lhe authors of these documents aresolelyresponsible for the viewsexpressed,whichdo not necessar- ily reflect thepolicies of the Systems Reform Commissionof the People'sRepublicof China, the Swiss Development Cooperation,or the WorldBank Contents i CONTENTS Introduction................................................................................................................................................... .l John Burfieldwith Di Xu andSongsuChoi PART I: THEME PAPERS POLICY INSTRUMENTS Technics....................................................................................................................................................... 7' AprodicioA. Laquian TOWN DEVELOPMENTFINANCING Finance...................................................................................................................................................... 7 HafizPasha & A. F. Aisha Ghaus An Overviewof PrivateSector Financingof UrbanInfrastructureServices....................................... 29 DavidE. Dowall URBANSYSTEMS Outside the LargeCities: What Role for Smaller UrbanCentres?....................................................... 39 DavidSatterthwaite TOWN LAND MANAGEMENT The Management,Costing and Marketingof Town Land................................................................... 65 Alain Bertaud NATIONALURBANPOLICY UrbanDevelopmentStrategies,Planning and Decentralisation:EmergingTrends .........................79 Ernie1A. Wegelin PROSPERITYAND SUSTANABlLlTY ProsperityandSustainabilityof China's Towns: Lessonsfrom Northand South ................................91 JohnM. Courtney ii China:SmallTowns Development Developmentand Sustainability-A Case Study in Shenzhen,China.............................................. 99 Xiaochen Meng Policy Reformand Town DevelopmentinChina................................................................................ 105 ZhaoliongHu PART II: SUMMARY OF CHINESE WRlnEN CONTRIBUTIONS OFFlClALSPEECHES Complied by John Burfield BackgroundPolicy Guidelinesof the Reformof China'sSmall Town5...............................................11 1 ZhongHaoruo Speechat the OpeningCeremony of InternationalSeminar on ChinaSmallTowns Development......................................................................................................................................112 Mao Rubai To Bring Rolesof the AgriculturalBank of China into FullPlayandpromote Development of SmallTowns in China...................................................................................................................... 1 13 He Linxiang Promoting the Healthy Development of Urbanizationin RuralAreasAbide by Scientific Law and Pattern......................................................................................................................................... 1 13 Li Baoku Basic Ideason the Reformand Improvementof the ManagementinSystemof Domicile China's SmallTowns ........................................................................................................................ 1 14 MouXinsheng Scientific Planningand Positive Guidanceto Promotethe HealthyDevelopmentof SmallTowns ..................................................................................................................................... 1 15 Ma Kai Effective Useof Science and Technologyfor Promotingthe Socioeconomic Developmentof SmallTowns ......................................................................................................................................... 1 15 Wang Baoqing Observationon the Question of Reformingthe AdministrativeManagement System of the SmallTown .....................................................................................................................................116 GuJiaqi To Improve the FinancialManagementSystems of the Township Governmentlsan Important Preconditionfor Promotingthe Developmentof SmallTown5..................................117 Ms. Gao Ying Deepening Rural EconomicSystem Reformto Quickenthepace of SmallTown Development 118 ... Wan Baorui SmallTown Construction-Reformon SmallTowns LandUtilizationSystem- Promotionof China's RuralModernizationProcess........................................................................ 1 19 Liu Wenjia Establishmentof a Set of StatisticalIndicatorsand Urbanizationlnformation Monitoring System for Rural Towns of China to Suit the Need of New Situation of Reform and Development............................................................................................................ 1 19 Lu Chunheng Contents iii ACADEMIC PAPERS Complied by John Burfield On Developmentof SmallTowns ............................................................................................................ 121 FeiXiaotong DevelopmentofSmallTowns Is an ImportantMeansfor Agriculturaland RuralModernizationin China ............................................................................................................ 122 ChenXiwen Urbanization:The Opportunitiesand Challenges Facedby Rural Developmentin China ............122 DuYing. The Role of GovernmentinTownship Developmentand ItsPolicy Design .......................................123 LiuHe Problemof Planningand Constructionof SmallTowns ........................................................................ 124 Zou Deci SmallTowns Constructionand RuralModernization--on Roadof RuralModernization with Chinese Characteristics .............................................................................................................124 Gao Chengzeng The Value Increment Profit of Land Capitalwith ItsAllocation........................................................... 125 Tiejun Wie andShou Yin Zhu The Eastern Part Leads the Developmentof the Western Part and in a Bid to Push Forwardthe Urbanizationof RuralAreas in China ........................................................... 125 BaiRenpu The Key PointsinEstablishingStatisticalIndexSystemfor China SmallTowns Development ...................................................................................................................................... 126 Zhou Yixing CurrentSituationand Motivationof LandMarket of SmallTowns inSouthernJiangsu Province............................................................................................................. 126 Yu Wenhua Estimationof the Dual Urban-RuralSocioeconomic StructureWill Accelerate & ImproveUrbanizationin China ......................................................................................................... 127 Ye Shunzan PART Ill: SUMMARY OF WORKSHOPS AND CONCLUDING REMARKS StrategyOverview.................................................................................................................................... 129 Andrew Hamer Summary Remarks..................................................................................................................................... 133 KatherineSierra Workshop Summary and Findings ......................................................................................................... 137 John Burfield ANNEX:LISTOF PARTICIPANTS-L........................................................................................................ 141 iv China: SmallTowns Development Introduction John Burfield, with Di Xu and Songsu Choi Background and techniques for rational decision making in small towns develo~mentin China. 'The Bank, S while agreeing to provide some limited support, ince the beginning of economic reformin secured a funding from the Swiss Agency for the late 1970s, rural China has Development and Cooperation (SDC) for study witnessed unprecedentedly large toursanda conferenceto bringinternationalper- increases in agricultural productivity.Duringthe spectives to bear on the effort, and agreed to same period, the economic growth in urban or- help manage such activities. The consultant, eas has createdsubstantialdemandfor labor.As Urbaplan, was hired to provide the support for a result, more than 100 million rural surplus the activities. laborers seek their livelihood in the cities. How- ever, this large influx of rural migrants has cre- ated tremendous pressure on land-use, infra- Conference structure and services in towns and cities, par- ticularly the large ones. The SRC, assisted by Urt~aplanand the Bank, or- ganizedthe Conference"China:SmallTowns De- While the Central Government has consistently velopment" in Beijing during November 13-17, favored small towns development, few effec- 1995. More than 200 participantsattended, con- tive measures have been employed other than sisting of policy makers. planners, academics administrative instruments to control population and international experts. Ninetheme papers by growth in large cities. Numerous problems in internationaland local experts commissionedby small towns development, such as the lack of Urbaplan were presented. In addition. 34 offi- financing for infrastructure and social services, cialspeechesandacademic papersbydomestic have not beeneffectively addressed. participantswere addressed during the first two days of the Conference. The third day consisted In 1993, the Central Government established a of a field trip to the town of Shengfang. Hebei working group under the Systems Reform Com- Province. Two workshops were heldon the fourth mission (SRC) to facilitate the development of day as follows: one focused on urban planning small towns. This working group requested the andland-usemanagement,andtheotheronpub World Bank to help examine and evaluate issues lic and private financing issues. Each workshop 2 China: SmallTowns Development was attended bya largecontingentof localgov- HafizA. Pasha and A. F. Aisha Ghaus, in their pa- ernment officials, professionals and academics, per "Finance", addressedthe financing issues for totaling more than 100participantswho contrib- small towns development.They first reviewed the uted to lively discussions. On the fifth day, theprospects and mechanisms available for financ- conferenceconcludedwithpresentationsof sum- ing the development of small towns in relatively maries and findings. low-income developing countries. Since small towns generally owe their existence to the pres- ence of rural-urbanlinkages, they argued, an ef- This Volume fortmustbe madeto exploit therevenue-genera- tion opportunities created by such linkages. A This volume consists of three parts. Part I con- sound strategy for small towns is to select taxes tains the commissioned theme papers by inter- which have relatively large, buoyant and immo- national and local experts. Part II presents bile tax bases, and which involve low collection abridged versions of 23 of the written contribu- costs.Suggestedcandidates includehead taxes, tions by domestic participants, for which English property related taxes, entertainment taxes, re- translations were made available. Part Ill gives source taxes, etc.. Moreover,the authorsempha- the summary of the workshops findings and con- sizedthat inter-governmentaltransfersfrom higher cluding remarks. levelsof government shouldalso bean important component of therevenuesof smalltowns. Onthe expenditure side, the authors argued that small Part I.Theme Papers town governments should perform the functions to provideonly the key basic municipalservices in The ninecommissioned theme papersaddressed orderto ensurethat limitedfinancialresourceand six themes of the conference: policy instruments; capacity be used more effectively. Additionally, towndevelopmentfinancing;urbansystems:town local governments must move towards recover- land management: national urban policy; and ing at least full operationand maintenancecosts prosperity and sustainability.Most of these theme inservices, suchas water supply, by meansof tar- papers by the commissioned experts drew upon iff systems which are relativelysimple to adminis- general internationalexperiences,rather than is- ter. Finally, they suggested that potentially high sues specific to China.The presentationswere fol- benefitscan begainedfrom improvementsinthe lowed byopen discussions,some of which are re- financial systems, informationmanagement, ac- portedin Part IIof this volume. counting standards and practices, staffing levels and qualifications,audit procedures,and expen- In the first theme paper "Technics", Aprodicio A. diture planning. Laquiandiscussedthe policyinstrumentsthat have beenobservedthrough experience to help small The limitedavailability of governmentrevenuesto towndevelopment.Hepointedoutthat thehouse- finance infrastructure will probably continue to hold registration (hukou)systemwhich worked in hinder small towns development.There is a need the pastinChinawill no longerwork as effectively to look for privatesectorinvolvement,which was because China's economy has become more the topic of David E. Dowall's theme paper "An and more market oriented. Guiding direct rural- Overview of PrivateSector Financingof Urban In- urbanmigrationtowardsmall towns would effec- frastructure Services". He argued that there are tively accomplished more through employment three important benefits of private financing to creation,Laquiansuggested.Provisionof physical both local and central governments: (1) it could infrastructure(roads,energy,water, communica- significantly enhance the efficiency and quality tions)alsoenhancessmalltowndevelopmentbut of service provision; (2)it conserves scarce public is insufficient by itself to guarantee small town sector resources; and (3) it provides additional growth. He further noted that the lack of educa- sources of capital for financing infrastructure in- tion, publichealthandsanitationservicesand so- vestments. He noted, however, that the private cialwelfareprogramsisanimportantproblemthat sectorwould bewillingtofinanceurbaninfrastruc- migrantsfaceinsmalltowns. Finally,heconcluded ture servicesif the latterwould generateprofit di- that technics of area-wide integration between rectly,or they are requiredas a conditionof prof- ruralandurbanareasisoneof the keypolicymea- itable realestate development. Dowallthen pre- sures that can be used for encouraging the de- senteda rangeof methodsand approachesthat velopment of small towns in China. create these conditionsfor privatesector financ- ing of urban infrastructureservices.These include Introduction 3 land privatization, development charges, leases agementshouldrestonbasic "landaccounting", andconcessions, publicandprivatepartnerships, and ensure consistency between resources and privatization of services, and so on. planneduse,and betweensupply anddemand. He also discussed the cost recovery mechanism Pursuing the theme of urban systems, David for different land-use types and presented an Satterthwaite's paper "Outside the Large Cit- illustration of the land accounting system. ies: What Role for Smaller Urban Centers?" dis- cussed how and why small and intermediate ur- Emiel A. Wegelin's paper, "Llrban Development bancentersdevelopedandhowgovernmentscan Strategies, Planning, and Decentralization: bestdeviseprogramsfor thedevelopmentofsuch Emerging Trends", discussed the experiences centers. The author first noted that each urban of national urban developmentstrategies in the center has its unique possib~litiesand constraints South and Southeast Asian regions. The global for development,andthat agovernmentprogram andregionaleconomicand demographictrends to develop one particular urban center may not support decentralization of government func- be appropriate for others. A nationwide or re- tions. He suggested that central governments gion-wide program for developing small and in- must support the multi-sectoral investment termediate urban centers requires local inputs. planning (MSIP) process at the local level, ad- Local governments know their local needs, po- just their legislative and regulatory frameworks tentials, and capacities and should be given the accordingly,and providecapacity buildingsup- authority to make their own choices as to what port for such processes. He stressed, strate- shouldbedeveloped.Toensurelocalaccountabil- gies of fiscal incentives to influence the loca- ity and fiscal and environmental responsibilities, tion of investment work best in conjunction with these local choices should t ~ emade within a MSIP processes, whereas they are less likely broaderregulatoryframework establishedby the to be successful in isolation. higher level of government. The author further discussed the links between agricultural and ur- Social and environmental sustainability of small bandevelopment and pointedout that effective towns development is the theme discussed in government policies to support agricultural John M. Courtney's paper "Prosperity and growthmayimpactthe economiesof manysmall Sustainability of China's Towns: Lessons from towns morethan anyexplicitdevelopmentpolicy Northand South." Courtneyfirst pointedout that for the towns themselves. Finally, the author prosperity and traditional cultural values are in briefly reviewed the relevant third world expe- conflict in the rapidly growing urban China, and rienceindevelopingsmalltowns asa way to slow rapid urbanizationhas brought a number of en- large cities growth. He concluded that making vironmental problems.'These problems are more large investments in developing "small urban serious in the larger cities. Acknowledging that centers" is unlikely to achieve positive results theeconomyandtheenvironmentneednotbein if the reasons for differential growth are un- conflict,but are irrevocablyinterconnected, the clear. author argued that small towns inChina provide an opportunity to accommodate future urban On the topic of town land management, Alain growth in a quality urban environment. A focus Bertaud, in his paper "The Management, Cost- for small town development should be the pro- ingandMarketof Town Land"presenteda frame- vision of access to environmental and social in- work which allows a local authority to define frastructure, such as clean water, sanitation, andquantify landdevelopmentreturns,costsand transport, education and.health services. The risks in a fast-growing small town. Because of sustainability of development requires govern- the status of land tenure during the transition mentsto integrate urban poverty mitigationand period towards a market economy in China, he environmental upgrading into economic devel- suggestedthat the localauthorityof a smalltown opment initiatives, and responding to China's shouldplay the roleof landdeveloperinaddition special social-economic conditions. to its more traditional responsibilities concern- ing the provision of public services and the regu- Inher paper "Development and Sustainability:A lation of land use. He noted that the principle of CaseStudyinShenzhen,China", XiaochenMeng landmanagementfor localgovernmentisnotonly addressedthe problemsassociatedwith the fast to have the flexibility in adjusting its plan to urban development and their impact on eco- changing demand, but also to provide land de- nomic and environmental sustainability. She veloperswiththe confidenceto invest.Landman- pointedoutthat the economicboominShenzhen 4 China: SmallTowns Development in the past 15years has caused a series of prob- Administrative, professional as well as theoretical lems such as the decrease of arable land, irratio- concernsfrom different perspectiveswere raised nal land-usestructureandwastage, environmen- for small towns development in China which re- taldegradation,aswellassocialinstability.Tosolve flected the range of the speakers' backgrounds these problems, attentionshould be paid to the and experience. Problems were identified in the transferfromruralto urbanlandmanagementsys- areas of local government administration, land tems, developmentplanning,protectionof arable management system, domicile control system, land, and strengthening of various management socialsecuritysystem,urbansystemplanning,and and regulations. She illustrated several lessons so on. Major recommendations of these written learned from Shenzhen in land policy and urban contributionsinclude:(1) strengtheningthecapac- management. ity of local government by relatingfinancial and functional responsib~litiesin small towns; (2) re- Also on the theme of prosperity and grouping of rural industries and combining re- sustainability, Zhaoliang Hu, in his paper "Policysources towards concentrated development for Reformand Town DevelopmentinChina",evalu- smalltowns; (3)overhaulingthedomicilemanage- ated the linkagesbetweeneconomic reformand ment system according to residence and occu- town development in China. He noted that a se- pation, and freeing migration within county juris- ries of reform policies have favored town de- dictions strict controls being retained beyond velopment. These includeruraleconomic reform, county boundaries; (4)reformingthe micro orga- adjusting township classifications, and openness nization of the countryside and developing net- to the global economy at different levels. He fur-works of citiesandsmalltowns; (5)improvingtech- ther discussed the existing problems in the cur- nologyandcomputerizingmanagementsystems; rent system, such as the unbalanced develop- (6) pilot studies and projects to evaluate the ur- ment across China, the constraints of household banizationstrategy; (7)settingupstandardsfor tax registration policy, township enterprise distri- collectionandmanagement;and (8)developing bution, and regulatory restrictions on town de- a nationalstatistical indexsystem for small towns. velopment. He concluded that China still has a long way to go in town development and imple- Part Ill. Summary of Workshops and mentation and improvement of policy reforms Concluding Remarks are very critical for its success. Three separate documents summarize the major Part II. Summary of Chinese Written findings and key conclusions of the conference Contributions and workshops. The strategy overview by An- drew Homer presented the elements of a work- Part II contains the summary of the Chinese writ- able town development strategy for China. He ten contributions which include 12 official stressed the value of privatelpublic partnerships speeches and 11 academic papers. The official in developing infrastructure as well as the im- speecheswere presentedbyChinesegovernment portanceof greaterlocalautonomyfor towngov- officials from the State Commission for Restruc- ernments, in line with the more market oriented turing Economic Systems, Ministry of Construc- economy. He further emphasized that experi- tion, Ministry of Civil Affairs, Ministry of Per- ments of town development strategy in differ- sonnel Administration, Ministry of Finance, Min- entlocationsshouldbecoordinatedandmonitored istry .of Agriculture, Ministry of Public Secu- in order to establish best practice experience. rity, State Administration of Land, State Sta- Katherine Sierra presented a summary at the tistical Bureau, Agriculture Bank of China, State closing of the conference and workshops. She Commission of Science & Technology, and Sys- noted that a major factor that holds back town tem Reform Commission. The academic papers development has been the deficiencies on the were provided by professors and researchers "software" dimension such as legal and regula- from universities and institutes. tory frameworks and resource mobilization mechanisms. She stressed that the success of town development lies in giving responsibility to, Introduction 5 anddemandingaccountabilityat, the lowestlev- els of governmentratherthanbyinfrastructure-led town development schemes. Finally, the major findings and conclusions of the conference and workshops were presented by John Burfield in Workshop Summary and Findingswhich is placed at the end of this volume. Acknowledgments ThisConferenceandthess proceedingswouldnot have been possiblewithout the efforts of a large numberof people.Inadditionto theauthorswhose papers and speeches are printed in this volume, particular acknowledgments are owed to Mr. Li Tie of the System Reform Commission of the People's Republic of China for his efforts in co- ordinating the Chinese participants and in help- ingthe creationof the conferenceagenda,toMs. Zong Yan of the World Bank resident mission in Beijing for her strong support in organizing the seminar, and to hundreds of Chinese profession- als, academics and administrators for their par- ticipation and contributions in the workshop dis- cussions. 'Thanks also go to the Swiss Agency for Development and Cooperation for their gen- erous financialsupport to the Conference. 6 China: SmallTowns Development PART I. THEME PAPERS 8 China:SmallTowns Development and socialand personaldisorganization.Environ- The household registration system has drasti- mentalists also do not like cities, pointing to the cally changed since 1984 when peasants were degradationof urbanenvironments due to over- allowed to leave the village and move to towns consumptionandfascinationwithmaterialthings. provided they did not rely on the state for their Ideologically,both Communism and Confucian- food andotherbenefits.'This changeaccelerated ism have strong anti-urban biases. Political phi- with the success of China's economic reforms, losophers (includingKarl Marx and F. Engels)also especially the production responsibility system, considered urban life dehumanizing, mechanis- which maderuralhouseholdsricherandenabled tic and materialistic. They tended to romanti- them to live in towns relying on their own re- cize the notion of small town life as being warm, sources.This policy change has triggeredoff one nurturing and benefitting from the functioning of the largest population movements in history. of civil society. In 1983, China had 2,786 small towns contain- There are a number of economists, on the other ing 62.3 million people. By 1985, the country hand, who see largecities as good, arguing that had 7,511 small towns with a populationof 166.3 they serve as the engines of rapid economic million. The number of small towns exceeded growth because of agglomeration economies, 10,000 in 1988 and it continues to grow. There economiesof scaleandopennessto globalcapi- are an estimated 12,000 towns in China at tal, human and material resources and markets. present and if current trends continue, as many Somesocialscientistsalso likelargecities,arguing as 400 million people are expected to leave that they bring about personality and social China's villages by the year 2000 and 200 mil- changes that favour autonomy and freedom, lion or more of these will be moving to small greatercreativity,anda morerationalratherthan towns and cities. stultifyingly traditional attitudes and behaviour. Great cities, in popular thinking, are where great The question uppermost in the minds of those thingshappen.Inengineering,architecture,com- interested in China's small town development, munications and the arts, the greatest accom- of course, is whether people currently living in plishmentsof humankindare seenin largecities. small towns will stay there or they will move on to small, intermediate andlor large cities. Chinahasadoptedthe policyof encouragingthe The issue of China's "floating population" growthof smallcitiesandtown as anintegralpart (liudong renkou) is of great concern to urban of its economic and social reforms and opening authorities, especially those in charge of family up to the outside world. This policywas probably planning (migrantsare known to ignore locally based on normative grounds because, as I said set birth quotas), housing (migrantsoccupy un- before,thescientificbasisfor favouringsmalltown controlled makeshift dwellings or live under growth is still a very debatable issue. bridges or on sidewalks) the police (migrantsare associated with criminality and corruption), Fromthe early 1950swhen China's urban policy employment (migrants flood job areas), trans- was implementedwith the helpof the household port (migrants overload vehicles and clog rail- registration or hukou system and a system of in- road and bus stations),and environmental con- centivesanddisincentives,thepolicyworkedquite trol (migrants throw their garbage around or well.Withtheexceptionof spurtsof bigcitygrowth they engage in enterprises that cause water, air immediatelyafter 1949, the Great Leap Forward and soil pollution). and the aftermath of the Great Cultural Revolu- tion, China's level of urbanizationremainedvery Becauseof the problemsmentionedabove. Chi- low and for most of modern China's more than nese authoritiesare hopingthat migrantswill stay four decades, itremainedway below20 percent. insmalltowns and notfloat to cities. However,it is Infact,duringthe GreatCulturalRevolution(1966- alreadyknownthatfrom 10to 20 percentof large 76). China's rate and level of urbanizationwere city populationsaremigrantswho arenotofficially much lower than its level of socioeconomic de- registeredinthe urbanareasthey are livingin.Itis velopment warranted. This was mainly because estimated that more than 1.2 million people in internal migration was strictly controlled. Mil- Shanghai, about 1 million in Beijing, 700,000 in lions of urban citizens were even sent out to the Tianjin and almost a millionin Guangzhou do not countryside to learnfrom the peasantry, a policy that served to decongest the cities. Theme Paper:Technics 9 have official hukou status in those cities. The as ruralgrowth rates and it is now expected that proportion of unregistered migrants in other cit- the world will become more than half urban by ies and towns is probably higher. the turn of the century. Lessonsfrom China and Other Countries Still, it is useful to reviewwhat lessons have been learned in many countries all over the world on China has not been alone in attempting to con- technics to develop small towns. Perhaps, from trol the growth of human settlements by encour- theseexperiences,Chinamightbeableto review aging the growth of small towns and discourag- itsownsmalltowndevelopmentpoliciesandstrat- ingthegrowthof very largecities.Aglobal review egy and come up with bettersolutions. of such policies reveals that most of these were basedon the normative notionthat rurallifewas MigrationControl good and cities were bad. An interesting obser- vationis that a reviewof such experiencesclearly One of the most commonly used policy ap- shows that many of these policies have not been proachesto developsmall towns is by controlling very successful. migrationaway from large cities and redirecting it toward small towns. Essentially,avthoritiestry to Inthe 1950s, many development planners, espe- prevent the movement of people to large cities cially those working with international organiza- with a system of incentives and disincentives. tions such as the Foodand Agriculture Organiza- China, of course, is the main proponent of this tion, theWorld Bankand many bilateralaidagen- technic. cies, came to the value judgment that the prob- lem in developing countries was a ruralone. This Most efforts to prevent people from coming into was basedontheobservationthatinmostof these largecitiesand to encouragethemto go to small countries the great majority of people live in towns have failed. Inthe mid-1950s, for example, rural areas. The programs of such internationa: the Government of Indonesia tried to prevent agencies objected to the so-called "urban bias" people from migrating to Jakarta, the national of mostgovernmentalpolicieswhich showed the capital. They introduced an IdentificationCard biggest portions of development investments system that identified people born in the city. going to large cities. The value judgment was Peoplewho did not have the identificationcard madethat theway to achievemoreequitablede- were taken by bus to their province of origin.'The velopment is to invest in rural areas. If one can authoritiesfound thesystemunworkablebecause make life in rural areas comfortable and happy, it was too difficult to monitor all the migrants.'The then people will not migrate to cities. In other system was also made more difficult by corrup- words, one can keep people down on the farm tion of the local levelofficials and the policewho provided the benefits of the city are brought to were expected to implementthe policy. them. Indonesia has also tried to control migration Experience has shown, however, that the mea- throughresettlementor "transmigration"schemes. sures needed to extend an urbanqualityof lifeto Millionsof people from the densely populated is- ruraldwellersrequiremassiveinvestments.Villages landof Java and Balihavebeenresettledinouter and small towns do not have the economies of islands to form agricultural colonies. Evaluations scale and agglomeration economies that ac- of transmigration have generally been quite count for accelerated economic growth. Their favourable, although the cost per migrant has marketsaretoo smallto support commercialand been high. An important aspect of the evalua- industrial production that would, in turn, support tion (supportedalso by studies of the Malaysian the massivesocial and infrastructureinvestments FederalLand Development Authority schemesin needed to make them livable. Such schemes as Malaysia)isthatsuccesswas oftenassociatedwith integratedruraldevelopment, the "Green Revo- the development of small towns that served as lution," farm to market roads, agricultural credit, foci of the settlers' lives.Where small towns devel- agriculturalextension,ruralenterprisereforms,and oped, often through spontaneous migrationthat ruralcommunitydevelopment have beentried in supplemented the sponsored migrationstreams, many countries. The current global judgment is the settlers were happier with the social and that these schemesdo notseem to have had too administrativeservices in the towns and they did much positiveeffect becausethe global rates of not abandon the transmigration schemes. urbangrowthcontinueto bealmosttwice as high 10 China:SmallTowns Develo~ment Household registration systems to control mi- the outside world, however, internal migration gration have been used in the former Soviet in China has become more spontaneous. This Union, Vietnam, China, the DemocraticPeople's means that migration patterns will probably not Republic of Korea, Cuba, and many Eastern Eu- be so easily influenced by governmental mea- ropean countries. For a number of years, the sures in the future. migration of people in these countries was suc- cessfully controlled. However, because many of The hukou system in China worked in the past these countries are now in transition to mar- because people were dependent on benefits ket-oriented systems, the household registra- suchasfoodrations,housing,educationandother tion systems are breaking down. benefits which were conditional on having the right local household registration. As China be- Studies of rural-urbanmigration in China are in- comes moremarket-dominated,however,people structive in this regard. According to a study by areabletoget thesebenefitsfrom themarketand Ren Suhua in 1989, migration in China takes the they do not haveto relyon the hukousystem.'The following patterns: system of "carrots" and "sticks" (incentivesand disincentives)disappearswith privatizationandthe (a)The volume of rural-urbanmigration in China flourishingof the market.The technic of migration has been traditionally low. Between 1951-53, net control,therefore,willprobablynotwork efficiently annualcity-wardmigrationwas 33.1 per 1,00O.'This under market conditions. dipped to -1 7.6 per 1,000 in 1961-65when the fail- ure of the Great Leap Forward and the disasters MigrationData Bases that followed it forced the out-movement of 18 millionworkersand 26 millionurbanresidentsfrom Although the hukousystem in China may not be citiesto ruralareas. From 1976-1986, however,net an effective instrument for controlling migration rural-urban migration had averaged 12.4 per under free market conditions, it can still serve as 1,000. an excellent data base for tracking peoples' movementsandusingthe data derived fromitfor (b)Chinese migration is mainly rural-urban. With planning and administrativepurposes. In a num- ber of Europeancountries, especiallythe Nether- the exceptionof the periodsof 1961-65and 1966- 76, the bulkofChinesemigrantshavemovedfrom lands, general information on peoples' move- ments are tracked through a computerizedsys- villages to towns and cities. tem. Detailed information on the types of jobs beingcreated inone placeand supplyof techni- (c) InternalmigrationinChinahasinvolvedmainly cal and professional in another enables short distances.Since 1981.moveswithinthesame human resourcedevelopment plannersto de- province have made up about 78 percent of all velop employment strategies. movements. Often,the migrationdata basecan beadded to (d) Internalmigration until 1984,was primarily in- a full-blowncivilregistrationsystemthattakes note fluencedbygovernmentpolicies.ThestudybyRen of events ina person'slifesuch as birth, marriage, revealed that 23.2 percentof people moved be- divorce or death. Insome countries,an individual cause of job transfers, 8.8 per cent involved de- may be given an identificationnumber and the mobilized soldiers (aspecial type of job transfer), important events in his or her life can be tracked 6.8 percentwere recentgraduates beingmoved by computers. to theiifirst jobs, 23.4 percentwere moves made necessary byimplementation of various govern- The important thing is to disassociate the migra- mentpolicies, 17.6 percentinvolvedfamily mem- tion data base from migration control, which is bers accompanying a person being transferred seen by many as a violation of the basic human becauseof ajob, and 20.2 percent involvedstu- right to move. dentsgoingtoaschooloutsidetheir placeof origi- nal residence. Employment, therefore, was the predominantreasonfor internalmigration. Employment Creation A more effective system for encouraging small Studiesof internalmigrationinChinaprior to 1984 town developmentis by creatingopportunitiesfor revealedthat ~ o ~ umovementswere mainly l ~ ~ ~ o ~ employment in smalltowns. Studies on the rea- influencedby governmentpolicies-Since the in- sonsfor~ral-~rbanmigrationhaveshownthat the stitution of economic reforms and opening up to Theme Paper:Technics 11 real or perceived opportunity for employment the enterprises were completely private business constitutesone of the major motivationsfor mov- concerns. Only 23.7 percent of the enterprises ing. were state owned and managed. Interestingly, manyof thestate enterpriseswerelargeronesand 'The best arguments for the use of employment were locatedinurbancentressuchas the Greater creation for encouraging growth in small towns Beijing region, Hebei Province, Jiangsu Province havebeenmade byProfessorFeiXiaotongwhose and the Shanghai-centredregion. studies in Wujiang County in Jiangsu Province in the 1930s revealedthe important role played by Basedon the study mentionedabove and obser- smallfactories and other enterprisesinsmalltown vationsfromsmalltowngrowtharoundtheworld, development. Professor Fei stressed the impor- thefollowingtechnicsrelatedto employmentcre- tance of nonagricultural enterprises and small ation in small towns may be considered as very scale manufacturing and processing activities in important interventions: enhancingand augmentingthe incomeof peas- ants.Heprovedthat historically,China progressed (a)Small town authorities can encourage small when small scale enterprises were encouraged scale enterprisesto locateinsmall towns byoffer- and the country's rate of development suffered ing credit schemes. One of the most important whensmalltownenterpriseslanguished.Duringthe needs of small scale entrepreneurs is capital. En- 1930s,for example,when cheap machine-manu- trepreneurs often do not have enough assets to factured silk became popular because of Japa- serve as collateral when borrowing investment nesemanufacturing,China'ssmalltownsilk indus- funds fromformalsources. Publicschemes to pro- try suffered tremendously and the country lan- vide low-cost capital will encourage such entre- guished. preneurs, whose success, in turn, will encourage the growthof small towns. Theimportanceof employmentcreationwas also supported by thework of ProfessorE.A.J. Johnson (b)Somesmalltownauthoritieshaveencouraged in lndia in the early 1950s.According to Professor enterprises by constructing work places, markets Johnson,smalltownsactedas thesocialand eco- and other structures that they can avail of at rea- nomic "bridges"that connectedruralvillagesand sonable prices. In Malaysia, for example, local cities together. In lndia and China, towns often government authorities have encouraged infor- served a very important marketing function. 