therefore has a specific gender dimen- tion opens up greater access to services and employ- sion. Women further face an unequal position in the ment opportunities, offers advantages arising from labor market because of their lower income relative lower fertility, and promotes increased indepen- to their male counterparts, their limited ability to dence. Indeed, women’s growing participation in secure assets independently from male relatives, and paid employment is a positive trend that is not only their greater exposure to violence. In this sense, a contributing to their empowerment but also improv- gendered lens is not only essential for examining the ing individuals’ and households’ chances to move out nonincome dimensions of urban poverty but is also of poverty. Increased movement of women between critical in understanding the broader issues of equal- rural and urban areas is motivated by the greater ity and social justice. availability of employment opportunities in urban Social programs often do not sufficiently focus on centers and confirms the positive impact of urbaniza- efforts to improve the efficiency and productivity of tion on women’s empowerment. household tasks. Often, this can be achieved through However, urbanization does not necessarily result relatively simple infrastructure and provision of basic in a more equitable distribution of wealth and well- services and appliances, such as gas or electric stoves. being between men and women. Compared with In addition, policy makers can support initiatives that men, women often remain at a disadvantage in equi- help reduce the time constraints caused by balancing table access to work and living conditions, income paid work with unpaid care work. Some such initia- levels, health outcomes and education, assets, and tives already exist within the activities of grassroots representation in formal institutions and urban gov- and women’s organizations, such as the Women’s ernance, as also discussed in World Development Network of Street Traders and Collective Kitchen Report 2012: Gender Equality and Development initiatives in Lima (Peru), the Shack/Slum Dwellers (WDR 2012). This is especially so for the urban poor, International (SDI) savings groups in several devel- especially slum dwellers, who face considerable envi- oping countries, and Kenya’s Home-Based Care Alli- ronmental hazards, shelter deprivations arising from ance. A lack of even basic data disaggregated by sex a lack of proper water and sanitation provisions, and has prevented researchers from developing a more difficulties in accessing health and education services. gender-nuanced picture of urban poverty. Data col- Unpaid care work for children, older people, and lection efforts on basic poverty indicators as well as the sick or disabled at home is typically (though not more specific surveys of labor force participation and always or only) performed by women in low-income migration need to record respondents’ sex at a mini- settlements; this work can include food preparation, mum and make it available to researchers. Along with cleaning, and washing among other tasks. Limited this, unpaid work needs to be incorporated within access to water and sanitation puts an additional an understanding of how economies operate for the burden on women responsible for such activities, not urban poor; without that, the impact of public poli- only by making the chores more difficult, but also by cies directed at urban poverty reduction cannot be requiring more time to perform them. This burden is fully grasped. further exacerbated by the type of employment that poor urban women engage in—typically low-paid Source: Based on Tacoli 2012. incentives to conserve farmland and green that improve the information foundations space) and within urban areas (to prevent of the valuation process, including a cadre inappropriate land use and underserved of appraisers trained in property valuation, neighborhoods). help to ensure transparency and to make What is the key to efficient land use? information about land values widely acces- The answer is the price of land. Institutions sible. In Korea until the early 1970s, local 136  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 government officials assessed the market FIGURE 3.2  Vietnam’s dual land price system value and replacement costs of assets for land creates problems for the assembly of large plots of land needed for industry acquisition purposes. In 1972, the govern- ment introduced the Basic Land Prices system to improve assessments. In this new system, 100 6 3 land and buildings had to be assessed by cer- 90 9 12 15 tified private appraisers rather than govern- 80 13 ment officials. Two appraisers had to provide 70 38 26 estimated values for the property, and the 60 final value was calculated as the average of Percent 50 the two values. If the two appraisals differed 40 by more than 10 percent, a third appraiser 30 56 88 62 72 was selected and the average recalculated. 20 Since 2003, a third appraiser may be rec- 10 ommended by affected individuals as well 0 (World Bank 2013a ). Hanoi Danang Bien Hoa National Developing countries often lack the sys- average tems to record and manage information on Large-scale development land transactions. The data may not reflect (>$100 million and 200 hectares) the true price of land because of black market Mid-scale development transactions to save on duties, for example, ($10 million–$100 million and 20–200 or because of heavy public subsidies on hous- hectares) Small-scale development ing and land use. Land registries are often (<$10 million and 20 hectares) archaic and lack the dynamic functions that allow them to be searched or updated quickly. Source:  World Bank 2011. These deficiencies translate into a dearth of data on real estate prices, preventing the critical analysis necessary for appraising land values. That, in turn, has heavy implications an imposed land price, a much lower value for local revenue generation, such as property used by the government in acquiring land tax collection and land sales or leases, that is and allocating it to developers and investors based on real estate values. (World Bank 2011). Such an inequitable sys- Take India, where such information sys- tem generates resentment over land acquisi- tems are in their infancy and the govern- tions: over 1996–2005, there were more than ment often acquires land for industrial and 12,000 complaints. And conflicts over land, infrastructure development. Farmers and in turn, hinder the consolidation of plots for other landowners are compensated with pay- industrial development. More than 85 per- ments benchmarked to the stamp duties, a cent of available plots in Vietnam are smaller land transaction tax. But because the mar- than 20 hectares, but industrial parks and ginal rate for stamp duties has been as high districts typically need 150–200 hectares of as 12 percent historically, land and property contiguous land (figure 3.2). So the country’s values have long been underreported (World two-price system impedes efficiency and eco- Bank 2013b).1 Now, as India’s policy makers nomic development. amend the rules for changes in land use, the In countries where land valuation is suc- lack of independent and reliable land valu- cessful, standardized techniques enable ations is likely to result in public discontent appraisers to arrive at uniform and trans- and conflicts over land. parent valuations. In the United States, most In Vietnam, too, official land prices fail to states require appraisers and assessors to be reflect demand. The country has two prices certified. Appraisers generally work for pri- for land transactions—a market price, and vate clients to determine the market value of GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    137 property for real estate transactions, while sales data of comparable properties for the assessors generally work for the government previous three years. It adopts the income to determine property values for tax pur- approach to value offices and businesses, tak- poses. Both must follow the same regula- ing an estimated income for the office rental, tions in valuing real estate. For practical pur- and dividing the net income by a capitaliza- poses, however, and to avoid overestimation tion rate. It uses the cost approach for new of prices, property prices for tax purposes construction and renovations and for special are often set at about two-thirds of actual properties such as stadiums, museums, and market value. In Bogotá, property values places of worship (Lafuente 2009). are usually set at 70–80 percent of estimated Complementary policies that assign prop- market value. erty rights and encourage trade of land are Public land valuation in developing coun- also needed to help settlements respond to tries is fraught with challenges, including the the changing needs of the market. Fluid land cost of hiring private appraisers (these coun- markets help the transition out of agricul- tries lack standardized public valuation meth- ture, where rural land can be sold or rented ods) and the need to update land price data. for urban uses, and rural residents can seek In addition, intergovernmental transfers of more rewarding opportunities in nonfarm public land are often recorded as having zero activities in urban areas. For instance in Viet- value. These challenges can be overcome, nam, strengthening of land tenure security however, as seen in at least two cases of quadrupled participation in rural rental mar- innovation in public land valuation. Kuwait kets from 3.8 percent in 1993 to 15.8 percent now requires two separate private appraisals in 1998 and resulted in an increase in rural- for land involved in public-private partner- urban migration from 29 percent in 1993 to ships (PPPs). And South Africa mandates that 64 percent in 1998. In addition, both rental public land be taxed the same way as private and sales markets had positive impacts on land, which means that public land under- productivity. goes the same valuation processes (Peterson In conclusion, making land markets and and Kaganova 2010). In other developing land management work better requires countries auctions are often used to reveal improving and upgrading or reforming the land values. underlying related legal system. Urbaniza- In contrast, federal regulation governs tion will increase the demand for land, and private land valuation in Germany. Ger- governments at the national and subnational many has local land valuation boards that levels will employ instruments such as land are charged with collecting and maintain- acquisition and land readjustment for accom- ing land price data as well as disseminating modating urban expansion, or land mon- land price information (Lozano-Gracia et al. etization for financing infrastructure. Strong 2013). The United States allows each state legal systems and credible institutions will to define its own method for private prop- be a precondition for success. In particu- erty valuation, and most states delegate this lar, these include carefully designed laws to power to local governments, leading to a vast assign and protect property rights; institu- array of approaches. While the most com- tions that enable independent valuation and mon is the market value (or sales compari- public dissemination of land values across son) approach, there are at least two others: uses; and a strong legal framework supported the cost approach, and the income approach. by a healthy judicial system to handle dis- All three methods are often used in paral- putes and oversee the process. lel to estimate property values. The state of For land acquisition, courts need to pro- New York, for example, uses these methods vide guidance on the legal scope of eminent for different property categories. It follows domain. Given that the definition of public the sales comparison approach to value small purpose constantly evolves, having a rigid residential properties and vacant land, using and exclusive list of public purposes will pose 138  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 stringent barriers to urban expansion. As of the city, the street patterns and widths, the an alternative, a flexible definition of public level of infrastructure (is there enough capac- purpose can be combined with a strong judi- ity to accommodate higher density, that is, cial system to guide and evaluate acquisition higher FSIs?), and cultural and social factors decisions on a case-by-case basis. If a flexible (are skyscrapers acceptable?) (Bertaud 2004). definition is used, it becomes increasingly Although these regulations exist for good important to provide a clear definition of the reasons, they often have unintended con- process to adjudicate conflicts in cases where sequences. If an area’s FSI is set far below the “public purpose” of a particular acquisi- the level at which investors might otherwise tion is questioned, as well as to establish the develop it, this repression of supply can push institutions that guarantee that affected par- people into other areas, and the increased ties can voice their concerns. demand for those other areas can raise prices across the city (Annez and Linn 2010). Simi- larly, if the FSI is a uniform limit, it may Coordinate land management with increase housing prices by limiting the sup- infrastructure, housing, and transport ply of land that would otherwise be built Manage densities up. It may also encourage the allocation of Just as valuing land and assigning property land and buildings to less productive uses. rights are challenges for accommodating Beyond slowing city growth in these ways, a urban expansion, so are managing densi- uniform limit can also push poor households ties within cities and finding ways to finance to distant suburbs, adding to their poverty by urban expansion and city renewal. One increasing their commuting costs and times. widely used tool for managing densities is the When households have no choice but to floor space index (FSI), or floor area ratio. locate near jobs, they often join hazard-prone This is the ratio of the gross floor area of a informal settlements. building on a lot divided by the area of that Consider South Africa, where the gov- lot. If, for example, the FSI in an area of a ernment has focused on provision of subsi- city is 1:1, developers can only put up a build- dized housing, first introduced as part of ing with a gross floor area less than or equal the Reconstruction and Development Pro- to the total lot area. While in some cases it gram. The benefits of the program have been may be possible to build a one-story build- questioned, however. The most common ing that covers the lot entirely, thus achieving complaint is that households receiving the an FSI of 1:1, developers typically construct subsidized housing are not satisfied, because buildings with a “footprint” or “plinth” the housing is often far from employment that covers less than the whole lot, and so centers; the new houses were often built in the structure has more than one story. For the “old” apartheid locations (which were example, a developer could build a four-story deliberately sited far from urban centers and building that covered 25 percent of the lot white neighborhoods). In addition, most and still meet the FSI of 1:1. households do not receive title deeds imme- Other planning regulations include set- diately but are allocated the housing admin- backs (minimum distances to the front, rear, istratively; whether they receive title right and sides of a plot) and maximum building away or not, households are barred from heights. Both are designed to protect adjacent selling or renting for a period of five years. properties and preserve access to sun, air, Furthermore, even after the five-year period, and open space (parks and plazas). Finally, the government has a preemptive right (the plot coverage ratio regulations limit the total right of first refusal) on the sale of the prop- area of a plot that can be developed (World erty. In short, poor location and lack of fully Bank 2013a). There is no such thing as an tradable property rights are often cited as optimal FSI. The “right” FSI for a specific reasons for the limited impact of the subsi- area depends on the existing spatial structure dized housing. GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    139 Integrate land management with infrastructure density zones are typically small. Its restric- A central problem of urban planning is that tions on land use vary with street width and of matching land use and infrastructure for capacity, with infrastructure capacity, and the best possible outcome. Higher densities with historical land use patterns (commercial generate a greater need for infrastructure ser- office districts typically have higher FSIs than vices (electricity, water, sewerage). But they residential districts). This granularity helps to also support environmental sustainability make Manhattan a good example of integra- because they are better suited to public trans- tion between land use and infrastructure. port. To be sure, density must not overwhelm In contrast, Mumbai’s density zones are infrastructure. Yet it is equally important not large and uniform across much of the city, to underuse infrastructure, imposing low- and densities are generally low. India’s urban density caps where infrastructure can sup- planners justify such low formal densities port higher ones. as necessary to avoid overburdening exist- To see what is at stake, compare Man- ing infrastructure, which is severely limited. hattan, New York City’s archetypal bor- Rather than increase formal or planned den- ough, with Mumbai (map 3.2). Manhattan’s sities, they have tried to preserve urban areas MAP 3.2  New York’s density management is granular and integrated with infrastructure while Mumbai’s is coarse and uncoordinated FSI variations in Manhattan’s zoning Parks FSI variations 0–2 2–3 3–5 5–6 6–8 8–9 Map of maximum allowed 9–11 FAR values in Mumbai 11–12 Nariman point 12–14 current CBD 14–15 with highest land values –1 0 1 2 3 4 5 6 7 0 5 10 15 20 25 30 kilometers kilometers Sources: New York City Planning Department 2011 (left); Bertaud 2004 (right). Note: In some zones, the floor space index (FSI) might be increased up to two additional units because of bonuses due to plaza, arcades, and the like. In some areas, the permitted FSI might not be reached because of setbacks and plot geometry. 