'The mal sectorfood sellersto locate insmall towns by ruralfarmerswent to markettowns regularlyto sell building kiosks or hawker stalls. In Indonesia, the their productsandto buytheirsupplies,equipment simple expedient of closing a street in a town to andother needs.Thesecommercialactivities cre- allow a night marketto be heldthere isa tremen- ated a lot of formal and informal sector jobs in dous support for local entrepreneurs. town, which tended to attract more people and added to the town's prosperity. (c) Providingamenitiesandservicesto smallscale entrepreneursinsmalltownsisalso a goodway of Ina study of 36smalltowns insix coastalprovinces supporting small town growth. Reliable electric- of China that I conducted in 1985 to 1989, 1 ity supply, clean water, garbage collection and counted 2,546 small enterprises that had been disposal and sanitation facilities are needed in establishedsince economic reformswere started markets and other centresof employment. Town inthecountryin 1984.Of thesmallenterprises,29.6 authoritiescan investintheseservicesand ameni- percent were established before 1976, 12.4 per- ties and get back their investments through user cent between 1977-1980, 15.2 percent between charges, taxes and fees. 1981-83,and42.8 percentbetween 1984-87.Itwas clearfromthestudy that thegrowthof smallscale (d) Technical assistance by small town govern- village and township enterprises in the 36 small mentsto entrepreneursand migrantscan helpto towns grewvery rapidlysince 1984.The growthof makethemsucceed.Suchassistanceisespecially these industries, in turn, coincided with the rapid usefulinthe fields of small businessmanagement, growth of small towns. product design, marketing, quality control, pro- duction techniques, and finding access to public Anotherimportantfindinginmystudyof smalltown services. With the success of the enterprises, of development isthe fact that thegreat majorityof course, small towns also flourish. these employment-creatingenterpriseswere col- lectives (63.1 percent). Another 12.4 percent of 12 China:SmallTowns Development Housingand Basic UrbanServices authoritiesshould makesure that housingand ur- banservicesaremadeavailableif they areto see Studiesof migrationtosmalltowns usuallydiscover their towns develop and grow. that many migrantsencountera numberof prob- lems uponarrival intheir town of destination. Ina The housingissue,of course, does not actually re- survey of 7,676 migrants to small towns which I quire theconstructionof housesandtheirdistribu- conducted in 1985to 1989.47.1percentsaidthey tion to people. Froma review of various technics encounteredsome problems.Intheir order of im- used in various parts of the world, the following portance,these problemswere as follows: (a)dif- approaches have beenfound to be useful: ficulty of fittinginto the newjob, 71.6 percent; [b) difficulty in fitting into the iew community, 63.3 percent: (c)difficultyinfinding employment,52.3 (a)Sites and services may be made available to migrants to small towns instead of finished hous- percent; and (d) difficulty in finding adequate housing, 48.6 percent. [Note:interviewees could ing. In this technic, the town government or the give more than one answer]. work unitmayallocatesomelandfor housingand then provide basic services such as clean water, sewerage, drainage, a road network, garbage The pattern of answers mentioned above shows collectionanddisposal, etc.The peoplecanthen that while housingseems lessimportant thanem- be encouraged to build their own houses on the ploymentandcommunityintegrationfor newmi- serviced sites. Inthis way, the housingwill not re- grants, it was still a major source of concern. The quire too much capitalization from the very be- housing problem is particularly difficult to solve ginning.'The housingrecipientswill also beableto because it requires a great deal of resources to build according to their needs, expanding the find good housing. In fact, in the survey, it was structure as the family expands and investing foundthat thehousingproblemwas stillunresolved money in the dwelling when they can afford it. five years after the beginning of the survey for more than 37.1 percentof thgpeople studied. (b) Housing can be providedby the work unit as close to the work site as possible.The highdensity By the last year of the survey, it was found that housing(usuallymulti-storey)can be buildonland almost 70 percent of the intervieweesstill had a owned by the work unit. There are a number of housing problem. About 25.4 percent lived in advantages to the work unit in this technic de- rented accommodations belongingto their work spite the fact that it may requireconsiderablein- units; 30.3 percent lived in public dormitories vestment up front. For example, workers assisted owned bythework unit (thesewere mainlyyoung with their housingwill be moreloyalto the organi- unmarriedworkers),and 11.3 percent rented pri- zation. Living close by will also tend to diminish vateaccommodationsanddoubledupwithother absenteeism.Socially, beingable to walk or take peoplebecauseprivaterentswere tooexpensive. a bicycle between home and work is, of course, The housingdifficultiesinthesmalltownswereseen beneficial to the environment. inthefact that amongmarriedmigrantswhowere accompaniedbytheirspouses, 1 1-4percentwere (c) Housingin small towns can be made of indi- stillwaitingfor a housingallocationfrom theirwork genous materials and they can be constructed units morethanfive years after the start of thesur- with appropriate local technology. If future vey. homeowners have the necessary construction skills, they maybeinvolvedinthe designandcon- Although housingmay not be initiallyseen by mi- structionprocessandsavesomemoney.Upgrad- grantsto smalltownsasa serious problem,itshould ing of semi-finisheddwellings has been found to be viewed as a mediumand long term issuethat beaneffectivestrategyto cut downcost of hous- townauthoritiesneedto addressif theyaretosuc- ing. In a number of countries, maintenanceand ceed in enhancing small town development. other housingcosts can besignificantly loweredif Housingis the mostexpensiveinvestmentofafam- this is delegated to organizedresidents. ily in its lifetime. Settling in a small town can be made easier if adequate housing and other ba- (d)Community organization and cooperative sic urban services (cleanwater, sanitation, edu- managementamongresidentsina housingcom- cation, health) are made available. In China, munity can be used as a technic of loweringser- these may be provided by the work unit. Town vice costs, enhancing commitment to shared goals and makingservice deliverymoreefficient. Because rural-urban migrants may come from Theme Paper:Technics 13 different villages and other towns, it may be nec- buildings, clinics and hospitals, schools and essary to organize them into community groups. churches or mosques would be sufficient to at- This may require the services of training commu- tract people and keep them in the town. Experi- nityorganizersand motivatorswho can facilitate ence showed, however, that even when these community cooperation. This community organi- physical infrastructures and social superstruc- zation is particularly useful in newly formed com- tures were provided, sometimes failed to flour- munities where people initially are strangers to ish. Employment opportunities, a sense of com- each other. munity, good local government leadership and other intangiblefactors seem to be more impor- (e) Housingand basicurbanservicesmaybeused tant as indicators of success in small towns than as effective instruments in a policy of physical infrastructures. "reconcentration"where ruralhouseholdswidely scattered in space can be brought together in That physical infrastructures are insufficient as a dense settlements that can then be more effi- developmental technic is also exemplified in ciently providedwith other urbanservices (piped Tanzania'sujamaavillagedevelopmentscheme. water, flush toilets, health clinics, neighbourhood InTanzania, small town plannersgave more em- schools).This policy of reconcentrationhas been phasis to social organization and the fostering of widely used in Cuba, for example, where five- community leadership than physical infrastruc- storey walk-up apartments have been con- tures. By stressing community development, co- structedfor the ruralpeople even in remoterural operationand commitment to the ujamaa ideal, areas. By concentrating people in dense settle- the small townswere able to mobilizethe people ments,itbecameeasiertoextendservicesto them for development. and to manage community life. EnvironmentalTechnics Areawide and Regional Planning One of the main concerns about small towns in One of the main reasons for the failure of small China is the fact that the village and township towns as human settlements is that they are iso- enterprises on which the town's development lated from both their rural hinterlands and from depends are often the cause of environmental other towns. Areawide planning has shown that pollution.'This is becausethese enterprisesare too whensitingsmall towns, closeattentionshouldbe small and they do not have adequate capital to paidto their linkageswith ruralareas,other towns install the pollution control devices. Some small and intermediateor large cities. scale entrepreneurs also simply do not know enough about the negative effects their actions Often,there isa tendencyfor smalltown planners have on the environment. They dump acids, to consider a majorfunctionas the mainbasisfor paints,usedoilandother types of toxicwaste into the creation of the town. Single purpose settle- drains or open streams unaware of the deleteri- ments, such as mining towns, tourist resorts, etc., ous effects of these substances on the environ- are difficult to make sustainable if they are not ment. linked with surrounding settlements. As much as possible,townsshouldbelinkedtogether function- An obvious intervention for countering environ- ally, i.e., comparativeadvantages of each town mentalpollutioninsmalltownsistheestablishment should be enhanced by networking. of localandnationalpollutioncontrolpoliciesand standards and their strict enforcement in small . It is most importantfor small towns and their rural towns. National and local legislation can be and higher order urban settlements to be linked passedto controlthe polluting behaviourof local bya good system of roads, telecommunications, entrepreneurs.The policiesand standards should and services. The linkages provide the synergy be widely disseminated, especially information necessary to make the different towns within a onthe causes of pollutionand the fines and pen- certain region far greater than the sum of their alties for polluting. parts. Authoritiesinsmall towns mayalso form technical Infrastructuresalone, however,will notguarantee assistancegroups to informsmall scale entrepre- the success of a small town. In the "growth cen- neursabout the environmental consequencesof tre" small towns strategy in Kenya, for example, their actions and to give them advice on how to government planners thought that roads, town curtailpollutingpractices.Enterprisesmaybegiven 14 China: SmallTowns Develo~ment enoughtimeto maketheadjustmentsbeforethey the costs of going to the centralcity can be high are penalized.Often, this positiveand supportive in both monetary and time considerations, the approachworks betterthat purely punitivemea- small towns tend to develop with an inward fo- sures. cus. Perhaps, if and when rural-urban transport systems improve, the small towns will be swal- While small towns may affect the physical envi- lowed by the mega-city. ronment directly, it is also possible to plan small townsso thattheyfit intothedemandsof the physi- Mega-urban region planning approaches in re- cal environment.Inthe Democratic People's Re- cent years, however,run counterto these trends. public of KoreaandinCuba,for example,thereis In many technologically advanced countries, a severeshortageof arable land.To adjust to this mega-urbanregionsare being planned and de- environmentallimitation,smalltownplannershave velopedas multi-nodalsettlements.The preferred sitednewtownsettlementsonsteephillsides,rocky technic is "densification" or the concentration of promontoriesand unfertile terrain. 'The fertile val- peopleinsmallersettlements.Thesedenselyinhab- leysarereservedforagricultureandotherproduc- ited settlements are, in turn, surrounded by pro- tive enterprises. 'The towns, by adjusting to the ductive agricultural green zones. They are also demands of the physical environment, are able linked together with non-polluting transport sys- to become moreecologicallyadaptive, perform- tems that enhanceeconomicandsocialintegra- ing their administrative,political and social func- tion. tionswith minimaladverseeffectson the environ- ment. Agoodexampleof thistechnic of integratingsmall towndevelopmentintomega-urbanregionplan- SmallTowns inMega-urbanRegions ning is seen in the Greater Vancouver Regional District in Canada. Greater Vancouver's vision is The polarized view that pits small town develop- oneof a centralcitysurroundedt ~eight "regional y ment against mega-city development often ig- town centres" that have their own autonomous nores the fact that one of the best ways of en- character.'Theregionaltowncentresaredesigned couragingsmall towngrowthis to linksmall towns asdenselyoccupiedsettlementswherejobs, hous- with very large cities in the context of mega-ur- ing,shoppingand culturalandsocialservicesare ban regions. In a comparative study of Greater concentrated.'The greenareasbetweenthecen- Beijing, Metropolitan Shanghai and Greater tresare kept as productivefarm landswherevery Guangzhouwhich Ihave beenconducting since intensive and technologically advanced "urban 1991, small towns on the periphery of mega-ur- agriculture" basedon hydroponics and intensive ban regions have been found to be thriving. In track gardeningare practiced. the beginningitwas feared that suchsmalltowns within the mega-urbanregionswere merely des- The decentralized mega-urban region planning tined to become satellite "bedroom towns" for approach is provingto be one of the most inno- commuterswhoworkinthe innercity.Furtherstud- vative technics in urban planninginrecentyears. ies are showing, however,that these towns have In some ways, it may be seen as an attempt to their ownidentities,theirown patternof enterprise achieve the social intimacy of the small town by developmentand their own politicaland admin- integrating it within the complex reality of the istrative dynamics. mega-urban region. If this balancing act suc- ceeds, small town development might continue Similar studies of small towns. within the hin- with itspositiveeffects. terland of HongKongand Macau are also show- ingrapiddevelopmentratesinthese settlements. Conclusions Although these small towns mainly serve the food, labour and service needs of the large ur- Thedevelopmentofsmalltowns inChinahasbeen ban areas, their prosperity is remarkably local. an integral part of the country's national urban The systems of local administration and urban strategy as Chinese authorities have considered management are also very particularistic. the positive and negative effects of small town lifein their nationaldevelopment efforts. Insome In part, the autonomous development of small ways, policieson small towns have been heavily towns within large mega-urbanregions might be influencedbythedebatesoncentralizedor "com- due to the poor transportation services in China mand economy planning" or decentralized or that prevent moreefficient commuting. Because "bottom up" planning.Acountryas largeas China Theme Paper:Technics 15 is an extremely difficult one to govern. In the re- tinction between small towns and big cities. The cent past, there has been a strong tendency to information revolution is blurring physical dis- attempt to govern through centralized control, tances as ideas rather than people travel. In the which, inturn, has resultedin negativeeffects on UnitedStatesandCanada,thedistinctionbetween small towns growth. rural and urban residence is already blurred. Ur- ban services that used to be hard to get in rural China'sadoptionof the policiesof economic and areas are now easily available. One can livein a socialreformandopeningupto theoutsideworld very small rural hamlet and still be connected hashadmostpositiveeffectsandimpact onsmall with the main city by telephone, fax, modems, towndevelopment.Thepastdecadeshaveshown e-mail and the Internet. Right now, these tech- that people in small towns can pursue develop- nological marvels may just be the stuff of mod- mental activities that, combined together, re- ernist aspirations in China but it will not be long sult in rapid economic growth at the national before they become reality. At that time, the level. Of course there have been some negative technics discussed in this paper may come into effects of small town development, such as un- full play and enhance the development of small controlled internal migration, pollution, corrup- towns. tion. On balance, however, the release of the creative energies of millions of people in small towns have improved the quality of life of the Presented at the Conference and Workshopon Small Towns majority of China's citizens. Development in China, sponsored by the State Commission for the Restructuringof Economic Systemsand the WorldBank, Beijing, 13-17 November 1995. A review of various approaches and technicsfor smalltowndevelopment inother partsof theworld that China's current policies on small towns are strongly developmental. Small towns have boomed economically as their linkageswith their rural hinterlands have increased. 'They have be- comegood placesto live as they havelinkedup with larger urban areas to take advantage of technologicaland social changes. Dr. Aprodicio A. Laquian Director Looking at developments of small towns else- Centrefor HumanSettlements where, one may conclude that in the city of the The Universityof BritishColumbia future, peoplewould not maketoo muchof a dis- Vancouver, Canada 16 China: SmallTowns Development Finance HafizA. Pasha and A.F. Aisha Ghaus U rbanisationis proceedingat a rapid pace modernisationeffortsof the countrywillhingecru- in most developing countries. For low and cially on the institutional and financial capacity middleincomeeconomiesof theworld,the of small towns of China to provide employment, averageannualgrowthrateof urbanpopulation housing and a modicum of basic municipal ser- is twice that of the overall population (seeTable vices to the large number of ruralmigrants. 1 ) . 'This growth differential is even more pro- nounced in China, where the growth rate of ur- The objective of this paper is to assess the pros- ban populationat 4.3 percent per annum is over pectsandmechanismsavailableforfinancingthe three times the total populationgrowth rate.This process of urban development in small towns of has led on the one hand to the emergence of relatively low income developing countries and 'mega' citieswith populationsinexcessof 10mil- to presentthe existinginternationalexperiencein lion and on the other hand to a vast multitudeof this area. Section 2 highlightsthe salient features smullcitiesand towns at therural-urbaninterface of growth of small towns generally and derives performing a wide variety of service and trading implications regarding household levels of functions. affordability, levels of demand for municipalser- vicesand potentiallocalsourcesof revenue.Sec- According to estimates of the World Bank for tion 3 discusses issuesof institutionalstructureand developingcountries,over onebillionpeoplelived capacity and focuses in particular on the range in 1992in cities and towns with populationof less and levelof functionsthat can beperformedeffi- than one million. The corresponding number for ciently by municipalgovernments insmall towns. China is over 200 million, where such settlements Section4 highlightstheproblemsof financialman- have exhibited considerable dynamism and agement relating to the operation of municipal growthand haveincreasedtheir collectiveshare budgets and the process of revenue administra- inurbanpopulationfrom 52 percent in 1970to 65 tion. Section 5 describes the pattern of municipal percentby 1992.Itisanticipatedthat overthenext finances in smaller jurisdictions and identifiesma- decade these cities and towns will have to ac- jor potential sources of revenue. Finally, Sec- commodate an additional 160 to 200 million mi- tion 6 presents the conclusions. grants from the countryside of China. Therefore, the success of future development and SOURCE: World Development Report, 1994, World Bank. 17 18 China:SmallTowns Develo~ment TABLE I EXTENT OF URBANISATION IN DEVELOPING COUNTRIES Population Share of Average Overall P o p u l a t i o n Country (Million) Urban Annual Population inCities1Towns 1992 Population Growth Growth withpopulationbe- (%) 1992 Rate (%) Rate (%) low 1 million (%) 1980-92 1 9 8 0 - 9 2 1970 1992 Bangladesh India Nigeria Pakistan China Sri Lanka Egypt Indonesia Myanmar Philippines Thailand Turkey Brazil Malaysia Korea, Rep. of Mexico LowandMiddle IncomeEconomies 461 0.0 3 6 3.7 1.9 59 63 Growthof SmallTowns cultural inputs like fertilisers, pesticides, trac- tors, agricultural machinery, etc., while the Rural-UrbanLinkages former involve wholesale trading in agricultural produceand agro-processingof agriculturalraw Small towns generally owe their existence to the materials. Initially, most of the economic ac- presence of rural-urban linkages. As agricultural tivity in small towns is informal and small-scale development proceeds and the rural economy in character of labor-intensivenature. Devel- . makes the transition from subsistenceto market- opment of small towns at the rural-urbaninter- based farming, the prospect for stronger urban- face can potentiallycreate a 'synergy' between rural linkages increases greatly. This explains why the process of rural and urban development the rate of formation of new towns and the rate rather than a conflict. of growthof existingsettle-mentsincreasesrapidly at intermediatestages of development, as is be- Economic Baseof Small'Towns ingobservedcurrentlyinmanydevelopingcoun- tries, includingChina. Given the sources of growth of towns, the eco- nomic baseof such urbancentersconsistsprima- Smaller townsand citiesoftenrepresentbetterlo- rilyof tradingandserviceactivitiesfor theruralhin- cations for agro-based industrial activity in view terland. As such towns grow they generally of greater proximity to agricultural production progress to also performingindustrial,administra- centers and for the same reason are better tive and culturalfunctions. Muchof this develop- equipped to provide services for the ment is spontaneous in character and needs to modernisation and improvement of agriculture. be supported by municipal authorities through Linkagesare bothforwardand backwardinchar- provision of infrastructure which promotes rural- acter. The latter arise from the marketing of agri- urban linkages. Theme Paper: Finance 19 Income LevelsandAffordability to fetch large surpluses over development costs because of low real estate values in relation to those observed in metropolitancities. Small towns generally represent the first change of residence for rural migrants.There is evidence of the 'leap frogging' phenomenon whereby The searchfor revenues in smaller municipaljuris- some migrants subsequently move on in search dictions,therefore, hasto beorientedtowardsun- of better economic opportunitiesto larger cities. conventionalsources.Thisrequiresanunderstand- The likelihoodof this is greater if the prospectsfor ing of the economic functions and base of such gainful employmentat the initiallocation remain areasand the exploitationthereof of anyrevenue uncertain. generating opportunities, frequently through the adoption of innovative tax instruments. For ex- ample, most urbanjurisdictionsinSouthAsia have Income levels are generally low in small towns found a largeand growingtax baseinthe move- becausehumancapitalendowmentsof residents, ment of goods from external (local and interna- consisting primarily of unskilledrural migrantsdis- tional)sourcesto withinthemunicipalboundaries. placedfrom agriculture,arelimitedand because A tax called octroi has been imposed on goods of thenatureof economicactivity pursuedatsuch entering thejurisdiction for sale, use or consump- locationswhichischaracterisedprimarilybyinfor- mal and small-scale modes of production. Pov- tion and collectedfrom transport vehiclesat posts erty levels are high in small towns in relation to located at the urban periphery. Evenwith small, larger cities and per capita incomes are a frac- flatratesof taxation, revenuecollectionsfrom the tax are large and in many small towns account tion (112to 213 usually) of the national average. for over 60 percent of total revenues. However, The consequences are that levels of effective demand andwillingness-to-payfor municipalser- thecommonimplicationof entrylexittaxesis that vices are low.Simultaneously, the tax basesrelat- they tend to fall mostly on basic items like food, ingto propertyvalues,incomes,valueofsales,etc. buildingmaterials,etc., andare, therefore,regres- sive in character. are small and narrow in view of the need to ex- empt a high proportionof tax payers. The basic challengeconfrontingmunicipalgovernmentsin Non-tax revenues also represent a promising small towns is to raise enough revenues through source. The resource mobilisation strategy in this taxesand userchargesto finance the investment area ought to focus on the natureof rural-urban and on-goingprovisionand maintenanceof ba- linkages.Thiswillrequirerelativelyunconventional sic municipal services like drinking water, sanita- investments in urban development like farm ser- tion, roads, etc. vices-cum-communitycenters, weigh bridges (at product markets), upgrading of public transport terminal facilities, recreational facilities (for rural PotentialSources of Revenue households).construction of guest houses and development of markets for livestock products 'The international experience with regard to the and for general trading purposes, etc., and the developmentof municipalfinances insmallcities levy simultaneously of appropriate fees, licenses and towns is one of limited success in resource and rentalcharges. In many countries, there are mobilisationinview of the lackof taxablecapac- significantexamplesof small,dynamic municipali- ity.Generally,the localtax to gross regionalprod- tieswhich generatealmosthalftherevenuesfrom uct ratiosobservedare belowone percent.Con- such nontax sources. ventional local sources of revenue like the prop- ertytax havesmallyieldsbecauseresidentialprop- InstitutionalStructure and Issues erty values (rentor capitalvalues)are low,the tax base of large-scale industry is limited and taxa- Formsof MultilevelGovernment tion of commercial property is restricted by the high degree of fragmentation and informal na- ture of trading activities. In fact, in many coun- 'The constitutional divisionof powers among vari- tries, small towns with populations below 25,000 ouslevelsof governmentcanbebroadlycatego- are not declared as rating areas for purposesof rizedas unitary or federal. A unitary country hasa property taxation because of high costs of col- single or multi-tiered government in which ef- lectioninrelationto potentialrevenueyields.Land fective control, including decision making, of pricesof publiclydevelopedplotsarealsounlikely government functions rests with the centralgov- ernment. A majority of countries have adopted a unitary form of government. Examplesof multi- 20 China:SmallTowns Development tiered unitary constitutionsinclude Egypt, Japan, I Criteriafor ExpenditureAUosation Korea, Indonesia, Turkey, Spain, United Kingdom I and China.China,infact, isa good exampleof a I . Efficient provision of public services: unitarygovernmentwhich is quite decentralised. Public services are provided most efficiently "by In 1980subnational governments secured signifi- the jurisdiction having control over the minimum cant autonomyfrom thecentralgovernment and geographicareathatwouldinternalizebenefitsand China can therefore be effectively considereda costs of such provision." However, some degree decentralised federation even though the legal of central control or compensatory grants may be warranted if: costs and benefits are realised structure continuesto be centralised. by nonresidents; service requires area larger than a local jurisdiction for cost effective provision Thefederalformof governmenthasa multi-tiered and administrative and compliancecostsare high. structurewithdecisionmakingsharedbyall levels 2 . Fiscal Efficiency and Regional Equity: of government.Thissystemisconducivetogreater Differential net fiscal benefit (imputed benefit freedom of choice, political participation, inno- from public service minus tax burden)arising from vation and accountability. Federal countries differences in the fiscal capacity of the local broadly conform to one of the two models, dual jurisdictions introduces fiscal inefficiencies and federalism and cooperative federalism. In the regional (horizontal)inequities.It has beenargued former, fiscal tiers are organised so that the na- that the nationalgovernmentshould play a roleto tional and state governmentshave independent correct these. authorityin their areasof responsibilityand act as 3 . Redistribution of real income: while the equal partners. Local governments do not have predominant role of the national government in anyconstitutionalstatusandaresimplyextensions pursuit of vertical equity is well recognised, in- of state governments. Incooperativefederalisms volvement of subnational governments in various levels of government have overlapping implementingspecific programsis essentialso that and shared responsibilities and all levels are such programscan be tailored to meet individual treated equally as partners in a federation. jurisdictions' circumstances. Canada, India and Pakistan broadly conform to 4 . Provision of Quasi-Private Goods: Pub- the first modelwhile United States and Brazil are lic provision of essentially private goods like edu- examples of the latter. cation, health etc., is justified on grounds of eq- uity. Since benefits accrue mainly to residents of There is a strongrationalefor decentralised deci- separate jurisdictions. such services are better provided by sub-national governments. sion making on grounds of efficiency, account- ability, manageabilityand autonomy. Ideallyde- 5 . Economic Stabillsation: It is customary cision makingshould occur at the lowest levelof to argue that federal government should be re- governmentconsistentwith thegoalsof allocative sponsible for stabilisation. efficiency.Thus the optimalsizejurisdictionfor dif- Fiscal federalism literature provides broad guid- ferent services will vary with the extent of econo- ance in delineating expenditure responsibilities mies of scale and benefit-cost spill-overs. Each among member units in a federation. These basic publicserviceshould be providedby thejurisdic- principles, presented in Box 1, are relevant'even tion havingcontrolovertheminimumgeographic for unitary states. Based on these criteria a guide- area that would internalizebenefits and costs of line can be devised as to which functions are best such provision. provided by nationaland by subnational govern- ments respectively. Assignments of public func- tions to subnational (local or regionallstate] gov- Allocation of Responsibilities ernments can be basedon various considerations like economiesof scale.appropriatepackagingof local public servicesto improve efficiency through Based on these principlesof expenditure assign- information and coordination economies and en- mentand the guidelines discussedabove the fol- hanced accountabilitythroughvoter participation lowingoptionsfor decentralisationmaybeappro- and cost recovery, costlbenefit spillovers. prox- priate. Local public services that could be imity to beneficiaries,and consumer preferences. decentralisedto localgovernmentsarepresented in Box 2. These are services for which economies Box I of scale are not a major consideration, political proximity is essential, no significant cost-benefit siderationsarenotimportant.Furthermore,these spillovers are anticipated,and distributionalcon- could bedecentralisedto localgovernmentsre- gardless of their size or financial capability. Theme Pa~er:Finance 21 --- - - -- Inaddition,landuseplanning,secondaryeduca- allocationanduseof publicresourcesandrequire tion and public health are other local public ser- a high level of effective inter-agency coordina- vices that could be decentralised to largerurban tion which is rarely forthcoming. municipalities(populationover 100,000.)Theseare services for which there is some degree of scale The same problemsarise becauseof fragmented economybutgovernment proximitytothe people service provisionin which different parts of a ser- is important, distributionalconsiderations are less vice are provided by different agencies. For ex- relevant,and benefit spilloversare not serious. ample, developmentplanningand implementa- tion functions may be separatedfrom operation, 'The intent of this analysis is to present a frame- maintenance and cost recovery functions. Fi- work for decentralization that could be imple- nally, there is lack of financial accountability mented uniformly across a country to avoid po- due to the weak link between the cost of local tential controversies arising from nonuniform services and perceived payment of local taxes. application. It is wrong to presume, however, that all subnational governments of a particular Another issue that arises is the lack of local au- category andsize ina developingcountrywould tonomyinplanning,development,administrative be equally capable and interested in taking on and financial matters. This arises particularly particular functions. It is essential, therefore, in "dual federalism" in which local governments to retain some element of flexibility regarding are considered only an extension of the provin- who doeswhat and howit is done. cial governments. In some countries local gov- ernment budgetsare approvedby the highertier of government. This gives the state government PotentialServices by LocalGovernments control over local development projects and fi- nances, includingresource mobilisation. Further- Water Supply more, statelprovincial governments in some Fireprotection cases have control over administrative matters Primary education like hiring, transfers, etc., of local council staff. Public Health This further affects the efficient working of lo- Refuse collection cal governments. Neighbourhoodparks and recreation Streetlroads Finally, lack of administrative capacity, re- Localtransit flected in inadequate staff level and poor qual- Traffic management ity, is also a problem constraining effective lo- Locallibraries cal government functioning in developing coun- LocalBylawsenforcement tries, especially in small towns. Altogether, it * seems that local governments in smaller towns and cities should perform all the functions (de- velopment, maintenance, cost recovery, etc.) related to the provisionof only a few of the ba- Issues in Management, Planning and sic municipal services like water supply, sani- Coordination tation, public health and intra-u~banroads. This will ensure that the limited financial resources The main factorswhich impingeon the capacity and institutional capacity are not stretched too of localgovernmentsandwhich areinstrumental thinly. 'The objective of small town governments in determining their efficiency and effectiveness must be to do a few things and do them well. relate to accountability,autonomy, and admin- Other services like education, health, residen- istrative capacity. Accountability for local ser- tial plot development, etc., may be left to higher vices in developing countries is generally poor. levels of government. This is, in fact, the com- This can partly be attributed to the unclearfunc- monly observed pattern for most developing tional responsibilitieswhereby a number of agen- countries. The available international data indi- cies are involved in the provision of the same cates that on the average almost 90 percent of service. For example, in some countries state the municipalbudgetinsmalltowns is accounted governments' provision of services such as pri- for by administrative overheads and costs of mary education and preventive health overlap services like water supply, sanitation and roads. and duplicate services provided by local gov- ernments. These creates inefficiencies in the 22 China: SmallTowns Development FinancialManagement opmentexpenditureand hencethe usefulnessf the accounting system is reduced. Third, bud- InstitutionalCapacityand Staffing levels getary control operates as a blunt tool with little regard for overall targets and priorities. Finan- cial control also needs to be extended to more In most municipal governments, especially in effective cash flow management and creditor1 smallerjurisdictions, themajorconstraintstofinan- debtormanagement. cial management in terms of the operation of budgets (flow of income and expenditure) and revenueadministrationis the lowqualityof human Expenditure Planning resources available for performing this func- tion. This is the consequenceof limited resources Expenditure planning is seldom undertaken in a and of the public sector remuneration structure multiperiod framework. Budgeting of expendi- which is uncompetitive in relation to the private tures tends to focus on detail ratherthan on stra- sector. 'The accountant in a small municipalgov- tegic decisions.Consequently,municipalbudgets, ernment is usually a low level government func- especially in small towns, are of little use as plan- tionary with limited professional credentials and ning documents. The link between expenditure training. Revenue administration is also under- and income raising decisions, which forms the developedwithinadequaterecordingof taxpay- basisof budgeting,is generally not clear. ers and billings. Frequently, this function has been privatisedand handedover to contractors. Inmanylocalgovernments,particularlythosewith Contracting systems vary ranging from fixed elected councilors, the practice is for available commissions to pre-emptionof revenue beyond funds (especially for development) to be allo- a committed level of income. Privatisation has cated, moreor tess, equally amongwards on the proved to be efficient in raising revenues or re- basis of considerations of equity. This leads to a ducing costs as longas the biddingprocessesfor fragmentation of the development effort and a appointmentof contractorsremain competitive. strong biasagainst investmentsintrunk infrastruc- ture. Also, project-approvalprocedures tend to AccountingStandards and Practices be bureaucratic and cumbersome in character and involve little economic appraisal in terms of Financialpracticesare generallybasedonsingle costs versus benefits. entry cash accounting on an annual basis. 'The financialsystems are traditionalin characterand Audit Procedures elaborate procedures of documentation have been established primarily to facilitate financial The audit function is centralisedusuallywithin the controland prevent leakagesof funds.'Thefinan- relevent departmentat the statelprovincial gov- cial records are usually structured by a chart of ernmentlevel.The primaryfocusof auditsistoassist accounts which identifies main service catego- the municipaladministrationinmaintainingaccu- ries and within each categoryseparates costs of rate accounts and protect against fraud, misap- staff (establishment),supplies (contingencies),re- propriations and waste. Audit manuals generally pairsandnewworks (developmentexpenditure). exist andspecifythe normalchecks.However,the There is very little emphasis on development of overall planning of audit and the auditing stan- managementinformationsystems to facilitate fi- . dards to be applied are not clearly defined. Fur- nancialdecisions. thermore, auditing techniques such as systems audit and statisticalsampling are not used. Financialmanagement reformswithin local gov- ernments must include, first, improvementsin bill- ingand collection.Separationof basic functional RevenueAdministration responsibilitiesbetweenassessment,record-keep- ingandcollectionisneeded.Financialrecordsfre- Revenue administration has generally not been quently do not show clearlywho should be billed given the priorityit deservesinview of the limited and by how much. Also, the gains from tax base available to small municipal govern- computerisationare high. Second, there is little ments. 'The incentive to raise collections is re- recognitionof the needfor proper cost account- duced in the case of local governments which ing by service to enable correct pricing deci- relyheavilyonsubventionsandgrants-in-aidfrom sions. Manymaintenanceitemsappear as devel- higher levels of government. In addition, the in- Theme Paper: Finance 23 ability to achieveeconomies of scaleraises costs I I of collection in relation to revenues generated Crfferiafor Tax Assignments and weakens the case for investments in tax ad- ministration.Consequently, in most small munici- Taxes suitable for economic stabilization palgovernmentsdepartmentalcollectionisfrag- should becentralized;lowerleveltaxesshould mentedandineffective.Theresponseiseither the be cyclically stable. handingover of this function to a higher level of "Unequal tax bases between jurisdictions government orprivatisationthroughappointment should be centralized. of contractors.Theformerrunsthe riskof reducing Taxes on mobile factors of production fiscalautonomywhileimpliedcostsandscopefor should be centralized. taxpayer harassment in the latter case may be Residence-based taxes, such as excises, high.Itis essentialthat evensmallmunicipalgov- shouldbeleviedbysubnationalgovernments. ernments develop an adequate tax administra- Taxes on completely immobile factors tion which can be deployed to collect revenues should be levied by localauthorities. efficiently from a few major sources. Benefittaxesanduserchargescanbelev- ied appropriately by all levels. Altogether,thepotentialgainsfromimprovements There should be efficiency in tax adminis- in financial management by municipal govern- tration, that is, the level of government likely mentsare high.This will notonly helpinmobilising to have the best information on a tax base moreresourcesbutalso inutilisingthem moreeffi- would bethelevelresponsiblefor levyingtaxes cientlyfor maximumimpactonthelevelandqual- on such a base. ity of servicesprovided. Revenue means should be matched as closelyas possibleto revenueneeds.Thus, tax Municipal Finances instrumentsto further policy objectivesshould ,be assigned to the level of government hav- To finance their expenditureliabilities, local gov- ing theresponsibilityfor provisionof theservice. ernments have access to two major sources of income.These can broadly be categorised into locally raised revenues and external revenues. Box 3 Localgovernments generally have fiscal powers to raiserevenuesfrom various taxes, usercharges preventoverdependenceof lower levelsof gov- andothersourceslikelicences,fees, rentalincome ernment on intergovernmentaltransfers, which etc. Substantial variation exists in the pattern of canotherwise distort localspending priorities.Cri- financing of local services among different cities teria usedfor the assignmentof taxes aregivenin indevelopingcountries.Taxesusuallyfinancethe Box 3. Broadly speaking, these emphasize equity highest proportion of local expenditures. For a (consistencyof revenue meanswith expenditure sample of 50 small cities in developing countries, needs)and efficiency (minimizingresourcecost). the average share of tax revenues is 45 per- cent. Nontax revenues consisting of user charges, fees, licenses,rentalincome, etc., have a share of about 30 percent and the remainder, Major PotentialLocalTaxes 25 percent, is accounted for by external rev- enues like grants-in-aid and revenue-sharing Basedon the above principles, the major poten- transfers from higher levels of government. tial local taxes are presented in Box 4. These broadlyincludetaxesonresources,property,sales, Tax Assignments badslsinsand user charges. Taxes on resources is a good localgovernmentinstrument becauseof the immobile nature of the tax base.Taxation of 'The extent of self-reliance of local governments real estate is suitable to recover costs of public crucially depends inthe allocationof fiscal pow- service provision related to properties. If the tax ers.'The divisionof revenuesourcesamong differ- baseis harmonised,single-stagesalestax can be ent levels of government constitutes the tax as- levied by any levelof governmentand can pro- signmentproblem.Onceexpenditureassignment vide a broad-basedand buoyant source of rev- has been agreed on, tax assignmentand design enue for local governments also. of transfers becomecriticalelementsinmatch~ng expenditure needs with revenue means at vari- ous levels of government. Proper arrangements 24 China:Small Towns Development Most local governments rely heavily on property I related taxes (includingtaxation of rental values I PotentialLocalTaxes and transfers).Sales tax, leviedinvarious forms. is also an important source of revenue. As men- Pr RelatedTaxe tioned earlier, in some South Asian countries, like OD",Zn Annual RenfalValues Pakistan,octroi(anentrytax]constitutesthesingle Tax on CapitalValues largest source of local revenue. Besides these, Tax on Transfer of Property popular local taxes include taxation of vehicles, EntryIExitTaxes gasoline and entertainment. I Octroi ExportTax The choice of which localtaxes to exploit insmall EntertainmentTaxes municipal jurisdictions depends upon the size, Tax on Cinemas buoyancyandmobilityof therespectivetax base, Tax on Dramatic and TheatricalShows incidence (burdenby income group) and ease Tax on Feasts of collection.Thesecharacteristicsarehighlighted Tax on Advertisements in Box 5 for different local taxes. The largest po- HeadTaxes tential tax bases are likely to be observed in the Tax on Professions, Trades case of entrylexit taxes and surcharges followed Tax on Hearths bytaxes onsales or production.Insmalltowns the Tax on Birthsand Marriages tax basesof entertainment taxes, transport taxes, PollTax taxes on 'bads', etc., will generally be small. Transport Taxes Registration and Annual Tax on Non- The most dynamic tax bases are likely to be ob- Mechanised Transport served in the case of entertainment taxes, prop- Registrationand Annual Tax on Motor erty-relatedtaxes, 'sin' taxes, taxes on sales and Vehicles surcharges. As opposed to this, the tax base for Resource Taxes head taxes, resource taxes and exitlentry taxes Royalties will tend to grow slowly.As highlightedearlier, lo- Conservation Charges cal taxes ought to be levied on immobile bases. 'Sin' Taxes This problemislikelyto be mostsevere inthe case Bettingand GamblingTax of entrylexit taxes, transport taxes, taxes on pro- Tax on Lotteries duction and sales. This will weaken the case for Tax on RaceTracks imposition of such taxes. From the viewpoint of Tax on Alcohol ease of collection, which is of particular impor- Tax on Delinquints tance in small towns with limited capacity for tax Taxes on 'Bads' administration, the best taxes are resourcetaxes, Taxes on Motor Fuels entertainment taxes, entrylexit taxes and sur- Effluent Charges charges. CongestionTolls Taxes on Production Excises Altogether, based on the characteristics of dif- Taxes on Sales ferent taxes, the prime candidates for levy by Single-StageSalesTax small town governments are property-related Taxes on Transactions taxes, entertainment taxes, head taxes, re- ContractsTax source taxes, taxes on animals and surcharges. Taxes on Animals This, of course, presumes that such taxes fall SlBox Saughter Tax within the domain of local fiscal powers. Also, LivestockTradingTax there will always be exceptions and in particu- Surcharaes lar towns, depending upon the nature of the re- PersonalIncomeTax gional economy, imposition of other taxes may Sales Tax well be justified. - - Box 4 Theme Paper: Finance 25 Characterlsffcsof Different Local TaxesIn Small Towns Type of Taxes Size Buoyancy MOMMY Incidence Ease of Tax Base of Tax Base of Tax Base of Collection Property-RelatedTaxesSmallIMedium MediumIHigh Low Progressive Low High I EntrylExitTaxes Large LowIMedium MediumlHigh Regressive MediumIHigh I Medium I EntertainmentTaxes Small High Low Progressive MediumIHigh High HeadTaxes MediumILarge LowIMedium Low Regressive1 LowlMedium Neutral MediumIHigh Transport Taxes Small MediumIHigh High Neutral Medium Low ResourceTaxes SmallIMedium Low Low Neutral High Medium1 High 'Sin' Taxes SmalllMedium MediumlHigh LowlMedium Regressive LowlMedium Low Taxes on 'Bods' Small LowlMedium Low Progressive LowlMedium Low Taxes on Production LowIMedium MediumIHigh MediumIHigh Regressive1 Medium Neutral Medium Taxes on Sales MediumILarge MediumIHigh MediumIHigh Regressive1 Low Neutral Medium Taxes onTransactions Small LowlMedium LowIMedium Progressive Low Low Taxes on Animals Small LowIMedium Low Neutral1 Medium Regressive MediumIHigh Surcharges Large MediumIHigh Low Progressive High High Box 5 User Charges and Pricing Policies the political will to pursue an aggressive cost re- coverypolicy.'Thesituationis exacerbated bythe low willingness by beneficiariesto pay, given the A proper pricing policy which recovers costs is a generally low quality of service provision.Inaddi- pre-requisitefor adequate and efficientprovision tion, issues of cost recovery in some centralised of urban services. However, the concept of self- economies, like China, go beyond simply raising sustained provision of services is, by and large, the levelof user charges. Chargesfor mosturban underdeveloped in developing countries. Tradi- services like water. sewerage, housing, public tionally, there has been an absence of a strong transportation, etc.arealllinkedinextricablytothe commitmentto direct cost recoverythrough user wage policy. With privatisation some countries charges.The pattern of financing of local expen- have experienced the process of collection of diture is a manifestationof this as only about 20 charges, and the experienceis mixed. As a prag- percent of expenditures are financed directly in matic principle, small town governments must a sample of about 50 citiesanalysed.'This propor- movetowardsattainingat leastfulloperationsand tion is much lower in the caseof social sectors. maintenancecost recovervwith the helc,of tariff systemswhicharerelativelyeasyto administerand 'The majorissuesincost recovery inmost countries less prone to leakages. relate to the ability and wiiiingness by beneficia- ries to pay for service provision and the adminis- trative feasibility of collection. Since income lev- lnferg~vernmenfalFiscal Transfers els,in general, are low, especially in small towns, and the natureofservicesprovidedby localgov- On the whole, there is a strong case for fiscal emmentslikewater supply and public healthare equalisation because it allows the replication of 'basic' in character,governmentsgenerally lack the financial structure of a unitary state in a 26 China: SmallTowns Development federalismwhile promotingdecentraliseddecision Rationalefor krscalTransfers making.Thus,efficiencyandequityconsiderations Flscal Imbalance coincide. The design of arrangements for trans- fers is also of prime importance.Criteria for such A fiscal gap may arise because of structuralimbalance transfers are presentedin Box6. between the assignment of revenuesources and of expenditureresponsibilities. Such imbalancesusually exist due to limited or unproductive tax basesand highlevel lntergovernmental fiscal transfers may be in the of federal/state taxation which limits local revenue-rising form of revenue-sharing, grants or fiscal potential. equalisationtransfersdependingontherationale. Flscal lnequlfy and lnefffclency Ifthe purposeof theIransferisto correcttheprob- Redistribution,an important objective of fiscal policy, is lem of fiscal imbalance, unconditional grants or best performed by the federal government. However, in revenuesharing based on "the derivation princi- a federal system "redistributionin kind" through the ple"orthe pointof collectionaregenerallyadvo- provisionof certain 'merit goods' like education, health, cated. If the transfers are made to correct fiscal social security is undertakenby lower tiers of govern- ment.These levels of governmentdue to inappropriate inequities or inefficiencies arising from a lack of tax assignments,factor mobility and tax competition common minimum standards than the desirable may underprovidesuch services and achieve the equity form of transfers is conditional, nonmatching objectives in only a limitedmanner. grants because they do not affect subnational Furthermore, common minimumstandards for public incentives for cost recovery while ensuring services in a federation are advocated on economic compliance with the higher government objec- efficiency grounds. Common minimum standards help tives. Open-endedconditional matching grants reduce intenegionalbarriers to factorsand goods mobility and thereby contribute to efficiency gains. are the most appropriate kind of transfer to cor- Given these goals of equity and efficiency,justification rect for interjurisdictional spillovers while fis- exists for transfer of funds to the lower levelsof govern- cal equalisation transfers may be justified to re- ment. move differences in net fiscal benefit across ju- Infer-]urlsdicfionalSpillovers risdictions. Spillovers usually occur because the benefit of a locally provided good or service itself spills beyond the local In practice, however, the design of intergov- jurisdiction to benefit those not contributingto the costs ernmental transfers is not entirely consistent of its provision.Examplesinclude air and water pollution withtheeconomicnormsenunciatedabove.This control, locallyeducated studentswho relocate, etc. lntergovernmental transferscan be used to conect for is particularly true for grants. For instance, inefficienciesarisingfrom such spillovers. equalisation transfer to eliminate differential net fiscal benefits among jurisdictions or selective Fiscal Harmonisaflon open-ended matching transfers to compensate Net fiscal benefitsmay vary between differentjurisdic- benefit spillovers are hardly tried in developing tions becauseof factors like differencesin fiscal capac- countries.Revenuesharingandconditionalgrants ity and naturalresource endowment, differencesin unit costs, etc. The presence of such differences encourages are the most popular mode of transfers. Ex- fiscally induced migrationand leads to externalities like amples of taxes shared with local governments unemployment, congestion. etc. Therefore, to promote include property tax, personal income tax, turn- efficiency and equity of the federal system, fiscal over tax, VAT, liquor tax and excises. The trans- equalization transfers may bejustified. fers are generally made on the basis of popula- Sfabillsaflon tion, percapita income,collection(origin),equal lntergovernmentaltransferscan also be usedto help shares, fiscal gap, etc. As a whole, the form of achieve economic stabilisationobjectives. Grants could. fiscal transfers from higher levels of govern- increasein periods of slack economic activity to ment to small towns should be a combination of encourage subnational expendituresand diminishduring revenue-sharing transfers plus fiscal the upswingof the economic cycle. equalisation grants. Given the limited taxable capacity of smaller towns, the share of fiscal SOURCE: Shah (1994). transfers in total revenue should generally de- cline with an increase in municipal status and Box 6 population size. lntergovernmental transfers are Sources of Copitol Funding an important source of revenue for local gov- ernments in most developing countries.The eco- nomic rationale for transfers is presented in Box Municipalgovernmentsinmostdevelopingcoun- 6. tries have limitedaccess to capital funding for fi- nancing upfront development costs of lumpy in- Theme Pa~er:Finance 27 Some countries have established arrangements Elementsof Design of FiscalTransfers for capital funding for local projects through de- velopment transfers from higherlevelsof govern- I ] Autonomy: The subnationalgovernments should have completeindependence and flexibility in setting ment through unconditionalor matchinggrants prioritiesand should not be constrainedby uncer- or project-specificassistance.These transfersare tainty associatedwith decisionmaking at the center. generally discretionaryincharacter and it is diffi- Formula-basedrevenuesharingor blockgrants, for cult for localgovernmentsto base their develop- example,are consistent with this objective: ment planson theseflows of funds.Inother cases 2) RevenueAdequacy: Subnationalgovernments municipal development funds (or banks) have should have adequaterevenuesto discharge been established.The general experience, how- designatedresponsibilities; ever, is that the demand for such funds at near- 3) Equity: Allocated funds shouldvary directlywith market rates by smalllocalgovernments remains fiscal need: low and the benefit from such schemes usually 4) Predictability:The grant mechanismshould accrues to the richer councils. ensurepredictabilityof subnationalgovernment's share by publishingprojections. Investment Incentives 5) Efficiency: The grant designshould be neutral with respect to subnationalgovernment'schoices of resourceallocation to differentsectors or types of Given the relativelylow public costs of providing activity: municipal services in smaller towns as compared 6) Simplicity: The subnationalgovernment's alloca- to metropolitan cities and the likelihood of less tion should be basedon objective factors over which pollution,environmentaldegradation,congestion, the individualunitshave little control: etc., a case can be made for diverting private 7) Incentive: The proposaldesign should provide investments to the former locations for creating incentivesfor sound fiscal managementand discour- greater employment opportunities and thereby age inefficientpractices.For example, there should be no specific transfer to finance deficits. attracting a greater share of rural migrants to smaller towns. The above criteria,in certaincases, may be conflict- ing and therefore, a grantor may have to assign prioritiesto different factors in comprisingpolicy Variousapproacheshavebeenadoptedtocoun- alternatives. terbalance locational disadvantages to private investorsby offeringincentives.Inmanycountries fiscal concessions are offered for location of in- SOURCE: Shah (1994). vestments in backward areas. These include tax holidayson profitstaxes,customsdutyexemption Box 7 onimportedmachinery,exemptionfromproduc- tion or sales taxes, etc. However, in many cases these concessions lead to distortions and emer- gence of tax havens. The alternative approach vestmentsininfrastructure.InPakistan,localcoun- has been the offering of investment grants or cils, especially the small town committees, are subsidised provision of public services. 'The gen- compelledtofinancedevelopmentexpenditures eral conclusion is that for investment incentives through revenue surpluses only and access to to besuccessfulininducingdevelopmentof small the domestic capital market is precluded. Such towns, these have to be selective and carefully restrictions imposed by statelnational govern- targeted in character, otherwise they tend to mentsaremotivated,first, bythe desire to control become diluted or are misused. the process of credit expansion and the money supply inordertoachievethegoalof macroeco- Conclusions nomic stabilisation and, second, by the percep- tion that many local governments are prone to- 'The principalconclusions that emerge regarding wards financial indisciplineand are likely to bor- the development of municipal finances in small row in excess of their debt repayment capacity towns are as follows: thereby runningthe risk of default.These percep- tions are slowly changing but it is unlikely, that, (i) Given the fact that most small towns come even in the presence of greater financial intoexistencebecauseof urban-rurallinkages,an liberalisation,small town councils will be allowed effort must be made to exploit the revenue-gen- significant access to capital markets. erationopportunitiescreatedbysuchlinkages.This 28 China: SmallTowns Development may require resort to innovative tax instruments (vi)Intergovernmentaltransfersfrom higherlevels and development of nontax sources by uncon- of government should be an important compo- ventional investments in urbandevelopmentlike nent of the revenuesof small towns. These trans- farm services-cum-community centers, public fers should generally be a combination of rev- transport terminals, markets, etc., and the levy si- enue-sharing transfers plus fiscal equalisation multaneously of appropriate fees, licences and grants.Shareoffiscaltransfersintotalrevenuemay rentalcharges. decline with an increase in municipal status and populationsize. (ii)Local governments in smaller towns and cit- ies should perform all the functions (develop- (vii)Investment incentives need to be offered to ment, maintenance, cost recovery, etc.) related divert and generate private investment in small to the provision of only the key basic municipal towns. However,theseincentivesshouldteselec- serviceslikewater supply,sanitation,publichealth, tive and carefully targeted in character to have roads, etc. This will ensure that the limited finan- the maximumimpact. cial resources and institutional capacity are not stretched too thinly. Also, of vital importance to These are some of the conclusions based on the the effective functioning of local governments is available international experience in the area. the establishmentof a legalframeworkfor admin- Implementationof the above recommendations istrationanda cleardemarcationof functionsand will enable small towns to play a more effective lines of responsibility. role in attracting the inRow of rural migrants and providing them with productive employment, (iii)Potentialgainsfromimprovementsinfinancial housingandaccessto basicmunicipalservices. managementbymunicipalgovernmentsarehigh. These include reforms in financial systems, data References and informationmanagement, accountingstan- dardsand practices,staffinglevelsandqualifica- Anwar Shah, TheReformof Inter-governmentalFiscalRelations tions,audit proceduresandexpenditureplanning. in Developingand EmergingMarketEconomies,Policyand ResearchSeriesPaperNo.23, World Bank,Washington D.C., In addition, revenue administrationneeds to be 1994. strengthened and the scope for privatisation of this functionexamined. The focus of revenuead- Roy W. Bahl and Johannes F. Linn, Urban Public Finance in DevelopingCountries.publishedfor the WorldBank,Oxford ministrationshouldbeon a few promisingsources. University Press, 1992. Roy W. Bahl and ChristineWallich, Inter-governmentalFiscal (iv)Amultitudeof localtaxesare potentiallyavail- Relationsin China, Policy ResearchWorking Paper No.863, ableto municipalgovernments. Insmalltowns,the World Bank, Washington D.C., 1992. strategyshouldbetoselecttaxeswhichhaverela- Hafiz A. Pasha and A.F. Aisha Ghaus, Local Government tively large, buoyantandimmobiletax basesand AdministrationandFinancesinPakistan,AppliedEconomics where the ease of collection is high and costs of Research Centre Research Report, Karachi, Pakistan, collectionare low.Primecandidatetaxesfor levy 1987. generally by small town governments are head taxes, property-relatedtaxes,entertainmenttaxes, resourcetaxes and surchargeson taxes of higher levels of government. In the case of individual towns, however, impositionof othertaxes may be justified in line with the nature of the regional Hafiz A. Pasha economy. Director Institute of Business Administration Karachi, Pakistan (v) As a pragmatic principle, small town govern- ments must move towards attaining at least full operations and maintenance cost recovery in A.F. Aisha Ghaus services like water supply and sanitationwith the DeputyIActingManaging Director helpof tariff systemswhicharerelativelysimple to Social Policyand DevelopmentCentre administerand less prone to leakages. Karachi, Pakistan An Overview of PrivateSector Financingof Urban InfrastructureServices David E. Dowall Introduction urban infrastructure, specifically transportation, telecommunications,energy,watersupply,waste hina has the world's largest population, collection and treatment, housing schools and approximately 1.2 billion people. Of the public health services. Unfortunately, given cur- total, only 28 percentor about324million rentgovernmentalpolicies,mostof thesmalltowns live in urbanareas. China'slow levelof urbaniza- and villages are unable to generate sufficient fi- tion reflects its planning and development poli- nancial resources to provide infrastructure. cies which seeksto maximize resources avail- Changes in government policies and programs ablefor industrialdevelopment by increasingthe are neededto enable local governmentsto mo- labor force participationrate and holdingdown bilize resources to finance infrastructure and ur- urban infrastructure investment. Since the 1950s banservices.However,public financialresources plannershave controlled migrationand popula- such as central government transfers or locally tion growth through a variety of programs. How- generated taxes are unlikely to keep pace with ever economic reformsandinstitutionalchanges urban developmentrequirements.An alternative now make it more difficult to control popuiation source of financing for urban infrastructure is to movementsand asa result,China'srateof urban- tap the privatesector. This paper outlines a vari- ization is accelerating. During the 1980s urban ety of promisingalternativetechniques for mobi- populationgrowth increasedat an averqgeof 4 lizingprivatesector capital. percent per annum. In the 1990s urban growth rates exceed 6 percent [Courtney, 19951. The ~enefitsof PrivateSector Financing of UrbanServices New policy directions taken during the 1980s have removed many of the constraints to small The private provision of urban infrastructureser- town development such as permitting individu- vices yields three important benefits to localand als, families or production units to invest capi- central governments: 1) it significantly enhances tal in tertiary activities for profit. Now rural the efficiencyand quality of service provision; 2) towns and villages contain numerous small busi- conservesscarce public sector resources; and 3) nesses and provide a range of commercial ser- itprovidesadditionalsourcesof capitalfor financ- vices. Many small towns are starting to attract ing infrastructureinvestments. This section of the industry.Continuedurbangrowthand economic paperreviewsthelong-standingargumentsfor the development requires enormous investments in 30 China: SmallTowns Develo~ment public provision of infrastructureservices and dis- Improving Infrastructure Efficiency cusses the new view of infrastructure provision which stresses privatesector provision. In the 1980s, public finance experts and econo- mistsbeganto seriouslyreassessargumentsfor the 'The prevailing wisdom over the years has been public provision of infrastructure services [Savas, that urbanservicesare best providedfor by local 1982and Roth, 19871. Engineers and economists governments [Bahl and Linn, 19921. Most eco- lookingat variousinfrastructuresystemsdiscovered nomic argumentsstress the fact that urbanpub- that government-provided infrastructure ser- licservicesarelargelynaturalmonopoliesandare vices were poorly planned and managed. Case subject to significant externalities. Some services studies revealed widespread inefficiency. Infra- such as water supply,wastewater collectionand structure service output is frequently lost. In- treatment, schools, and security are so impor- frastructure systems are poorly maintained, and tant and confer such significant public benefits infrastructure services are underpriced result- (often referred to as "merit goods") that they ing in fiscal drains for governmental units. Elec- shouldonly beprovidedfor bygovernment. Pub- trical power supply losses are typically two to lic infrastructure services are typically so ex- three times higher for poorly run public corpo- pensive that they are beyond the financial ca- rations than for the most efficient private cor- pacity of private businesses. Even if such sys- porations [World Bank, 19941. Water losses of- tems could be financed through tariffs, it may ten exceed 50 percent of water production in be difficult to exclude non-payers from using old poorly run municipal corporations. In Africa, them. These arguments haveprofoundlyshaped nearly one third of the roads built in the past 20 urbanpublic policiesaroundthe world and ledto years are now useless due to inadequate main- the proliferation of urban infrastructure ser- tenance. During the 1980s electrical power tar- vices during the late 1800s in Western Europe iffs in developing countries were sufficient to and North America and the current massive ex- cover only 60 percent of the actual costs of op- pansion of infrastructure in Asia and Latin erating new systems. America. Table 1 illustrates trends in infrastruc- ture coveragefor low-,middle-and high-income Over the past 15 years, studies of infrastruc- economies for 1975-1990. tureprovisionandmanagementindevelopingas well as developed countries have pinpointed widespread inefficiencies and poor quality ser- vice. The consensus view of infrastructure economists is that the widespread inefficiencies Theme Paper: An Overview of Private Sector Financingof UrbanInfrastructureServices 31 of infrastructure provisionindevelopingcountries concessions or long term servicelmanagement is the result of weak or inappropriate economic contracts [Kessides, 19931. Shifting infrastructure incentives builtintoexisting institutionaland orga- service provision responsibilities to private sector nizationalstructures.Extensiveinternationalexpe- firmshelpslocaland nationalgovernmentsto con- rience directed toward improving the efficiency serve scarce resources and to better target their of infrastructure service delivery suggests that re- limited resources on activities or services which forms should emphasize modifyingthe incentives only they can provide. which infrastructure managers face so as to en- hancetheir performance.Mostrecommendations Affructing Private Capitalto Infrastructure centeronintroducingcommercialprinciplesto in- Investment frastructure provisionand increasingcompetition between service providers [Kessides, 1993). Inresponseto restrictionsonlocaland centralgov- Privateprovisionof infrastructureservicesis an im- ernment indebtednesscentral and local govern- portantaspect of the overallreformof the sector. mentshave lookedtowards the privatesector for Privateprovisionof infrastructureintroduces com- infrastructureinvestmentcapital.Overthepastten mercialdisciplineintotheoperationandmanage- years, a multitude of new financing tools have ment of infrastructure services. Increased effi- been developed to attract and channel private ciency is due to a number of factors including: 1) funds into infrastructure projects. Private financ- clarity of objectives of the private operator; 2) ing of infrastructure service provision can be ac- managementautonomyof operator;3)account- complishedin a numberof ways including:1) ne- ability of operator to his investors; 4) provision of gotiated private contributions (developmentex- managerial incentives to operator; and 5) com- actions) where a private developer pays for the petitionfrom other firms or potentialoperators. infrastructuresystemsneededto support newde- velopment;2)formationofjoint ventures between public and private sectors to provide infrastruc- Conserving Scarce Public Sector Resources ture services; 3) contracting out of services (the contractor would then finance the purchase or During the 1970sand 1980s many OECD govern- leasing of equipment to provide the service); 4) ments became concernedabout their large and provision of long term leases or concessions; 5) growing budget deficits [Butler, 1985). Conse- privatization of infrastructure services; and 6) pri- quently, throughout the 1980s, a main emphasis vate commercialor bond-basedloanstogovern- of economic policywas to control public spend- ments or public utilities. ing and borrowing [OECD, 19911. With borrowing restricted, many subnational units of govern- Motivatedbyconcernsaboutinefficientinfrastruc- menthavenotbeenableto keeppacewithgrow- ture provision,the lack of public sector financial ing demands for infrastructure. Real, inflation resources, limitations on public sector borrowing adjusted, expenditures on infrastructure invest- and by changes in technology, financing meth- mentand maintenancehavefallendramatically. ods and institutionalpractices, the private provi- Giventhe lack of public sector capital to finance sion of infrastructureservicesis rapidly expanding and operate infrastructure,many local and cen- around theworld. Overthe past ten years private tral governments started transferring respon- sectorprovisionof infrastructureisgainingaccep- sibilities for infrastructure services from the tance and the share of urban services now pro- public to the private sector. For example, in the vided bythe privatesectorisincreasing.As of 1993, U.S. many cities have shifted solid waste col- private investment in developing country infra- lectionand managementto private sector firms. structure was averaging $15 billion per year. Pri- Insuch cases, localgovernmentsno longer need vate sector financing of all kinds currently ac- to allocate public funds to support the operation counts for about 7 percent of total infrastructure of solid waste management services [Savas, financingindevelopingcountries.Over$60billion 1982). Responsibilities for highway construc- dollars on BOT projects have been financed be- tion or transportation.has been shifted to pri- tween 1982 and 1995 [Public Works Financing, vate companies, through concessions and BOT 19931.During the next five years, the share of pri- (build-operate-transfer) systems [Gomez- vate sector financing is expected to increase to IbaAez and Meyer. 