140  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 BOX 3.3  Do cities need master plans? Instead of drawing up a master plan and making a cies with a constantly updated spatial distribution of large effort to update it every 10 years, as is frequently populations so that they can adjust their investment the pattern, it may be better to produce a much sim- programs to meet current and future demand. pler spatial strategy document that could be updated This proposal is not revolutionary. Most master every year by staff of a city’s urban planning depart- plans around the world are largely ignored (even in ment. The emphasis of such a document would be on China). In Vietnam, master plans are often referred the current spatial situation and spatial trends. Its to as “hanging plans,” suggesting that they often main objectives would be to ensure housing and land decorate the walls of planning departments but are affordability and adequate mobility. Such a process rarely implemented. As in most countries, Vietnam would focus on analyzing real estate prices and supply line agencies typically make investment decisions and demand constraints for all income groups, firms, based on their own population projections, which are and households. The plan would cover three topics: rarely consistent with master plans and often differ land use and spatially distributed demographics; road between agencies. Changing the planning process to and transport networks; and land use and develop- be more in line with market dynamics would lead to ment regulations. Rather than attempting to cover all better and more consistent development outcomes. sectors, when the spatial strategy is approved by gov- Singapore and Hong Kong are good examples of land ernment, it could be distributed to line agencies that use planning and internal consistency between spa- have the technical expertise to develop sectoral plans tial objectives and the provision of physical and social that are consistent with spatial distribution of peo- infrastructure. ple and jobs, as well as consistent with their budget constraints. It is important to provide the line agen- Source: World Bank 2011. by pushing development out to new towns designing the expansion of cities using norms and suburban industrial estates, disconnect- and spatial choices that reflect the preferences ing people from job opportunities (World of urban planners rather than to supply con- Bank 2013b). But this strategy ignores an straints and consumer demands. The result is opportunity: India’s cities could instead use often a master plan that is ineffective for both rising land values to finance better, higher- forecasting and guiding urban development capacity infrastructure, to increase office (box 3.3). space, and to add affordable housing for low- and moderate-income groups. Integrate land use and mobility planning Keeping densities low and failing to coor- When urban land and building regulations dinate density with infrastructure suppresses limit densities in urban areas, they push peo- economic growth, most importantly exacer- ple and firms to the outskirts. When cities are bating housing shortages and affordability. forced to grow out instead of up, the urban Cities’ plans and zoning designations need to transport network becomes increasingly reflect market realities. The consequence of important as the only way to connect peo- master plans that artificially limit land sup- ple to jobs. A good transport system allows ply can be soaring land prices. When plans people to make efficient trade-offs between underestimate required land uses, such as the housing type and amenities they consume residential, industrial, commercial, and ser- and the distance they travel to work. When vices, land prices for parcels zoned as such the network is deficient, the problems stem- tend to sell at higher prices than would be ming from stringent regulations in land mar- set in the marketplace. In many cities in the kets are exacerbated. For example, people developing world, urban planning consists of may be forced to live in slums close to job GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    141 BOX 3.4  Publicly accessible information on urban hazard risk can improve household decision making With access to good information about hazard risk, analysis of various risk reduction strategies. Flood- households can make better decisions on where to prone Jakarta, for instance, is considering measures live, depending on the location’s proximity to job such as drainage improvement, river improvement, centers, the quality and cost of transport services, upgrading of retention ponds, and various options and the location’s risk of exposure to natural haz- for a coastal defense infrastructure. ards. Some examples of such information systems B etter risk information supported the introduc- •   include: tion of the Turkish Catastrophe Insurance Pool, a risk transfer mechanism set up after the Marmara •   The Bogotá Disaster Vulnerability Reduction Proj- earthquake in 1999 that killed at least 17,000 peo- ect, launched in 2006, invested in information ple and damaged 120,000 houses in the Istanbul collection and vulnerability assessments for better region. The program reduced households’ financial targeting of risk reduction measures. One output damages by enabling them to have catastrophic was a database of earthquake vulnerability scores insurance and encouraging physical risk mitigation. for all buildings in the city that helps prioritize A joint study by the World Bank, the Asian Devel- •   upgrades and makes insurance markets more trans- opment Bank, and the Japan International Coop- parent (Prasad et al. 2009). eration Agency assessed future climate risks for •   Jakarta and Can Tho (Vietnam) recently carried coastal megacities and found that by 2050, the fre- out vulnerability assessments with World Bank quency of major floods in Bangkok could increase support (World Bank 2012b). The studies demon- from once every 50 years to once every 15 years. strate the use of geographically referenced data to About 1 million inhabitants would be affected pinpoint hazard risk and to support cost-benefit (ADB, JICA, and WB 2010). centers, often assuming natural hazard risks, these policies to benefit the city as intended, because they cannot afford to move into for- they must be integrated throughout the plan- mal housing or cannot access cheaper land on ning process. Urban transport is often an the outskirts of cities for lack of an efficient “institutional orphan,” however, with its urban transport system. In Santo Domingo, responsibility often fragmented across agen- the capital of the Dominican Republic, 45 cies (World Bank 2013a). Land use planning percent of the houses in the largest slum are is a core function of development authori- located near a river and are flooded in heavy ties, with transport planning often limited rains (Fay, Ghesquiere, and Solo 2003). The to developing the road network. Such frag- poorest live in the lowest-quality dwellings mentation of responsibilities results in ineffi- in the areas most at risk. Likewise, informal ciencies. In Bangalore, a new airport several settlements in Rio de Janeiro and Caracas miles outside the city was close to being com- cling to steep slopes with large landslide risk missioned when city authorities realized that during rainstorms. Publicly available infor- the road connecting the city to the airport mation on hazard risk can enable households was inadequate. to make informed decisions (box 3.4), but Land use planning is integral to transport lack of coordinated land use and mobility planning because land use largely determines improvements will force them to make sub- transport demand. Different cities need dif- optimal choices. ferent mixes of transport types, and differ- Thus, plans to connect neighborhoods ent neighborhoods need different modes. should be integrated with plans for urban Mass transport generally suits compact land use, especially density plans. For any of areas; private vehicles, more sprawling ones. 142  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 Mixed-use plans can reduce the need for long production is to encourage firms to locate in trips by locating housing, shops, services, and dedicated industrial parks such as China’s jobs all within a short radius. Studies also special economic zones where government suggest that higher densities are good for effi- has encouraged the installation of industrial ciency and for environmental sustainability, infrastructure to increase industrial produc- reducing energy consumption and emissions tivity without compromising environmental by reducing vehicle miles traveled (Newman damage. Another option to break the link and Kenworthy 1989; Mokhtarian, Bagley, is to invest in transport infrastructure to and Salomon 1998; Schrank, Lomax, and encourage suburbanization of manufactur- Eisele 2011). Transport plans, in turn, shape ing, which reduces industrial pollution expo- land use by making specific sites more acces- sure for people who live in the center city, sible. For example, a new road to undevel- while encouraging them to move closer to oped land can facilitate its development, or a the suburban jobs. In China and the Republic new downtown metro connection can boost of Korea, these policies also had the positive demand for redevelopment of the urban core. effect of attracting the industry’s supply chain However, increased prosperity leads in (intermediate goods suppliers) to the suburbs, general to increased purchase of vehicles and causing population suburbanization. even though the miles traveled in urban areas “Smart” regulation includes allocating is smaller than in rural areas, this increase in pollution permits to achieve the dual goals of vehicle ownership will have serious implica- pollution mitigation and continued industrial tions for carbon emissions. Controlling car- production. Under such a permit system, the bon emissions is a daunting challenge for government places a cap on total tons of pol- policy makers in developing countries (Kahn lution that may be released by industry in a forthcoming). As population and manufac- given area surrounding the city and requires turing firm densities in urban areas grow, polluting firms to bid for permits to pollute in so too do negative spillovers that affect the the area. This system discourages firms from population’s health, with significant effects polluting and gives them incentives to install on children’s development, and that lead to production technologies that economize on environmental damage in the form of floods pollution. Governments can disseminate and droughts. The implications of both spill- information about industrial polluter activity overs for the MDGs related to health and by requiring firms to report their emissions sustainable development are not trivial and levels. After the 1984 Union Carbide chemi- have well-known policy implications for indi- cal disaster in Bhopal, India, the United States vidual countries. created the Toxic Release Inventory dataset, In the absence of urban planning, individ- requiring U.S. manufacturing firms to publi- ual firms invariably locate in city centers to cize their emissions released to air, water, and take advantage of industrial agglomeration, land. Indonesia followed with success. which contributes to high carbon emissions. To economize on transportation costs, Usually, labor-intensive industries choose workers choose housing located close to countries with low wages, and electricity- firms. Government can invest in urban trans- intensive heavy industries pick locations portation to move goods and people within where electricity is cheap. The challenge for the metropolitan area, but richer people developing-country policy makers of indus- particularly continue to prefer private cars trial cities is to foster sustainable urbaniza- that add to carbon emissions. Some evidence tion policies to reduce carbon emissions with- suggests that a 10 percent growth in per out constraining industrial growth. The key capita income is associated with a 10 per- to sustainable urbanization is designing city- cent increase in per capita vehicle ownership. specific and type of local pollution specific Policy options to minimize the environmen- interventions. tal impact of private car ownership include A low-cost way for governments to break a tax that influences a household choice to the link between industrial and pollution purchase a vehicle, the type of vehicle, and GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    143 use of the vehicle. A gasoline tax that not significant in urban settings. In Sub-Saharan only discourages driving but also increases Africa, for instance, 83 percent of rural and fiscal revenues, pricing the use of public roads 60 percent of urban households rely on solid through tolls, and increasing public parking fuels for cooking. Indoor combustion of solid rates are other policy options to dampen the fuels can cause severe health effects, espe- “heat-island effect” created by running vehi- cially among women and children who spend cles. Government also can issue “pollution more time in the house (Bruce, Perez-Padilla, tickets,” similar to speeding tickets to older and Albalak 2000). These include lung can- cars and diesel trucks, and mandate the use cer, pulmonary disease, low birth weight, of cleaner gasoline. cataracts, pneumonia, and tuberculosis. To encourage mass use of public transit, The World Health Organization estimates subways linked to city centers are popular. that exposure to solid fuel smoke causes 1.6 Investments in subways in Beijing and New million deaths a year and the loss of 39 mil- Delhi are examples. But subways are costly lion disability-adjusted life years. With ris- and irreversible investments. The alternatives ing wealth in urban areas, households often are investments in rapid buses, which offer switch to more convenient liquid fuels. Kero- competing speed and environmental benefits. sene use is widespread in urban areas where Bogotá has done this with TransMilenio. electricity access is lacking, especially where Urban households also use energy for air kerosene is subsidized, such as in India and conditioning, heating, and appliances like Nepal. Perhaps as many as 500 million refrigerators. These improve the quality of households globally still use kerosene and life but also add to carbon emissions. Gov- similar fuels for lighting, as well as for cook- ernments can mitigate future climate change ing and heating. Apart from poisoning, fires, through flexible electricity pricing, which and explosions, kerosene poses risks from encourages consumers to keep energy use exposure to fine particulates, carbon mon- low. Smart cities use “smart meters” to moni- oxide, formaldehyde, and other potentially tor energy use but variable pricing penalizes harmful emissions (Lam et al. 2012). the poor. Through block tariff rates with a Basic services in many developing coun- low bottom rate for households that con- tries are distributed unevenly. Consider figure sume a low level of electricity, governments 3.3, which shows access to piped water for can make energy use affordable for the poor. urban residents in Brazil, Colombia, India, In addition, poor urban households tend Uganda, and Vietnam. In each of these five to choose the riskiest places where hous- countries, water access varies with city size, ing is cheapest. Policies to encourage energy but it does so differentially. In Vietnam, efficient buildings can be helpful in these access is high but less equitable, with smaller situations. cities showing lower access. In Brazil and Colombia, service coverage is high and fairly equitable. In India and Uganda, access is Leverage competitive forces to lower and less equitable. expand services Governments have many choices in how to Examine market structure provide or expand basic services for their When policy makers consider how to expand urban residents. In many instances, basic infrastructure and improve the provision of services are lacking altogether. Lack of elec- basic services, they have a choice. Rather tricity, for example, often forces households than give first priority to financing, as is to trade off their health when they use alter- often done, they can look at the structure nate fuels for cooking and other uses. Indoor of markets for basic services and determine air pollution from solid fuels—wood, dung, what rules will work best. In particular, coal, charcoal—continues to be widespread policy makers may consider rules for com- in areas where electricity is not available. petitive pricing and cost recovery. Indeed, in This is a larger issue in rural areas but is still many cases the expectation of cost recovery 144  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 FIGURE 3.3  Share of population with access to piped water by country and across city size a. Brazil b. Colombia 100 100 80 80 60 60 Percent Percent 40 40 20 20 0 0 Largest Smallest Largest Smallest City size City size c. India d. Uganda 100 100 80 80 60 60 Percent Percent 40 40 20 20 0 0 Largest Smallest Largest Smallest City size City size e. Vietnam 100 80 60 Percent 40 20 0 Largest Smallest City size Sources: Brazil: IBGE 2000; Colombia: DANE 2005; India: Ministry of Home A airs 2001; Uganda: Uganda Bureau of Statistics 2010; Vietnam: Sources:  Brazil: Brazilian Institute of Geography and Statistics (IBGE), for 2000; Colombia: National Administrative Department of Statistics (DANE) for 2005; General Statistics O ce of Vietnam 2009. India: Ministry of Home Affairs for 2001; Uganda: Uganda Bureau of Statistics for 2010; Vietnam: General Statistics Office of Vietnam for 2009. through fees will determine the availability of and sanitation in cities nationwide. A big part financing (box 3.5). of Colombia’s success is that policy reforms Recall Colombia’s success in providing allowed fees to nearly cover costs. For nearly universal access to water, electricity, example, average residential water fees more GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    145 BOX 3.5  Expanding access to services: A tale of two sectors For the most clear-cut demonstration of the role of FIGURE B3.4.1  Water services versus mobile phones prices and price formation processes, consider access in Africa to water versus access to phone services in Sub- Saharan Africa: just about everywhere in Sub-Saha- Uganda ran Africa, access to mobile phones is greater than Swaziland access to modern water systems (figure B3.4.1). Offi- South Africa cial policy statements have been full of promises to enhance access to water for decades, yet similar state- Nigeria ments have not been made regarding access to cell Mozambique phones. Hence, official policy stance does not seem Mauretania the key factor. Kenya Maybe de facto administrative capability is more Gambia important. Both water and phones need some level Gabon of regulation. Yet the regulation of modern phone Botswana systems is conceptually more challenging than the Angola regulation of water systems. In all systems, regula- tion needs to set prices that cover costs. Costs and an 0 20 40 60 80 100 allowed rate of return need to be calculated. So it is % of penetration for water systems that typically have monopoly pro- Mobile phones (Q3 2007) Utility water service viders in any given area. The mobile phone sector has both competitive and noncompetitive segments that Source:  Global Water Intelligence 2008. require regulation. Multiple players pose challenges to regulating interconnection; as a result, telecommu- nications regulation should be more demanding than tors is the level of prices relative to cost. In the water water regulation. However, many African countries sector, prices typically barely cover operating costs have been able to provide a regulatory environment and tend to be about 30 percent of total cost. In the that enables penetration of mobile phone usage, even mobile telephone sector, prices tend to exceed cost. in challenging environments like the Democratic Unsurprisingly, both public and private system opera- Republic of Congo, whereas they have not been able tors, who can charge and collect prices that exceed to achieve the same for water. Hence “capacity” to costs, have an incentive to expand systems and can do regulate does not seem to be the deciding factor either. so. Providers who receive less than full cost have nei- So what can explain the divergent patterns of ther the incentive nor the financial ability to expand access? A striking difference between the two sec- access. Source: Klein 2012. than doubled over 1990–2001 (World Bank a result, the average poor household spends 2004). With almost 90 percent of households less than 5 percent of its income on water. having a metered connection, household Ugandan policy makers have started consumption was nearly halved. And that, thinking about the rules that need to be in in turn, reduced the need to develop major place to expand access to basic services. new infrastructure. Even with fee increases, Water reform in 1998 focused on creating the water remains fairly affordable in Colombia. right incentives for more efficient service pro- The fee structure allows the government to vision, attributing responsibility to local ser- cross-subsidize: richer households and indus- vice managers and increasing their account- trial users pay for the poorest consumers. As ability. Since 2000, the national government 146  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 has been working with Uganda’s National first compete to supply firms and households Water and Sewerage Corporation (NWSC), in a given market by laying separate pipe- the