19931. In other cases, gov- 14percentof developingcountries' infrastructure ernments are shiftingoperatingresponsibilities for financing [WorldBank, 19941.The dramaticgrowth watersupplyandwastewatercollectionandtreat- in private sector financing reflectsthe increasing mentsystemsto privatefirms bygrantingsuchfirms attractivenessof such investmentsand the signifi- 32 China:Small Towns Develo~ment cant changes in institutionalenvironments which where privatedevelopersagreeto provideor pay permit such forms of financing. The public sector for infrastructure, they do so because the eco- benefits created by private sector financing of nomic benefits they gain from real estate devel- urbaninfrastructureservices isclear.The nextsec- opment exceed the costs of the new develop- tion looks at the privatesector benefits. ment. If the costs of development exactions are excessive or not commensuratewith the benefits Why the PrivateSector May BeWilling to of the project, developers will refuse to provide the services and not go forward. FinanceUrbanInfrastructuresServices There are essentially two conditionsunder which Specific Methodsand Approachesfor the privatesector may be willing to provide or fi- PrivateSector Financingof UrbanInfra- nanceurbaninfrastructureservices: 1) if itcanearn structure Services a profiton the provisionor financing; and 2) if the provisionor financingof the service isa condition This section providesan overviewof the principal for approvalof realestate development.If urban methodsused by centraland localgovernments service provision follows market principles, busi- to foster the privateprovisionand financingof ur- nesses may bewilling to finance urbaninfrastruc- ban infrastructure services. The techniques in- ture on purely commercial terms. Tariffs for infra- clude:landprivatization,developmentexactions, structureservices mustbe highenoughto provide special assessment and benefit assessment dis- adequate cashflows to cover operating and tricts, certificatesof participation,privatecontract- maintenancecosts, amortizecapital investments ingof services, leasesand concessions, BOT, pub- and providenet revenuesas a returnon invested lic privatepartnerships,theprivatizationof services, capital. Private investors are particularly con- commercial bank financing, infrastructure funds cerned with their rights to set and modify tariffs, and private bond financing. Each section de- the lengthof their contractsand the levelof com- scribesthetechnique,providesexamplesofwhere petitionthey are likelyto face. If these issues can it isusedand discusseskeyimplementationissues. besatisfactorilyaddressed,governments cansuc- cessfully attract private firms to provide and op- erate urbaninfrastructureservices.There are now Land Privatization many examples of companies around the world who are interestedin providing urbanservices to Manylocalgovernments,whether theyareintran- citiesandlocalgovernments-solid waste collec- sitionor marketeconomies,relyonthesaleor long- tion, electricity, water supply, wastewater collec- term lease of government land to finance infra- tionand treatment, telephoneservices,roads,air- structure provision. Most of China's larger cities ports, etc. [Kessides,19931. have considerable experience in selling the de- velopment and use rights to urban land parcels Beyond contractingout, offering operating con- [Dowall, 19931. In most cases, local governments cessions, structuring joint ventures or privatizing identifytheir landresourcesand packagesites for services,localgovernmentsfrequentlyrequirethe competitivetender.Developersbidfor sitesbased privatesector to provideurbaninfrastructureas a on their developmentpotential,location,market- condition for gaining development approval abilityandrequirementsfor infrastructureprovision. [Altschuler and Gomez-lbafiez, 19931. Even if ur- Payments for land-use rights are frequently paid banservicesare not providedfor ona profit-mak- "up-front," so that the local government can use ingbasis,realestatedevelopment companiesare the proceedsto financeneededinfrastructurein- willing to provide such services if they are a con- vestments. In some cases, bidders for sites make dition of project approval. In many countries, lo- bidswhichincludebothcash paymentsandcom- cal governments require that developers pay or mitmentsbythe biddersto buildspecificinfrastruc- directly provide urban infrastructure services ture facilities [World Bank, 19941. A major advan- as a condition of project approval. For example, tage of using land privatization to finance infra- developers have been required to provide road structureis thatitallowsgovernmentto retaincon- improvements,constructsubway stations, payur- trol of the operation and management of local banservicefeesorexactionsas partof the project infrastructuresystems.Landprivatizationis likelyto approval process.In some instances when a pri- be highly marketablein high growth areas. vate sector firm is purchasingland from the gov- ernment. infrastructureprovisionisincludedas part 'The municipalsale of land and/or land use rights of the compensation for the land. In all cases is commonplace all over the world. Transactions have beenregisteredinShanghai, Tianjin, Beijing, Theme Pa~er:An Overview of PrivateSector Financingof UrbanInfrastructureServices 33 Guangzhou and Fuzhou in China. Land Great care is taken to ensurethat the new devel- privatizationiscommoninHongKong,Singapore, opmentwill payitsownway, andthat existingresi- and Seoul as well as in NorthAmerica and West- dents not be forced to subsidize infrastructurein- ern Europe. Former socialist countries in Central vestments neededfor new development. and Eastern Europeare experimentingwith land privatization, and numerous demonstration A wide range of development impact fees are projectshavebeensuccessfullycarriedoutinRus- used in the U.S. A survey by Purdum and Frank sia, Ukraine,Hungary,Polandand Bulgaria.The fi- [1987],found that exactions are leviedfor the fol- nancial potential of using land sales to finance lowing urban services: police and fire stations, infrastructure is enormous. In Guangzhou during parks,roads,schools,water lines,water treatment the 1980s, over $120,000,000 worth of infrastruc- facilities, sewerage collection and treatment fa- ture was financed by real estate development cilities, solid waste collection and disposal, and corporations [Dowall, 19931. affordablehousing.'The actualpaymentmadeby the developeris either basedon a formula (using Landsales arecomplextransactionwhichrequire an impact fee calculation) or through negotia- considerable technical skill to successfully com- tion. A 1991survey of impact fees and exactions pleted. Most cities start by preparing a land in 100 U.S. cities (mostlyCalifornia]indicates that privatization strategy which is based on a urban fees for new housing averaged $12,000 per unit developmentprogram,inventoryandselectionof and $54to $76per square meter for commercial sites, a step-by-stepprocessof soliciting, evaluat- buildings [Nicholasand Pappas, 19911. Exactions ingandnegotiationof bids.Landprivatizationpro- ranged between 5 to 10 percent of total devel- grams typically require about one to three years opment costs. to complete and requireexpertise in urbanland- use planning, site evaluation, real estate market A critical consideration in designing and imple- and financial analysis and law [Dowall, 19911. mentingdevelopmentimpactfeesiswhether they While these skills are frequently available in large are reasonable and whether the developer can metropolitanareas, they may be lacking insmall afford to pay them. In a market economy, the towns. Staff training will be critical to ensure answers to these questions are complex and de- successful land privatization outcomes. pend on the incidenceof the impact fees- that is, who ultimately pays them, the developer, the Development Exactions buyer or renter of the new facilities or the land owner. If the developer knows that he must pay thefee, hewill typicallytry to pay lessfor the land, ManylocalgovernmentsinNorthAmerica usede- and the incidence may fall on the land seller. If velopmentexactionsto financeinfrastructurede- the developer can't get a reductionin the price velopment.The surge in the use of exactions can of the land,then hewill try to pushthe cost on to belargelyexplainedbyrisingconcernsonthepart the purchaser of the new units. If this can't be of citizens that growth pay its own way, growing done, then the developerwill earn a lower profit. environmentalismanddemandsfor costlymitiga- Incentrally planned economies with land owner- tion of adverseenvironmentalimpacts,citizenre- ship vested with the state, the incidence of de- sistance to new taxes, cutbacks in federal aid to velopment impactfees andchargesmaybemore localgovernments,growing concernsabout lag- directly linked to the land and therefore the use ginginfrastructureand theincreasedusageof fis- of land privatization and development exaction cal impact assessment to measure the probable methods of infrastructure financing should be fiscal consequences of new urbandevelopment closelycoordinated.The mainconcern aboutus- [Altschuler and Gomez-lbariez, 19931. ingdevelopmentfeesand charges is not to try to overload the developer with too many fees and 'Themostcommonformof developmentexaction charges. If the fees aretoo high, it maybe impos- is the levying of impact fees or charges on new sible for developers to profitability build and sell development.'The typicalpractice is for the man- projects. Researchon residential redevelopment dated exactions to be paid by the developer as projectsinlargeChinesecitiesclearlyillustratesthe a condition for receiving a permit for develop- problems associatedwith trying to levy very high ment.Exactionsmay befinancialor in-kind.Inthe exactions [Dowall, 19941 U.S. local governmentsset these fees or charges inrelationto the actualinfrastructureimpact that a newprojectwill imposeoninfrastructuresystems. 34 China:SmallTowns Develo~ment Asignificantadvantageof usingdevelopmentex- Certificatesof Participation actions is that they do not require the surrender of government control of infrastructure service Some forms of infrastructuresuch as buses, trains, provision to the private sector. The government small power plants and other forms of infrastruc- merely has to adopt a programof development ture which are suitable for collateral can be fi- exactions.The fees can be collected up-front or nanced by leasing arrangements. Private inves- they can be combined with developer-initiated tors purchasecertificatesof participationor equip- speciallbenefit assessment districts. ment trust certificates- financial instruments backed by physical assets. Ownership of the in- 'The economic and financial analysis required to frastructure is held by a trustee as collateral,and design development impact fees and exactions the user makes lease paymentswhich in turn are is relativelycomplex.Small towns and villageswill used to pay debt service. At the end of the lease requiresignificant technicalassistance and train- period, the infrastructure is transferred to the in- ing.Modelordinancesand methodsfor potential frastructureoperator. application should be developed. Certificates of participation methods are well Developer-InitiatedSpeckllBenefit suited for financing small infrastructure elements Assessment Districts where local governments are allowed to negoti- ate long-term leases. This may not be the case in China. Legal and financial research is neces- A numberof localgovernmentsaroundtheworld sary. Legal and financial expertise is required have developed programs of special or benefit to negotiateacceptableleaseagreementsshould assessment districts to finance the provisionof in- they be permitted. frastructure [Porter, et. a/;, 19921. Usually ini- tiated by real estate developers, a district is formed (usually an area which is coterminous Private Contractingfor Services with a newrealestatedevelopmentproject)and the land and propertywithin the district is taxed The previouslydescribedmechanismsfor privately to finance durable infrastructure investments. financing urban infrastructure services are ones While special assessment district are quasi-gov- which allow the government to continue to ac- ernmental entities, in economic terms they are tively operate and manageservice provision.Pri- very close to being private interest entities- vate contracting of services shifts the day-to-day property owners or lessors make payments to responsibilitiesfor service provision on to private retire debt borrowed to finance infrastructure contractors.Manylocalgovernmentsaround the improvements. Such districts are very common world have begun to contract infrastructure ser- in the United States. In California, Mello-Roos vices out to privatecompanies.Itis foundto be a Districts, created in 1982 are used by private flexible and cost-effectivetool for increasing the developers to establish small taxing districts quality and user-responsivenessofservices.Insuch which require future owners or lessors of land casesthe governmentoffers, byway of competi- to pay for infrastructure improvements [Beatty, tive bidding,therightto providethe citywithsome et. a/., 19951 defined service.'The privatecontractor is given a right to exclusively provide the service for a fixed Managementcontrolandoperationof infrastruc- period and is allowed to levy charges for such ture systems remains with the local government. services. Cities usually require developers to establish dis- tricts as a condition for development approval. AccordingtotheWorld Bank,therearethreetypes Creating such districts will require enabling leg- of contracts- performance agreements, man- islation and careful financial analysis to deter- agement contractsand contractingout.The type mine assessment amounts and schedule of pay- which should be used depends on the infrastruc- ment.Insmall towns financialand legalexpertise ture activityand the specific objective or goal of may not be available, requiring technical assis- contracting. If contracting is being used as a ve- tance and training. hicleto finance newor expanded services, oper- ating contracts which specify services to be pro- vided, tariffs to be collected and periods of per- formance maybeappropriate.Toensurethat per- formance levelsaremaintainedandthat usersget valuefor money,contractsshould beperiodically Theme Paper:An Overview of PrivateS,ectorFinancingof UrbanInfrastructureServices 35 reviewed. By stipulating that agreements will be maintainan existingwater supply system, undera periodicallyreviewed,contractors will face com- concession, the contractor would be requiredto petitive pressure from potential bidders to main- provide specified extensions and expansions or tainlowpricesandhighqualityof service (Baumol, replacements of a water supply system [Triche, Panzer and Willig, 19881. MejiaandIdelovitch,19931.Concessionsarrange- ments are used to provide urban transportation, A major factor which will determine the relative water supplyandwastewatercollectionandtreat- success of contracting out is whether tariffs for ment, and telecommunications. servicesareadequateto providea returnof costs and leave the contractor with an appropriate As inthe caseof contractingout, leasesand con- profit. If government-set rates are too low, few cessions are very complex transactions to effec- contractorswill bewillingto bidto provideservices. tively structure. Small towns and villages are un- Iftariffs arenotincreasedto adequate levels,gov- likelyto havethe professionalexpertisenecessary ernments may have to subsidize the costs of ser- to design and negote such transactions. Again, vice provision in order to attract contractors. Ex- extensive technical assistance and training will periencewith the contractingout of bus services be neededto implementleasesand concessions. in developingand developed countriessuggests that the efficiencygainsfromcontractingout are Build Operate and Transfer (0073 greatestwhen services are not subsidizedbygov- ernment [Meyerand Gomez-lbafiez,19931. 'The BOTapproach isstartingto bewidely usedto privatelyfinance the provisionof urbaninfrastruc- Designing and implementing a contracting out ture. According to Public Works Financing, ap- programishighly complex.Smallcitiesand towns proximately 150infrastructureprojectsworldwide lack adequate economic, technical, financial had been funded up to 1993, and another 360 andlegalexpertise.Technicalassistance, training projects were in the pipeline worldwide. The and the preparation of demonstration projects funded projects have a combined value of $63 would be appropriate. billion. The pipeline projects have an estimated valueof $235billion[PublicWorksFinancing, 19931. Leases and Concessions BOT is a form of concession,where a privateen- SurveysbytheWorldbankindicatethatleasesand tity enters into a contract with the governmentor concessions for infrastructure are increasingly theutilityto constructan infrastructurefacility and commonindeveloping[Worldbank, 19941.Thirty- operateitfor a fixed periodof time (15to 25years sevencountrieshave beenidentifiedasusingleas- is common). During this period, the contractor ing and concessions as a means of infrastructure collects user charges and fees from users of the provision. Leases and concessions differ from facility .'The design of the facility, the term of the simpleservicecontractsinthat they arefor longer operating period and the user tariffs and escala- periods and typically require a large financial tions, andwhat constitutesan acceptable return commitmenton the partof the operator. Undera oninvestedcapital (usually15-20percent)arepart lease, the government typically provides capital of the negotiated BOT agreement. BOT projects facilities and the contractoroperates the equip- aredevelopedby largeprivatecorporationswith ment.Theoperator paysthe localgovernmentor experience in the provision of specific infrastruc- public utility a fee for usingthe equipment and it turefacilities (electricpower,roads,transitsystems has the exclusive right over the contract period andwater andwastewaterfacilities).BOTprojects to collect the revenuestream (fromuser tariffs).In are typically financed with a combination of eq- France, leases have been used for decades for uity (thecompany investingin the project puts in providingwater supply to urbanareas. Other de- its own capital) and long-term private debt veloping countries have alsostarting using leases [Augenblickand Custer, 19901. for privateprovisionof water supply. StructuringBOTagreementsisextremely complex. Concessionsaresimilar to leasesand incorporate Experiencewith projectsrevealsthat it is betterto allof the same elementsbut placemorefinancial start with smaller less complex and risky projects. responsibilities on the contractorto provide addi- However, the transaction costs for putting BOT tional infrastructure investments. Whereas in the projectstogether is very highand relativelyinsen- case of lease. the contractorwould operate and sitivetoprojectscale.Thereforevery smallprojects may not be financiallyfeasiblefor BOTfinancing. 36 China:SmallTowns Development For large projects, the risks are many and varied. cation and professional expertise to effectively Delays and cost overruns are common and will perform the duties of a partner.Small towns may impact tariff structures and operating terms. Re- lack theprofessionalskillsand thereforetechnical cent controversiesin India and Thailand spotlight assistance and trainingwill berequiredto help lo- the complexity and highstakes that big highpro- calitiesstructurepublic-privateinfrastructurepart- fileprojectstakeon.Itisof paramountimportance nerships. thatthe underlyingBOTcontractenforceableand clear. Provisionsare needed for dealingwith dis- Privatization of Infrastructure Services putes. Some contracts rely on internationalarbi- tration, usingthird party bodiesto referee claims. Somecontractsusethe lawsof a third partycoun- An obvious option for financing urban infrastruc- try. Forexamplea BOTprojectbetweenanIndian turesystemsis to privatizeexistingservicesthrough and Germanfirm might use Englishlaw to deter- divestiture.Underthis approach,infrastructuresys- mine contract provisions. tems are transferred to private entities. The pro- cess usually entails packaging systems for sale Attempting to introduce BOT financing into throughcompetitivetender.Priorto tendering, the China's small towns and villages may be diffi- preciserightsand obligationsof the privateentity cult given the extreme complexity of the trans- is defined,includingthescopeofservices,theright action. Also given the high transaction costs as- to set tariffs (usuallyregulated by a utilities com- sociated with BOT financing, it may be difficult mission), and obligations to provide services to to structure projects in small towns. Given these customers in the service area [Kessides, 19931. limitations it may be more fruitful to look at Care must be taken to ensure that private enti- regionalapproachesto BOTprojectswhich could ties do not exclude unprofitable routes or sub- be carried out at the Provincialor subprovincial systems from service, that they provide an ad- level. equate level of service and that rates reflect actual costs of service and providethe operator with an adequate return on invested capital. Di- Public Private Partnerships for Infrasfructure vestiture activities have increased dramatically Provisions over the last ten years. Evaluations of many of these privatizations suggest that substantial ef- Another approachto attractingprivatecapitalto ficiency gains result from divestiture. Obvi- finance infrastructuredevelopmentisto formnew ously, divestiture frees up considerable public corporations or utilities to provide infrastructure sector financial resources once infrastructure services. Instead of using leases, concessions or services are shifted off the public budget. Be- BOT methods, a local government would form a tween 1988 and 1992, infrastructure corporationwith privateinvestors.The local gov- privatization proceeds generated $21 billion in ernment would typically contribute land, existing developing countries [Sader, 19931. infrastructuresystem and/or cash to the partner- ship.The privatepartnerwould bringexpertiseand Privatizing public infrastructure systems re- capital on the enterprise. The partnershipagree- quires careful and extensive financial and tech- ments specifically define the roles of the public nical analysis. In most cases, governments have and private sector partners.The agreement pro- retainedindependentexpertiseto packageinfra- vides a frameworkfor financingoperations, capi- structuresystemsfor privatization.Oncethedives- tal investmentsand sharinginthe cashflowof the titure has taken place, professionalburdens are project. significantlyreduced and are generally limitedto public utility oversight and regulation. LocalgovernmentsinNorthAmerica haveestab- lished numerous partnerships to build and oper- Tapping Commercial Banks ateinfrastructuresystems [NationalLeagueof Cit- ies, 19871. Parking structures are commonly built Largeprivateinfrastructureservice providerstypi- andoperatedbypartnershipsasarerailwaycom- cally have direct connections with private com- panies,andhotelsand visitor centers. Partnerships mercial banks. If local governments can attract provide the public sector with more active con- these large enterprises to purchase, lease or op- trol of the infrastructureactivity thanwould often erateinfrastructuresystems, thenaccessto private be the casewith long-termleases,concessionsor commercialcredit should not be difficult. On the BOTprojects.They requirea high levelof sophisti- other hand,commercialbanksare lessinterested 'Theme Paper:An Overview of Private Sector Financingof Urban lnfrastructureServices 37 in lendingdirectly to municipalities (orif they are stitutional investors.They spread risks by investing willing it is usually for short time periods).To help in a range of projects across a number of coun- developing country local governments attract tries. A major barrier to the expansion of private privatecapital,multilateralandbilateralagencies capital into infrastructure financing is the lack of have developed loan guarantee programs. If information and institutional frameworks to sup- commerciallendersareprovidedwithguarantees port high-value long-term investments. of repayment,they may bewilling to make long- term loans to localgovernmentsand parastatals. Private Bonds The Government of Thailand has recently estab- lisheda loanguaranteeprogramfor 10cities.The guarantee facility will initiallystart with $75million If countries have functioning bond markets, insti- and itwill lendbetween5and8 times this amount tutional investors such as insurance companies to municipalities. Eventually the program is ex- and pension funds can be tapped to finance in- pected to leverage up to $1.2 billion in loans for frastructure projects. Revenue bonds, which are water supply, wastewater collection and treat- used to finance new projects, use the cashflow ment and other environment-relatedinfrastruc- from infrastructureoperationsto pay interestand ture projects [World Bank. 19941. return advanced capital to bond holders. They have been used to finance toll roads in Mexico anda power plant in the Philippines.As domestic Tofully exploitfundingopportunities,localgovern- stock and bond marketsevolve,itwill beeasier to ments will need to tap both domestic as well as tap domestic savings. Bond markets are well-es- foreignsourcesof capital.Giventheenormousde- tablished in OECD countries and they play a sig- mands for infrastructure in China and other de- nificant role in financing municipalinfrastructure velopingcountries,itisclear thatdomestic sources projects.Insome cases, bonds are issuedfor spe- of funding must bedeveloped.A transitionalstep is to develop nationallevelinfrastructurebanksto cific projects.Inothers, a poolof bondsareissued to cover several projects, which may be located mobilize domestic savings and channel funds to- in more than onejurisdiction. wardinfrastructureproiects.InJapan,for example, the Japan ~evelo~mentBank has tapped po.stal savings accounts to provide long-termfinancing Prognosisfor Increasing PrivateSector for infrastructure development. Municipal banks Financingof lnfrastructure inEuropehavealsosuccessfullymobilizedsavings and used these funds to finance infrastructure Over the past five years private sector financing projects. There is less experience in developing of infrastructure projects has dramatically in- countries, but India's new lnfrastructure Leas- creased.Severalstructural changes suggest that ing and Financial Services Corporation and its these trends will continue and likely accelerate. moretraditional Housingand UrbanDevelopment Firstandforemost,the demandfor financingcapi- Corporation are working to sell their municipal talisenormousandwill continueto growindevel- loans to private financial institutions once mu- oping countries, particularly Asia, requiring that nicipal borrowers establish adequate credit his- privatesources of capital betapped.Second, the tories [World Bank, 1994. capacity and willingness of governments to fund infrastructurethrough centralgovernment grants or loans is declining,and local governmentsand lnfrasfrucfure Funds utilitiesneedto developalternativesourcesof pri- vate capital. 'Third, infrastructure operators are Several developing countries have established underincreasingpressureto operatesystems ac- government-sponsored infrastructure funds to cording to commercial principles and such generate equity capital to finance infrastructure changes will make infrastructure project attrac- projects. Typically, governments advance funds tive opportunitiesfor financing and lending. in order to attract private capital. Pakistan and Jamaica have both established funds to support The rate of increase in private sector infrastruc- energy-related infrastructure. Indonesia has set ture financingwill greatly depend on howquickly. upa RegionalDevelopmentAgency to handlethe institutional environmentsdevelop and adapt to transition from grant to debt-funded local infra- therequirementsof privatelenders.Suchchanges structureprojects [WorldBank, 19941.Privatefunds are required in the administrativecapacity of in- have recently started to operate internationally. frastructure and economic development institu- Thesefunds tap pensionfunds and other largein- tionsandindomestic capitalmarkets.Initialfinanc- ing by the private sector have been on-off 38 China:SmallTowns Development projects,usingproject-financetechniqueslikeBOT. National League of Cities [I9871Financing Infrastructure: Inthe nextstage, countriestypically establishspe- Innovations at the Local Level. Washington, D.C.: The NationalLeagueof Cities. cialized infrastructure financing institutions and reformcommercialbankswhich thenstart to fund Nicholas, James C. and Geoff Pappas [I9911"lmpact Fees infrastnrctureprojects.Inthelaststage,institutional on the Rise Again," Growth Management Studies Newsletter, Vol. 6,July. and individualinvestorspurchasebondsor stocks which are traded on domestic stock and bond Organization of Economic Cooperation and Development markets. [ l 9911 UrbanInfrastructure:FinanceandManagement.Pans: OECD. References Porter, DouglasR., Ben C. Lin,Susan Jakubiak and RichardB. Peiser (19921Special Districts: A Useful Technique for FinancingInfrastructure,Second Edition.Washington, D.C.: Altschuler,AlanA.andJoseA.Gomez-lbafiez[I9931Regulation The UrbanLandInstitute. for Revenue: The PoliticalEconomyof Landuse Exactions. Washington, D.C. The BrookingsInstitution. Public Works Financing. [19931. Augenblick, MarkandB.ScottCuster[l9901"TheBuild,Operate Purdum, ElizabethD. a ~ James E. Frank [I9871"Community d and Transfer ("BOT")Approach to lnfrastructureServices Use of Exactions: Results of a National Survey," in James Projects in Developing Countries," Working Paper 498, E. FrankandRobertM.Rhodes,eds.DevelopmentExactions. lnfrastructure and Urban Development Department. Chicago: Planners Press. Washington. D.C.: 'The World Bank. Roth, Gabriel [I9871 The Private Provision of Public Bahl.RoyW. and JohannesF. Linn (19921UrbanPublicFinance Services in Developing Countries. Washington, D. C.: in Developing Countries. New York: Oxford University Economic Development Institute Series in Economic Press. Development. Baumol, William J. John C. Panzar and Robert D. Willig [I9881 Sader, Frank 119931 "Privatization and Foreign Investment ContestableMarkets and the Theory of Industry Structure. in the Developing World, 1988-1992,"Policy Research Son Diego: Harcourt,Brace Jovanovich. Working Paper 1202. Washington. D.C.: World Bank InternationalEconomics Department. Beatty, David F., et. al. [I9951Redevelopmentin California, Second Edition. Point Arena, California: Solano Press Savas, E. S. 119821 Privatizing the Public Sector: How to Books. ShrinkGovernment.Chatham.NewJersey:Chatham House Publishers. Butler, Stuart [I9851 Privatizing Federal Spending: A Strategy to Eliminate the Deficit. New York: Universe Triche, Thelma, Abel Mejia and Emanuel ldelovitch [I9931 Books. "Ananging Concessions for Water Supply and Sewerage Services: Lessons Learned from Buenos Aires and Courtney, John [I9951"Urbanization Issues in China: The Caracas," !nfrastructure Notes WS-10. Washington, D.C.: Role of Small Towns in Regional Development," Paper The World Bank. presentedat TheSustainableCitiesConference:Hangzhou. China. The World Bank [I9941 World Development Report 1994: lnfrastructure for Development. Washington, D.C. The Dowall, David E. [I9941 "Urban Residential Redevelopment World Bank. in the People's Republic of China," Urban Studies, Vol. 31,NO. 9,pp. 1497-1516. The World Bank [l9931China: UrbanLandmanagementinan Emerging Market Economy. Washington, D.C.: The World Dowall, David E. [I9931 "Establishing Urban Land Markets in Bank. the People's Republic of China," Journal of the American Planning Association, Vol. 59,No. 2,Spring 1993,pp. 182-192. Dowall, D.E. 119901 "Public Real Estate Development:A New Role for Planners," Journal of the American Planning Association, Vol. 56,No. 4.,pp. 504-512. Gomez-lbafiez, Jose A. and John R, Meyer [I9931Going Private: The International Experience with Transport Privatization. Washington, D.C. The Brookings Institution. Kessides, Christine [I9931 "Institutional Options for the David E. Dowall Provision of Infrastructure," World Bank Discussion Paper Professorof City and RegionalPlanning Number 212.Washington. D.C.: The World Bank. Universityof Californiaat Berkeley Outsidethe LargeCities;What Rolefor Smaller UrbanCentres?' DavidSatterthwaite ost books, articles and research reports 'This paper will consider the importance of small about urban issues in the South are and intermediate urbancentres bothfor their in- about capital cities or largecities. Most habitants and for their surrounding rural popula- of the concern expressed about urban problems tions. Itwill discuss howandwhy they developed. is for large cities. But only a small proportion of It will also discuss how governments can best de- the populationintheSouth liveinlargecities- see vise a special programme for such centres and Table 1. Infact, far morepeopledepend onwhat the links that must be forged with rural and agri- can be termed 'small and intermediate urban culturaldevelopment. The biasesagainst smaller centres' than on large cities. Either they live urban centres in government'smacro-economic in small- and intermediate-sizedurban centres and pricing policieswill also be described as will or they live in rural areas but depend on these the costs of improving basic service provision. So urban centres for shops, markets, and services. The South's Urban Population in 1990 Total Numberof Percent of total population Urban Urban (millions) Agglomerations Population 10million plus inhabitants 98.5 8. 6.9 5 - 9.99 millioninhabitants 113.3 15 7.9 1-4.99 millioninhabitants 280.2 148 19.5 Less than one million 943.5 c. 30,000 65.7 Total urbanpopulation 1,435.5 100.0 Based on data in United Nations. World Urbanization Prospects: the 1994 Revision, Population Division, New York, 1995. Table 1 39 40 China: SmallTowns Development too will the possible role of small and intermedi- instancetourism, mining,or timber. Othersdevel- ateurbancentresinhelpingto controlthegrowth oped becausethey were well located close to a of large cities. metropolitancentreand becamefavouredloca- tionsfor newindustrial,commercialorrecreational In this paper, the term 'small and intermediate enterprises linked to that metropolitan centre. urban centre' will be used to include all urban Others developed because their location was centresexcept for nationalcapitals and for other judged to betherightplaceto develop 'defence' urbancentreswhich haveconcentrationsof eco- industries. Some examplesof the factors under- nomicactivitieswhich areof nationalimportance. lyingthe developmentof different urbancentres This rather loose definitionis chosen deliberately, aregiveninBox 1. lsmailiainEgyptwouldnot have since this paperwants to stressthe importanceof developed into an urban centre of more than considering urban centres within their national 200,000 inhabitantsif theSuezCanalhadnotbeen context. Inaddition, this is not to imply that there built. The concentration of industry in Rae Bareli are necessarilysimilarities in different urban cen- inlndiaowesfar moreto thefact that itwas inthe tres categorized as 'small' or 'intermediate'. parliamentaryconstituencyof thelateMrs.Gandhi when she was Prime Minister than it does to any inherentadvantage the urbancentreoffers to in- 'The Uniquenessof Each Centre dustries. Pereira'sdevelopmentwas muchhelped Governments and aid agencies have become bythe prosperousfarmers livingnearby. Owerriin moreinterestedin 'smalland intermediateurban Nigeriawould be far smaller and less prominentif centres'. This is usually because they hope that it had not been chosen as capital of a new state these centres will take some of the pressure off in 1976. the large cities. There are many special govern- ment programmesfor small and intermediateur- The histories of different smait and intermedi- bancentres. Buttheirsuccesswill depend largely ate urban centres reveal the complex mix of lo- on whether they help develop untapped poten- caland regionalfactors--andoftennationaland tial or under-utilizedresourceswithin these urban internationalfactors--which influenced their de- centres. There is no point in encouragingthe de- velopment. In regions with long histories of velopment of tourism or industry in urban centres settledpopulationandof commercialagriculture, which have little potentialto attract tourists or in- urban centres usually have long histories. For dustries. example, lndiahasalways beena predominantly rural nation and yet most of its urban centres It is not easy to identify the urban centres with have long histories. While India's urban popula- potential and ascertain the government actions tion increased more than 500 percent between needed to release this potential. The main rea- 1901 and 1981, the number of urban centres son is the uniqueness of each urban centre--soa increased by only 77 percent; since very few government programme to develop one urban urban centres decline to the point where they centre may be totally inappropriate for others. lose their status as 'urban centres'. this sug- Historicalstudiesshowthe phenomenallyrichand gests that most existing urban centres in lndia diverse set of reasons for the developmentof dif- were also urban centres in 1901.2 In fact, in ferent urban centres. many regions, a very high proportion of urban centres actually have histories which are cen- turies old.3 Manyurbancentresfirstdevelopedbecausethey were chosenas centresfor provincialorstategov- In most nations, there is often a surprising de- ' ernment or centres of military control. Others de- gree of similarity between a list of today's ur- veloped because new businesses developed ban centres and a list of administrative centres therelinkedto prosperouscommercialagriculture foundedmanydecadesorevencenturiesago.Box nearby or to the demand for goods and services 2 give some examples. generated by those earning an income in agri- culture. Some urban centresdeveloped as road Of course, there are many new urban centres or railtransport centres; others because they be- in regions being settled for the first time. Many came the constituency of a prominent politician areas have been settled in the last 40-50 years who steered publicinvestmentsand public enter- which were previously either uninhabited or prisesthere; andothers becauseenterprises there sparsely populated; the search for new farm- successfully exploited one specialized niche in a land and pasture, timber and minerals has usu- regional, national or international market--for ally been the reason. Many governments have Theme Paper: Outsidethe LargeCities: What RoleforSmaller UrbanCentres? 41 Examplesof Influenceson the choice as capitalof a newlydesignatedprov- Developmentof Some Urban Cenfres ince in the midSixties. These and the fact that ISMAII-IA(Egypt):With around 175,000inhabit- it was on the crossroads for the highways link- antsin 1975,it had beenestablishedsome 100 ing the region to Colombia's three largest ur- years earlier as the headquarters for the Suez ban centres explain its growth to become the Canal Authorities when Egypt was under Brit- region's largest urban centre. In 1951, it had ish rule.'The Suez Canal Authority remains the 76,262 inhabitants but by 1985, there were largestemployerwhilesmallscaleshipbuilding, 328,000, including nearly 96,000 in Dos lightmanufacturingand service industriesalso Quebradas, a separate municipality which provideemployment. developed next to Pereira, across the Otun river. OWERRI (Imo State, southeast Nigeria): with some 9,331 inhabitants in 1953 and 90,000 in RAE BARELI (India):Withover 90,000inhabitants the late Seventies, the modern urban centre by 1981, this has become an important indus- datesfrom 1901when the colonial(British)gov- trialcentreanda commercialandservicecen- ernment established a small militaryladminis- tre for its region. Itowed its early development trative headquarters there. Much of its early to selection as a district headquarters and a development related to the locationthere of centrefor the colonialarmy under Britishrulein public services and facilities--a native court, the mid-19thcentury.Itwas a stationon oneof government station, barracks, prison, school. the earlier railway lines. But it remained a rela- It became a provincial headquarters in 1914 tively poor, small urban centre, reflecting the butwas bypassedby the railway; other urban poverty of most farmers in its region. With just centresnearbydevelopedstrongereconomic under 17,000 inhabitants in 1901, it grew vefy bases. The residency and consulate of the slowly andstillhadunder30,000 inhabitantsby Province moved to Port Harcourt in 1927. But 1961.Butduringtheseventies,itattracted some with the creation of Imo State in 1976, many large government-owned industries which civil servants, professionals and traders came meantanunprecedentedexpansionanddiver- to Owerrisince itwas chosenas the newstate sificationof its economy.'The mainreasonwhy capital. It became the centre for numerous government-owned industries set up there state and Federal government departments, was that it was the main urban centre within parastatal organizations and corporations. the parliamentary constituency of the late Mrs. Gandhi who at that time was the Prime PEREIRA (Colombia): With 328,000 inhab- Minister of India. itants in 1985, it was founded by a group of entrepreneurs in the mid-19th century in SOURCES: Forbes Davidson, 'Ismailia: from what was then an inhospitablejungle. At that masterplan to implementation', Third World Planning time, forests in the region around it were Review Volume 3, No 2. May 1981; Geoffrey I. being cleared by thousands of settlers and Nwaka, 'Owerri. development of a Nigerian state capital', Third World Planning Review Volume 2, No 2, with richvolcanic soil, cocoa, sugarcane and Autumn 1980: Julio D. Davila. 'City profile: Pereira- coffee became the dominant crops. As cof- Dos Quebradas' in Cities Volume 5, No 1. February fee becamethedominantexportof Colombia, 1988: and Harikesh Misra, Chapter 5 in Jorge E. the region around Pereira grew rich. Pereira Hardoy and David Satterthwaite (Editors),Small and Intermediate Urban Centres: Their Role in Regionaland shared this prosperity with a booming com- NationalDevelopmentin the Third World, Hodder and merce and agro-industryand local businesses Stoughton (Europe)and Westview (USA), 1986. re-invested their profits in such industries as textiles, clothing and electrical equipment. A further boost to its development was its Box I sponsored such colonizations but there is usually and Ecuador,inAmazonia andinsouthernNepal anadditionalspontaneousanduncontrolledcolo- (inthe Terairegion),and inmany partsof Indone- nizationmovementwhich may be larger than of- sia and Malaysia.Some of the most rapidlygrow- ficialprogrammes. Examplesofsettlement inpre- ingcitiesoverthe last30-40years are those which viously uninhabited or sparsely inhabitedregions grew as administrative,service or processingcen- are evident in the easternregions of Peru, Bolivia tres in these newlysettled areas. 42 China: SmallTowns Develo~ment Similarities Between Contemporary Urban EASTAFRICA:Virtually every urbancentrewhich Centres and Old Administrative Centres had 20,000 or more inhabitants by the mid-sev- entieshad beenan established colonialadmin- LATINAMERICA: Most nationaland provincial istrative station by 1910. The size, location and capitals were founded under colonial rule - distributionof urbancentresin EastAfrica today including all ten of today's largest citieslmet- is almost entirely the product of Britishand Ger- ropolitan centres, all of which were founded mandecisionmakingpriorto the FirstWorld War. by the year 1580 (MexicoCity,Sao Paulo, Rio InTanzania, 17of the 18urbancentreswith 20,000 de Janeiro, Buenos Aires, Bogota, Lima, ormoreinhabitantswereoriginallycolonialtown- Santiago,Caracas,Guadalajara,Monterrey]. ships; 12of themwere on the railway linesdevel- All national capitals in the 20 Latin American oped undercolonialruleto transportcashcrops nationsand in Jamaica and Trinidad and To- to portsfor export. bagoarecolonialfoundationswith theexcep- tion of the capital of Brazil. Thirteen were TWO REGIONS IN INDIA: In three districts in founded inthe 16thcentury (althoughMexico Karnataka state which have urbanized rapidly Cityhadanindigenousprecedent),two inthe in the last 70 years (Bangalore, Mysore and 17thcentury,five in the 18thcentury and one Mandya), virtually all urban centres had been in the 20th century. With two exceptions the administrative centres set up by the British (Brasiliaand Quito),theyaretheir nations'larg- colonialgovernmentinthemid 19thcentury. The est urban centre. All national capitals which two mostimportantadministrativecentresestab- were founded duringthe colonialperiodwere lished bythe Britishinthe 19thcentury are much important administrative centres under colo- the largesturbancentrestoday. Inthree districts nial rule as sites of Viceroyalties (MexicoCity, inUttar Pradeshstate,whichhavenot urbanized Lima, BuenosAires and Bogota)in the 16thto rapidly (Rae Bareli,Sultanpur and Pratapgarh), the 18thcentury and/or sites of regionallegal the three largest urbancentres today were the courts (audiencias)and headquartersof uni- only militarycantonments,the onlydistrict head- versities. quarters and the first municipalitiesunder colo- nial rule in the 19th century. Most other urban NORTH AFRICA: The basic outline of cur- centres are also subdistrict headquartersdesig- rent urban patterns was established during nated as such in the 19thcentury. the colonial period. The colonial extractive economies, which were well established in SOURCES: Janet Abu-Lughod, chapter on 'Urt~anizotionin the 19th century, tended to concentrate ur- North Africa' in B.L.J.Berry (Editor), Patterns of ban development in port cities - reviving old Urbanizationand Counter-urbanization, Sage Publica- ports like Algiers, Tunis and Alexandria and tions, 1975: Jorge E. Hardoy, 'Two thousand years of creating new ones like Casablanca, lsmailia Latin American urbanization' in Jorge E. Hardoy (Editor) Urbanization in Latin America: Approaches and Issues, and Port Said. The urban centres that de- Anchor Books, New York, 1975; H.N. Misra 'Rae Bareli, veloped in the interior were essentially cen- Sultanpur and Pratapgarh Districts' and B.S. Bhooshan, tres for military control or served the min- 'Bangalore, Mysore and Mandya Districts' in Jorge E. ing of a resource or (gradually)expanding Hardoy and David Satterthwaite (Editors),Small and Intermediate Urban Centres: Their Role in Regionaland European agriculture. NationalDevelopmentin the Third World, Hodder and Stoughton (UK) and Westview (USA), 1986. Box 2 Although so much of the literatureon cities in Af- ingor decliningeconomywill usuallymeanslower rica, Asia and Latin America talks about 'rapid populationgrowth or even no growth or popula- urban growth', in fact a considerable propor- tion decline. Urban centres in any region or na- tion of the urban centres there are not growing tion can be likened to businesses and each of rapidly while many have hardly grown at all in them compete with each other for investments recentdecades andsomehaveactuallyhadde- and expenditures. Their economic growth (and cliningpopulations. Agrowthinemploymentop- their populationgrowth)is relatedto their success portunities (or the possibilities for survival) usually or failurein this competition.The literatureon ur- fuels the growth of an urban ~entre.~A stagnat- ban centresconcentratestoo muchon the ones Theme Paper: Outsidethe Large Cities: What Rolefor Smaller UrbanCentres? 43 which grow rapidly and fail to reflect the range Certainauthors have also claimed that generali- and diversity of all urban centres, including the zations can be made about the rates at which diversity in their populationgrowth rates. small or intermediateurbancentres grow6--and it is common to find statements such as "small There are hundredsof urbancentreswhich have and intermediateurbancentres are growing stagnated with little or no population growth or faster than larger cities" in the generalliterature. evenpopulationdeclineinthe last40years. There But this too does not stand UP to detailed arealsodozensofurbancentreswhichwere once examination. TO test this, an analysis Was done cities of great importancein their nation but then of populationgrowth rates for smalland inter- declined as other urban centres grew more rap- rYIediate urbancentres for two or morein- idly. Box 3 gives some examples. tercensus periodsin Mexico, Peru, Ecuador, Tanzania, the Sudan, Kenya,Colombia and Pakistanand for several intercensusperiodsin To state that every urban centre is unique may regions in Argentina, North and South Indiaand be stating the obvious. But it is necessary to do the Sudan. Moreover, this found no valid gener- so because so many inaccurate generalizations alizations for such centreswithin nations or for have been made about 'urban centres' or spe- internationalcomparisons. In each instance, cifically about 'smallandintermediateurbancen- there was a largerange of populationgrowth tres' which imply that they are not unique. Sev- rates among the different urbancentreswith no eral authors have generalized about 'the social correlation betweenthe size of the urbancentre and economic functions of small and intermedi- and the populationgrowth rate. The only ate urbancentres'. Drawingon thesegeneraliza- exception was the obvious tendency for popu- tions, advice isthengivento governmentsonhow lation growth rates to slow for the very large to develop special programmes for these urban cities - becausethe larger the populationat the centre^.^ But urban centres are so diverse that beginningof the time period, the larger the few generalizationsare accurate. Some do have denominator and thus the lower the growth enormous untapped economic potential while rate. others have little or no potential. The potential sometimes has little to do with the size of the ur- bancentre. And anurbancentre'spotentialcan Inconclusion,many small and intermediate change;for instance,when coffeepricesarehigh urbancentres had comparable historicalroles in the world market, many urban centres in cof- under colonialrule and often under postcolonial fee growingareashavemorepotentialtoexpand rule as administrativeor military centres. Many and diversify than if coffee prices are low. such centres havestrong linkswith commercial agriculture. Many haveconsiderablepotential But there are hundredsof industrialestates in to develop larger and more diversifiedecono- small and intermediateurban centres around mies. But the extent of such common influences the world which lie empty or only partially used; and their importancerelative to other influences these estateswere often built at great expense. varies so much as to caution against generaliza- They were builtwithout careful evaluationsof tions. If governmentswant to develop these the potentialof each centre to attract and urbancentres, they must design policieswhich sustain industrialdevelopment. There are doz- encourage the development of each urban ens of factories in small urban centreswhich centre'sunique needs and potentials. Each were located or pushedthere by governments urbancentrewill haveits own resources,devel- to 'decentralize'industrywhich have either opment potential, skills, constraints and.linkswith closed or are currently producingvery expen- its surroundings and with the wider regional and sive goods, because the locationwas chosen nationaleconomies. for politicalreasons. Developingtourist facilities in small urbancentres nowseems more com- The Role of LocalGovernment mon than developing industrial estates--butthis too will waste scarce public investment if done If the possibilitiesand constraintson development with no evaluationof the real potential of each aresospecific toeachurbancentre (and region), centre to attract tourist expenditures.Some then there is need for localinput in designing any intermediate-sizeurban centres are also seeking nation-wide or region-wide government to develop "technopoles",researchparks or programmefor smallandintermediateurbancen- other sites to attract high-technologyindustryor tres. Without localinput.howcan nationalor pro- services. 44 China:SmallTowns Develowment Examplesof Ciffes Whose lmporfancein Their basedonoilexportandindustrialdevelopment, NaffonalEconomiesHas Declined Hamadanlostitsroleas animportanttransport andmanufacturingcentre;itwas by-passedby NORTH AFRICA: Many of the great historical the newinterregionalrailandroadsystems built cities of the Islamic period (9th- 15thcentury) during the thirties and forties. By 1976, its role were inland, reflectingthe importanceof land as a subnational administrative centre (it be- trading routes--Meknes, Fez, 'Tlemcen, came a provincialcapital in 1966)and a cen- Constantine, Kairouan, Marrakesh being ex- tre for public services had become more im- amples. 'These generally had little role in the portant than its fraditional commercial and colonialeconomieswhich were largely based manufacturingactivities. on mineralandagriculturalexport. Suchillustri- ous cities as Tlemcen, Kairouanand Fez found POTOSI, BOLIVIA: Around 1640, Potosiwas the their economicbasesof handicraftproduction largest city in both North and South America and trade systematically undermined by the with some 140,000 inhabitants, and its rich sil- new commercialfirms in the portswhich grew ver deposits were a symbol of wealth around to serve the colonialeconomy. the world. During its peak years, silver mining therestimulatedtheeconomiesinotherregions BRAZIL: Under Portuguese colonialrule, in the withmuleraisingincentralArgentina (themules late 16th and 17th centuries, urban centres were crucial for transporting minerals and developedto serve the sugar plantations pro- people and they were sold in the markets of ducing for export in the North-East. By 1600, TucumanandSalta),mercury (quicksilver)pro- SalvadorIBahia was the most important and duction in Huancavelica (Peru),wines from prosperousurbancentre and the national(co- CentralChileand WesternArgentina andfood lonial) capital. With Brazil's economy firmly from the lower and warmer valleys around basedontheexportof sugar,cotton,hides,and Sucre and Cochabamba (Bolivia).Potosiwas fine woods from the North-east,Sao Paulo, to- never an importantreligious, administrative or day Brazil'slargestcity,was onlya smallfrontier educational centre butwas an importantstop town. The gradual decline in the European on the old land route connectingLima-Callao sugar marketduringthesecondhalfof the 17th (Peru) with Buenos Aires (Argentina) via centuryshiftedthe economiccentresouth. Rio Huamanga (Ayacucho),Cusco, Puno, La Paz, de Janeiro grew as the port serving the mines Oruro and Potosi and then Jujuy, Salta, and it became the nationalcapitalin 1762. As Tucuman, Cordoba and Buenos Aires. As sil- gold deposits became exhausted, coffee ex- ver became increasingly difficult and more ports became the main commercial activity costly to mine, Potosi's population declined, and the coffee boom helped develop the ur- as did the regional economies it had stimu- baneconomyintheSouth-Eastwiththe expan- lated. It experienced a brief revival in the sion of railroads increasing the importance of late 18thcentury with the import of improved certain centres, notably Santos (amajor port) extraction technologies, but then it declined and Sao Paulo. to 26,000 inhabitants in 1854 and 21,000 in HAMADAN, IRAN: Hamadan, with approxi- 1900. Today it has around 45,000 inhabit- mately 150,000 inhabitants in 1978, became antsandminingis stillthe maineconomic base. famous as one of the cities on the silk route during the 11th and 12th centuries, but col- SOURCES: Janet Abu-Lughod, chapter on 'Urbanization lapsed when invading armies over-ran it in in North Africa' in B.L.J. Berry (Editor], Patterns of the early 13th century. Its role as a major Urbanizationand Counter-urbanization. Sage Publica- tions, 1975: Jorge E. Hardoy, 'Two thousand years of commercial centre was restored in the sec- Latin American urbanization' in Jorge E. Hardoy ond half of the 19th century with the flow of (Editor)Urbanization in Latin America: Approaches and goods between Britain and British controlled Issues, Anchor Books, New York. 1975: and Hiromasa Indiathrough Baghdad,HamadanandTehran. Kano, 'Citydevelopmentandoccupationalchangein Iran: a case study of Hamadan',The Developing Ithas longbeenfamous as a centrefor leather Economies. September, 1978. goods and carpets. But as Iranbecame an in- dependent nation-state with its economy Theme Paper: Outside the Large Cities: What Rolefor Smaller UrbanCentres? 45 vincial governments understand local needs, are more likely to do so if they receivea shareof make best use of local resources or tackle local resourcesrather thansimply acting as tax or rev- constraints? enue collectors for higher levelsof government. This impliesthe needfor decentralizationof power Buildinga stronger and moreeffective local gov- and resources. If assessments of development ernment demands the reversalof policies appar- possibilities are so unique to each centre, it is lo- ent inmany nationsinthe last20 - 30years. It must cal governments (mostlylocated in small and in- reverse the tendencyfor nationalgovernmentto termediate urbancentres), not nationalgovern- impose severe limits on local government's rev- ments based in the capital city, which should or- enue-raising powers and to take for itself the ticulate localneeds (fromtheir areaofjurisdiction) more lucrative and easily collected taxes. And and influenceresourceallocations at higher lev- as statedbyUnitedNationsrecommendationson els. Only through representative local govern- small and intermediate urban centres, it also ments is such an articulationof local needs likely demands a clear definition of the constitutional to take place.Nonationalministryor agency can and legal status of local governments (which is know the specific needsof each locality and the often still lacking)and the establishmentof clear preferences of its population. lines of authority and respon~ibility.~As sug- gestedin the current debate inLatinAmerica on Localassessmentsof availableskillsandresources decentralization and democratization, this also andthe monitoringof changesover time requires implies a more representative local government strong, competent and representativelocal gov- with the ability to generate considerable con- ernment. This is probably the most essential ele- sensus on local development initiative^.^ ment of a national programme for small and in- termediate urbancentresanditbringswithitmany Again, there are no general recipes on how to developmental advantages. As a review of the increase local government revenues. The fact experienceswith decentralizationnoted,central- that the employmentbase and economic trends izationcan bringsome heavy costs: can differ greatly even for urban centres within the same region suggests a need for consider- "A ministry of agriculture that applies crop able flexibility as national governments revise productionquotasto all areasof the country their definition of the activities that local gov- without taking regionalvariations in soil and ernments can use to generate revenue. For in- climate conditions into account... hinders stance, a small urban centre with a prosperous production and wastes resources. When (and growing) agricultural market could use central planners design rural development market fees or bus-park charges to raise funds projects in the national capital without thoroughly understanding local, social, to improve services and facilities in the mar- economic, physical and organization ket. A centre with a developing tourist trade conditions, they often generate opposition could utilize a "bed tax" for hostels, hotels and among local groups or encounter such boardinghouses. Local taxes on beer,liquor and apathy that the projects are doomed to tobacco have proved important sources of rev- failure at the outset. Overworked and enueinmany instance^'^ and havethe additional cautious central finance officers, who advantage of raising prices for goods whose typically are responsiblefor approvingeven overconsumption produces serious health prob- petty expenditures for local development lems. Broad-basedsales taxes can provide sub- projects, often release funds for agricultural projectsso latein the fiscalyear that optimal stantial revenues for local governments but few . planning times are missed. ...Central national governments allow their use;" how- administrators cannot know the complex ever, care must be taken not to tax basic com- variety of factors that affectsthe success of modities since this would fall very heavily on projectsinlocal communitiesthroughout the poorer groups. A property tax can fit much bet- country. In their attempt to cope with this ter both with ability to pay and extent to which uncertainty. they create highly centralized public infrastructure and services are used. and standardizedprocedures:or throughfear While relatively complex to collect, it has the of making mistakes, they do nothing about advantage that manylocalgovernmentsalready urgent decisions that are essential for implementing local projects and havethe powerto useit and alreadyderivesome programs".7 income from it. Support from national govern- ment may be needed to increase the tax-yield, Competent and representative bcal govern- not least because local property owners will ments can mobilize local resources more effec- oppose this. Cadastral surveys and tax assess- tively than higher levels of government. But they 46 China: SmallTowns Development ments are often out-of-date and the revenues centres and their surrounds. This can allow their collected are far below potential yields. Up-to- effectiveness to be assessed before a commit- date cadastral surveys also help in physicaland ment is made to a national programme. For in- land-useplanning. stance, national government could support a schemewhereby inhabitantsinone particularur- But it is not only local governments which de- ban centre could choose to 'pay' local taxes or serve support from higher levels of government. fees by working a set number of hours in local In many nations, local associations or coopera- development projects; appropriately set ex- tives can implement certain development initia- change rates between the number of hours of tives. For example, an association or coopera- labour contributedin lieu of localtaxes could en- tive of farmers might become responsible for sure that measuresto increase local revenuesdo local road or bridge upkeep or electricity supply notfall heavilyon lowerincomehouseholds.As in while local parents and teachers associations government's use of private associations to fulfill might helpraisefunds to maintainthe schooland certaintasks, thiscaneasilybecomehighlyexploit- supply it with books or equipment. Perhaps the ative but it is far less likely to be so if localgovern- possibility of government support for such ments are elected and are generally viewed by groups has been given too little consideration-- most of the local population as having as their especially where local government is particu- main concern, the interests of the locality. If larly weak. It is usually a short term measure; local nongovernment organizations are encour- richer governments often try to exploit private aged to representlocal groups and interests,this groups like parent-teachersassociations by de- too can providea check onmis-useof powerand manding that they meet certain costs formerly resources. met by government. But it may provide a valu- ablestop-gap. National government might also support locat government schemes to generate employment Thus, one of the main justifications for a gov- in slack agricultural periods of the year. Public ernment programmeon small and intermediate works with substantial long-term paybacks but urban centres is not related to these urban cen- which are unattractivefor privateinvestorscould tres in themselves. It is about how local levels be especially important. For instance, activities of government can respond to local needs and such as ruralfeeder road constructionor mainte- the ways in which these needs can be met. It is nance, bus-parksurfacingor maintenance,refor- also about mobilizinglocal resourcesfor national estationpluswatershedmanagement,installation and regional development. To achieve this re- of water pipes, construction or maintenance of quires a long term programme by national gov- flood control or irrigation channels can provide ernment to help build institutional capacity, rev- seasonalemploymentandmuch-neededincome enue base and skilled personnel at local level. supplements to many lower income households. Clearly, this must be backed by better censuses Importantsocialandeconomic benefitscouldbe and surveys to provide the informationfor local achieved at relativelylow costs. development plans so these are more gearedto local needs, resources and potentials than the In most instances, national governmentwill have 'standard packages' for all smaller urban cen- to work out revenue-sharing arrangements with tres so often proposedand implemented by na- local governments. One relativelysimple way to tional governments. Obviously it must be transfer resourcesfrom centralto local levelsisan matched by regulations and controls which en- annualblockgrant to each smalloc intermediate courage fiscal responsibility and accountability urban centre (or each local government area] to the citizens within their jurisdiction. It must based perhapson populationsize and an assess- also bematchedbyenvironmentalcontrolswhich ment of need. The use to which the grant is put ensure no decentralization to these centres of would be decided locally (within broad guide- pollutingindustriesthat are seeking to avoid the lines)for projectsrelatingto social and economic stricter regulations (or their application) larger development. This hasbeendonefor manyyears cities. in Indonesia through the INPRES programme, al- though no evaluationof this programmeand the Given the scarcity of resources and the time extent to which local populations felt that their needed to build stronger and more competent needs were being addressed was found. Similar local governments, nationalgovernments could kinds of block grant are also being tried in some try out innovativeapproachesinselected urban LatinAmericancountries, as partof decentraliza- tion and democratizationprocesses. Theme Paper: Outsidethe Largle Cities: What Rolefor Smaller UrbanCentres? 