autonomous public provider of water lines. Then all the providers but one would and sanitation to the country’s large towns, fade away. In other cases, a monopoly pro- to enforce performance contracts. Renewed vider started and was not challenged, either every three years, the contracts include spe- because competitors could not undercut it or cific indicators that NWSC must meet at because entry was forbidden by law. Natu- the end of the period (Banerjee and Morella ral monopolies can also appear in exclusive 2011]). However, Uganda’s reform has not yet locations, such as airports and central metro attempted to promote cost recovery through stations. user fees. The NWSC charges a uniform fee Yet monopolies can abuse their market across all towns and customer categories power, charging prices that are too high to served. In 2010, the fee covered production be socially acceptable. Such prices can also costs in only 6 of 23 areas served. make economies less productive and less For some services such as urban transport, competitive. So how can policy allow prices competition has to be regulated, because free to cover costs while ensuring that prices market entry could undermine safety stan- stay close to costs, as opposed to fattening a dards. The “penny wars” of Bogotá are an monopoly with excessive profits? interesting example. Before a bus rapid tran- sit system called TransMilenio was intro- Auctioning service franchises duced in 2000, about 30,000–35,000 buses Regulation can closely mimic the effects of were operating in the city (Hook 2005). The competitive pricing even where monopolies government granted nonexclusive permits to exist. City leaders can auction the right to the route operators, with whom bus own- provide a service for a certain period, moving ers were affiliated. The bus owners in turn away from a monopolistic price and closer to charged their drivers fixed rents. The drivers’ the price that would arise from competition. revenue thus depended directly on how many Firms that lose at auction exit that particular fares they collected. Cutthroat competition market. If it is possible to put such a monop- ensued, with unsafe results: drivers had a oly franchise up for auction fairly frequently strong incentive to speed, cut people off, and based on the lowest price, the auction will act carry too many passengers. The introduction like a market to set prices. of TransMilenio, together with a new regu- Many cities, including Bogotá, London, latory framework, eliminated these “penny and Santiago, auction bus routes, assigning wars.” The new framework included bid- operators to predefined itineraries. Santiago ding for all parts of the service, from routes awards five-year contracts using criteria that to infrastructure. TransMilenio allocates the include the fare offered by the bidder, along market to operators according to their qual- with quality variables. Before the auctions ity, among other factors, and it pays them began, during a period of deregulation, bus by the kilometer, assuring them of a certain fares had risen; with the auctions, the fares amount regardless of their passenger load came back down. Where possible, franchise (World Bank 2013a). auctions repeated at intervals of one to three Direct competition may also not be fea- years can make price regulation essentially sible in sectors that naturally favor monopo- unnecessary. Such auctions have been used lies. Much of a city’s networked infrastruc- not only in bus transport but also in waste ture falls in this category: its duplication management. If a company loses a franchise, tends to be inefficient. A single network, its assets—buses, garbage trucks—can be fully built out, can often underbid any com- deployed elsewhere. petitor (Klein 2012). Canada’s cities are one Public policy can set service prices below example of a natural monopoly superseding cost-recovery levels to meet social and envi- market competition. Water utilities would at ronmental obligations. When prices are set to GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    147 cover all the costs of an infrastructure proj- people, either by conducting means testing (as ect, including the cost of capital, systems will in Chile’s water subsidy system), by target- likely be built out to serve all customers who ing areas where the poor tend to live, or by are ready to pay the service cost. But policy offering lifeline rates (for reduced service at makers may also want access to infrastruc- a reduced price). Lifeline rates raise an objec- ture to be extended to other customers, both tion, though, because they can benefit people for equity and for environmental sustainabil- at any income level. Such objections are a ity. Price discrimination and subsidies can reminder that subsidies require careful design. boost coverage and access. Basing them on quantity or consumption does not necessarily promote equity. A study of 26 Establish subsidies for social equity quantity-based subsidy cases in Africa, Asia, The poor often pay higher prices per unit of, and Latin America suggested that 24 were say, water or energy than do wealthier peo- regressive, and that where coverage is not uni- ple. Water vendors in poor urban areas may versal, connection subsidies may be a solution charge several times the unit cost of modern for reaching the poor (Komives et al. 2005). A water service (Klein 2012). Price discrimina- noteworthy innovation in enhancing access to tion—charging rich people more and poor services for the urban poor is through output- people less—is one way to restore equity. One based aid, which links the payment of public method of price discrimination is to offer the funds or subsidies to the achievement of spec- poor a specially tailored price-quality mix. ified outputs and actual service performance For example, poor people who can afford (box 3.6). to buy water at times, but not regularly, can buy it by the bucket. Or the poor can be Establish subsidies for environmental served by simpler pipelines. In other ways, sustainability too, the poor can be offered flexible service Public transport can mitigate urban conges- that is better than what they had before, yet tion: a bus carrying 40 or 50 people takes up not exactly what the rich receive. (Water no more road space than two or three private that is not fully treated can still serve many cars. And public transport pollutes less, gen- common uses, such as flushing toilets. Poor erating fewer greenhouse emissions. Yet in people can make their water potable by boil- many countries, public transport is unafford- ing it.) Finally, the poor can be given more able for the poor. For example, households flexible payment terms, for example, through in Kampala pay $13 a month for fares, about the use of electronic cards. In pursuing these 8 percent of their budget (World Bank possibilities, it can help to let unconventional 2012c). Although that is consistent with providers, from for-profit vendors to commu- global estimates of what people pay for trans- nity-based organizations, enter the market port, it is unaffordable for the poor. To use (Baker 2009). While these are clearly not the public transport, the poorest 20 percent of only solutions for improving access to water, households would need to spend 41 percent they provide various second-best options to of their income on fares. Similar patterns provide services of varying quality. appear in other cities worldwide. Governments can also provide subsidies The predictable result is that in many to improve equity—but one must recognize developing countries, urban public transport that many subsidies do not increase access to ridership is low. In cities where transport fares services. For example, subsidizing an existing do not cover the full cost of service provi- utility may help the better-off people who are sion, transport subsidies can boost ridership. already connected, but no one else (Komi- But to succeed, such subsidies require strong ves et al. 2005; Estache and de Rus 2000). contractual agreements and regulation. The Accordingly, policy makers should focus dis- problem is that even after fares are decoupled cussions of subsidies on policies to expand from full operating costs, transport provid- access. They should target subsidies to poor ers still need assurance that their costs will be 148  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 BOX 3.6  Using output-based aid in urban projects The people most affected by the lack of access to basic advance, phased subsidy payments against intermedi- services in urban areas are the poor, who often obtain ate outputs have been used. On rare occasions, small essential services such as drinking water or electricity advance payments have been required for start-up from informal vendors at substandard quality and at costs and awareness campaigns. Most service provid- a high premium. Given the growing demand for basic ers meet prefinancing needs from internal cash flows services, the need to improve service delivery in low- or externally sourced funds, or both. income urban settlements in increasing. One way to help the urban poor gain access to basic services is Designing OBA projects for the urban poor: A major through output-based aid (OBA), which links the pay- obstacle to service provision in informal or slum set- ment of public funds or subsidies to the achievement tings is the often precarious tenure status of slum of specified outputs and actual service performance. dwellers; many are ineligible by law for formal house- Output definitions are designed to be as close to the hold connections. Residents also have no guarantee desired development outcomes as is practicable and that their dwellings will be safe from demolition. still within the scope of the service provider to deliver. Service providers may lack legal or regulatory author- Most urban OBA projects also require that a portion ity to serve these informal areas and are also likely of the subsidy payment be withheld until sustainable to lack incentives to do so for fear of low uptake or service delivery has been demonstrated. because they see it as a high-risk investment. For OBA schemes to succeed, they must have buy-in and com- Targeting the urban poor: A core component of OBA mitment from local governments. Furthermore, the is explicit targeting of low-income households. For government agency should have the administrative the urban poor, a major hurdle to obtaining basic ser- capacity to manage OBA contracts and subsidies. vices is the high initial cost of access, such as a con- nection fee for water supply. OBA can help reduce this Lessons learned and prospects for scaling-up or rep- barrier by paying a subsidy to bridge the gap between lication: Although OBA is not the solution for all the actual cost of access and what users are willing urban service problems, it is a tool to help increase and able to pay. Geographic targeting can be effective the access of urban poor households to basic services, in cities where poor households tend to be concen- particularly where the cost of service access is unaf- trated in slums and informal communities; alternative fordable, and where service access needs to be built targeting strategies subsidize only those services that into urban project design. Land tenure issues must the nonpoor are less likely to use, or target beneficia- be addressed early on in the design stage. Active out- ries based on their income or poverty level. reach and engagement with community-based orga- nizations and political and community leaders is also Risk transfer and access to finance: In OBA schemes, key for successful project design and implementa- payment on delivery of specific outputs shifts perfor- tion. Incorporating OBA schemes into broader urban mance risk to service providers, which can be public, reform and slum upgrading programs can also be private, or nongovernmental organizations. Since ser- effective in bringing multiple stakeholders together, vice providers are not paid the subsidy in full until acting as a resource convener, and potentially playing they deliver outputs, they must have access to suffi- an important role in shaping the urban development cient finance for the initial investments, a significant policy framework for service provision and service risk and one of the biggest constraints to developing access for the urban poor. output- or results-based projects. When service pro- viders cannot afford to finance the whole project in Source: Adapted from Ahmed and Menzies 2012. met by revenues. Cities such as Bogotá, Curi- collections (or not directly so). To cover costs tiba (Brazil), London, and Seoul have solved fully, public agencies then seek other sources the problem with gross-cost contracts, which of revenue. Transport systems around the assure operators that their revenues will world vary widely in the share of operating be based on performance, not on fare box costs recovered through fares. In a sample of GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    149 FIGURE 3.4  Ratio of public transit fares to and improvements to the networks connect- operating costs in a sample of large cities ing cities and neighborhoods, policy makers can take the steps described in the following Hong Kong SAR, China three subsections. Curitiba Singapore Bangalore Value the city’s external and internal Santiago connections Mumbai Toronto For external connections to other cities and London Seoul rural areas, policy makers can compare Delhi transport costs—and the density, quality, and Ahmedabad capacity of roads, railways, waterways, and Paris Vancouver the like—with data from similar places. In Mexico City this way, they can determine where improve- New York ment is most needed. 0 20 40 60 80 100 120 140 Systematically disaggregating transport Percentage costs can identify bottlenecks and reveal opportunities for infrastructure improve- Source:  World Bank 2013a. ments that yield high dividends. A survey of Note:  The numbers in this chart relate to bus and metro systems oper- ated by public entities or large corporate entities. A weighted average truckers in India showed that transport costs was based on ridership across modes. Small private operators were not were highest near large cities and their sur- included because data were lacking. rounding rural and peri-urban areas, a pat- tern similar to that found in Brazil and Viet- 20 public transit systems, only 5 fully covered nam. Freight rates for metropolitan transport their costs through fares. In New York City, in India, defined as trips shorter than 100 35 percent of costs were recovered through kilometers, averaged as high as Rs 5.2 per fares; in Mexico City, 40 percent (figure 3.4). ton-kilometer ($0.12)—twice the national average of Rs 2.6, and more than five times the cost of such trips in the United States Connecting cities (figure 3.5). Connections—between and within cities— Why are India’s metropolitan freight trans- benefit producers and consumers, both in port costs so much higher than its long-haul urban and rural areas. They give producers access to input (including labor) and output FIGURE 3.5  Costs of moving freight in India markets. They give consumers options and, in many cases, better prices. And connections 6 provide cities and rural areas with new eco- 5 nomic opportunities. But policy makers who Price per ton-km (Rs) envision better transport connections for cit- 4 ies and neighborhoods face difficult choices. 3 With limited resources, they cannot invest in everything. It is hard to know which new or 2 improved connections will yield the highest 1 returns over time. Setting priorities for connective invest- 0 ment means picking winners and losers in the >10 4–10 1–4 <1 short run, but in the long run, thinking about City size, millions of people priorities can make a vast difference for cit- Short trip (<100 km) Long trip (>100 km) ies, surrounding rural areas, and even coun- tries. To identify the most effective additions Source:  World Bank 2013b. 150  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 costs? One reason is the use of smaller, older and ensuring that congestion and pollution trucks on metropolitan routes. Another is remain within acceptable limits. the higher share of empty backhauls (truck- ers returning empty) on metropolitan routes. Coordinate among transport options Finally, trucks on metropolitan routes clock and with land use about 25,000 kilometers annually, just a fourth of what they need to be economically As discussed earlier, policy makers must viable. To improve coordination and reduce systematically coordinate transport plans the cost of metropolitan freight movements, with land use policies and related infra- trucking firms could adopt logistics manage- structure plans. Although each situation is ment systems; they could collaborate or con- unique, it is important to ensure that trans- solidate with competitors; or they could form port options are consistent with affordabil- trucking associations. If India’s high freight ity. In Uganda for example, public transport costs are not reined in, then they will affect is unaffordable to many at current income national economic development, as happened levels. Household survey data suggest that 64 in Vietnam, which, like India, has large percent of urban dwellers walk to work, and concentrations of economic activity in and the share is as high as 70 percent in Kampala around metropolitan areas. (figure 3.6). As cities in Uganda expand their Alternatively, policy makers can identify spatial footprints, lack of viable commuting possible transport cost reductions and con- alternatives to walking severely limits labor nectivity gains that reflect the city’s desired market opportunities for people who live fur- mix of economic activities and extent of spe- ther away from economic centers and may cialization. In Colombia, lowering transport even exacerbate slum formation, because costs along the country’s key trade corridors many people will trade off housing quality to can enhance competitiveness for its cities and be close to jobs. for the nation. For example, transporting Typically, income determines transport freight by road from Bogotá to the Atlantic choice. In Addis Ababa, 70 percent of trips are coast costs about $94 a ton while maritime by walking, with an average distance walked transport from the Colombian coast to the of 5 kilometers; public transport is estimated United States costs about $75 a ton. High to cost 3–37 percent of household income. In domestic transport costs undermine the com- Nairobi, 48 percent of trips are by walking petitiveness of goods produced in Colom- or other forms of nonmotorized transport, bia’s largest cities, especially compared with and the average trip is 4 kilometers; the poor other large cities around the world. Reduc- pay 34 percent of their income on transport. ing domestic transport costs by 12 percent And in Dar es Salaam, the average distance could lead to an increase in exports of about walked is 2.2 kilometers and the share of 9 percent. nonmotorized transport is 45 percent, with For internal connections that link people transport expenditures for the poor account- with jobs, it is important to identify the prob- ing for 53 percent of income (World Bank lems: Are gridlock and lack of adequate pub- 2013a). These patterns are typical through- lic transport deterring residents from working out Africa. Another challenge here is that outside their immediate neighborhoods (mak- although most (poor) people walk, hardly any ing labor markets inefficient)? Conversely, are facilities and safety standards are available long commuting times or high fares forcing to protect pedestrian road users. Improving residents to live in crowded slums so that they sidewalks, streetlights, and other measures to can walk to work? A city that faces one or protect pedestrian users should be important both of these challenges needs a plan for a in an urban transport strategy. better transport system, including a desired Despite the challenges, policy makers mix of transportation modes. The plan