47 Pools of skilled personnel and specialized equip- rising prosperity for most of the local population ment could be shared by groups of localgovern- and rapid urban developmentwithin or close to ments or local associations; this could lower con- the main farming areas. (Box4) But this increase siderably the cost to each of purchasing and in agricultural production can also go hand in maintaining equipment and paying professional hand with rapid impoverishment for most of the salaries which they cannot individually utilize all local population so many move out of the area year. Groups of local governments could also to fuel the growth of large cities (Box 5). shareaccountants,engineersandroadconstruc- tion equipment. Governments in smaller urban At least four factors are critical in determining centres can also borrow equipment or seek pro- the balance between the two extremes and the fessionaladvicefrom governmentsinlargerurban extent to which growing agricultural production centres nearby; there are examples to draw on helps stimulate urban development within the where this has been done.I2 same area: the structure of land ownership, the type of crop or livestock raised,the use to which While suchsuggestions mightseemsomewhatre- profits are put, and government's policy on the moved from a discussionon small and intermedi- price of crops. ate urbancentres, in fact they are of centralim- portance in promoting social and economic de- To take first the question of land ownership, if velopment withinand aroundsuchurbancentres. there are many farmers making a good living by They are also of central importance in increas- intensive farming on relatively small farms (as ing the attraction of such centres to productive in Box 4) with relatively equitable land owner- investment. As Johannes Linn notes: ship, there is a very strong stimulus to growth in local urban centres as businesses meet farm- "the quality of management by the urban ers' needs. If a few farmers or absentee land- authorities may have an important effect owners own most of the land and there is rural on whether and how a city grows...Among labour surplus (which is usually the case], land the elements of urban managementat issue owners can keep wages very low for agricul- here are: the provision of adequate public tural labourers. This lessens these labourers' utilities for industry and commerce: the level of consumption and thus level of support existence of a well functioning urban transport system for the speedy for local shops and services. This is the case in distribution of goods and services: many plantations where agricultural production availability of developed land for new is highly profitable for the owners yet relatively wholesaleandretail;a goodcommunications few localpeoplereceivereasonableincomesand system (telephonesand postal);anda public there is little support for businesses in urban administration that minimises efficiency centres nearby. Large landowners may increas- losses and compliance costs for regulations ingly push small, subsistence farmers off their and taxes."l3 land as in the case illustrated in Box 5. Insummary, nationalgovernment must not gen- eralize about the kinds of activities which should Many studies of the impact of the Green Revolu- be developed or promotedin smalland interme- tion inruralareas inAsia and of the development diate urban centres. They must develop the ca- of commercial farming in Latin America have pacity of governments located insuch centresto shownthat increasingagriculturalproductionand make their own choices as to what should be productivitycan meanimpoverishmentfor many developed,basedon localneeds,potentialsand rural dwellers. Inequitable land-owning struc- capacities but within broader regulatory frame- tures are usually the principal cause. works that ensure local accountabilityand fiscal and environmentalresponsibility. The type of crop or animal raised also influences the number of jobs and the incomes they gener- The links betweenagriculturaland ur- ate. The amount of labour needed per hectare bandevelopment of land can vary by a factor of 100 or more for different agricultural products raised under dif- Few governments appreciate that productive, ferent circumstances.At one extreme, pastoralists intensiveagriculture can support both a prosper- may need 100-200hectares or more of land per ous ruralpopulationand rapidgrowth and diver- personto generateenoughincometo survive. At sificationin the economies of small and interme- the other extreme, an intensively cultivated farm diate urbancentres.Increasesinthe value of ag- of only one or two hectares provides a reason- ricultural production can go hand in hand with able livingfor entire families in many parts of the 48 China: SmallTowns Development world.I4There are also cases of families surviving Cattle ranching in Uruguay illustrateshow exten- on what they produce on landholdings as small sive agriculturalproduction and inequitableland as one tenth of a hectare.I5 ownershipcan minimizeemploymentgeneration in rural areas and small market towns. 'The con- centrationoncattle ranchingfor exportinthe late Positive links between agricultural, whole valley's population. rural and urban development Growingagriculturalproductionalsostimulated The development of the Upper Valley of Rio many urban-based enterprises. First, cold stor- Negroand NeuqueninArgentina illustratesthe age plantswere built. As fruit cropsusuallyripen possibility of positive links between agricul- withina relativelyshortperiodof time, this brings tural, rural and urban development. Within a enormousdemandsonthetransportsystemover 700 square kilometre fertile river valley, to- a small portionof the year. Cold storage plants tal population has grown from approximately allowedthe packaging and transportingof fruit 5,000 inhabitants in 1900 to over 300,000 in to be spread over a longer period. Inaddition, 1981. Although growth and diversification of industries developed to produce packing ma- agriculturalproductionhavebeenthe main 'en- terial and boxes for the fruit and to produce ci- gine of growth', more than 80 percent of the der, applejuice,jams, and dried or tinnedfruits. Upper Valley's population live in urban cen- Industries also grew to support the farmers, in- tres with 5,000 or more inhabitants. cluding a large agricultural chemicals factory and a factory producing machinesfor prepar- A hundred years ago, the first colonists had ing land and picking fruit. just begun to grow crops. The establishment of a military fort there in 1879 provided the In 1957,the two 'nationalterritories'inwhichthe nucleus for the first town and provided much Upper Valley was located became provinces. of the demandfor foodandfodder.But the Up- Thismeanta considerableincreaseinthe power per Valley's prosperity began to grow when a and resources available to the provincial gov- railway linked it to Buenos Aires in 1899 and ernment and one of the Upper Valley's urban gave local farmers access both to the national centreswas a provincialcapital. This inturn also and the international markets and when gov- stimulated and supported urban development ernment investment in a dam and flood con- as the administrative machinerygrew to cope trollirrigation system encouraged intensive with its increased responsibility--althoughthis agriculture. stimulus was largely confined to the provincial capital. For the first quarter of the twentieth century. there was very rapid inmigration to the re- In recent years, the Upper Valley has experi- gion, including many immigrants. Initially, al- enced economic problems. Perhaps the most falfa was the main crop but this was gradually notablewas in the second half of the Seventies replaced by fruit trees-especially apples and when the economic managementof the (then) pears. The landowning structure was relatively military government made the Argentine cur- equitable: mostof the landcame to be farmed rency strong against the currencies of coun- by farm-owners with sufficient capital to in- tries which bought Argentine farm exports, vest in intensive production. Relatively small thus greatly reducing farmers' returns. But it farms producingagoodincomewere the norm. does illustrate how rapid growth in agricul- . turalproductioncan beaccompaniedbyrapid The growing numberof prosperousfarmerspro- growthinemploymentlinkedto agricultureand vided a considerable stimulus to local urban rapid grow+hin urban population. development.Despiteits small area of only 700 square kilometres, no single, dominant urban centre emerged' A of urban centresde- SOURCE: Mabel Manzanaland Cesar A. Vapnarsky. 'The development of the UpperValley of Rio Negroand its veloped around railwaystations,running along peripherywithin the Comahue Region, Argentina' in the rivervalley. Eachhadshops and businesses Jorge E. Hardoy and David Satterthwaite (Editors), selling to farmersintheir immediatevicinitywhile Small and lnterrnediate Urban Centres: Their Role in they them specialized busi- Nationaland RegionalDevelopmentin the Third World, Hodder and Stoughton (UK, 1986) and Westview (USA, nesses and government offices serving the 986). Box 4 --- - ---- - -- ---A- Theme Paper: Outside the Large Cities: What Rolefor Smaller UrbanCentres? 49 19th and early 20th centuries is one reason why stimulusforsmallurbancentresbecausethereare Uruguayis amongtheworld's most urbanizedna- too few rural dwellers nearby with incomes to tions with so much of its urban population con- spend,saveorinvest insuch urbancentres'shops centrated in the national capital, Montevideo. and services. Businesses in these urban cen- Cattle ranching often goes with an inequitable tres also received little of the business from rich land owning structuresince it producesgood re- cattle ranchers who usually dealt directly with turns on capital but very lowreturns per hectare. banks, export houses and industrial and trans- InUruguay,a combinationof cattleranchingand port enterprises in Montevideo. Shops and firms inequitablelandowningstructuresmeantthatonly insmall urbancentres close to the cattle ranches a tiny proportionof the ruralpopulationearneda could not provide the range of goods and ser- good living. vices that the relatively few, rich families wanted.I6 Farming in the Upper Valley (Box 4) Cattleranchingrequiresfar less labourthan crop was completely different because many small1 cultivation; onefamilywithoneortwo agricultural relatively well-off farmers bought goods and workerscan lookaftercattle on severalthousand services from local enterprises and sth~ulated hectares. Rather than having one or two house- localurbandevelo~ment- holds making a good income from agriculture every 5-10 hectares (as intensive crop produc- Another exampleof the influenceof landowning tion] one or two households make a very high structure and crop type is provided bythe North- income every 500-1000 hectares. 'There is little east of Brazil. The Northeast has long beena re- Growthin agriculturalproduction, Encouragedbygovernmentandsupportedby ruralpovertyand out-migration: favourable prices, citrus production has The case of Cruzdas Almas grownat theexpenseof cassavaandtobacco production. However, citrus production re- InCruzdas Almas inthe Reconcavoregionof quires less labour and more capital than cas- Northeast Brazil, most farmers cultivate sava and tobacco. As citrus cultivation ex- cassava (themainsubsistencefoodcrop)and pands. the demand for labour declines and citrus fruits or tobacco as cash crops. Small small farms are absorbed by larger farms. amounts of other food crops are grown for This has resulted in a sharp increase in mi- family consumption. gration out of the area. Between 1960 and 1975, there was a rapid drop in the number their mix of of tenants and sharecroppers, suggestingthat crops to match the availability family they were forced out as part of the process labour; hiring labour is too expensive for ofland small farmers. Those with the smallest hold- ings usually grew tobacco. Although low In this instance, government policies to en- prices from an exploitative marketing sys- couragegrowth in agriculturalproduction en- tem ensures a low return for the work put couragedincreasingconcentrationof landown- intocultivatingit,tobacco producedthehigh- ership and increasing migration out of the est income per hectare. This is more impor- area, mostly to large cities. In effect, such tant than the highest return on labour, if you policieshaveencouragedanincreaseinwealth only have a small plot. On small holdings for a few and impoverishment for many. The with free family labour, maximizing income example shows how government policies to per hectare guides the choice of crop mix. stimulate agricultural development may in- But it is common for one or more members crease rather than decrease people's migra- of the family to migrate to a city, as family tion to cities--although the stated objective size grows too large for the farm's income. of many agricultural development policies is Cash sent to those on the farm from family to slow such migration. members in cities are important for many households-But as family members do move SOURCE:William s. saint and William D. Goldsmith, away from the farm, so too the mixof crops is 'Cropping systems. structural change and rural-urban adjustedas less family labour is available. migration in Brazil', World Development vol 8 11980) pp 259-272. Box 5 50 China: SmallTowns Development gion associatedwith great poverty (especiallyin programme [andothergovernmentprogrammes rural areas, many of which are prone to regular that hadprecededit]suggestedthat groupsout- droughts). 'The flight of poor people from this re- side the Northeast were always the main ben- gion has done much to fuel the rapid growth of eficiaries and those that did benefit within the largecitiesintheSoutheastof Brazilandthesettle- Northeastwere not amongthe poor and did not mentof Amazonia. Butthe root causeof poverty need government help.20 The cost to govern- inthe Northeastisnota lackof land. AWorld Bank ment of steering industry into this region was studyshowsthat therearenearlyone millionfarms also enormous--the equivalent of US$15,000 for or sharecroppedplotsinthe Northeastwhich pro- every job ~reated.~'Consider what might have vide an acceptable standard of living for farm- been achieved if this same sum were spent on ers." 'There are also "nearly 30 million hect- purchasingunutilizedand underutilizedland and ares of under-utilized land of similar if not su- allocating it to those with no land or inadequate perior quality on the estates" on which "nearly land.Indeed,sucha programmewould probably another million families could achieve compa- have provedfar cheaper as those who received rable living standard^".'^ Most of this land is the land paid back part of the cost, when their un-used or under-utilized but it is the property farms begantogenerateagoodincome. of large landowners; only four percent of land- owners own more than half the agricultural land The stimulus from a growth in agricultural pro- and only one in four families dependent on agri- duction to local urban centres can also be re- culture owns the land they work. moved by profits being steered elsewhere. This might simply be the result of absentee landown- If this land were transferred to those with no ers or foreign owners of cash crop plantations. land or too little land, this would provide ad- One examplewas the vast Gezira schemedevel- equate incomesfor perhapsanothermillionfami- oped by the Anglo-Egyptiancondominium gov- lies. The smallest farmers in the region ernment in the Sudan to produce good quality cotton for LancashireMills and to lessen the cost 'employ 25 times more labour per hectare to the British government of maintaining the co- on their land than do the largest farms and lonialgovernment. Between 1925 and 1950, the obtain vastly higher productivity levels. 'The company managingthescheme andthegovern- smaller farms (lessthan 50 hectares)cover ment receivedgood returns.But the tenant farm- only 10 percent of the agricultural land, ers received a very low return for the crops produce over 25 percent of the region's they produced and so had little or no income to sugar,cottonand riceand40 percentof the spend. This meant little stimulus for trade, com- beans, corn and manioc. Yet two million agriculturallydependentfamilies ownnoland merce and industry in local urban centres.22 at allwhile anarea of landthe size of France is un- or under-utilized."l9 The potential stimulus from agricultural produc- tion to local urban centrescan also be removed Once again, this shows the importance of agri- by government influence on prices for crops. A culturalland owning structures to the questionof study of agricultural pricing in 'Thailand, Egypt, small and intermediate urban centres. If unuti- Argentina and Pakistan found that government lized and underutilized land was transferred to intervention in setting prices for crops had the those lacking land with farm sizes sufficient to al- effect of taxing the farm sector with large in- low a good living, it would bring a major stimu- come transfers to urban areas.23In Pakistan, low lus not only to agricultural production (which urbanfood prices have helped keep low wages would helpfeedcitypopulations)butalsoto small in industry which, combinedwith low prices paid urban centres there. for cotton and other raw materials,helpedmain- tain export industries' competitive position in Ironically, it is in the Northeast of Brazil that the world market.24Studies in the late seven- one of the longest runningand best known gov- ties showed that farmers in many sub-Saharan ernment initiatives was launched to develop a African nations were receiving less than half the 'backward' area. During the sixties and early world market value of their crops from govern- seventies, special incentives attracted hundreds mentcroppurchasingagencies.Forexample,one of new factories to the Northeast while many of the main reasons for the rapid decline in co- existing factories expanded their operations. But coa productionin Ghanawas the heavy tax im- this did little or nothing for the rural poor. Most posedonfarmersbythe governmentthrough the of the new jobs were in the largest cities within Cocoa Marketing Board's pricing policies; obvi- the richest states. One analysis of this Theme Paper:Outsidethe La1q e Cities: What Role for Smaller UrbanCentres? 51 ously this too hasanimpactonruralincomesand noexpliciturbanor ruralgoals,i.e., policiesaimed thus on the development of urban centres in or at reducing deficits in balance of payments or close to the cocoa growingareas.25 keepinginflationincheck. Many 'nonspatialpoli- cies' such as macroeconomic and pricing poli- Ironically,mostof the advicegiventoThird World cies, transport tariffs and taxation systems and governments on how to developtheir smaller ur- factors such as the relative strength of national, bancenIres(sooftenbyWesternconsultants)says subnational and local levels of government are little or nothing about the influence of different importantinfluencesonwhich urbancentres de- typesof cropand laridowningstructuresonthese velop rapidly and which do not. It is important centres. Indeed,manyconsultantssee theprob- to understand how these factors influence the lemof backwardregionsstemmingfroma lackof spatial distribution of jobs and investments be- small urbancentres. Their solutionis the creation causeof theconflictbetweennonspatialandspa- of 'articulatedhierarchies' of settlements (includ- tial policies. It may be that a government'seco- ingsmallurbancentres).Butthisis muddlingcause nomic and fiscal policies are indirectly a major and effect. Small urban centres with buoyant cause of the rapid growth of the capital city, economiesdevelopbecausethere are sufficient yet at the same time, another ministry or de- peopleandbusinesseswithincomesto spendand partment in the government is trying to slow capital to invest in their shops and businesses. If this rapid growth. government builds some small urbancentres be- cause no such centres exist in a backward re- The extent to whichgovernmentpoliciesand ac- gion, this does not provide these urban centres' tions can helpconcentrate populationin capital shops and businesseswith customers. As United citiesisillustratedby the case of LimainPeru (Box Nations Recommendationson this subject com- 6). With 4.4 million inhabitants in its metropolitan mented, area in 1981,itwas 10times the size of Peru'snext largest city, Arequipa. "there is no obvious economic or social rationale behind the often recommended Import substitution policies have often helped policy for governments to create an concen.trateindustriesin large cities. Many gov- articulated hierarchy of small and ernmentssupportedthedevelopmentofindustries intermediate centres in backward areas."26 in their own nationsto substitute for goods previ- Creating or imposing an 'articulated hierarchy' ously imported. In most instances, the effect of urban centres does little or nothing to deal was subsidizing industrial investment in the larg- withthemostfundamentalcausesof povertyand est cities. One of the reasons for the growth of lack of development in so many regions--poor many of Latin America's largest cities (alsonow or depleted soil, inequitable land owning struc- amongtheworld's largestcities) was thesupport tures (includingperhapsmanyabsenteelandown- given by governments to import substitutionafter ers) or lack of investment in flood control, irri- 1930.In Brazil,the states of Sao Paulo and Rio de gation and other essential infrastructure. If gov- Janeiro (withthe two largest metropolitan cen- ernments can support growing agricultural pro- tres) have benefited most from government in- duction and intensification and full use of good centives to promote import substitution while quality land while at the same time preventing some of the poorest, most rural states benefited inequitablelandownershipstructures,they willdo least.27InNigeria,inrecent decades,indirectsub- far moreto stimulatetheeconomiesof manysmall sidies from nationaltrade policieshavefavoured urban centres than any explicit.policy for these enterprises in Lagos (with more than 5 million centres. peopleintheconurbation)andtheregionaround it.2eInThailand, one reasonwhy Bangkokgrew to Social and spatialbiasesin government becomemuchthe largest city inthe countrywas that it receivedmostof the benefits of theimport priorities substitution policies during the 1970s. By the end Virtually every government policy, action or ex- of the sixties, protectedindustrieswere given full penditurehassome influenceonthespatialdistri- duty exemptiononcapitalgoods and rawmate- butionof investments andjobs, and throughthis, rials. Most of these industries were located in on the spatial distributionof population(bothru- Bangk~k.~~ raland urban]. Some of the most powerfulinflu- encesonthespatialdistributionof investmentsand jobs comefromgovernment policieswhich have 52 China: SmallTowns Development Forcountries which export agriculturalcrops, the ter, corn, electric power, diesel fuel and public exchange rate of their nationalcurrency against transport.33Furthermore, railroad freight rates thoseof nationstowhichtheyexportaffectsfarm- "were structured to favour routes to and from ers' incomes. An 'overvalued' nationalcurrency Mexico City" while property in the Federal Dis- (perhapskept that way by the Ministryof Finance trict "was relatively undervalued for tax pur- to cheapen imports)reduces returns for farmers poses and other states were taxed at relatively producingexport crops. One reasonfor rural-ur- high rates".34Mexico City or the wider metro- banmigrationin Nigeriaduring theseventieswas politan area also received many of the new in- that oil exports kept the exchangerate of the Ni- dustriesencouragedbytheFederalGovernment's geriannairahighagainstthecurrenciesof nations import substitution policy. which had previously been major markets for its agriculturalexports.This ledto extremely unattrac- Thus, many government policies and expendi- tive pricesfor export cropsand loweredthe costs tures whose objectives are social, economic or of imports, including imported basic foodstuffs. political have strong spatial effects. Many have Ruralincomessufferedandso did the economies helped to cause very rapid growth rates in the of small and intermediate urban centres which largest city or cities in recent decades. Changes hadservedas marketsandcentresfor goodsand to these policies could help promote the devel- servicesfor theruralpopulation. Someurbancon- opment ofsmalland intermediateurbancentres. sumers benefited.30Similarly, during the second As Andrew Hamer stresses: half of theseventies,theArgentine pesobecame increasingly strong against the US dollar and the "eliminatingsectoraldistortionsmaydo more currencies of other nations to which Argentina for decentralized development than all the exported, seriously affectedthe income of farm- myriad spatial efforts conventionally ers producing export crops.31 proposed by Third World policy makers.35 But the fact that social or economic policies do A study of spatial development in Mexico illus- have strong spatial influences is not in itself the trates how various government policies helped issue. The issue is whether such spatial influ- ensure that Mexico City Metropolitan Area re- ences are judged to be contribute to or work mained the main focus for rural-urban migra- against other socialand economicdevelopment tion throughout the 1950s and 1960~.~~'The Fed- goals. If governments do want to stimulate ur- eral District (the central part of the metropoli- ban development away from their large cities, tan area) received the highest share of public they must consider how nonspatial policies con- investment in transport, water and power, a tribute to or conflict with this goal. 'disproportionately large share' of total out- lays on education and subsidized prices for wa- CapitalCity Bias:the Caseof Uma, Peru low theworld price,again benefitingLima be- causetwo thirds of thecountry'smotorvehicles Lima has received a dis~ro~OrtiOnatel~high are concentratedthere. Foodpriceshavealso share of infrastructureand public investments, been subsidized, shifting the internal termsof a the vocalpoliticalpressures trade against the rural areas and resulting in in the capital and greaterawareness the heavygovernmentsupport forthe foodimport extent of pbblic service lags in Limathan else- billsfor consumers.The persistent where. Utilities such as water and domestic ove~aluationof thecurrencyharmedtheag- electricity have beensubsidized moreheavily riculturalareasandnaturalresourceregions(i.e. in Lima. Inan attempt to rationalize the inva- the peripheryi by eroding their export poten- sion of land by squatters seeking to build their tial and subsidizingthe main focus of import ownhousing,thegovernment hassuppliedfree demand, Limaitself. lotsinmanyperipheralareasto migranthouse- holds'mortgage hasbeenheavily s~'- SOURCE: Harm w, Richardron, .Planning strategies and sidized with most of the loans made in Lima. policies for Metropolitan Lima,, Third Untilvery recently,gasolinewas pricedfar be- Review Volume 6,NO 2, ~ a 1984.y Box 6 - - - 'Theme Paper: Outside the La1-geCities: What Role forSmaller UrbanCentres? 53 Basic Service Provision in such provision were not necessarily higher in smaller urban centresand cost recoverywas not Government expenditures on low-cost housing, necessarily lower. urban infrastructure and services have usually been concentrated in the largest city or in a few "The economies of scale in providing such large urban centres--although in recent years, physical services as protected water several governments have steered more invest- supplies and hygienic disposal of household ment to smaller urban centres.36 Many such and human wastes have been much over- projects have been partially funded by interna- stated in development literature. If the tional aid agencies and these have also been appropriate technology is chosen. and a concentrated inthelargestcities,evenif inrecent suitable organization is set up for operation years certain aid agencies have consciously and maintenance, per capita costs in small andintermediateurbancentrescanbelower sought to fund more projects in small and inter- thaninlargeurbancentres.Manyoptionsare mediate urban centres. Certainly, only a small availableto matchthewiderangeof physical proportion of the inhabitants of small and inter- conditions,socialpreferences andeconomic mediateurbancentres havewater piped to their resources found in different settlements."39 houseandhouseholdandhumanwastesremoved. Inmost nations, only a small proportionof houses In regard to public transport, governmentshave are served by paved roads and storm drains. perhapsunderestimatedthe extent to which ap- Few of the neighbourhoods within small and in- propriately designed and managed systems can termediate urban centres have within them first be largely self-financing. But with these and aid posts, dispensaries or other services to pro- other public services and facilities, the possi- vide their inhabitants with primary health care. bilitiesforimprovementlargelydepend ona level Most small urban centres have very inadequate of skilled personnel and resources at local gov- or no public provision for emergency lifesaving ernment level which is rarely apparent. services. There is also the need to improve service pro- Most small cities and urban centres have envi- vision to rural inhabitants and small and inter- ronmental problemsarising from a lack of piped mediate urbancentres are the best locations for water supplies or water sources used for hu- many services. Forgovernmentsintenton reach- man consumption being contaminated, lack of ing a higher proportion of rural citizens with provision for drainage and for the safe disposal health care, health education and preventive of excreta and lack of provisionfor garbage col- healthcoverage and moreoptionsfor education lection and disp~sal.~'For most nations, smaller and training, an increase in services and facili- urban centres are likely to have a much lower ties within many small and intermediate urban proportion of their populations served by piped centreswill beneeded.While primary healthcare water systems and by sewage systems than units often need to be located in villages, small larger cities. For instance, in Argentina, the or intermediate urban centres will usually be the smaller the urban centres, the higher the pro- best location for hospitals (first referral level) portion of households lacking piped water and and for coordinatingandmanaginglocalschools connections to sewers. The average for urban and health care centres. Similarly, primary centres with 200,000 to 500,000 inhabitants schools for rural citizens may be best located in is approximately 18 percent lacking piped water rural settlements but as education at secondary and 60percentlackingconnectionto sewers. The and higherlevelsexpand,manyof theschoolsand average for urban centreswith 5,000 to10,000 in- colleges will be best located in small and inter-. habitants is over 40 percent of households lack- mediate urbancentres. ing piped water and more than 90 percent lack- ing connection to sewers.% In education, there is an evident need to lessen the centralization of school curricula. School Public provisionfor water supply and for removal programmes are often uniform for entire nations: of householdand humanwastes does not neces- rarely do they make allowancesfor local and re- sarilycost moreinsmall urbancentres,compared gional needs and resources. Skill training appro- to largeurbancentres.This was highlightedin the priate to local development possibilities is even recommendationsgiven to governments by the rarer,althoughthereare notableexceptionssuch UnitedNationswhichstressedthat percapita costs as the Tiradentes project in Brazil. As Max Neef notes, vocational training, as traditionally prac- ticed in most countriesof Latin America 54 China: SmallTowns Development "discriminates in the sense that it tends to Small Urban Centres and controlling - benefit the large metropolitan areas more the growth of large cities than the small cities, towns and villages. Furthermore....theorientationandcontentof Many governments in the South have adopted any vocational training curricula has to be special programmes for small and intermediate determined by - and adapted to - regional and local characteristics,and not by the urban centres in the last fifteen years. These extrapolation of national and global programmesgo under many names,for instance trend~."~O specialprogrammesfor 'secondarycities', 'inter- mediate cities', 'mediumsize cities' 'growthcen- What distinguishes the Tiradentes project from tres', and 'migrant interceptors'. Some govern- most other programmesfor small or intermediate ment programmesfor small and intermediateur- urban centres was the extent to which it was ban centres serve national political goals, for basedon locallyarticulatedneedsand localskills instanceconsolidatingpopulationina borderarea. and resources.The municipalityhas some 10,000 In others, they are seen as supportinglocal or re- inhabitants,divided intotwo urbandistrictsand a gional development, serving a new land coloni- rural area of poor soils. In recent decades, its zation programme or the exploitation of some economy stagnated after a period of splendour natural resource. But most have a primary or when gold was mined nearby. The Tiradentes secondary goal of diverting growth away from project sought to build on old traditions of craft the largest city (or cities). skills and to allow the older generation, skilled in crafts, to passon their knowledgeto younger ap- One of the most ambitious plans to control the prentices. The project had many other aspects growth of large cities was launched in Egypt in such as the preparation of an exhibition of pho- the second half of the seventies. Cairo was de- tographs of Tiradentes taken during the past one clared 'overcongested'.So, too, was the city of hundred years, and the formation of a Guild of Giza nearby (whichis part of MetropolitanCairo) the Artisans. The relevance of this project to and Port Said. These cities were to have their other urban centres is not so much what was populationreduced by the year 2000. Various done but how its plans were based on the re- other urban centres and areas were declared sources of that particular municipality and on 'saturated' and were to have no more popula- the needs of its inhabitants. tion growth. Meanwhile, most of the growth in populationbetween 1978and 2000 was to be in One important but rarely discussed aspect of various satellite cities around Cairo and Alexan- small and intermediate urban centres is the role dria, in the zone beside the Suez Canal and the of such centres as a focus for social life and so called 'virgin areas' (including the Red Sea social contacts in their area. Ina reviewof some Coast, the NewValley to the south, the Sinaiand 400 papers and articles on small and intermedi- the area around Mirsa Matruh on the Mediterra- ate urban centres in Africa, Asia and Latin neancoast).Thesefour 'virgin'areaswereto have Ameri~a,~'few considered this aspect. But in 14millionpeople by the year 2000. many nations or regions, there are likely to be friendship, kinship and family links betweenmany At first sight,suchan ambitious planhasconsider- rural inhabitants and those in small and inter- able appeal. Cairo is very congested and its mediateurbancentres.Suchcentresmay bethe growth is taking place over valuable fertile land; place where young people in the area socialize because only 4 percent of Egypt is fertile land, and where there are opportunitiesfor engaging the loss is particularly serious. The cost of imple- in sports and recreation, and attending religious menting even a part of this plan would be pro- services and festivals. It is within many such hibitively expensive. To get 14 million people to centres that the culture of the area has its most leave the crowded cities, the Egyptian govern- concentrated expression. Simply because such ment would have to develop the virgin areas. aspects are less tangible and less researched Hundreds of thousands of jobs would have to be than the potentialfor increasing agricultural pro- created in order that tens of thousands of busi- duction, it does not mean that their role in mak- nesseswould be persuadedto set up there. But ingsmallerurbancentres desirable places to live most businesses would never set up in these 'vir- andwork should be underestimated. gin areas' because they need the labour force, the infrastructure,the goodsandservices and the contacts with government agencies which can only t ~ efound in or close to Cairo or Alexandria. Theme Paper:Outside the La1rgeCities: What Role for Smaller UrbanCentres? 55 The government could never afford to develop tones and professional schools. For many busi- these virginareasto the pointwhere tensof thou- nesses, these are more important than cheap sandsof newbusinesseswouldsetupthere. There lab o ~ r . ~ ~ is already evidence of reluctance on the part of businesses to move to the large new satellite cit- A lot of research has tried to establish the 'opti- ies around Cairo. But a more worrying implica- mum size' for a city, i.e., the size at which a city tion of such a planwould be that it would starve has all the specialized enterprises noted above all other cities, municipalities and rural areas of but none of the disadvantages of very large cit- investment funds. While relatively few people ies. Some researchers have claimed that cities are being persuaded to move to virgin areas at with 140,000 inhabitants are the 'optimum size' great expense, conditions elsewhere--where while anotherhas claimedthat the optimumsize most of Egypt's population lives--would dete- is between 1 and 2 million inhabitant^.^^ Such fig- riorate. uresmakenosensebecauseeachcityhasitsown uniqueadvantages and disadvantagesmanyof ManyThird World governmentsare investingcon- which do not relate to its size but do relate to its siderablesums of moneyin developingsmall and location and to the costs of drawing on certain intermediate urban centres to try to slow the resourcesnearby. Take the questionof gettinga growth of their largest cities. However, if govern- water supply. The cost of obtaining water varies ments are concerned about slowing down the enormously from place to place; for some cities growth of large cities or stimulatingthe develop- of (say) 1 million, the cost of doubling the water ment of smaller urban centres, they must look at supply so that heavy industry can expand is not why the largecitiesare growingrapidlyandmany so great; they are close to a major river or have small urban centres are not. As noted earlier, largegroundwater reserveswhichcant ~tapped e governments' macro-economicand pricingpoli- without depletingthem. Doublingwater supply cies, their sectoral priorities and the fact that lo- inother cities of 1 millioninhabitantscan be very cal government remains weak and ineffective expensive if there is no water source nearby. In may be the real reasons. Investinglarge sums in short,itisnotonly sizewhichdeterminessuchcosts. developing some 'small urban centres' will not achieve much, if the more fundamental causes One very important reason for an over-concen- are not addressed. tration of industries and commercial and finan- cial businesses in large cities is that they are Box 7 listssome reasonswhy modern industries not charged for the costs they generate there. and service enterprisesbecome concentrated The discussion about the optimum size for a city in one large city. forgets that most of the benefits of the large city go to businesses while most of the costs In relatively poor and un-industrializednations, a are dumped on poorer citizens. Major indus- government'sspending large sums of money try- tries and commercial or financial businesses of- ing to steer industries to locations which will not ten get all the advantages. 'They get the water suit them can damage the economy. Many of they need, the telephoneservice, electricityand their industries will need to be in or close to the solid waste collection, usually from government largest city. If they are producing consumer utilities. Their roads are paved and are served goods, costsare oftengreatly reduced by being with storm drains--paid for by government. In close to the largest consumer market. Because most cases, they pay little or nothing to dispose most nations' largest city is also their port, costs of theirwastes; henceindustriespollutethe airand are also cut if they import machinery or inputs or dump untreatedwastes into nearby water bod- they export someof their output. Largecitiesalso ies or into the sewage or drainage system. Their have a greater variety of skilled peopleand spe- professionalsandseniormanagementusuallylive cializedservices. Perhapsthey are the only cities inneighbourhoodswhichalsoreceivewater,tele- with sufficient water and reliable electricity sup- phones,electricity.roadsandgarbagecollection. plies. As Bertrand Renaudpointsout, only in rela- tivelylargecitiescanmanyspecializedenterprises Meanwhile,low-incomepeoplelive inareaswith exist - for instance specialized business services, few or none of these public investmentsand ser- shippers and jobbers, financial offices, legal of- vices. They often live in areas having the most fices, trade unions, repairs, specialized printing, air and water pollution. They suffer most from consultingfirms, equipment leasing firms, labora- traffic congestion, because they live in the worst located areas. If governmentscharged the rich 56 China:SmallTowns Development Factorswhich create or consolidate c) Investmentsininfrastructure(egroads,rail- ways, power, water supply, ports, airports, the primacyof one largecity phonesand telecommunications.....)favouring Historical Factors primatecity--andits region. a) Creation of a nation-wide administrative d) Concentration of richer income groups in hierarchywith power highly centralizedin pri- or near primate city--so this remains the mate capital city major consumer market. Part of this may be due to the unwillingness of executives, pro- b) Initial development of a commercial fessionals and skilled labourers to move away economy based on the export of mineral or from the primate city because only here is agriculturalproductswhich focused develop- there the quality of services and facilities that ment on ports (whichwere also usually capi- they desire. tals). If profits were steered out of the nation (eg. foreign owned plantations or mines) the e) 'The government's macro-economic and low incomes of the labour force meant little pricingpolicieshavingneteffect of subsidizing demand to support urban enterprises in the investmentsand consumersin the primatecity producingareas f ) Industrial and service sectors not having c) FormanynationsinAfricaandsomeinAsia, developedto the pointwhere decentralization the colonial legacy created the necessityfor of some activities (eg branch plants, routine centralizedgovernmentcontrolbecauseof a administration, research,distribution)can take fragile national unity at Independence (and place spontaneously thus primacy of the nationalcapital). g) Necessityfor majorenterprisesto haveclose d) Concentration t ~ yGovernments on indus- contact with nationalgovernment agencies ( trializationandon achievingsectoralplanning eg to acquire licenses for imports or govern- targets; again the existingprimatecity was of- ment contracts) which in turn is linked to the ten the only one with the infrastructure and scale and nature of government involvement services and pivotal position on national and in productionand trade internationaltransport routes. h) A national economy strongly integrated e) The dominance, in nations achieving inde- into the world market which may focus atten- pendence,of one politicalpartywith a strong tion on major port cities --which for histori- support from urban union and labourinterests cal reasons are primate cities. with headquartersor constituencies based in the capital city i) Nationswhichremaindependoncashcrop or mineral exports so primate city dominated Current Factors urbansystem imposedbycolonialruleremains theonewhichbestservestheeconomicmodel a) Businesses in the primate city not being and export crop dominated interregional charged the full cost of the publicly provided transport system. infrastructure and services they use and the costs they generate - including not having to j ) National capitals have to have various in- payfor the disposal of wastes or the controlof stitutions and activities associated with being air and water pollution the centre of government for a 'nation state'. eg governmentministryheadoffices,officesof b) Centralization of power and resources put~licagencies, nationallegislative,executive within national government. Governments in andjudicial i~stitutions,foreign embassies and other cities lack power and resources to be all the higher order goods and serviceswhich able to compete with primate city for new all these require. Few if any of these can be investments since they cannot provide the locatedawayfrom the nationalcapital. Inpre- infrastructure and services that new busi- dominantly ruralnations,just these can create nesses need. a 'primate city'. In addition, in relatively rural nations,demand for higherorder servicessuch as insurance, international banks and other Box 7 Theme Paper: Outside the Lar,geCities: What Rolefor Smaller UrbanCentres? 57 richwithin the larger cities. The fourth is the point "producer services" and higher order con- notedabove,makingmiddle-andupper-income sumer servicessuchastravelagentsandspe- groups and businesses in large cities pay for the cialist medical services can be so smallwith costs they generate. demandfor themso concentratedinthe na- tionalcapital that theyalso helpreinforcepri- Inmanyof the richer and moreurbanizednations macy. in the South, there are greater possibilities for a more decentralized pattern of urban develop- N.B. This is not a completelist and the extentto which ment.Inmostcountriesinthe Norththerehasbeen some or all of these are relevantto one particular notionwill vary greatly, as will their relative importance. populationmovementawayfrom many (ormost) of the largest cities, especially those cities that grew to become the largest ports and industrial Box 7 (continued) centres.There is an increasing proportionof busi- nesses outsidelarge cities, in small urban centres or 'greenfield sites' outside any urban centre or thefullcostof allthepublicinvestmentsfromwhich alongmajorhighways. Thereis someevidenceof they benefit, government revenues would in- this also taking place in parts of Brazil,Argentina, crease enormously. It governments charged in- South Korea and Mexico, usually in and around dustries for the full cost of the roads they useand the richest and most urbanized regions (see Box air and water pollution they generated, again, 8). Again, this more decentralized pattern of ur- government revenueswould increaseand pollu- bandevelopmentwill begreatly encouragedby tion levels would fall. If governments charged the strategysketched inthe previousparagraph. businesses for part of the cost of supplying the residential areas of their workforce with basic Populationdeconcenfration services, this revenue combined with that from within core regions full cost recovery from the rich would pay for improving conditions for poorer groups. But Important "counter-tlrbanization" or "counter- more importantly, the increased cost for ma- metropolitanization"trendshavedevelopedinall jor businesses in large cities would also encour- theworld's wealthiestandmosturbanizednations, age them to consider whether certain smaller including some in "the South." 'This impliesan al- urban centres might not be cheaper and better mostuniversaltendency for a moredecentralized places for their factories or offices. Perhaps pattern of urban development within market or governments' failure to fully charge large busi- mixed economies above a certain per capita in- nesses located in the major cities for the costs come, although there is great variety in the they generate and the costs of servicing them is scale, nature and timingof these trends. Itis also one of the most important reasons that these worth noting that "counter-urbanization" and businesses remain so concentrated in such cit- "counter-metropolitanization"trendsweregener- ies. ally weaker in Europeand North America during the 1980s, compared to the 1 9 7 0 Also, ~ ~ ~the Thus, the best long term strategy to slow the increasingglobalization of the world's economy growth of the largest cities and to stimulate the is increasing the economic primacy of some ex- development of small and intermediate urban isting primatecitieswithintheir nationalurbansys- centres is a combination of four elements. The tems--essentiallywhere primatecitiesdevelopan first is stronger, mo.recompetent, more represen- increasingly important role within the world tative local government. With more funds, more economy. Inother economies, however.most of trained personneland more realistic localdevel- the new enterprises linked to global markets are opment plans,theycanattractandsupportmore outside primate cities. Primacy is generally rein- newbusinessesandimprovethequalityandquan- forced within the command and control centres tity of basic services. The second is a more pro- ofthe world economy andwithin the citieswhich ductive and more diversifiedagriculturewith ac- are important international centres linking their tions also to tackle problems of un- or under-uti- national or regional economy with the global lized land held by large landowners and poorer economy." groups' access to land. The third is adjustments to macro-economicand pricing policiesso these For many of the world's largest cities, part of the do not have the effect of 'taxing' the poor and slowdown in their populationgrowthis explained those outsidethe largestcitiesandsubsidizingthe by a rapid growth in populationand production 58 China:SmallTowns Development just outside theirboundaries,with muchof this pro- ably gone furthest in the United States where duction intimately connected to enterprises still population densities in outer suburbs are gener- withinits boundaries. Ingeneral, all major cities or ally much lower than in Europe and where many metropolitancentres experience a decentraliza- enterprises have also developed close to major tionof populationandof productionas theygrow. highways outside the centralareas. Some of the This generally begins with suburban housing be- mostinnovativeandsuccessfulconcentrationsof ingdeveloped at ever greaterdistancesfrom the enterprises are not in cities but concentrated city centre and then a widening commutingfield alongmajorhighways (forinstancethefirms along and an increasingconcentrationof enterprises in Route 128inMassachusetts)orinSiliconValley. This suburban locations or in belts around the metro- has led to new terms such as the "100 mile city" politan area. But the speed of this decentraliza- where there is no obvious "central city." De- tion of peopleand enterprisesand itsspatialcon- centralizationof production and of urban popu- figuration seems to vary greatly from city to city lationwithin core regions can also be seen in the and to change over time. There are also recent rapid growthof smaller cities that are closeto the examplesof citycentresattractingnewenterprises majorcitiesor metropolitanareas as theseattract otherthan those that concentrate incentralbusi- both industrial and service enterprisesthat previ- ness districts and also new re~id,ents.~~ ously would tend to concentrate in major cities. Regionswith good quality transport and commu- This rearrangement of production within cities is nication networks encourage this, as does the perhaps best understoodin terms of three sets of "just-in-time" system which needs some physical factorswith differentspatialimplications.Theseare proximity. factors that One of the most remarkableexamples is the re- encourage a movementof enterprises out of gion bounded by Sao Paulo, Belo Horizonte, Rio major cities, metropolitan areas or even wider de Janeiro and Porto Alegre in Brazil which in- metropolitan regions, discourage new ones lo- cludes a great range of cities of different sizes, cating there, and cause a decline in the enter- many of which have been successful in attract- prises that are concentrated in central cities: ing new enterprises that previously would have concentrated in the major cities. Many such cit- still concentrate enterprises within or close ies are within 200 km of Sao Paulo's central city to metropolitan areas (or urban regions) but and have many advantages and few disadvan- outside the central city; and tageswhen compared to investmentinSao Paulo itself. PrivateinvestmentinGreaterSao Paulowas discouraged oy the well-organized trade union encourage enterprises back into central cit- movement, pollution, transport problems and a les. lack of suitable land sites. Investment in cities nearbywas encouragedbyawholerangeoffac- The scale and importance of the first of these tors including better roads and telecommunica- sets of factors has long been evident and care- tions, the availabilityof land and fiscal incentives fully documented (summarizedin Box 8). What in the smaller cities. The decentralization of pro- is lesswell documented, especiallyintheSouth, is duction was also boosted by the promotionand the fact that it has become common to have a support of the government in information tech- decentralizationof populationand of production nologyinCampinasandinthe aeronauticsindus- away from the central city (and even its inner try in Valle del Parait~a.~~Motor vehicle compa- suburbs) but with a continued or increased con- nies such as General Motors, Volkswagen and centrationof populationandof productionwithin Mercedes Benzhave chosendifferent small cities the metropolitanarea or wider region. Judged within this region." However, this model of a re- nationally, this remains an increasedconcentra- gion with a diverse but highly integrated urban tion of population and economic activity within systemand a decliningimportancefor any domi- what might be termed "core region" but a de- nant city, depends on good transport and com- creasedconcentrationofpopulationandeconomic munications system and good quality infrastruc- activity within the core region itself. In most tureandservicesavailableindifferentcities. Many major cities in the North and many in the South, of the largest cities intheSouthremainmorecon- there hasbeena decliningproportionof thepopu- centrated,becauseof poorertransportand com- lation living in the central city and the outward municationssystem.As scarce infrastructureand sprawl of the urban agglomeration, especially along major roads and highways. This has prob- Theme Paper:Outside the Large Cities:What Rolefor Smaller UrbanCentres? 59 Factors that can encourage a more Social factors decentralized paffern of urban development A combinationof relativelyhighper capita in- Economic factors comes and equitable income distribution na- A combinationof the growthof newconsumer tionally- so inareas otherthan that aroundthe industries which do not need to be close to primatecity, demand for goods and services major city centres or ports and good quality encourage businesses to locate there. infrastructureand services available in smaller High level of literacy and education among cities where land and other costs are also theinhabitantsof urbancentresother thanthe cheaper both for enterprises and for their staff primate city including higher education lo- andwhere the city is linkedto a national high- cated there - plus active regionalllocal busi- way system and (often)an airport closeby. ness communities Business support services like banking, devel- High levels of crime, violence, pollution and opment credit agencies, technicalassistance congestion in major cities which encourages facilities, etc. in urban centres other than pri- firms to invest elsewhere and those able to af- mate city to assist in the 'birth' and develop- ford to choosewhere to live to move to other mentof localfirmsandgoodculturallentertain- areas. mentlrecreationfacilities for managers,execu- tives, professionalsand skilled labour Influential labour movements developing in existing industrially developed areas which Industrial and retaillwholesalelservice sector businesses can avoid if they set up elsewhere within a nation with a size, diversity and con- and reduce labour costs as a result centration of units within single enterprises to allow the decentralisation of branch units or A highproportionof particularage groupswith routine operations (e.g., accounts, billing...) incomes who prefer to live outside the major outside large cities to lower production costs cities and have the means to do so, e.g. re- or better tap markets there tired people and families with young children Goodinterregionaltransport andcommunica- lnstitutional and policy factors tions systems (e.g.telephones,cellularphones); Decentralizedpoliticalstructurewhichincludes when combined with advanced systems of strong and efficient local government for ur- management and control linked to sophisti- ban centres other than primate cities and a catedcommunicationssystems,this allowsthe good database to inform prospective inves- spatialdispersionof largeenterprises'activities tors about local climate/water availabilitylre- (eachseekinglocationbestsuitedto itsopera- sources tion) with no loss of management/control of whole enterprise from head office. Businesses and middle and upper income groups in large cities being charged the full Decayingeconomic base of what had been cost of thepubliclyprovidedinfrastructureand the main industrial centres which may also services they use, and also businesses not prove unattractive locations for most new in- beingallowedto dumpsolidand liquidwastes dustrial or service enterprises (includingtoxic wastes)and pollutethe air. Successful,highvalueintensiveagriculturalpro- No need for businesses seeking permissionto duction,especiallyif this createsgoodincomes invest or import or export to have long nego- for a large number of people and/or forward tiationswith governmentagencies, located in and backward multiplier linkagessupported primate city Strongand successfultourist industryinsmaller towns and in rural areas linked to beaches, N.B. Many of these factors have contributed to a parks, lakes, rivers... (althoughgreat variety in decline in population in many large cities or metropoli- the extent to which the incomes/profits are tan areas in the North and many seem to be acting in many of the South's most urbanized and industrially captured by enterpriseswithin the smalltowns advanced regionswithin nations. as against travel agents, transport firms.... in nearbycities). Box 8 60 China:SmallTowns Development - skilled labour tend to be concentrated in large The reasonsfor inappropriate'spatialgoals' is not cities, so modern economic activity clusters simply ignorance. Many businesses would face around them.49 largeincreasesincosts if theywere chargedreal- isticpricesfor thepublicinfrastructureandservices Some concluding comments they used and were prohibited from dumping untreated wastes. Many special government In most nations, there are many small and inter- programmes on small and intermediate urban mediate urban centres where there is little or no centres are merely cosmetic operations to give possibilitythat strategicpublicinvestmentsorsup- the impression of government activity and con- portswill stimulate development.Some have too cern. Indeed,someseemnomorethanattempts poor or depleted a resource base. Others have to disguise the increasingcentralizationof power stagnant or decliningeconomies becauseenter- in national government with the decline in the prises no longer sell goods or services at a com- power and resourcesavailable to local govern- petitive price or because demand for them has ment.52 declined and there is little practical possibilityof finding more buoyant alternatives.The appropri- The whole subject of 'human settlements' which ate public response to such problems needs to brings in metropolitancentres, large cities, small be place-specific and case-specific. But the and intermediate urban centres and ruralsettle- widely usedpolicy of steeringsome public enter- mentsis very poorly understoodoutside a narrow prisestosmallandintermediateurbancentresonly groupofspecialistsandresearchers.Suchpeople for them to struggle to survive because of inap- talk of 'urban systems'53because it is only pos- propriatelocationsandpoorsupportinginfrastruc- sible to make sense of an urban centre if its role ture and services, or the policy of giving a large in relation to other urban centres is understood. subsidy to privateenterprises to move there, are Thus, the 'urban system' is all the urban cen- unlikelytotacklethecausesof suchcentres' prob- tresandthe movementsbetweenthemof goods, lems. Indeed,in manyinstances, they may have people,informationandcapital. 'The criticalcon- littleor noeffectonalleviatingthepovertyofsuch nections between urban centres include roads, centres' inhabitants,despite the high cost to the railways and sometimes aircraft but also all government. forms of telecommunications. In considering the problems of large cities or of Since people, resources and economic activities small urbancentres, one must not forget that it is are distributed in space around a region or na- people'sneeds,noturbancentres' needs,which tion, it is through the 'urbansystem' that they are is the realconcern. It is easy to muddle the two. connected. Tk.is 'urban system' and its connec- As Charles Gore states in an analysis of regional tionswithruralsettlementsprovidesthebackbone problems, it is very common for social problems onwhichalldevelopmentprojectsorprogrammes located in cities and regionsto be muddledwith areplanned. Yet governmentsandaidagencies the problemsof those citiesandregions or a con- still tend to treat 'urban development' or wider fusion of 'place prosperity' with 'people pros- 'human settlements' issues as if they were a sec- per it^'."^ This confusion is evident in much of the tor intheirownright with theirown ministryor divi- advice given by 'small and intermediate urban sion. 'Human settlements' are viewed as beinga centre' specialists to governments. convenient,discretecomponentof development so that, like agriculture or industry, responsibility Itis also evident ingovernmentpolicies. 'Manyof for planning and implementing projects or the goals of such policies are explicitly 'spatial', programmes can be left to one agency. This e.g., to reducethe concentrationof urbanpopu- hardlyaidstheneededcoordinationbetweenin- lationinthecapitalcity.Ifthe proportionof urban vestmentsininfrastructureandinvestmentsinag- citizens livingin the capital city fell, this could be riculturalor industrial projects.It ensures that 'hu- counted as 'a success'. But this 'success' might man settlements' receive a low priority since in- be associated with increasing poverty and eco- vestments in them produce less visible and mea- nomic stagnation. Certainly in Argentina, the surable results than investments in agriculture or decline inrecentyears inthe proportionof urban industry. Meanwhile, professionals' understand- citizenslivinginBuenosAires hasbeenpartiallythe ing that each nation's human settlements and resultof a declineinnationaloutput,an increase their manycomplexinterlinkagesarethe physical insocial inequality and a decline inthe capacity of the metropolitancentretogeneratenew job^.^' Theme Paper: Outsidethe Large Cities: What Rolefor Smaller UrbanCentres? 61 context within which all investments are made is morerealisticlocaldevelopmentplans,to the mo- rarelyreflectedinnationalplansandgovernment bilizationand better use of resourcesand to agri- structures. culturaldevelopment Itis onlythroughtheurbansystemanditslinkswith NOTES AND REFERENCES smaller settlements that farmers can be reached with agricultural extensionservices, inputs,credit, Background storage, marketingand processing.Similarly,only through an urbansystem and its linkswith smaller Table 1 gives examples of the proportions of na- settlementscangovernmentsincreasethe propor- tionalpopulationsandnationalurbanpopulations tion of the populationreachedwith healthcare, living in small and intermediate urban centres. education,postaland telephone services, emer- It shows how a lot of urban citizens do not live gency lifesaving services and so on. It is through in large cities, even if the trend in most nations the urban system that both agricultural and hasbeentowardssuchincreasedconcentration, nonagriculturalenterpriseshaveaccessto interre- at least until recent years [2]. lndia provides gionaland intraregionaltransport and communi- an interesting example. India's urban problems cationssystems.Finally,thispaperhasarguedthat are virtually always urban problems in Calcutta it is through the different levels of local govern- and Bombay. But these two cities contain little ment (mostof which are located in small and in- more than 10 percent of India's urban popula- termediate urban centres) that local needs and tion. Even taking India's twelve largest urban resources are best assessed, most development centres each with more than a million inhabit- initiatives efficiently implemented and most ants in 1981, they containedonly one quarter of multisectoral development programmes coordi- India's total urban population. In 1981, Havana nated. (Cuba's capital) contained just 30 percent of Cuba's urban population. In 1985, Colombia's The role of small and intermediate urban cen- capital (Bogota]containedonly 20 percentof its tres within national and regional urban systems urbanpopulationwhile Bogotaplusthenextthree and nationalproductionis usuallygivenscant at- largest urban centres contained just 43 percent tention. Obviouslythe development rolesof such of total urban population. These and other ex- centres cannot be considered in isolation from amples in Table 1 suggest that a very large 'ur- those of largerurbancentres or those of the rural ban population' live outside large cities. economy.Smalland intermediateurbancentres (howeveronechoosesto definethem)aremerely part of a range of different-size settlements I.This paper is developed from Chapter 9 of Hardoy, Jorge E. and David Satterthwaite. Squatter Citizen; Life in within any nation or region. An understandingof the Urban Third World, Earthscan Publications, 1989. trends in terms of changes in population or in Part of it was also published in Third World Planning economic structurewithin such centres can only Review in 1988. beachievedthroughanunderstandingof therole =.Mohan,Rakesh, "India:comingto terms with urbanization", of each particularcentrewithinthewider system. Cities August 1983. 3 . Bhooshan, B.S., "Bangalore, Mandya and Mysore Districts, Special government programmes for small and Karnataka Southern India", and Misra. H.N., "Rae Bareli, intermediateurbancentresmustbebasedonthe Sultanpur and Pratapgarh Districts, Uttar Pradesh State, understandingthat each centrewill haveits own North India" in Jorge E. Hardoy and David Satterthwaite, Small and Intermediate Urban Centres: their Role in Na- unique mix of resources, development potential, tionaland RegionalDevelopmentin the Third World. Hodder skills, constraints and links with the surrounds and and Stoughton. UK and Westview. USA, 1986. the wider regional and national economy. Of '. Of course. there are also many urban centres which grow course, the potential for development--orcon- rapidly not as a result of a growth in employment opportu- straints on development--change over time. nitiesbut because of the movement there of people fleeing Among the reasons for such change might be wars, droughts. famines but this growth is rarely perma- changes in the national economy or nent government's macroeconomic policies or the 5 . See for instance: Mathur. Om Prakash. "The role of small world market.Governmentscannotaffordtoview cities in notionaldevelopment" in O.P. Mathur (Editor),SmaN too narrowly their 'small and intermediate urban Cities and NationalDevelopment. United Nations Centre for RegionalDevelopment, Nagoya. Japan. 1982and Rondinelli, centres'. Nor can they affordto ignorecontribu- DennisA.."lntermediate Cities in DevelopingCountries",Third tions that people. citizens, businesses and local WorldPlanningReview,Volume4. Number4. November 1982. governmentsbasedinsuchcentresmay maketo 62 China: Small Towns Development 6 . As in the previous note and Rondinelli, Dennis A. "A Com- 22.ElAgraa, Omer M.A., IanHaywood, Salih El Arifi, BabikerA. parativeAnalysisof Demographic,Socialand EconomicChar- Abdalla, Mohamed 0 . El Sammani, Ali Mohamed El Hassan acteristics of lntermediate Cities in DevelopingCountries" in and HassanMohamedSalih, "The Gezira Region,The Sudan", O.P. Mathur (Editor),SmallCities and NationalDevelopment, in Hardoy and Satterthwaite (Editors) 1986, op. cit. UNCRD. Nagoya, Japan, 1982. 23. Bale, Malcolm D. and Ernst Lutz, Price Distortions in 7. Rondinelli,DennisA., JohnR. Nellisand G. ShabbirCheema. Agriculture and their Effects: an lnternational Comparison. "Decentralizationin developing countries - a review of re- World Bank Staff Working Paper No 359. Washington DC, cent experience," World Bank Staff Working Papers. Num- October 1979. ber 581, 1984. pp. 3-4 24. Gotsch. Carl and Gilbert Brown, Prices, Taxes and Sub- a . UNCHS (Habitat). "Planning and Management of Human sidies in Pakistan Agriculture 1960-76, World Bank Staff Settlements with Emphasis on Small and IntermediateTowns Working Paper No 387, Washington DC, April 1980. and Local growth Points: Report of the Executive Director", paper HS/C/8/3 presented to the Eighth Session of the U.N. 25. World Bank, Accelerated Development in Sub Saharan Commission on Human Settlements, February 1985. Africa, Washington DC, 1981. 16. UNCHS (Habitat),"Planning and Management of Human 9. See the proceedingsof the seminar on "Municipalitiesand Local Government in Latin America" held in June 1986 in Settlements with Emphasis on Small and IntermediateTowns Bogota in Revista Mexicana de Sociologia.Autumn 1987. and Local growth Points: Report of the Executive Director", paper HS/C/8/3 presented to the Eighth Session of the U.N. lo. Bahl.Roy,DanielHollandandJohannesLinn, UrbanGrowth Commission on Human Settlements, February 1985. and Local Taxes in Less Developed Countries, Papers of the East-West Population Institute No 89, Hawaii, September 17. Tyler, William G.,The Brazilian Sectoral Incentive Sys- 1983. tem andthe RegionalIncidence of NonSpatialIncentivePoli- cies, Discussion paper UDD-31, Water Supply and Urban De- 'I. Bahl, Holland and Linn 1983, op. cit. velopment Department. the World Bank. 1983. 1 2 . See for instance Davila, Julio D., Maria Errazuriz, Fran- Daly,M.. DevelopmentPlanningin Nigeria. PlanningStud- cisco Londono and Consuelo de Marulanda, El Rol de las ies Programme, University of Ibadan. quoted in Michael CiudadesIntermediasy Pequenasen eldesarrolloNacionaly Olanrewaju Filani, "Nigeria: the need to modify centre-town Regional-Estudiosde casode Pereira-DosQuebradasySanta development planning" in W. Stohr and D.R.F. Taylor (Edi- Rosade Viterbo, Colombia, IlED LatinAmerica, Buenos Aires, tors), Development from Above or Below?. John Wiley 8, November 1986. Sons, Chichester, UK, 1981. ". Linn, Johannes F., Cities in the DevelopingWorld, World 29. Douglass, Mike, "Thailand: territorial dissolution and Bank, Oxford University Press, 1983. pp. 57-58. alternative regional development for the central plains" in W. Stohr and D.R.F. Taylor (Editors), Development from 14. See energy budgets and land requirements in different Above or Below? John Wiley 8, Sons. Chichester, UK, 1981. farms and crop types in Leach, Gerald, EnergyandFoodPro- duction, lnternational Institute for Environment and Devel- ". O'Connor.A.M.. SecondaryCitiesandFoodproductionin opment, 1975. Nigeria. IIED, London, February 1984. IS. See energy and land budgets for Chinese smallholders in 31.Manzonal. Mabel and Cesar A. Vapnarsky. "The Devel- Leach 1975, op. cit. opment of the Upper Valley of Rio Negro and its Periphery Within the Comahue Region, Argentina", in Hardoy and 1 6 . Collin Delavaud. Anne. Uruguay; Medium and Small Cit- Satterthwaite (Editors) 1986, op. cit. ies, lnstitute des Hautes Etudes de I'Amerique Latine, Laboratoire Associe du Centre National de la Recherche 32.Scott, Ian Urban and Spatial Development in Mexico, Scientifique, Paris. 1976 Johns Hopkins University Press, Baltimore and London, 1982. 17. Kutcher. Gary P. and Pasquale L. Scandino, The Agri- 33.Scott 1982, op. cit., page 1 11. cultural Economy of Northeast Brazil. Johns Hopkins Uni- versity Press, 1981, page 216. 34.Scott 1982, op. cit., page 118. Hamer 1984, op. cit. l a . Kutcher and Scandiuo 1981, op. cit.. page 218 35. Hardoy, Jorge E. and David Satterthwaite. "Govern- I P . Kutcher and Scandino 1981. op. cit.. page 218 36. ment Policiesand Small and lntermediate Urban Centres" in 2 0 . See for instance Dickenson, John "Innovation for re- Hardoy and Satterthwaite (Editors) 1986, op. cit. gional development in Northeast Brazil, a century of fail- ures", Third World Planning Review Volume 2, Number 1. 37.For case studies, see for instance Meekyaa, Ude James Spring 1980, Gilbert, Alan and DavidE. Goodman,"Regional and Carole Rakodi "The neglected small towns of Nigeria", income disparities and economic development: a critique". Third World Planning Review Vol. 12. No 1. February. 1990, in Alan Gilbert (Editor)Development Planning and Spatial pp. 21-40. and Amis, Philip. Urban Management in Uganda: Structure, John Wiley 8, Sons, Chichester, 1976. pp. 113 - Survival Under Stress, The Institutional Framework of Ur- 142. ban Government: Case Study No 5, Development Adminis- tration Group, INLOGOV, University of Birmingham, Birming- 21 . Homer, Andrew M. Decentralized Urban Development ham, April 1992. 