must can encourage the use of public transport balance two main objectives: increasing and increase the geographic scope of the the supply of affordable transport options labor market. In Brazil, for example, the GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    151 FIGURE 3.6  Modes for commuting to work in Uganda’s urban areas a. All urban areas b. Kampala 2.6 9.2 19.2 5.9 5.4 14.6 8.6 64.3 70.3 Taxi/car Bus/van Walking Boda-boda Other Sources:  Uganda Bureau of Statistics 2010; World Bank 2013a. Note:  A boda-boda is a bicycle taxi. government requires formal sector employers improvements to them will yield the highest to provide transit tickets to their employees returns for efficiency and equity? Similarly, through a system called vale transporte (VT); leaders must find ways to make transport firms then deduct the VT expenditures from within cities affordable while limiting con- taxable income. Although it applies only gestion and pollution. This challenge is to the formal sector, the VT system effec- particularly important for infrastructure tively spreads the cost of transport subsidies such as roads, where user charges alone can- between employers and the government. not recover costs (box 3.7). Investments to In most rapidly growing cities, a useful increase capacity should be combined and mobility plan needs to make way for multiple aligned with other policies. Targeted sub- options for shared travel. Metro rail systems sidies, though not effective for all purposes and bus systems are the most common among or in all contexts, can sometimes be used them. There may also be multiple operators to make transport more efficient as well as managing each of these systems. It is impor- more equitable and safer for the environ- tant that these are well coordinated and feed ment. And other fiscal and regulatory tools into each other rather than duplicate each can be used to manage demand for particu- other. Therefore, an important regulatory lar transport modes. role will be to coordinate service planning. Financing cities Leverage investments that will yield the Having identified priorities for planning and highest returns for cities collectively connecting, policy makers confront the prob- and individually lem of financing those investments. The main National leaders must identify the most effi- difficulty is the need for money up front. cient investments in connections among all Large capital outlays are needed to provide the cities and rural areas in a country. Where infrastructure and services, especially those is demand for the expansion of intercity that are not fully in demand now but will and regional infrastructure and transport become so as urbanization picks up speed services highest? Which corridors are iden- (Mohan 2009). The large capital investments tified through spatial analysis and simula- that are needed in the construction phase, tions as most central to the network, so that whether for transport, water provision, solid 152  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 BOX 3.7  Pricing and funding through ancillary services A number of infrastructure services cannot be restaurants, and so forth) at the airport are a major charged for easily. Roads are a prime example. Here source of revenue. it may be possible to use ancillary services to pro- Such add-ons to the basic infrastructure service vide revenues for the venture. For example, a toll can make funding possible, while avoiding recourse road franchise may be combined with the right to to the regular government budget. Such add-ons can rent out service concessions for gas stations as well make an infrastructure service independent of fiscal as restaurant or hotel services at rest stops along the processes and can help insulate the service provider highway. Going further, it is possible to provide a toll from undue political influence. road company with rights to real estate development At the same time, there is danger of excessive sub- along parts, or all, of the highway. When granting a sidization, particularly subsidization that makes it highway concession, the full package of rights and possible for economically unviable projects to go for- obligations can be auctioned to obtain the best price ward. Hence, cost-benefit analysis should routinely for the whole package. An example is airport fran- be used to ascertain that the infrastructure service is chises, where the rights to concession services (shops, likely to be welfare enhancing. waste management, or sewage removal and Value and develop creditworthiness treatment, are likely to far exceed the bud- get of any city government. But financing can Without domestic credit markets, and often become more sustainable through taxes real- lacking the transparency needed in munici- ized with increased economic growth, and pal bond markets, many city governments in with the ability of policy makers to leverage developing countries cannot access long-term land markets and approach local currency credit. Experience shows that subnational debt markets. debt can work when clear regulations are in How do policy makers bridge the gap place to guide the issuance of debt, risks from between readily available resources and borrowing are appropriately managed, and investment needs? What sources should they the conditions for subnational governments tap? To start with, the government can estab- to issue debt (including the purpose, type, lish its creditworthiness by first securing and amount of debt that can be issued) are cash flows from user fees and taxes and by clearly set forth.2 leveraging the value of land in several ways, To make the issuance of debt to cities more including through taxes. Only after that can transparent, Colombia has published “traffic the government begin to borrow money and light” ratings of the capacity of individual attract private investment, making finance local governments to pay, with red, green, easier. Whether financing is public or pri- and yellow signals reflecting a combination vate generally does not make the difference of liquidity and solvency indicators. To rate between successful and struggling cities. But municipalities’ subnational debt, a red light there are at least two situations in which pri- identifies those whose ratio of interest to vate financing may be the preferred course: operational savings exceeds 40 percent and when the government sees public-private whose ratio of debt stock to current revenues partnerships as a way to improve efficiency in exceeds 80 percent. Red-light municipalities service provision, and when the government cannot borrow. Green-light municipalities suffers from severe credit constraints that can. Yellow-light municipalities can borrow prevent it from obtaining credit for improve- only after obtaining the approval of the cen- ments to publicly run systems. tral government. GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    153 Creditworthiness extends beyond local Coordinate public and private finance governments to their utility companies. In using clear and consistent rules Kenya, the Water Services Regulatory Board When city governments have constrained calculated and published utility shadow access to credit, private investors may step credit ratings for 43 water service providers in to fill the gap. There are many types of in 2011 and found only 13 providers to have partnership structures, with each one trans- investment grade ratings. ferring different levels of risk to the private Smaller cities can seek shor t- and sector. They include service contracts, man- medium-term loans from higher levels of agement contracts, leases, and privatization. government and pool their credit. Thus, Under any of these structures, property rights governments of smaller cities can use bond must first be clearly defined so that credi- banks, loan pools, and guarantees to reduce tors need not depend on the government’s lenders’ risks. Two common types of munici- promises. Then a PPP, with private sector pal bonds are general obligation bonds, debt selection mechanisms based on the market instruments secured by general purpose and on cost-benefit analyses, can improve municipal revenue such as property taxes, project selection and ensure project sustain- and revenue bonds, debt instruments secured ability while adding sources of infrastruc- by the revenue generated from specific ture financing. Nevertheless, PPPs are no municipal assets (such as ports, toll roads, magic bullet: they require commitments to and water and wastewater utilities), with or sustainable cost-covering tariffs or equiva- without recourse to general revenues. Rev- lent tax revenues. They cannot stand in for enue bonds are particularly useful in cases good financial management or good project where bond markets are not well developed. evaluation. Clear rules must dictate the pro- Colombia, India, Malaysia, Romania, the cedures, the requirements, the approvals, and Russian Federation, the ­ Slovak Republic, the institutional responsibilities of the entities Slovenia, South Africa, and República Boli- involved, and the allocation of risk. variana de Venezuela provide examples of Consider Ghana, where such rules were countries where cities have raised funds from not in place. In 2002, the government of municipal bonds. Ghana initiated a process to encourage sev- In the absence of a well-developed bond eral PPPs in the urban water sector, but the partnerships succumbed to lack of transpar- market, financial intermediaries in diverse ency and accusations of corruption in the forms play important roles in mobilizing selection process. In contrast, Chile put in resources for urban infrastructure financing. place a clear and transparent procurement In Colombia, a successful financial inter- process, focusing on public awareness and a mediary is FINDETER (Financiadora de learning-by-doing approach that allowed for Desarrollo Territorial S.A.), a government adjustments along the way. This process led company created to finance regional urban to the award of 21 road projects on a compet- infrastructure projects. More than 90 per- itive basis between 1993 and 2001 (Hodge cent owned by the national government, with 2006). The bidding started with smaller proj- the remainder owned by the regions (depart- ects to test the market while also minimizing ments), FINDETER provides resources for the risk for the private sector. More than 40 financial intermediaries who assign them to Chilean and international companies from 10 regional authorities. It has received funds countries participated in the bidding through from multilateral banks and has consistently 27 consortia. received high credit ratings (Samad, Lozano- To successfully implement PPPs, city lead- Gracia, and Panman 2012). Still, none of ers will have to consider strengthening pub- these methods can replace a creditworthy lic sector capacity, laying out the appropri- local government. ate legal and sector framework, promoting 154  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 rigorous planning and risk assessment of land values across various uses. Third is a through feasibility studies, ensuring trans- strong legal framework, with a healthy judi- parent and competitive procurement, build- cial system to handle disputes and oversee the ing strong monitoring systems, and allow- land-based financing process. Furthermore, ing flexibility for adapting to unpredictable a single planning strategy should integrate events. land-based financing with urban land use planning. With developing land management institutions, identifying infrastructure needs Leverage existing assets to develop new and integrating planning across sectors are ones, linking both to land use planning the first steps in securing financing, because Land sales and leaseholds can provide initial investors will be able to better assess risks capital for new infrastructure investments. and see the city as a good investment. Sales in Cairo, Istanbul, and Mumbai pro- vide examples of the revenue potential of Managing decentralization land auctions. For example: More generally, the financing of all local ser- I n Cairo in 2007, the auction of 3,100 •   vices is challenging: while services are best hectares of desert land for a new town gen- delivered locally, the local tax base is often erated $3.12 billion, an amount 117 times narrow. That is true not only for cities but for greater than the country’s total urban all subnational governments (SNGs), includ- property tax collections, and about a tenth ing not only municipalities but also provin- the size of national government revenue. cial and state or regional governments. All The proceeds were to be used to reimburse poverty is “local”—and given their proximity the costs of internal infrastructure and to to citizens, SNGs are often better suited than build a connecting highway to Cairo’s ring higher levels of government to address these road. challenges. First, they have an informational I n Istanbul in 2007, the auction of an old •   advantage that makes them more efficient in bus station and government building gen- discerning citizens’ needs, which is particu- erated $1.5 billion, more than the city’s larly relevant for beneficiary identification in total 2005 fiscal expenditures and infra- poverty programs. SNGs can direct resources structure investments. toward these needs (allocative efficiency) In Mumbai in 2006–07, the auction of 13 •   and can also provide some services more effi- hectares of land in the new financial cen- ciently than higher levels of government (pro- ter—the Bandra-Kurla Complex—gener- ductive efficiency). Political decentralization ated $1.2 billion. That was more than 10 also lowers the “barriers to entry” for differ- times the total 2005 fiscal spending of the ent groups of society, so they can more easily Mumbai Metropolitan Regional Develop- and directly participate in decision making ment Authority, and six times the total (box 3.8). value of municipal bonds issued by all Reductions in poverty can only be urban local bodies and local utilities in achieved if the net fiscal incidence remains India in more than a decade. The proceeds pro poor (Boex et al. 2006). That is, regres- were to be used primarily to finance proj- sivity of local revenue can be accepted as long ects identified by the Metropolitan Trans- as expenditures are progressive and lead to portation Plan. an overall positive incidence. That, however, also requires that the burden and benefit dis- Yet policy makers should recognize that tribution of the tax system and public expen- all successful land-based financing instru- ditures as a whole be considered, which in ments require at least three kinds of rules to turn requires coordination across all levels be in place. First are rules to assign and pro- of government. But achieving this coordina- tect property rights. Second are institutions tion is becoming harder in the current urban- for the valuation and public dissemination rural dynamics and now represents one of GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    155 BOX 3.8  Key design issues of decentralization The three elements of decentralization are adminis- act. In fact, decentralization is a “moving target”— trative, fiscal, and political. Administrative, or expen- there is no final model that countries can reach. What diture, decentralization relates to expenditures and matters most is to fit the different design elements services assigned to subnational governments; fiscal, together coherently and avoid disjointed decision or revenue, decentralization is related to the sub­ making. national government’s own revenue, transfers, and The degree of fiscal, political, and administrative debt; and political decentralization refers to elections decentralization is not related to whether a country is and the delegation of authority, as well as citizen federal or unitary. Relevant examples include unitary participation. China, with about 76.5 percent of expenditure decen- Countries are constantly adjusting and fine-tuning tralization (accountability, in turn, is upward toward their intergovernmental relations. Given the several the central level). In contrast, in federal Mexico, the trade-offs that have to be faced, the three elements of degree of expenditure decentralization is about 46 decentralization constitute a never-ending balancing percent. the challenges to achieving the MDG targets. Urban areas are, in principle, more attractive As urbanization unfolds, the more populous for “vote seekers” than rural areas, and that areas acquire higher fiscal capacity (that is, can create an undesirable expenditure bias. their governments can generate more rev- Moreover, urban and rural service delivery enue). That implies they have more resources gaps may not coincide with territorial bound- available to address poverty issues. Absent aries, making coordination all the more nec- any convergence effect, SNGs in rural areas essary—and all the more difficult. will face continued or even higher resource Weighing the risks and advantages of constraints. And because poverty is concen- decentralization is prudent—but countries trated in these areas, the gap between needs often have no choice: several levels of gov- and the means to address them will increase. ernment need to find ways to cooperate if In any decentralized system, there are the MDG goals are to be reached. Many trade-offs to be faced. Decentralization of examples from across the world underscore revenue-generating authority reduces the not only that effective policies can be crafted, ability of central governments to redistribute. but that they can be crafted and coordinated Decentralization of the spending authority by various levels of government working implies that priority setting needs to be coor- together. dinated among the different levels. This fail- ure to coordinate can affect the capacity to Revenue challenges in rural areas establish a “level playing field” in countries Because a large share of their population is through fiscal equalization. poor, SNGs in rural areas have a relatively Decentralization also carries other risks: low fiscal capacity and are consequently institutional capacity can be weak; special more dependent on revenue transfers from interests can capture government entities; higher levels of government. A large infor- and the poor and their priorities can be over- mal economy may further limit subnational looked. Political party systems and electoral taxation. Some rural governments can even rules greatly influence the service delivery pri- be in a “transfer dependence trap,” because orities of councilors, mayors, and governors, there is no linear relation between increased so services and resources may not always tax effort and the level of expenditures that be directed to where the needs are greatest. can realistically be achieved—a dilemma that 156  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 constitutes one of the “dangers” of decen- the limited possibility to establish user fees tralization (Prud’homme 1995). Assume, for and toll roads, financing by other entities or example, a SNG whose total revenue is com- higher levels of government is required. posed of 10 percent in taxes and 90 percent These challenges have important con- in transfers. All other things equal, financing sequences. They require different levels of a 10 percent increase in expenditures requires governments to contribute with grant financ- doubling the tax effort. That often exceeds ing to service delivery. These coordination the institutional capacity as well as the will- requirements can be particularly significant ingness to assume the political cost of rais- at the regional or intermediate level of gov- ing taxes. Transfer dependence is particularly ernment, where there may be dual authori- large for regional governments in many uni- ties. Investment funds can play a large role in tary government systems where policy deci- rural areas because they cofinance or execute sions are channeled to subnational governing public works directly. Some of these entities units for implementation (such as Bangladesh have been trying to substitute for weak insti- and Bolivia), because tax bases that are best tutional capacity. But such efforts have also suited to regional management (automobile led to a bypassing of rural SNGs in service taxes, for instance) have been given to munic- provision, creating an undesirable spiral of ipalities. For SNGs in rural areas, therefore, weak accountability and capacity. the possibilities to engage in redistribution through local taxation are limited. The financing challenge of the MDGs in Redistribution therefore needs to come metropolitan areas mainly from the expenditure side, which In contrast to rural areas, SNGs in urban depends critically on the level of expenditure areas have greater fiscal capacity and hence decentralization. More often than not, an can influence outcomes much more through SNG manages only parts of the service deliv- their own revenue decisions. Nevertheless the ery: public investment and infrastructure. overall level of transfer dependence of metro- Human resource management, particularly politan governments can be substantial. Some in the social sectors (health and teaching per- of the more financially autonomous metro sonnel) has long been a politically sensitive areas include Addis Ababa, Melbourne, area, and most management decisions remain and Pretoria (Shah 2012). Cities like Berlin, centralized in many countries. Bucharest, and London, however, are depen- Given these uneven advances and levels dent on central grants for about 80 percent of autonomy in expenditures, SNGs in rural of their revenue. Absent any convergence areas are often constrained in their ability to effects regarding how to structure revenues, provide packages of services to the poor and fiscal capacity will increase as agglomera- to target the incidence of spending so that ser- tion unfolds. The tax incidence of revenue vices are directed where the needs are greatest. decisions naturally depends on the particular In addition, the often low population den- taxes and user fees applied. Common revenue sity implies higher per capita costs in pro- sources are land-related revenue (property viding public services (Hon 2009; Kitchen taxes, improvement levies, auctions, leases), 2006; McMillan 2007). Consider that the which can affect the locational decisions marginal cost in service provision for water and income of individuals; personal income and sewerage increases substantially in rural taxes (applied at the local level in 13 of 27 areas, and it is particularly high for tertiary Organisation for Economic Co-operation and education. Although education costs for pri- Development [OECD] countries); and user mary and secondary education are often less fees, which are usually applied at uniform affected by economies of scale than other rates and therefore can have regressive effects. services, factors such as very small class size Institutional changes often cannot keep up can increase costs substantially even in rural with rapid urbanization and therefore usually areas. Roads can facilitate access between remain informal. It is no surprise then that rural areas and economic centers, but, given many informal local institutions are merely GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    157 BOX 3.9  The complex structure of metropolitan governments Metropolitan governance is complex in many cases, ties (districts) that are split among three provinces involving several single- or multiple-purpose jurisdic- (Banten, Jakarta, and West Java). tions covering a whole metro area or just parts of it. Mexico City’s metropolitan area spans parts of two •   Metropolitan areas and their surrounding jurisdic- states and has a national capital district and more tions are either managed by subnational entities or than 50 municipal-type local governments. have some central government involvement, given The São Paulo metropolitan area (with 39 munici- •   the complexity in finding purely local solutions. For pal governments) operates with relatively little example: coordination, because a suprametropolitan entity has yet to emerge. •   New Delhi is affected by overlapping jurisdictions: T he Cairo region incorporates five contiguous •   power is divided among all three levels of govern- governorates (the intermediate tier of Egyptian ment—the central government, the Union Territory administration) and eight new cities. Governor- of Delhi, and three municipal bodies (the Delhi ates represent the central government. New cities Municipal Corporation, New Delhi Municipal were created to attract people from the Nile Delta Committee, and Delhi Cantonment). to Cairo and have no formal relationship with local •   I n Jakarta’s metropolitan area, there are three administration. They are overseen by the Ministry urban municipalities and three rural municipali- of Housing, Utilities, and Urban Development. planning entities with no taxing powers, or of the central government to redistribute to that the central government influence is con- other areas, among them the rural SNGs. siderable. These institutional arrangements also affect if and how citizens are repre- Setting up a financing system that sets sented and can make their voice heard (box the right incentives for service delivery 3.9). The informality of these institutional can be challenging for a metropolitan area arrangements has three consequences: (World Bank 2013a; Kim 2013; Shah 2012; Slack 2006; Sud and Yilmaz 2013). The high It rules out more firmly establishing the •   proportion of commuters leads to a break- authority to tax at these levels, which can down of the tax-benefit principle: citizens be used to finance local expenditures. may benefit from the public services pro- I t limits possibilities for redistributing •   vided by a metropolitan area but pay taxes within metro areas or to other subnational at their residence in medium-size towns at units, which is critical for maintaining a the outskirts. Cross-territorial transactions level playing field for all entities. For exam- can occur more frequently in areas with ple, redistributive efforts will be more diffi- many entities and jurisdictions, affecting cult to be launched from subnational levels collection and distribution of sales taxes and themselves—in contrast, in Argentina and corporate income taxes, for example, unless Canada, for instance, the provinces are they are administered at a higher level of entitled to choose formulas for redistribu- government. tion in some of the financial instruments. Service delivery itself is challenging for Although vertical equalization can achieve several reasons—all of which limit account- the same results from any level, such a sub- ability and efficiency: national solution would need political con- sensus that would perhaps not exist on a The multiple territorial boundaries of met- •   nationwide scale. ropolitan areas can complicate the assign- I f revenues are further decentralized in •   ment of responsibilities for delivering the urban areas, it can undermine the capacity service, as well as accountability. 158  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 •   In two-tier models, economies of scale may Public investment be limited at lower levels. As metropolitan areas encircle small municipalities, frag- Public investment is directly related to attain- mentation may occur across jurisdictions, ment of the MDGs because of its importance at the same time that further horizontal in closing infrastructure gaps in urban and integration is limited for political reasons. rural areas (Alm 2010; Bahl and Bird 2013; •   Organizational arrangements can be com- Frank and Martinez-Vazquez 2013; Pagano plex: regional transport authorities, public 2011; Romeo and Smoke 2013). But the level enterprises, and special-purpose districts, of efficiency in public investment varies sub- among others, are common, and coordina- stantially across both developed and devel- tion among these and with entities of the oping countries. Surveys done for the World SNG can be problematic. Economic Forum in a sample of 94 coun- •   M etropolitan areas may not have the tries worldwide indicate that some advanced incentives to invest adequately in making countries have seen decreases in the quality complex services accessible in all sectors, of infrastructure, while some countries in including inpatient care, specialized medi- the developing world have taken respectable cal treatment, and higher education, all leaps forward. of which have positive externalities and Decentralized public investment is complex spillovers to other areas. Such underinvest- and might lead to inequity in spending. Project ment can be mitigated with grants from the appraisal may not be sufficiently rigorous to central government, although that raises weed out those with questionable impact, so the question of alignment of the different cost and time overruns often do not become compensation mechanisms. Bahl and Bird apparent until later stages—when sunk costs (2013) refer to India, where a large federal have to be accepted. Inequities in the distribu- grant for urban infrastructure development tion of assets across different jurisdictions can and slum upgrading is allocated to cities on also be significant. Public investment often a matching basis. The program was intro- implies bulky infrastructure works offering duced in 2005, and while it has succeeded localized benefits whose distribution is influ- in focusing increased attention on urban enced by political economy factors. Together, infrastructure issues, implementation prog- these factors can undermine equity, one of the ress has been slow. South Africa makes use key aspects for achieving the MDGs. of a more formal municipal infrastructure Improved public investment will require grant, designed primarily to improve ser- three actions. First, coordination across lev- vices in poor neighborhoods. In Brazil, ad els of government should be strengthened. hoc grants are made to support specific Experience in developed countries (France, projects. Spain) has underscored that this coordi- nation requires reasonably strong fiscal As a consequence, coordination with other levers. Chile, for instance, is coordinating levels of government and within the metro- public investment through regional invest- politan areas are significant and, if not done ment windows, including cofinancing with well, can limit accountability and efficiency. municipalities. Second, institutional and process reform should allow “poor” projects to be weeded Going forward: Three priorities out before they gain traction and support— for subnational governments while projects with high returns should be If rural and urban SNGs are to successfully selected. Korea, for instance, has successfully address the challenges to delivering basic ser- addressed the “optimism bias” by requiring vices necessary to achieve the MDGs, three reappraisal in projects with cost and time areas of future action are critical: improving overruns. public investment; fiscal equalization; and Third, equalization of public investment governance arrangements for accountability. spending should be strengthened. With GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    159 infrastructure gaps shifting among urban sufficient levels of horizontal equity, as mea- and rural areas at a quickening pace, the sured using a per capita standard as a rea- need for “place-based” responses to the ser- sonable comparator (World Bank 2012b). In vice delivery challenge is increasing. This Bolivia, distribution is driven by hydrocarbon adequacy in resources should be provided in revenues, which bear no relation to levels of terms of a country’s entire expenditure needs, poverty in the different provinces. If horizon- which include capital infrastructure, with the tal equity is recognized as a base for address- goal of creating a level playing field. ing the MDGs, then more effort needs to be put into fiscal equalization. The type and degree of equalization is, Fiscal equalization in the end, a political decision. Given the The incidence of both revenues and expen- prominence of infrastructure challenges in ditures is critical for MDG outcomes. These the urban-rural dynamics, however, it is effects can be enhanced by establishing some unlikely that full equalization for all sectors level of equalization to address inequities in can or should be achieved. The right bal- resource distribution (Blöchliger and Vam- ance is likely to depend on the type of infra- malle 2009; Boadway 2012; Dafflon 2012; structure needed and may vary with specific OECD 2007). Changes in the patterns of circumstances, such as subnational capacity urban-rural development imply three basic and credit availability. In the case of infra- forces: citizens’ needs change because of structure for social services, such as health ongoing changes in their demographic com- and education, recurrent equalization grants position, poverty profiles, and income levels; may be needed to cover continuing operation costs of service provision are affected; and and maintenance costs. For utilities and other fiscal capacity is affected. Fiscal equalization infrastructure whose costs can be largely can help address these factors. recovered through fees, credit-facilitating Equalization can be structured vertically policies may be the most appropriate means (across different levels of government), hori- of equalizing expenditures. For network zontally (across and among jurisdictions), or infrastructure where costs cannot be recov- as a combination of both. It requires defining ered through fees, such as no-toll roads, a the particular need, cost, and fiscal capac- conditional grant may be most appropriate. ity issue to be addressed through a transfer; Overall, it is clear that no country begins defining a group of representative taxes and with a clean slate. More often than not, representative expenditures to be equalized; reforms of intergovernmental transfers are and agreeing on the degree of equalization. done at the margin and incrementally, as is All these decisions have both a technical and demonstrated by Colombia’s current royalty a political ingredient. reform, which achieves more equality for roy- In short, equalization is a complex under- alty resources in a gradual fashion. Other note- taking both politically and practically. As worthy efforts are currently being undertaken an outcome of political negotiation, trans- by Ethiopia, Kenya, Morocco, and Tajikistan, fers are often overburdened with objectives, although the results remain to be seen. which may weaken desirable compensatory effects. Some countries do organize spatially Governance for accountability targeted programs aimed at stimulating regional development at large with a focus on Accountability is critical to tackle the MDG the private sector. However, those programs challenge. Accountability depends on the way that include incentives such as tax breaks authority is constituted, but it also depends or subsidies often challenge coordination on human resources management, an often among the different interventions, including forgotten but critical element for accountabil- service delivery and taxation, and specific ity and efficiency. poverty and social programs. For example, All decisions on resource distribution in Malawi, transfers are not establishing require institutional arrangements and the 160  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 authority to exercise those decisions. These reform, they need particularly strong incen- determine, to some degree, if and how costs tives to be sustainable. These examples and revenue can be shared within and across underscore the fact that human resources jurisdictions. Institutional and governance reform constitutes a challenging area that arrangements reflect a country’s political can often progress only in limited, narrowly decisions, often based on its particular social, defined service delivery areas where suffi- geographic, or political context. Subnational cient demand for reform exists. In contrast, governments and their authorities can be Kenya’s ambitious territorial and devolution elected or delegated; in some cases, parallel or reform has forced it to engage in large-scale dual authorities exist. Whatever the arrange- human resources reform, but the reform is ment, as a guiding principle, a minimum level still too new to evaluate the results. of accountability, vertically across levels and horizontally across the different territorial units, needs to be in place for MDG-relevant Planning first, followed by policies to be fully effective. financing Human resources are a critical, yet often As urban centers continue their inexorable overlooked element of accountability. They growth over the next decades, a strategy is establish institutional capacity, a necessary needed to better manage the urbanization condition to addressing service delivery chal- process through a coordinated, prioritized, lenges. They define the “fine dividing line” in and sequenced approach to the planning- responsibilities among levels of government, connecting-financing formula of urbaniza- which is key for accountability. And they are tion. Unplanned and uncoordinated urban a significant cost driver that can impact fis- development can pose risks, trading the cal responsibility. Three areas of institutional hopes of those who migrate in search of a capacity are critical because they establish a better life for unsanitary living conditions, basic level of transparency: financial manage- joblessness, and high exposure to natural ment, procurement, and human resources. disasters. Public policy makers must act now Efforts are under way to create integrated to get this rapidly paced urbanization “right” financial management systems in many coun- by improving access to affordable and reli- tries, including Russia (as a centralized solu- able basic services such as education, hous- tion), and some Latin American countries ing, transport, and health care for all, and (Guatemala, Peru). by promoting effective land use management Given deeply entrenched political economy to influence the spatial structure of cities. factors, the risk of disjointed decision mak- Isolated efforts are unlikely to help. Experi- ing is high. Hiring and firing decisions, along ence in managing urban growth has varied with salary policies, need to be made in a considerably across countries (see box 3.10 coordinated fashion. The example of Mexico for policies in the BRICS), but policy makers underscores some of the challenges: because of going forward will need to focus on getting political resistance, federal teachers were not land management “right” and integrating the decentralized to the states, resulting in a paral- intensity of land use with the placement of lel hiring process at the state level that blurred infrastructure, housing, mobility, and envi- the lines of accountability. In Colombia, the ronmental amenities. early decentralization process established cen- Of course, financing rapid urban growth tral pay levels, while SNGs were supposed to is challenging, because large up-front capi- cover the increased cost, which was shifted tal investments are needed to build systems back to the center through higher transfers. for transport and water, solid waste manage- With growing interdependencies, human ment, and sewage removal and treatment. resources management needs to be strength- Financing, however, needs to be closely ened in an intergovernmental fashion. tied to how urban areas are planned and con- Because these capacities are often “invisible” nected. Often, getting the planning in place to citizens, which limits any demand-based will allow cities to leverage land and credit GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    161 BOX 3.10  Learning from urbanization in the BRICS The economic motors of development are shifting ernment has introduced some of the most inclusive from the urbanized developed world toward the rap- urban legislation, as exemplified by its ambitious City idly urbanizing developing world, and most famously Statute. Nevertheless, the problems of the divided those of Brazil, Russia, India, China, and South city, stemming from past urban policies, remain a Africa (the BRICS). The BRICS provide some inspir- huge challenge. In retrospect, a more inclusive and ing examples of how to seize the opportunities that proactive approach to rural-urban migration and urbanization can provide. Their governments all went urban growth from the start would have been more through difficult periods when they tried to resist the equitable at the time and very beneficial in the long predictable movement of people into cities, or steered run. people or enterprises to inappropriate urban locations. Several of the BRICS bear heavy burdens from past China’s ardent urbanization and rapid economic failures to accommodate urban population growth growth. China’s economic transformation, which equitably and efficiently. To avoid such burdens, cit- began as a rural experiment, soon became urban, ies and nations need to plan proactively for urban involving first a string of coastal cities, then larger growth, making use of both markets and planning urban regions, then inland cities. These innovative tools, and engaging with all sectors of society, includ- cities soon brought vast quantities of capital from ing the economically and politically weakest. around the world together with low-wage workers Rapid urbanization in the BRICS has generally from China’s agricultural regions. The central gov- accompanied economic growth and a shift out of ernment progressively loosened controls on private agriculture. Nevertheless, governments have been investment within cities and on temporary rural ambivalent about urbanization, even causing some of migration into the cities. Economic powerhouses the economic and social disruption that has attended arose incrementally from locally driven but centrally this march toward urbanization; examples are China sanctioned urban experimentation. City governments during the Cultural Revolution and South Africa were given increasing powers and put under enormous during Apartheid. Each country illustrates different pressure to raise economic production. A dominant lessons about the opportunities and risks associated model emerged of entrepreneurial city bureaucrats with urbanization. taking lead roles in land conversions. They oversaw the transformation of low-value urban or rural land Brazil’s reluctant urbanization and the emergence of into serviced plots whose long-term leases were sold favelas. Brazil’s world-famous slums or shanty towns at near-market prices to real estate developers, or at also called favelas show how the failure to accommo- lower prices to investors promising industrial or com- date growing urban populations can lead to enduring mercial establishments. social inequalities. Fearing that urban planning would China’s stunning economic success highlights the encourage poor rural migrants, the Brazilian govern- importance of achieving moderately efficient urban- ment did little to plan for rapid urban growth. Inac- ization for economic growth, but it is based on poli- tion did not slow the pace of urbanization, but poor cies other countries would struggle to replicate and planning did contribute to a very unequal urbaniza- has brought unenviable environmental costs and tion, with large segments of the population inhabiting social inequalities. China has recently tried to reduce poorly located and ill-served informal settlements. these detractions while maintaining rapid economic Many inhabitants have done surprisingly well under growth, but it has been difficult to challenge the exist- the circumstances, but hazardous locations, enor- ing model, whose success is based on closely align- mous barriers to service delivery, bad relations with ing local authorities’ official and unofficial interests local authorities, and the like persisted. with market pressures, even when that causes envi- In recent decades, pioneering approaches have ronmental damage or amplifies inequalities. Urban emerged: participatory budgeting in Porto Alegre, experimentation could still hold the key to progress sustainable travel in Curitiba, and condominial sew- on social and environmental agendas, but local alli- erage in various cities. These and other innovations ances of entrepreneurial bureaucrats and developers have gained international renown. The national gov- are unlikely to drive these agendas. (box continues next page) 162  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 BOX 3.10  Learning from urbanization in the BRICS (continued) Russia: Cities in the wrong places. Russia’s urbaniza- The creation of constitutional rights for the poor tion history shows how long-term economic growth has helped to promote equity but has not always been requires people and economic enterprises to move to backed by political will and sufficient government productive urban locations—not just to anywhere in resources to meet people’s basic needs for electric- any city. This is a difficult process to direct unless ity, water, and sanitation. Equally needed are city- markets are allowed to play a larger role than permit- level leadership and investment plans that integrate ted by the Soviet authorities. fragmented cities more effectively, boost jobs and From an economic perspective, the Soviet system livelihoods, and work with poorer communities to located many urban activities and populations in the improve essential services. wrong places. Central decision making that did not take markets into account left many cities exposed at India: Ambivalence to urbanization offers an uncer- the end of the Soviet era. The need for spatial restruc- tain future. India is less urban than the other BRICS, turing brought heavy social and economic costs, add- and its ambivalence toward urbanization could ing to the traumas that accompanied the dismantling impede economic progress, at least for the low-income of the Soviet central planning system. Populations groups who find it increasingly difficult to secure a shifted toward newly vibrant cities and service centers place in India’s cities. The size of India’s still-growing in the south and west, and away from industrial cit- population that has to find sustenance in rural set- ies with few amenities in the far north and east. That tings is daunting. India’s current challenges illustrate may have been the right response from an economic the importance of taking the rural implications into standpoint, but it involved considerable dislocation. account when designing urban policies. Cities that produced goods for the military-industrial This is a particularly critical time for India’s complex, or consumer goods protected from compe- urban policies because they will help to determine tition, have suffered enormously, even as those with whether economic growth is maintained, who will natural resource bases or other strengths in the mar- benefit, and what the environmental consequences ket economy have thrived. will be. The Indian government has initiated several important programs intended to support equitable South Africa’s apartheid urban controls and its frag- and efficient urban development, including the Jawa- mented cities. South Africa’s apartheid system was an harlal Nehru National Urban Renewal Mission and extreme lesson in the dangers of exclusionary urban Rajiv Awas Yojana. India has also pioneered civil policies, particularly when combined with overt dis- society and grassroots efforts to improve conditions crimination against particular social groups. Since for deprived urban dwellers, including a partner- apartheid ended, urbanization has rebounded, but the ship between the Society for the Promotion of Area inherited social and economic divisions have proven Resource Centres, Mahila Milan, and the Indian to be intractable. The low density, fragmented form National Slum Dwellers Association. To meet its of South African cities has also had harmful social, urbanization challenge, India must not only address economic, and environmental consequences, some of existing urban poverty but also create cities that can which are only beginning to be addressed. Low den- accommodate rapid urbanization and give even the sity has imposed additional barriers to employment poorest rural dwellers a fairer share of the benefits of for the poorest communities, added to the cost of economic growth. bulk infrastructure provision and public transport, and fostered carbon-emitting private transport. Sources: Contributed by IIED and UNFPA. markets to generate finances, as well as to urban areas enhance job opportunities, pro- encourage investments by the private sector. ductivity, and living standards by better man- Integrating planning, connecting, and aging densities, and by also reaching out and financing can go a long way in ensuring that improving welfare in rural areas. GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    163 Annex 3A.1  International Financial Institutions and Urbanization International financial institutions (IFIs) have competitiveness of African cities to help them long been engaged in supporting the urban- enhance their role as engines of growth and ization process through different lending and economic development. The strategy focuses nonlending mechanisms. These include a on three main pillars in alignment with the range of responses from financial support to AfDB’s core areas of interventions: infra- improve housing conditions for slum dwellers structure development, urban governance, to strengthening transport services to reduce and private sector development. The urban congestion costs to integrating knowledge strategy is based on the AfDB’s medium-term products that help countries plan better for plan for 2008–12 and the 2009 mid-term anticipated migration from rural areas to its review of the African Development Fund cities as well as address issues of congestion (ADF), the concessional financing window from natural growth of urban areas. of the AfDB. The urban strategy aims to help member countries progress toward the achievement of MDGs and to mainstream African Development Bank the key cross-cutting issues concerning all The African Development Bank (AfDB) urban operations, namely, knowledge genera- Group recognizes that the continent’s cities tion and management, regional integration, and towns can be a major driving force for environment, climate change, gender, and economic development. In 1992, its board empowerment of vulnerable populations. approved an Urban Development Policy to Implementation of the AfDB’s urban strat- provide guidance for AfDB Group opera- egy will exploit the bank’s existing financing tions in the urban sector, build a foundation instruments using the central governments’ for dialogue with counterparts, and promote channels: loans and guarantees, mainly to cooperation with other development part- middle-income countries, and private sector ners. The policy targeted regional member loans to middle- and low-income countries; countries’ capacity to plan and implement loans or grants from the ADF to low-income investment programs, promote private initia- countries and fragile states; and trust funds tives, support decentralization, and upgrade and other facilities. For financing in the case human resources. An important component of creditworthy municipalities, the AfDB will was improving the living conditions of the invest in knowledge generation and lessons urban poor. The AfDB has supported urban from other institutions concerned with this development over the years through projects type of financing. in public utilities, industry, transport, educa- In recent years, the AfDB has supported tion, health, and other social interventions. some 70 urban-related projects and ini- Between 1967 and 2007, roughly 15–20 per- tiatives, such as: improving Zanzibar’s cent of the cumulative financing provided by water supply and sanitation services (spe- the AfDB Group benefited urban dwellers cial drawing rights [SDR] 28 million); the and enterprises either directly or indirectly. Dakar-Diamniadio Highway Project (SDR In 2011, the AfDB developed its urban 45 million); the Nairobi-Thika Highway strategy , which was aimed at enhancing the Improvement Project (SDR 121 million); and effectiveness of its interventions in urban the Conakry Electrical Networks Rehabilita- development in Africa (AfDB 2011). The tion and Extension Project (SDR 12 million). main objective is to boost the viability and Since 2000, the AfDB’s financial commitment 164  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 TABLE A3.1  AfDB’s deliverables in energy, transport, and regional integration, 2010–12 Indicator   Energy   Length of transmission and distribution lines rehabilitated or installed (km) 13,129 Distribution substations and transformers constructed or rehabilitated (number) Forthcoming Power capacity installed (MW) 780 Staff trained/recruited in the maintenance of energy facilities (number) 1,963 People with a new electricity connection (number) 203,602 Population benefiting from new electricity connections (people) 6,498,853 Transport   Roads constructed, rehabilitated, or maintained (km) 15,695 Feeder roads constructed or rehabilitated (km) 7,994 Staff trained/recruited for road maintenance (number) 13,950 People educated in road safety and HIV transmission (people) 810,000 People with improved access to transport (people) 40,326,880 Regional integration   Cross-border roads constructed or rehabilitated (km) 471 Cross-border transmission lines constructed or rehabilitated (km) 597 Source: AfDB 2013. for urban development interventions has Asian Development Bank amounted to SDR 2.26 billion (US$3.5 bil- lion). The AfDB has also invested in various The Asian Development Bank (ADB) has other interventions that have played a role in sought to facilitate the structural transforma- improving the socioeconomic levels of both tion for successful urbanization by providing urban and rural populations, through such various financial and knowledge-based instru- means as increased access to energy and ments to its client countries. Of project financ- transport facilities and in regional integra- ing identified for rural and urban development tion. Table 3A.1 illustrates some of the key projects, approximately $3.3 billion was allo- results delivered in these areas in 2010–12. cated for urban development and $2.3 billion The AfDB has also undertaken economic for rural development in 2012. In rural areas, sector work, such as a study on the expan- the transport and information and communi- sion of Monrovia’s water supply and sanita- cations technology (ICT) sectors received the tion system (SDR 1.5 million). Moreover, fol- most, at 45 percent in 2012; agriculture was lowing its 2008 annual meetings in Maputo well behind, with 25 percent of the total allo- where the High-level Symposium addressed cation for rural development in 2012. In urban issues on urbanization, inequality, and pov- areas, transport and ICT is also the largest erty in Africa , in 2009 it embarked on a sector, receiving 35 percent of the total allo- research program in partnership with the cation for urban projects; energy received 24 Swedish International Development Coop- percent, and water supply and other municipal eration Authority aimed to yield knowledge services received 17 percent in 2012. Note that products to assist AfDB staff and member the ADB has slowly increased its allocation to countries in addressing urban development support urban development from around 50 issues. A key product of this partnership is a percent in 2008 to close to 60 percent of a book titled Fostering Shared Growth: Urban- growing amount of total resources available ization, Inequality and Poverty in Africa, for both areas of development. due for publication in 2013. An exemplary project illustrating the East Asia: China and Mongolia impact of AfDB’s projects on the lives of the urban poor is the poverty reduction project Support for “urban-rural dynamics” in in Ghana (Box 3A.1). China and Mongolia is broadly in line with GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    165 BOX 3A.1  Tackling urban poverty in Ghana As urbanization has proliferated in Ghana, particu- access to income-generating activities through capac- larly in the central and northern regions, the level ity building and a strengthened urban small-scale of urban poverty has also been on the increase. An enterprise sector. estimated 2 million urban dwellers in Ghana are clas- The project covered 12 metropolitan, municipal, sified as poor. In Accra alone, 45 percent of the pop- and secondary towns with a total population of 4.45 ulation lives in the poorest neighborhoods and lack million. The expected benefits include improvement water, sanitation, and educational facilities. As a pilot in the livelihoods of the urban poor through better country, Ghana benefited from the AfDB urban pov- access to good socioeconomic infrastructure, cre- erty reduction project worth about $40.25 million. ation of 6,000 jobs for unemployed youth, and skills The objectives of this project were to develop development training for at least 4,000 women. The urban settlements through participatory manage- project was expected to generate 350 urban and peri- ment, job creation, and strengthened public-private urban socioeconomic subprojects and 50 environ- partnerships and local governance and management mental subprojects. capacity; improve living conditions in urban and peri- urban zones by increasing access to basic quality ser- vices and socioeconomic infrastructure; and facilitate Source: AfDB 2011. the ADB’s support for inclusive growth. ADB country’s macroeconomic urban strategy operations help address regional and urban- aims to rationalize the unbalanced urban rural disparities, improve rural livelihoods, structure at all levels of the urban hierarchy, and facilitate urbanization with job creation which currently provides a weak base for for migrant workers. supporting sustainable and inclusive develop- In China, more than 90 percent of the ment. The approved loan amounts for urban ADB’s operations are focused on the lesser- development ranged from around $485 mil- developed central, western, and northeastern lion in 2008 to $350 million in 2012. These regions to promote regionally balanced and projects aim to enhance the development integrated urban-rural development. Trans- potential of small- and medium-size cities, port operations have facilitated movement thereby directly and indirectly providing of people for better access to job opportuni- support to reduce regional imbalances and ties and public services, particularly among income disparities between urban and rural migrant workers. Urban operations have areas. The ADB has been a close partner supported integrated urban-rural infrastruc- to the Chongqing Municipality, the first ture development and improvement of urban ­ p rovincial-level demonstration area for services, including provision of employ- piloting urban-rural reforms in China. In ment services and technical and vocational 2010, the first $100 million in funding for education and training. Natural resources the Chongqing Urban-Rural Infrastructure and agriculture operations have supported Development Demonstration Project was biomass energy and water and natural approved to finance key infrastructure of resources protection, which help generate urban-rural roads and small-scale potable income and expand livelihood improvement water supply plants in eight poor districts opportunities. and counties of Chongqing. In 2013, the The Chinese government is accelerating ADB and the national government are work- its support of the development of the coun- ing on a proposed $150 million loan proj- try’s small- and medium-size cities. The ect for the second phase, which will further 166  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 demonstrate more balanced and inclusive decision making by policy makers faced with urban-rural development in Chongqing. urban and rural development challenges. Mongolia’s population was 2.8 million in For example, in Kazakhstan, the Country 2011, including 1.3 million inhabitants of Partnership Strategy for 2012–16 includes a Ulaanbaatar City. Forty percent of Ulaan- detailed sector assessment of urban transport baatar’s population lives in the city core and water and sanitation.3 In Uzbekistan, the while 60 percent (approximately 800,000 Country Partnership Strategy for 2012–2016 people, or about 30 percent of the national assessed issues surrounding water supply and population) live in peri-urban, or ger, areas. sanitation, waste management, urban trans- During the past five years, the population port, and other municipal services.4 of the country increased by about 220,000; The urban regional technical assistance all but 10,000 of these were in Ulaanbaatar projects fostered the work of the Urban Com- City. In addition, the countryside population munity of Practice, one of the core knowl- decreased dramatically while the populations edge management areas of the ADB, and, in of the aimag (provincial) capitals and other particular, the Cities Development Initiative small cities remained almost stable. The pop- for Asia (CDIA), an international partnership ulation growth of Ulaanbaatar City mainly program assisting medium-size Asian cities happens in the ger areas, which, despite their to bridge the gap between their development size, are considered temporary settlements plans and implementation of their infrastruc- and have never been formally integrated into ture investments. The CDIA uses a demand- the city development process or infrastruc- driven approach to help identify and develop ture programming. Thus, the continuing urban infrastructure investment projects in ger area densification and sprawl is putting the framework of existing city development tremendous pressure on the urban environ- plans. These projects focus on urban environ- ment. The huge gap between services in the mental improvement, urban poverty reduc- formal and ger areas remains one of the most tion and gender, climate change mitigation or difficult challenges for the government, espe- adaptation, and improved governance. cially as projections indicate that they will To facilitate these initiatives, the CDIA add another 350,000 people over the next 10 provides a range of international and domes- years. tic expertise and advice to help cities move Approved loans for infrastructure in Mon- from strategic master plans to concrete poli- golia during the past five years amounted to cies and infrastructure projects ready to pres- about $78.2 million. They included projects ent to financiers and project developers. Core to improve water and other municipal infra- city-level CDIA activities include: structure and services in small towns in the southeast area of the Gobi Desert ($15 mil- Advisory support for undertaking infra- •   lion) and the improvement of urban transport structure investment programming and in Ulaanbaatar City ($59.9 million). In 2011, prioritization. a Public-Private Transportation Act was Consultancy support for preparing prefea- •   approved to prepare a multiannual financial sibility studies on high priority infrastruc- framework for improving Ulaanbaatar City’s ture investment projects that demonstrate urban services and ger areas development. integration within a city’s overall develop- ment process. Identifying financial sources for selected •   Central and West Asia: Multisector investments from domestic and interna- assessment for Kazakhstan and tional finance markets as well as opportu- Uzbekistan nities for public-private partnerships (PPPs). In addition to financial support, the ADB S trengthening local institutional capac- •   also provides analytical services to facilitate ity through on-the-job training related to GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    167 infrastructure investment planning and operation. Examples include specifically tar- programming and project management. geting micro, small, and medium enterprises in rural underserved areas for finance loans As of December 2012, the CDIA had and supporting the involvement of farmers by approved applications from four cities in extending backward linkages in agribusiness. thirteen countries with a number of oth- The EBRD also plays an active role in ers under consideration. These interventions helping put adequate infrastructure in place are estimated to lead to about $6.5 billion in to facilitate changing urban-rural dynam- strategic urban infrastructure investments. ics and to minimize the negative impact of In the current portfolio, urban transport is urbanization on cities. The EBRD’s activi- the largest CDIA sector, followed by flood ties in the water and wastewater sector aim and drainage management, urban renewal, at achieving an enhanced and sustainable and wastewater management. While the provision of services to urban populations. ADB and the KfW (German government– These operations are based on sustainable owned development bank) are the primary cost-recovery tariff structures; the develop- downstream financiers, increasing emphasis ment of robust regulatory approaches with a is being placed on assisting cities to bring in focus on the modernization of infrastructure; additional financing through PPPs. Although the promotion of appropriate environmental, the CDIA focuses on environmental improve- social, health, and safety improvements that ment, poverty reduction, and governance result in high-quality service delivery; and aspects, its work has invariably contrib- management efficiency. Since its inception, uted to a wider set of cross-cutting impacts. the EBRD has rapidly expanded its activities Especially through capacity strengthening, in the water and wastewater sectors through- the CDIA has contributed to improved gov- out its countries of operation. To date, EBRD ernance with city partner agencies (see also has financed over 130 water and wastewater Linfield and Steinberg 2012). projects, for a total of e2 billion. Improvement in urban transport, in which the EBRD has been actively involved, European Bank for is another essential component of facilitat- Reconstruction and ing urbanization processes. Urban transport Development has a unique ability to provide high-quality The activities of the European Bank for alternatives to use of private cars and is thus a Reconstruction and Development (EBRD) viable antidote to urban congestion and pol- that address issues related to urbanization lution, two negative consequences of urban- differ from those implemented by other mul- ization. Urban transport provides value added tilateral development banks. The EBRD has a to the urban environment and increases the specific mandate that identifies the main goal general quality of life for the urban popula- as support for its member countries in their tion by improving air quality, reducing delays transition to market economies. Through caused by congestion, and contributing to a variety of products (both investment and carbon reductions. The EBRD has financed technical co-operation) offered to private more than 60 urban projects in different and public sector clients representing a range countries of operation, for a total of e1.4 of different sectors, the EBRD therefore billion. The EBRD addresses complex issues has a specific role that indirectly addresses related to a variety of existing bottlenecks in the urbanization issue. This role involves the urban transport sector by implementing improving the business environment and an integrated approach that consists of invest- removing infrastructure bottlenecks, both of ments, technical assistance aimed at improv- which are crucial in facilitating the urban- ing management capabilities, and policy dia- ization process in EBRD’s 34 countries of logue with local and national authorities to 168  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 BOX 3A.2  The EBRD’s integrated approach to transition challenges in Almaty’s urban transport sector Fueled by a number of factors, including economic, growing traffic problems and increasing dependence social, and structural changes in Kazakhstan over the on private car usage, the EBRD’s investments aim at past decade, the population of Almaty, the country’s increasing the capacity and standards of public trans- largest city, has been steadily growing. This growth is port services as an alternative to car usage and pro- in large part a result of internal migration of the work- viding an overall balanced approach to urban mobil- force from rural areas. The population of Almaty is ity with viable travel choices for users. The investment expected to reach 1.6 million before 2015, up from 1.1 projects include major investments in a modernized, million in 2000. In the urban transport sector, popu- clean urban bus and trolleybus fleet to provide a cost lation growth has been punctuated by a steady rise in benchmark to the private sector. Finally, an integrated private car usage, which subsequently led to a change e-ticketing system operated under a build-operate- in Almaty’s transport pattern. The car fleet in circula- transfer concession will be implemented across all tion increased from 218,000 in 2003 to 560,000 in public transport services to allow for network benefits 2011. Greater reliance on cars has increased road con- (that is, increased ridership spurred by free transport gestion, and air quality in Almaty has been severely modal transfers) to accrue to the operators. affected by pollution from traffic, and in particular, The EBRD’s policy dialogue will focus on institu- by emissions resulting from the use of low-quality tional development of the sector in Almaty and will fuel, a badly maintained and outdated private car include, among other activities, design and imple- fleet, and ever increasing congestion compounded by mentation of a robust regulatory approach through insufficient road management. In general, there has creation of a new urban transport authority; improve- been an underinvestment in public transport solutions ments in the contractual agreements to enable financ- and traffic and parking management; institutional ing investments by private operators; and introduc- weaknesses and deficiencies in regulatory frameworks tion of an integrated electronic fare collection system. have also been identified as issues detrimental to the In parallel, the EBRD’s efforts will be complemented effective development of urban transport. by assistance from the World Bank and the United To address these complex challenges, the Euro- Nations Development Programme to support the city pean Bank for Reconstruction and Development in developing a computer-based traffic model, a new (EBRD) is pursuing an integrated approach to the comprehensive route scheme, and carbon emission urban transport sector in Almaty involving invest- reduction assessment methodologies for the sector, ments in target projects coupled with extensive all of which will help to improve the functioning of technical cooperation and policy dialogue activities. and benefits produced by the transport sector. It is Together, these activities aim at setting new standards expected that the EBRD’s activities in urban trans- for service quality in public transport, establishing a port in Almaty, in close collaboration with other solid foundation for the introduction of a new regula- international financial institutions, will contribute to tory framework in the sector, and integrating private creating efficient and effective market mechanisms in operators into a single client-oriented system with sig- this sector and help mitigate negative consequences of nificantly improved service standards. To address the urbanization in Almaty. strengthen the regulatory and institutional pace in Latin America and the Caribbean. framework (box 3A.2). Urbanization in the region rose from 62 per- cent in 1980 to 81 percent in 2011, making it the second most urbanized region in the Inter-American Development world. If this trend continues, in 20 years Bank 90 percent or more of the region’s popula- The Inter-American Development Bank tion will be living in cities. Although mega- (IDB) established an Emerging and Sustain- cities are more prevalent in Latin America ­ ities Initiative (ESCI) in 2011, since able C than in developing countries in other regions, urbanization is taking place at a very fast it is now intermediate-size cities that are GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    169 growing the fastest (Lora 2010). This pace of to guide investment decisions in the sectors urbanization is creating daunting challenges that may generate more positive impacts; for intermediate and emerging cities in the find specific solutions according to their cost- region.5 benefit that would pave the way toward sus- These emerging cities are still character- tainability (“prioritized interventions”); and ized by unacceptably high proportions of follow up on progress in closing gaps and the population living in poverty, with lim- reaching goals. ited governance and an enduring scarcity T he I n itiative works i n t h ree key of resources. The challenges are multiplied dimensions: when considering the efforts of cities to cope and adapt with the adverse effects of climate T he environmental and climate change •   change. Events such as flooding and storm dimension is concerned with environmen- surge increasingly impact cities in the region, tal management and local pollution control generating significant economic losses. Politi- issues (including air and water contamina- cal decentralization has advanced substan- tion, solid waste management, and disas- tially in the region over the last two decades. ter prevention), climate change mitigation Local governments have assumed greater (through energy efficiency and other mea- responsibilities for the provision of social sures), and climate vulnerability reduction services. However, fiscal decentralization and adaptation measures. has not kept pace, and most municipalities T he urban development dimension refers •   are not fiscally independent and do not man- to the effects of the city’s design and foot- age their fiscal affairs well. They have very print (or its ability to control its growth limited fiscal space to accommodate neces- through effective planning and land use sary investments in sustainability, and in control), social inequality and uneven dis- most cases are not creditworthy partners to tribution of urban services, efficiency of its the private sector (PPPs transactions). Their urban transportation network, economic capacities to improve the quality of life of competitiveness, and the level of public their citizens are limited. safety. T he fiscal sustainability dimension is •   related to the ability of local governments Emerging and Sustainable Cities to prioritize and finance needed invest- Initiative ments, fund and maintain their urban and The first phase of the Emerging and Sus- social services, control adequately their tainable Cities Initiative (ESCI), launched expenditures and debt, and make decisions in 2011, was a pilot test to develop ESCI’s in a transparent manner. methodology and its application in five cities: Goiania in Brazil; Santa Ana in El Salvador; ESCI’s methodology Trujillo in Peru; Port-of-Spain in Trinidad and Tobago; and Montevideo in Uruguay. Deployment of the Initiative in cities con- In February 2012, the Bank’s Board of sists of two distinct stages. The first stage Directors approved the second phase of the involves the development of an action plan, ESCI, which includes scaling up of the pro- which begins with data collection, analysis gram to a total of 26 cities in the region and diagnosis, and prioritization through the between 2012 and 2015. The purpose of application of different filters (environmental, the Initiative is to improve the sustainability economic, public opinion, expert opinion). and quality of life in emerging cities in Latin The IDB ensures support for generation of America and the Caribbean. The Initiative expertise and diffusion of innovative experi- provides a set of tools that intermediate cit- ences among the cities’ governments. ies can use to identify key bottlenecks they The IDB, together with McKinsey & may face in their path toward sustainability; Company, has developed a rapid assessment weigh and prioritize the identified problems diagnostic tool that analyzes 150 indicators 170  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 and provides, in a period of six months, a connecters, and catalysts for knowledge. That comprehensive diagnostic of a city’s situation means translating global evidence and best with regard to the three dimensions of inter- practices into local solutions. It means con- est. The diagnostic is followed by a prioriti- necting cities with one another to exchange zation process that includes extensive consul- best practices and learn from one another. tation with civil society, academia, and local And it means catalyzing new research by government as well as a public survey among making data openly available to the public, citizens. This exercise leads to the develop- so that others can validate conclusions, build ment of an Action Plan, including key strate- from the findings, and contribute to develop- gic interventions. ment solutions. Once the action plan is developed and To put this approach into action for cities, agreed among local stakeholders, the second the World Bank launched a global knowledge stage—execution of the plan—begins. The partnership around the transformational Initiative assists in the design and develop- topic of urbanization in 2011. The Urbaniza- ment of the pre-investment components of tion Knowledge Platform (UKP) seeks to con- at least one priority intervention as well as vene and connect city leaders, national policy in the mobilization of financing from differ- makers, academia, the private and third- ent sources (such as the public sector bud- party sector, and development agencies from get, private sector capital through PPPs, and around the world to co-create and customize commercial bank financing). The execution new insights on the most pressing challenges phase also includes the implementation of and opportunities faced by cities. Its mission a monitoring system through the participa- is to put the world’s best knowledge and data tion of local nongovernmental organizations in the hands of policy makers so that they (NGOs), the private sector, and academia. can better harness urban growth for sustain- The IDB has established a Special Fund able and inclusive development. ($25 million) to support provision of non- The UKP began its activities by convening reimbursable technical assistance to cities and cohosting more than 20 high-level policy adopting the ESCI methodology. The fund- consultations and knowledge exchanges in ing covers the development of all the phases partnership with local think tanks, regional in the ESCI methodology. teams, and policy makers in 14 countries on 5 continents. Collectively, these events consulted more than 800 city leaders and The World Bank 4,000 other stakeholders to facilitate exten- The World Bank has maintained a large sive South-to-South knowledge exchange, presence in the area of rural and urban convene regional stakeholders around com- development. Recently, it has scaled up its mon challenges, and lay the groundwork for knowledge-based services regarding urban- future partnerships to jointly fill knowledge ization, in particular through the Urbaniza- gaps. For instance, the platform facilitated tion Knowledge Platform, which focuses on regional knowledge exchanges among may- collaboratively building the evidence base for ors for shared learning, including forming a sustainable urban development. community of city leaders from 8 countries Effectively managing the rapid change in South Asia for unprecedented city-to-city associated with urbanization is no easy task. learning that sidestepped inactive coopera- And the risks are high, because many of the tion at national levels. And it nurtured global decisions that city leaders make today may PPPs of more than 60 organizations to help lock cities onto a path of development that harness the promise of “smart city” and proves unsustainable. To help cities avoid this “smart climate” innovations tailored to the fate and harness urbanization for sustainable needs of low-income countries. and inclusive growth, institutions like the Crucially, these global exchanges also led World Bank must be more than producers of to the identification of the most pressing chal- knowledge—they must also be customizers, lenges and opportunities facing cities. The GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    171 city leaders consulted through the Platform For instance, UKP-led discussions and follow- asked the World Bank: What must be done to on research by Professors Paul Collier and create jobs? What must be done to improve Tony Venables on the persistence of informal living conditions in slums and hazard-prone settlements demonstrate that no single root areas and to bridge the social divide? What cause explains the failure to deliver afford- must be done to expand the coverage and able housing. Rather, a number of inter- quality of basic services? related impediments need to be addressed So what has been learned to date? First, through integrated action across disparate there are no straightforward answers to these policy domains—from financing to housing questions, and the evidence base on many of regulations to the cost of construction mate- these issues is filled with critical knowledge rials—because isolated progress on any one gaps. But the UKP’s discussions with hun- bottleneck will be of limited impact if the oth- dreds of city leaders from around the world ers continue to bind. For urban knowledge also taught that, while all cities are unique, generators and development practitioners to the challenges they face are remarkably simi- help, they must lead by example by leveraging lar, even across stages of development—with platforms like the UKP to collaborate across shared issues ranging from climate change disciplines and sectors to build integrated to social inclusion. That means that “know solutions to urban challenges. how” and solutions are transferable — that Third, the number one obstacle to provid- the lessons learned from one city can, and ing city leaders with a fact-based understand- should, inform the choices of cities on the ing of their challenges and opportunities is other side of the planet. In other words, while the poor quality and tremendous fragmen- there is no single blueprint for success, it is tation of city-level data. In fact, while many the case that some countries and cities have policy decisions are made and implemented been more successful than others. There is at the local level, most statistical information a need, therefore, for new and expanding cit- is collected at the national level. As a result, ies of today to learn what worked and what more reliable data are available today on, did not from those that have gone before say, the island-nation of Fiji—with a popu- and to collaborate on common solutions to lation of 860,000—than for the megacities shared problems informed by the evidence. of Delhi, Rio de Janeiro, or Shanghai, which Such shared learning and collaboration has each have populations in excess of 10 million. been obstructed by a lack of facilitating This imbalance creates an enormous mis- global public goods (such as forums, knowl- match between the scale at which informa- edge platforms, and open data). The World tion is available and the level at which urban Bank through the UKP aims to help fill this development is conducted, and significantly gap and to play the role of knowledge broker. constrains the growth of cumulative urban Second, most cities face not just a single knowledge generation across countries, bottleneck to sustainable development but regions, and disciplines. To address this issue a wide range of challenges that require inte- and respond to the overwhelming demand of grated solutions and tight policy coordination its members and participants, the UKP has across multiple agencies, jurisdictions, and partnered with the Swiss government to, for disciplines that do not always have a natu- the first time, systematically bring together ral incentive to collaborate. Most obviously, and visualize data on cities for global bench- rapid urbanization has caused urban centers marking and evidence-based decision mak- to spread beyond city boundaries and across ing. The goal is to work with cities and part- disparate local governments that often fail ners to harmonize, standardize, consolidate, to coordinate their actions, making it diffi- and open-source city data to form a robust cult to take a strategic approach to manag- global evidence base on the challenges and ing urban growth. A lack of sufficient policy opportunities faced by cities. coordination similarly hinders progress on The World Bank through the UKP is com- several other aspects of urban development. mitted to facilitating this shared learning 172  URBANIZATION AND THE MDGS GLOBAL MONITORING REPORT 2013 across cities. But the Bank cannot do this Other organizations alone. The key is for the urban community to come together to build a global pool of Various bilateral agencies and United Nations experience and evidence that all can draw (UN) agencies have also undertaken initia- and build from to better inform the tough tives to assist urbanization. Such efforts and often irreversible decisions that city lead- include several led by the UN Population ers need to make to harness urbanization for Fund (box A3.3) and a joint effort by various sustainable development. bilateral and multilateral institutions, known as the Cities Alliance (box A3.4). BOX 3A.3  UNFPA’s work on urbanization Urbanization in the BRICS. The United Nations Pop- Urbanization, climate vulnerability, and adaptation ulation Fund (UNFPA) and the International Institute planning. The UNFPA’s work in this area points to for Environment and Development (IIED) have col- the vital role that understanding population dynamics laborated for the past four years on a wide-ranging and extensively using demographic data has in devel- knowledge-building project focusing on urbanization oping preemptive and effective adaptation policies in the BRICS (Brazil, Russia, India, China, and South and practices. It also illuminates who is vulnerable Africa). These five countries provide some inspir- and how to help build their resilience. ing examples of how to seize the opportunities that urbanization can provide. All have gone through dif- POPClimate web platform. Spatial analysis of pop- ficult periods when they tried to resist the predictable ulation data is at the core of understanding and movement of people into their cities, or steered people acting on climate vulnerability, particularly in high- or enterprises to inappropriate urban locations. Sev- concentration, high-exposure urban areas where vul- eral of the BRICS bear heavy burdens from past fail- nerability is dynamic and climate impacts threaten ures to accommodate urban population growth equi- the lives and livelihoods of many. The POPClimate tably and efficiently. To avoid such burdens, cities and web platform was developed around UNFPA’s man- nations need to plan proactively for urban growth, ual on the analysis of census data for climate adapta- making use of both markets and planning tools, and tion planning and was designed to bring together a engaging with all sectors of society, including the eco- community of data users, climate practitioners, and nomically and politically weakest. adaptation planners who can develop, share, and comment on new approaches for data-driven adap- Urbanization and gender dynamics. UNFPA also tation planning. The website is open to select users partnered with IIED to develop the conceptual and now and has been launched publicly (http://nijel.org empirical foundations of the links between urban- /un_popclimate/). ization and gender dynamics. For example, a recent working paper highlights the tendency to plan Other UNFPA initiatives on urbanization. UNFPA against, rather than for, low-income urban residents contributed to the development of the World Bank’s and its implications from a gender perspective. This Urban Risk Assessment methodology, particularly planning does not exclude the urban poor from focusing on the importance of a dynamic understand- income-generating activities but makes it difficult for ing of risk and vulnerability that integrates urban them to secure decent living conditions. In so doing, growth and change. It is also engaged in with IIED to inadequate urban policies place a disproportionate come up with more innovative ways to manage densi- burden on reproduction rather than on production ties in cities and is conducting joint research in the activities, and on women rather than men. A gen- field of urban food security. dered understanding of urbanization and urban pov- erty highlights how urban disadvantage also includes Source: UNFPA 2013. limited access to shelter and basic services. GLOBAL MONITORING REPORT 2013 U R B A N I Z A T I O N A N D T H E M D G S    173 BOX 3A.4  Cities Alliance: A new business model to promote systemic change and scale The Cities Alliance is a global partnership whose new charter, and changed its business model. Moving members include multilateral and bilateral develop- decisively away from single, often ad hoc projects, the ment agencies, donor and developing-country gov- Cities Alliance used a $15 million grant from the Bill ernments, international associations of local gov- and Melinda Gates Foundation to move the fulcrum ernment, and two international nongovernmental of its work program to longer-term, programmatic organizations, one of which represents slum dwell- support in the form of multifaceted country programs. ers. Launched by the World Bank and UN-Habitat in The combination of multiple activities in support 1999, the Cities Alliance was immediately successful of a coherent national program holds very real prom- in ensuring that the issue of slums was integrated into ise for the systemic change and scale impacts that the the international development agenda. Today, work- Cities Alliance is seeking to support. In Uganda, for ing through its members, the Cities Alliance seeks example, that support is focused on all 14 secondary to strengthen and promote the role of cities in pov- cities, which is not only where the bulk of urbaniza- erty reduction and sustainable development, improve tion is taking place, but also where capacity con- synergies between and among members and part- straints, infrastructure backlogs, and affordability ners, and improve the quality of urban development challenges are most extreme. cooperation. With the support of Cities Alliance members, Good urban policies need to be based on solid including both the World Bank and Slum Dwellers data, the generation of which the Cities Alliance has International, the government of Uganda is draft- supported: from the sophisticated and comprehensive ing a national urban policy. In small cities like Arua, HABISP model in São Paulo,a which provides com- Jinja, and Mbarara, slum dwellers are forming sav- prehensive information on housing and other socio- ings groups and carrying out slum enumerations. economic conditions of the urban poor, to the Know Slum dwellers and local governments are now talking Your City campaign, which sees that slum dwellers to each other, land is being made available, and basic collaborate with their local governments to find solu- services are being provided. A $130 million World tions to problems faced by slum dwellers. Bank loan will soon start to provide much needed To help its partners better respond to the chal- critical infrastructure in these secondary cities. lenges of urbanization, the Cities Alliance recently completely restructured its organization, adopted a a.  www.habisp.inf.br. Notes References 1. I n the United States, transaction taxes are AfDB (African Development Bank). 2011. Trans- around 1–2 percent of property values. forming Africa’s Cities and Towns into 2. This includes national government clearing of Engines of Economic Growth and Social subnational borrowing. Development. AfDB, Tunis. 3. http://www.adb.org/sites/default/files/cps-kaz- ———. 2013. “Fostering Shared Growth, Urban- ization, Inequality and Poverty in Africa.” 2012-2016-ssa-03.pdf. AfDB, Tunis. 4. http://www.adb.org/sites.default.files/cps-uzb- Ahmed, W., and I. Menzies. 2012. “Using 2012-2016-ssa-04.pdf. 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Tacoli, Cecilia. 2012. “Urbanization, Gender Washington, DC: World Bank. and Urban Poverty: Paid Work and Unpaid Appendix Table A1.1  Classification of economies by region and income, fiscal 2013 East Asia and Pacific   Latin America and the Caribbean South Asia   High-income OECD economies American Samoa UMC Antigua and Barbuda UMC Afghanistan LIC Australia Cambodia LIC Argentina UMC Bangladesh LIC Austria China UMC Belize LMC Bhutan LMC Belgium Fiji LMC Bolivia LMC India LMC Canada Indonesia LMC Brazil UMC Maldives UMC Czech Republic Kiribati LMC Chile UMC Nepal LIC Denmark Korea, Dem. Rep. LIC Colombia UMC Pakistan LMC Estonia Lao PDR LMC Costa Rica UMC Sri Lanka LMC Finland Malaysia UMC Cuba UMC   France Marshall Islands LMC Dominica UMC Sub-Saharan Africa   Germany Micronesia, Fed. Sts. LMC Dominican Republic UMC Angola UMC Greece Mongolia LMC Ecuador UMC Benin LIC Hungary Myanmar LIC El Salvador LMC Botswana UMC Iceland Palau UMC Grenada UMC Burkina Faso LIC Ireland Papua New Guinea LMC Guatemala LMC Burundi LIC Israel Philippines LMC Guyana LMC Cameroon LMC Italy Samoa LMC Haiti LIC Cape Verde LMC Japan Solomon Islands LMC Honduras LMC Central African Republic LIC Korea, Rep. Thailand UMC Jamaica UMC Chad LIC Luxembourg Timor-Leste LMC Mexico UMC Comoros LIC Netherlands Tonga LMC Nicaragua LMC Congo, Dem. Rep. LIC New Zealand Tuvalu UMC Panama UMC Congo, Rep. LMC Norway Vanuatu LMC Paraguay LMC Côte d'Ivoire LMC Poland Vietnam LMC Peru UMC Eritrea LIC Portugal   St. Lucia UMC Ethiopia LIC Slovak Republic Europe and Central Asia   St. Vincent and the   Gabon UMC Slovenia Albania LMC Grenadines UMC Gambia, The LIC Spain Armenia LMC Suriname UMC Ghana LMC Sweden Azerbaijan UMC Uruguay UMC Guinea LIC Switzerland Belarus UMC Venezuela, RB UMC Guinea-Bissau LIC United Kingdom Bosnia and Herzegovina UMC   Kenya LIC United States Bulgaria UMC Lesotho LMC   Georgia LMC Middle East and North Africa   Liberia LIC Other high-income economies Kazakhstan UMC Algeria UMC Madagascar LIC Andorra Kosovo LMC Djibouti LMC Malawi LIC Aruba Kyrgyz Republic LIC Egypt, Arab Rep. LMC Mali LIC Bahamas, The Latvia UMC Iran, Islamic Rep. UMC Mauritania LMC Bahrain Lithuania UMC Iraq LMC Mauritius UMC Barbados Macedonia, FYR UMC Jordan UMC Mozambique LIC Bermuda Moldova LMC Lebanon UMC Namibia UMC Brunei Darussalam Montenegro UMC Libya UMC Niger LIC Cayman Islands Romania UMC Morocco LMC Nigeria LMC Channel Islands Russian Federation UMC Syrian Arab Republic LMC Rwanda LIC Croatia Serbia UMC Tunisia UMC São Tomé and Principe LMC Curaçao Tajikistan LIC West Bank and Gaza LMC Senegal LMC Cyprus Turkey UMC Yemen, Rep. LMC Seychelles UMC Equatorial Guinea Turkmenistan UMC     Sierra Leone LIC Faeroe Islands Ukraine LMC     Somalia LIC French Polynesia Uzbekistan LMC   South Africa UMC Greenland       South Sudan LMC Guam       Sudan LMC Hong Kong SAR, China       Swaziland LMC Isle of Man       Tanzania LIC Kuwait       Togo LIC Liechtenstein       Uganda LIC Macao SAR, China       Zambia LMC Malta       Zimbabwe LIC Monaco       New Caledonia       Northern Mariana Islands       Oman       Puerto Rico       Qatar       San Marino       Saudi Arabia       Singapore       Sint Maarten (Dutch part)       St. Kitts and Nevis       St. Martin (French part)       Trinidad and Tobago       Turks and Caicos Islands       United Arab Emirates       Virgin Islands (U.S.) Source:  World Bank data. Note:  This table classifies all World Bank member economies, and all other economies with populations of more than 30,000. For operational and analytical purposes, economies are divided among income groups according to 2011 gross national income (GNI) per capita, calculated using the World Bank Atlas method. The groups are: low-income countries (LIC), $1,025 or less; lower-middle-income countries (LMC), $1,026–4,035; upper-middle-income countries (UMC), $4,036–12,475; and high- income countries, $12,476 or more. Other analytical groups based on geographic regions are also used. The names of countries and economies in this table comply with the World Bank’s official listing. 177 178  URBANIZATION AND THE MDGS APPENDIX Table A1.2  Country classifications in IMF’s World Economic Outlook, 2013 Advanced Economiesa Australia France Korea, Republic of Slovak Republic Austria Germany Luxembourg Slovenia Belgium Greece Malta Spain Canada Hong Kong SAR Netherlands Sweden Cyprus Iceland New Zealand Switzerland Czech Republic Ireland Norway Taiwan Province of China Denmark Israel Portugal United Kingdom Estonia Italy San Marino United States Finland Japan Singapore Emerging Market and Developing Countriesa       Central and Eastern Europeb Sub-Saharan Africab   Albania Lithuania   Angola* Lesotho Bosnia and Herzegovina* FYR Macedonia   Benin Liberia* Bulgaria Montenegro   Botswana Madagascar Croatia Poland   Burkina Faso Malawi Hungary Romania   Burundi* Mali Kosovo* Serbia   Cameroon Mauritius Latvia Turkey   Cape Verde Mozambique Central African Republic* Namibia Developing Asiab   Chad* Niger Bangladesh Myanmar*   Comoros* Nigeria Bhutan Nepal*   Congo, Dem. Rep. of* Rwanda Brunei Darussalam Palau   Congo, Rep. of* São Tomé and Príncipe Cambodia Papua New Guinea   Côte d’Ivoire* Senegal China Philippines   Equatorial Guinea Seychelles Fiji Samoa   Eritrea* Sierra Leone* India Solomon Islands*   Ethiopia South Africa Indonesia Sri Lanka   Gabon South Sudan* Kiribati* Thailand   Gambia, The Swaziland Lao People’s Democratic Republic Timor-Leste*   Ghana Tanzania Malaysia Tonga   Guinea* Togo* Maldives Tuvalu*   Guinea-Bissau* Uganda Marshall Islands* Vanuatu   Kenya Zambia Micronesia, Federated States of* Vietnam   Zimbabwe* Mongolia         Middle East and Commonwealth of North Africab Independent Statesb Latin America and the Caribbeanb Afghanistan, Islamic Republic of* Armenia   Antigua and Barbuda Guyana Algeria Azerbaijan   Argentina Haiti* Bahrain Belarus   Bahamas, The Honduras Djibouti Georgiac   Barbados Jamaica Egypt Kazakhstan   Belize Mexico Iran, Islamic Republic of Kyrgyz Republic   Bolivia Nicaragua Iraq* Moldova   Brazil Panama Jordan Russian Federation   Chile Paraguay Kuwait Tajikistan   Colombia Peru Lebanon Turkmenistan   Costa Rica St. Kitts and Nevis Libya* Ukraine   Dominica St. Lucia Mauritania Uzbekistan   Dominican Republic St. Vincent and the Grenadines Morocco   Ecuador Suriname Oman   El Salvador Trinidad and Tobago Pakistan   Grenada Uruguay Qatar   Guatemala Venezuela Saudi Arabia     Sudan*     Syrian Arab Republic*     Tunisia     United Arab Emirates     Yemen, Republic of * Note:  The names of countries and economies in this table comply with the IMF’s official listing. a. As used here, the terms “country” and “economy” do not always refer to a territorial entity that is a state as understood by international law and practice. Some territorial entities included here are not states, although their statistical data are maintained on a separate and independent basis. b. Countries in bold typeface are low-income developing countries eligible for financial assistance under IMF’s Poverty Reduction and Growth Trust. Countries with an asterisk are included in the World Bank’s list of Fragile and Conflict-Affected States. c. Georgia, which is not a member of the Commonwealth of Independent States, is included in this group for reasons of geography and similarities in economic structure. 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