1 10 pages. and Industrial Location Behaviour in Sao Paulo, Brazil: A Synthesis of Research Issues and Conclusions, Discussion Hardoy, Jorge E., Diana Mitlin and David Satterthwaite. Paper. Water Supply and Urban Development Department, Environmental Problems in Third World Cities, Earthscan the World Bank, Washington DC, 1984. Publications, London, 1992. Theme Paper: Outside the Large Cities:What Rolefor Smaller UrbanCentres? 63 PROPORTION OF NATIONAL AND URBAN POPLlLATlONIN SMALL AND INTERMEDIATE URBAN CENTRES (Selected nations) % of nationalpopulationin % of urbanpopulationin Smalland inter- Large Smalland inter- Large mediate urban urban mediate urban urban Country centres centres centres centres Kenya 7.5 7.7 49.5 50.5 ( 1 979) The Sudan 12.3 5.3 69.0 30.1 ( 1 973) Tanzania 8.7 4.6 65.9 34.0 ( 1 978) India Pakistan Colombia 40.5 30.7 56.9 43.1 ( 1985) atxl 46.3 19.8 70.0 30.0 ( 1 981) Ecuador 23.7 25.6 47.9 52.0 ( 1 982) N.B. Cross country comparisons are invalid since the choice as to which urban centres are 'large' is made within the urban context for each country. Note 3 gives more details and lists the sources for the statistics. TABLE I ". Boiroch, Paul,"Employmentand largecities: problemsand 39.UNCHS (Habitat]. "Planning and Management of Human Settlements with Emphasison Small and IntermediateTowns outlook," InternationalLabourReview Volume 121.No.5,Sep- and Local growth Points: Report of the Executive Director". tember-October 1982. paper HS/C/8/3 presented to the Eighth Session of the U.N. UNCHS (Habitat),An Urbanizing World; The Global Report Commission on HumanSettlements, February 1985, page 6 - U . onHumanSettlements,OxfordUniversityPress,Oxfordand New drawing from information provided in Linn, Johannes F. "The York, 1996. costs of urbanizationindeveloping countries", Economic De- velopment and CulturalChange Volume 30 (3).Universityof ". See for instanceSassen, Soskio, Citiesina WorldEconomy, Chicago. 1982,pp. 636-637. PineForgePress,ThousandOaks, London, NewDelhi, 1994, 157 ". pages and Friedmann, John, "Where we stand: a decade of Max-neef, Manfred, From the Outside Looking In, Dog world city research". Paper prepared for the Conference of HammarskjoldFoundation,Uppsala,Sweden, 1982.page 121. World Citiesina WorldSystem, Center for InnovativeTechnol- Hordoy, Jorge E. and David Satterthwaite, "A survey of ogy, April 1993,37. empirical materialon the factors affecting the development of small and intermediate urban centres" in Hardoy and 4CParker, John, "Turn up the lights; a survey of cities", The Economist,July 29th. 1995. 18 pages. Satterthwoite (Editors) 1986, op. cit. 47.Caride, Horacio E. and Jose A. Borello. IndustrialLocationin 42.Renoud, Bertrand. NationalUrbanization Policy in Devel- MajorLatinAmericanMetropolitanAreas. reportprepared by oping Countries. Oxford University Press (for the World IIED-America Latino for the Business Council on Sustainable Bank], Washington DC. 1981. Development. 1995. 48.Caride and Borello 1995,op. cit. 64 China: SmallTowns Development 4v. Hams, Nigel, "Bombay ina globaleconomy; shctural ad- 52.Harris,Nigel, "Spatial planning and economic develop- justment and the roleof cities", Cities.Vo1.12. No.3, June 1995 ment", Habitat lnternational Volume 7, No 5/15, 1983. ,pp. 175-184. s3. Bourne, L.S. and J.W. Simmons, Introduction to Systems Gore, Charles, Regions in Question: Space. Development of Cities, Oxford University Press. 1978. TheoryandRegionalPolicy,Methuen, London and NewYork, 1984. page 263. Although this book concentrates on exam- ining the validity of theories on urban. regional and rural developmentwhich are used to justify regional policy in the Third World, it has considerable relevance to the subject of small and intermediateurban centres. Many governments have sought to justify their programmes on small and inter- mediate urban centres in terms very similar to earlier jus- tifications for regional policies. DavidSatterthwaite 51. Manzanal,Mabel. "Changes inArgentina'sUrbanSystems andthe Economic Crisis". CitiesVolume 5.No3.August 1988, InternationalInstitutefor Environmentand pp. 260-267. Development The Management,CostingAnd MarketingOf Town Land Alain Bertaud The Growthof SmallTowns Of course a very high demographic historical growth rate is no guaranty that this growth rate InChina,the populationof small towns is grow- will continue in the future. The demographic ing at a very uneven rate. Some small towns growth rate is only an indicator of economic are growing at the astonishing rate of 20%per growth which in turn depends on many factors year, others at a high rate of 5 or 6% a year, which are independent from the control of the othersarestagnating,somemightbelosingpopu- local authority. For this reasonsmall towns' Local lation. The methodology explained in this paper Authoritieshaveto bevery cautiousininvestingin concerns only the towns which are growing at a infrastructurefor future growth. fast rate -more than 4% a year. Land develop- ment investment is made necessary by fast de- mographic rate. But international experience Why Land Management? shows that Investment In infrastructure and land development does not create In China, because of the status of land tenure growth. It is certainly possible to develop land during the transition period toward a market inadvance of anticipateddemographic growth, economy, the local authority of a small town is but developing land for more than, say, 3 years obliged to fulfill the function of a land developer anticipated growth is extremely risky and has . This is no trivial matter. A city like Zhili Town in no economic justification. Zhejiang Province which has been growing at around20%peryear (townproper)duringthelast Demographic growth requires land for town ex- 10years, requiredto develop about300 hectares pansionbutit also requiresa higher level of infra- of land to accommodate the demographic and structure investment per capita, and higher op- economic growth between 1985and 1994for an eration and maintenance costs. A town which additionalpopulationofabout25,000 people.This grows at 20% a year doubles in area in 3.5 would be considered a very large and complex years, a town growing at 10%doubles in 7 years land development project even in cities where a and a town growing at 5%doubles in 14 years land and a financialmarket alreadyexist. (assuming the density stays constant). The Local Authority of a small fast-growingtown shouldfunctionasa landdeveloperuntilthisfunc- tion is taken over byspecializedprivatedevelop- 66 China: SmallTowns Development - -- ers.Thiswill happenwhen enough land has been of revenues during a given period by selling land convertedfromagriculturalto buildablelandand use rights. But each land use right sold involve a when enough land leases have been issued to future expense for the Local Authority in terms create a land market between users. In China of construction of trunk infrastructure, treat- the transition period during which the Local Au- ment plants, provision of social services, refuse thority have to play the developer role may last dumps, etc. If the Local Authority spends its another 10 years. Of course Local Authorities current revenues to pay for liabilities incurred in should playthe role of land developerinaddition the past, it will become bankrupt as soon as that to their more traditional responsibilities con- growth slows down only slightly. Borrowing cerning the provision of social services, the op- money to develop infrastructurewill increase the erationand maintenanceof utilitiesandtheregu- risk of bankruptcy. The principles and methods lation of land use. described below are aimed at avoiding this type of problem. The following remarks illustrates the methods that a small town could use to fulfill this role of Principlesof Land Management land developer. I insist that these methods are usefulonly for towns with a demographic growth The managementof landshould be drivenbyan- rate of more than 5% a year. ticipated demand for land fueled by economic activities.Asuccessfullanddevelopmentscheme In small towns with fast growth, Local Authori- depends on the confidence that end users will ties cannot be expected to finance out of their have in the developer, in this case the LocalAu- own savings their requirement for infrastruc- thority. In establishing the regulatory framework ture. They have no choice but either to borrow underwhich the land marketwill operate there is to finance their needs or to let the environment a contradictory need for flexibility and cer- deteriorate for lack of adequate infrastructure. tainty. In the later case, ultimately, the bad quality of the environment will discourage growth and will Flexibility. Land-use plans are never established prove very costly to clean up, certainly much on a "scientific" basis. They are only a projec- more costly than if the town has beer)well man- tion based on the planner's judgment of future aged from the start. Therefore Local Authori- land users demand for land and infrastructure. ties should learnthe preconditionswhich will give The end users and as a consequence their de- them the possibility to borrow to finance mand for land, are not known at the time the their growing need for infrastructure.To be able planisprepared.Therealeffectivedemand might to borrow, Local Authorities should prepare the be quite different from what was anticipated. following: There is no point in forcing land users to modify a] a credible land management system and their demand in order to fulfill the plan. Land b] financial projections based onsound cost-re- users in small towns have the choice to move to covery principles anothertownwhere landand infrastructurehave been plannedto meet their needs.The LocalAu- ProfessorDowallin his paper given to this confer- .thority should therefore show flexibility in ad- ence "AnOverviewof PrivateSector Financingof justing its plan to changing demand. 'The use of UrbanInfrastructureServices"describesthefinan- simple computer models greatly helps adjusts cial instruments which are available to a Local land-use plans rapidly while maintaining finan- -Authority to finance its infrastructureand its land cial viability. development needs. The method described be- low allow a LocalAuthority to define and quan- Certainty. Land users need to have confidence tify what these needs might be. to establish their business on land that the Local Authority has developed .This requires certainty. Too often, Local Authorities, when confronted Land users should be certain that the Local Au- with fast growth, content themselves in oper- thority will not change the terms of the lease, the ating what are called "Ponzi schemes". A Ponzi nature of the development rights given to them, scheme is an operation which allows financing the delivery of infrastructure promised, in par- current expenditures with current revenues ticular in terms of water, water treatment, without taking into account the future liability drainage,electricityandtelecommunication.Any represented by the flow of current revenues. change made in the terms of the contract given For instance a Local Authority may receive a lot Theme Pa~er:The Ma1nagement,Costing & Marketingof Town Land 67 -- by Local Authorities to land users will weaken its consistent. For instancethat the amountof water credibilityandeventuallywill causefinancialprob- provided by the water system be consistent with lems by slowing economic growth. theprojecteddensityofjobs andpopulation,that the financial costs be consistent with the length Land management rests on basic "land ac- of constructiontime and the projected inflation counting" techniques.The base of the account- rate, etc. The use of computer models is nec- ing systemis of course the area of the landto be essary to insure this internal consistency.The use developedand the cost of developingit and the of computers facilitates internal consistency, it market value of the area of land which would does not permit to calculatewhat will be the ex- eventually be sold. It is important to distinguish act value of the land developed. This value will the difference between "cost" and "value".Too alwaysbeestimatesthemselvesbasedonsurveys. often in China the two terms are used synony- mously. Costs are what it cost to develop the Finally,for each type of land use the cost recov- land. Value is what land user are ready to pay ery mechanism which will be used has to be forthelandwhichhasbeendeveloped.Weshould establishedin advance. For instance the cost of aimof courseto developlandwitha value higher developinglandfor schoolsorfor industrieswill be than the cost to develop it. But this relation recovered in different ways which have to be should not be taken for granted. The cost of de- anticipated.Thecostof developinglandforschool velopinglandmightat times behigherthanwhat might be recovered through a surcharge on the the user wants to pay. If it is the case, the Local cost of residentialland,ora surchargeonthecost Authority will go bankrupt. In the accounting of residentialand industrialland,or througha tax system described hereafter land development on development paid by all enterprises and costs and land values are calculated indepen- households in the town. Whatever the system se- dently.Developedlandcostsarecalculatedbased lected, it has to be explicit and become part of on the quantity of civil work and financial cost the accountingsystem. which are required, land values are based on what land users are currently paying for land Costrecoverymayvaryfor eachtypeof landuse, with equivalent characteristics.The model could it can be direct or indirect. Refer to David at timesshow negative landvalues.Itmeansthat Dowell's paper for the different mechanisms the projectasdesignedcouldnotbeimplemented whichcouldbeused. without incuring a loss to the Local Authority. a) Direct recovery through Ofcourse bothlandvaluesanddevelopmentcosts i) land sale or land lease price change over time. Some changes, such as infla- ii) user fees tion can be anticipatedwith a certaindegree of b) Indirectrecoverythrough tariffs certainty, at least in the short terms. Change in demand and therefore landvalues are more dif- The Componentsof LandDevelopment ficult to anticipate. A large supply of developed land in adjacent towns may result in a drop of Models developedlandvalue.Whatever the uncertainty in changes in values and costs, these changes To illustrate the use of a land accountingsystem have to be guessed but explicitly expressed in brieflydescribedabovewe havepreparedaland the landdevelopmentaccountingsystem. development model based on current and an- ticipated land use in Zhili Town.in Zhejiang Prov- It is important to insure internal consistency ince. The figures are only for illustrative pur- between land-use types, regulations and poses. The model is composed of 2 parts: demography, and projected demand for differ- a) A currentland-usemapanda projectedland- ent landuse type, for infrastructureand for social use map services. A land accounting system for devel- b) A table, itself divided into 3 parts: oping, for example, 100 hectares of land may i) land user/ builder model include more than 400 parameters.The value of ii) land developer model some of these parameterswill be bcsed on esti- iii) cash flow mates -such as the rate of inflationor the value of a given plot of land--other will be based on quantities--suchas area of roads, length of wa- ter pipes, densities, etc. It will be important that the value of all these parameters be internally 68 China: SmallTowns Development The mainrole of this modelis to ensure the Conclusions internalconsistencyof the parameter.Giventhe assumptionsmade on demand and inflation, The methodologydescribed above will not solve the modeltypically providesan answer to the all the problems of fast-growing small towns. following questions: But it could avoid financial difficulties in the fu- ture, andit shouldallow LocalAuthorityto borrow a) what will be the need for externalborrowing with a minimumof risksfor boththe borrowerand for the project? the lender. Borrowingin turn should allow to de- b) What could be the pricecharged for devel- velop a muchhealthierenvironmentand a more oped land for different usento recoverall the efficient infrastructure, fostering more economic costs of the project? anddemographicgrowthinthesmalltownsinthe c] what would be the effectsof landuse long run. changes on the financial viability of the project? The methodologyexplainedaboveshouldbedis- This type of land-usemodelsare builtin 3 steps: seminated to all the Local Authorities of small a) Buildingof a geographicaldata base towns experimenting in fast growth. A manual i) creating adequate land classification and a software adapted to Chinese conditions ii) establishingbuildingrestrictionsbyland- should be developed and training sessions orga- use type nized. Training sessions should not be limited to iii) designingboundariesbetweenzones theuseof landdevelopmentmodelsbutcouldalso and designinginfrastructurenetwork includethe useand disseminationof appropriate b) Establishingcost-recoveryprinciples,and de technology for the development and construc- mand for land and floor space; tionofinfrastructure,forwaste management,and i) explicit cost recovery methodfor each for the operationand maintenanceof city infra- type of infrastructureand for each type structure. Financial institutions should make of use; funds availablefor the financing of infrastructure ii) anticipated sale pricefor developed insmalltowns. Loanswould bemadeto LocalAu- landof different types basedon de thority who prepare land development projects mand whichwould beappraised by lendinginstitutions. c) Calculating developmentcost, of revenues Appraisals techniqueswould also haveto be de- throughsale of land userightsor leases, cash veloped in China for this type of lending. flow, borrowingneeds. Alain Bertaud PrincipalUrban Planner Urban DevelopmentDivision The World Bank 'Theme Paper: 'The Management,Costing & Marketingof Town Land 69 8 Novrmbcr, 1995 Technical Anriex The managemellt,Costing And MnrketingOC'Sown Idand by Alilin Bennutl Example of a IJi1ndncvclopment ~h'fodel which could be usc for thc dcvclopmcnt of small towns in Clrina 1 . Some small towns in China are growing at a very fast rate. The local autliority responsible for land development need a tool to develop land which wor~ldinsure that they recover through the sale of land use leases the ru11 capital cost ol' infrastructureand social services. At present most towns have a land development plan, but very few are projecting their revenues and expenditure in a systematic manner. The current annex, based on a real case in China, illustrate the simple methodology which could be used to link current land use plans, to expected developed land market prices, infrastructureexpenditures and financial cash flows. 2. The followingexample is based on a real land development plan provided by the town of Zhili in Zhejiang Province. 'l'he land use parameters are the ones measured fiom the map. 'The niarket price for various type of land and buildings are not real. They are provided only fir illustration purpose. 3. The annex includes the followingdocuments: a) Map 1: Existing Urban Area and future extensioli b) Map 2: Projectecl land use c ) Map 3. Detail of land Use Classification d) Table 1 : Summary Land Use corresponding to development Map 1 and 2 e) Fable 2 :Builder Model: Purchase of developed land Based on different lype of land use and market price this rnodel calculate the average price for developed land which could be recovered tiom developed land . f) Table 3: Land Use model: This part of the rnodel calculates the number ol'people and density oi'the total site to be developed; ) Table 4: Land Developer Model This part of the model calculatesthe cost of infrastructureper salable squnrc meter and compare it to the average developed land cost obtained in table 2. h) Table 5: Land Developer Cash ilow This part of the rnodel calculatesthe quarterly expenditure and income, thc need for borrowing per quarter,and the financialrate of return orthe operation. i) Graph 1: Implementation schedule; Thispaph showsthe projected implementatioilschedule for expenditure and revenues j) Graph 2 :Land developercash flow: this graph shows the need for borrowing per quarter and the financial surplus or deficit of the project. 70 China:SmallTowns Development EXISTING URBAN AREA AND FUTURE EXTENSION - 0ROADS I&FOREST PARKS CANALS EXISTING URBANAREA I PROJECTEDURBAN Kilometers Theme Paper:The Management,Costing 8 Marketingof Town Land 71 PROJECTED LAND USE RESIDENTIAL = 141Ha 25%- COMMERCES = 48Ha 8% - INDUSTRIES =99Ha 18%- FACILITIES = 15Ha 3% - UTII-ITIES = 16Ha 3% - 1.PARKS& FOREST= 57Ha - 10% CANALS = 104Ha 18% - 0ROADSS PARKINGS = 83Ha 15%- rn Kilometers 72 China:SmallTowns Development XlLl - LAND USE ATTRIBUTES Theme Paper:The Management, Costing & Marketingof Town Land 73 8-Now95 TABLE 1: SUMMARY LAND USE CORRESPONDING TO DEVELOPMENT MAP 1AND 2 ExlstingP~own(1995) ProjectedTown (2000) TObe developed (2000) Map ref. ha % ha I ha ah A. Salable land 43.05 88.14% 287.48 50.98% 244.43 49.01% of which: Commerce C2 Markets C26 Industry 1 M1 Industry 2 M2 Warehouse W l Residential 1 R1 Residential2 R2 Total Salable land 8. Non Salable Land of which: (i)Comrnunrtyfacilities of which: Governmentoffices C1 Cultural facilities C3 Sports C4 Hospital C5 Schools R22 total (i) (ii)Parksandopenspaces of which: Parks GI1 Forest G21 Environmental prot. G22 Tourist rest area S22 0.0% 0.22 0.4% 0.22 0.4% total (ii) 0.32 100.0% 57.47 100.0% 57.15 100.0% (iii) Utilities dwhich: Utllity: water U l l Utility:power U12 Utllity: transport 1 U22 utility: transport 2 U29 Utility: telecom U3 utllky: waste water U41 Utility: Others U9 total (iii) (tv) Roads 8 transport dwhich: bansport 8 square 521 Parklng S31 Transportterminal T23 Roads (v) Canals 8 ponds W 4.32 6.64% 1 104.23 18.48% 1 99.90 20.03% Total nonsalable Ian 22.04 33.86%1 276.39 49.02%! 254.35 50.99% I total ProlectArea 65.10 1oo.00~ 563.87 100.00~ 498.77 100.00xI 74 China: SmallTowns Development 1 TABLE I BUILDER MODEL: PURCHASE OF DEVELOPED LAND - Figurer prondsd below are tor IllurtralNePurpose only and do not reoresentreal cars nor recommsndatm ITERATION : I 8. Construction Cost C. Developed land Prlce 30 Prlce of develo~edland per owell~ngUnll Y/du 135143 24,257 27.660 3.514 31 Floor Area Ratlo I 2.50 0.75 0.50 5.46 32 Salable land per dwelllng Unlt m2 80.0 400.0 240.0 14.0 33 Purchase prlce of salable Land Y/m2 1.689.29 60.64 115.25 250.97 I 35 Percent of salable land for each type 1 % 1 1 4 . 4 ~ 1 3 8 . 0 ~ 1 1 . 9 ~ 1 45.7~1 100.0% 1 I I I I I I I I I I I I I I 37 Average Purchase Price of 38 Develoned Salable Land Ylm? 383.2 TABLE 2 - LAND USE MODEL Figuresprovided belo*, are lor 11lustnrNepurposeonly and do not reoresent real case nor recommenaamn Theme Paper:The Management,Costing 8 Marketingof Town Land 75 TABLE 3 -LAND DEVELOPER MODEL: PURCHASE OF UNDEVELOPED LAND Fiqures prowded below are for rllustrativeourpose onlv and do not reoresent real case nor mommendaton ITERATION : 1 A. Total Sale Prlce of Developed Land Area (m2) alable m2 Total Yuan 8 Commerce 8 Markets 351.932 1.68929 594.513.889 9 Industry 8 warehouses 928,710 60.64 56,319,612 10 Residential 1 46,435 115.25 5,351.690 11 Residential2 1.116.896 250.97 280.304.944 12 Total Sale Price of DevelopedLand 2,443,973 383.18 936,490,135 1% recnvere (Total I Ylm21 ~ l m 2 1 B. Cost of Off Slte Infrastructure Cost (Y) ( directly 1 ~ecovered ( salable) 17 Roads 0 0.00 0.00 18 Water Supply 0 0.00 0.00 19 Sewerage 10,000,000 25% 2.500.000 1.02 0.50 20 Storm Drainage 0 0 00 0.00 21 Electricity 10,000,000 25% 2.500.000 1.02 0.50 22 Cornmun~tyFacilit~es 0 0.00 0.00 23 Sewerage Treatment 10,000,000 10% 1,000.000 0.41 0.20 24 0 0.00 0.00 25 Others 0 0.00 0.00 26 Off srte infrastrvcture base costs: 30,000,000 6,000,000 2.46 6.01 27 Design 8 Supervision % 8% 2.400.000 480.000 28 Phfsical Contingencies " 10% 3.240.000 48.000 29 Interest During Construction 5% 1,782.000 2.400 30 Total Off Site Infrastructure Cost 37,422,000 6,530,400 2.67 1.31 31 32 Total off site costs to be recovered from sde: 6,530.400 2.67 1.31 yIm2 ylm2 C. Cost of On Slte Infrastructure Cost (Y) salable gross 35 36 Land Fill 10,000,000 4.09 2.00 37 Site Preparation and Level~ng 20,000,000 8.18 4.01 38 Primar$ and SecondarS Roads 100,000,000 40.92 20.05 39 Internalroads and footpaths 10,000,000 4.09 2.00 40 Water Suppl$ 40,000,000 16.37 8.02 41 Sewerage 50,000,000 20.46 10.02 42 Storm Drainage 50,000,000 20.46 10.02 43 Electr~c~t$ 50,000,000 20.46 10.02 44 Street Lighting 50,000,000 20.46 10.02 45 Commun~t$fac~lities!construction) 50,000,000 20.46 10.02 46 Landscaping 5,000,000 2.05 1.00 47 0.00 0.00 48 Other 0.00 0.00 49 on slte infrastructure base cost 435.000.000 177.99 87.21 50 Design & Supervision % 5.0% 21,750,000 8.90 4.36 51 PhOsical Contingencies " 10.0% 45,675,000 18.69 9.16 52 Interest Durlng Construcbon 5.0% 25,121.250 10.28 5.04 53 Land Developer Profit 20.0% 105,509,250 43.17 21.15 54 Total on Site Infrastructure Cost 633,055,500 259.03 126.92 D. SummarS of lnfrast~cturecost to be recovered fram slte 571Totaloff slte costs to be recovered from srte 6 530 400 7 6 7 1 2 1 581Totalon Site Infrastructure Cost 633 055 500 259 OR 176-Q? - - 59IRelocaboncosts: 100.000.000 40 97 70ns --- 61 Total infra. cost to be recovered from slte: 733,055,500 299.94 746.97 62 Total recoveredfrom sale of developed land: 936,490,735 383.18 187.76 63 Market value of undevelopedland: 203.434.635 83.24 40.79 ITABLE4 -LAND DEVELOPERCASH+LOW 1 ITERATION: 1 A EXW!UMTM o aagn: 1 7lTnal Cost 01Oflslle Wramhre. 6.UO.IW =lsb_3F32 i 0.*COYC I 16 ~ S a k d D F Land: Y ~ 936.490.135 =lab 31F62 I in i.mo~. . iw onsbnn- 35 b S bHR-a 36 Relaanan 3 7 p r b u w d ~ ~ Tcmbw-mres 39 W eE-Mn lPE) 40 ToW -0 + PE 41 lnc- bnplmnlatlon Schdulb 42 h c a h r m s a k d l n d 43 PncsEsc~UmlPE) 44 hCacW E 48 Caah F l a 46 OvrWtf Ca.h ~bm 47 Urrmw8c..kvm 40 tlan( cutloCoratulm(IDC) 49 ~ C a s h ( l a ~ I D C Theme Paper:'The Management,Costing & Marketingof Town Land 77 iteration 1 29-Mar-96 ImplementationSchedule +Relocation Land DeveloperCash Flow 78 China: SmallTowns Development Urban DevelopmentStrategies, Planningand Decentralisation: EmergingTrends EmielA. Wegelin Introduction (excludingJapan); by 1980 this number had in- creased to 16 and by 2010 there are likely to be U rbanisation in Asia is proceeding at an 31cities inthis populationbracket.Inthisframe of unprecedented rate. During 1970-1990 mind,attemptswere madeto controlthe growth the ruralpopulationof Asia (excludingJa- of urban areas through both measures aimed at pan) grew by 1.4%from 1,590 million people to restricting urban populationgrowth directly and 2.115million; urbanpopulationgrew by 3.9%from through increasedrural developmentefforts. 407 millionto 879 millionduringthesameperiod.It is estimated that the rural populationof Asia will Gradually, however, perceptions of policy mak- havereached2,217 millionin2025 (agrowthfrom ers are changing. Increasingly accurate demo- 1990of 102millionpeopleor 0.1% pa., with nega- graphic data showthat in mostAsian developing tive growthinthelastdecade of that period);the countriesrural-urbanmigrationaccounts for only urbanpopulationwillgrowby 1,677millionto2,556 at~outone half of urban populationgrowth and million during the same period (growth of 3.1% that migrants generally move because of ratio- p a ) ,with the urbanpopulationshareincreasing nal motives related to employment opportunity from 20% in 1970to 29%in 1990and 54%in 2025.1 differentials. Spatial economic and fiscal data tend to support this perception of migrants: cit- Initial policy responses to this staggering urban ies and towns are engines of economic growth populationgrowth inthe developingcountriesof and sources of employment [particularlyin the Asia have generally been negative ones, based service sector). Urban areas are also major on the thought that urbanisation was undesir- sources of national, provincialand local tax rev- ableandto beavoided.Thisimagehasbeenfed enue, in many cases not only outstripping rural by visions of unmanageable, ever-growing areasona per capita basis,but ofteninabsolute megalopolies: in 1970there were six cities with a terms as well. populationof five millionpeopleor above inAsia Inconsequence,policydiagnosisischangingtoo: there is an increasingawareness that the positive IUnited Nations.Departmentof Economic and Social economic functions which cities fulfill can be Informationand PolicyAnalysis 'WorldUrbanisation Pros- mademoreeffectivethrough appropriateinvest- pects:The 1992 Revision,estimatesand projectionsof urban ments in infrastructure, urban services and shel- and ruralpopulations and ofurbanagglomerations",1993, pp.4-15. ter improvements. Provided that local urban 80 China: SmallTowns Development managementlinstitutionalcapabilities are drasti- ~ational~rbanDevelopmentStrategies: cally improved, these investments can generally Meaningand Evolution befinanced byrevenuesgeneratedinthe urban areas themselves (i.e., not at the national For many years most countries in the region did exchequer'sexpenseor at the expense of the ru- not harbouranyspecific urbandevelopmentstra- ralsector).Inotherwords, theincreasinglyrecom- tegic notionstospeakof at thenationallevel.Only mended urban developmentpath is:reducethe gradually did coherent policy making on dependencyof urbanareasonnationalfiscal re- urbanisationtake shape, in most cases initially as sources through increased generation of local an articulation of the desire to decant urban revenues to finance more cost effective urban growth from the megacities to secondary towns. infrastructure/servicesdevelopment. Often this This flowed primarilyfrom a negative perspective does not necessitate rateltax increases but of urbanisationas undesirablepressure,andwant- ratherimprovedassessment and collectionprac- ingto reducesuchpressureof urbanisationon the tices, improved local administration techniques, major cities.Later an additional argumentwas a more effective budgeting systems, as well as desire to spread the benefitsof urbanisationspa- more efficient infrastructure investment plan- tially and across the urban hierarchy to smaller ningandprogramming,andoperationandmain- centres.Clearlythisreflecteda concernwith spa- tenance improvements. This gradual change in tial equity. Additionally, it became increasingly policy perception, since around 1975, has led to recognised that urban areas are disproportion- increased attention of national policy makers in ately contributing to economic growth, and theAsiandevelopingcountries(andinternational hence, over time concernsadded a different ur- assistance efforts) to local urban services de- ban strategy dimension. livery and, more recently, to strengthening of localurban managementand finance practices Only in Indonesia and Pakistan has an attempt as crucial prerequisites to the development of been made during the early 1980s to develop a an effective delivery system. coherent urban strategy based on these consid- erations. In Indonesia,the NationalUrban Devel- However, if urban developmentis to increasingly opment Strategy Study, developed with LINDPI rely on local resourcemobilization,the inevitable UNCHS support during 1982-85served relatively corollary is decentralisation of authority and re- effectivelyto demonstratepolicytrade-offsof ef- sponsibilityfor local urbanservices delivery:. Why ficiency (growth) and equity considerations to would local government otherwise be interested policy makers. In Pakistan, the National Human in more effectively levying user charges or local Settlements Policy Study and the National Man- taxesontheir citizens?Fora nationalgovernment agement of Cities Policy Study, initiated around thisseemingly posesthedilemma betweenbeing the same time, had the same objective. How- able to effectively pursue a unified national ur- ever, these studies did not have much influence bandevelopmentstrategyand allowinglocalau- onpolicymaking,mainlybecausethey had been tonomy to thrive. It alsoraisesthe issueof interac- initiated at federal government level by the tion between national economic development (weak)sectoralministrydealingwith urbanissues, planningand local investment planning. whereas the prime operational responsibility for urbanservice delivery constitutionally is a provin- Thispaperdiscussesthe contentsandmeaningof cial governmentfunction. national urban development strategies as they havebeenconventionallyperceivedand as they More recently, policy makers have also become are evolving inthe South andSoutheastAsian re- aware of the urbanisationof poverty. While pov- gion; itsuggestssome implicationsfor national-lo- erty for manyyears had beenperceivedprimarily calplanninginteractionsandfor decentralisation, asa ruralproblem,ithasbecomeclearintheAsian .drawinglessonsfromsomeof theinitialexperience region, that this problem is urbanising along with with such strategies in the region. demographic trends, providing a new equity di- mensionto urbanstrategy considerations. Fourthly,at leastinSoutheastAsia, economicsuc- cess created its own new problems, i.e., the ris- ing aspirations of the increasinglywell-educated urbanised middle class, who would no longer be contentwith payingtaxes without representation and influence.'This has added to the clamour for Theme Paper:LlrbanDevelopmentStrategies,, Planning & Decentralisation:EmergingTrends 81 decentralisationand reinforced the necessityfor cal level, by local governments4and communi- governments to be morecoherent in their strate- ties themselves. Similarly, addressing urban en- gies for urbandevelopment. vironmental issues requires both national as well as local action. Fifthly, an additional consideration which has changedurbandevelopment policyperspectives This is not to say that nationalgovernmentsshould in the region significantly is the growing concern leave urban development completely in the with environmentalsustainability and howthis im- hands of the [international]market placeand lo- pacts on growth and poverty. cal government. Numerousways still exist for na- tional government to express its spatial and Lastly,the end of the cold war, alongwithglobal sectoral priorities, particularly through the technologicalchange (particularlyas it relatesto regulatory framework governing private invest- data processing,informationandcommunication ment, the regulatory framework governing the technology) and the global economic operation of local government, central liberalisationtrends (whichhavebeenparticularly government's coordinating mechanisms with important in Southeast Asia, but increasinglyalso provincial (orstate)and localgovernments, and in other partsof the region)has heightenedcon- perhaps most powerfully, the allocation of its cernswith globaland regionalinterdependence. investment resources for urban infrastructure Many governments in the region have correctly and poverty alleviation programmes. However, perceivedthe opportunities for economic growth the important point to make is that these instru- in this "globalising" economic environment, and ments increasingly have to be exercised in a havetakenmeasuresto liberalisetheir economies, highly competitive international economic envi- while being fully aware of the risks of having to ronment. operate in a global competitive environment.By and largethe impact of this on urbansettlements The aboveshiftingbalanceof emphasisinnational is that cities and towns increasingly compete at urban development strategies is clearly brought global and regional levels for direct private na- out in recent urban development policy frame- tional and internationalinvestments to generate work exercisescarried out in the regionand else- employment. Therefore, national governments where.5 have had to take a second look at their urban development strategies, trying to support their cities and towns as economic hubs in exploiting their comparativeadvantages,often in conjunc- tion with cities or regions in neighbouring coun- 2See:Fu-chenLo and Yue-man Yeung, Global restructuring tries. and emergingurbancorridorsin Pacific Asia, in: Fu-chenLo and Yue-manYeung [eds.).EmergingWorld Cities in Pacific Asia: Growth and Adjustment to Global Restruc- The SlJORl triangle initiative of trying to turing, forthcoming. synergizethe comparativeadvantages of Batam This in itself may well be beneficial for small towns (Indonesia),Johore (Malaysid]and Singapore in development:as e.g.notedinJorge E. Hardoyand David terms of cheap labour supply, accessibility and Satterthwaite,eds (19851, Smalland lntermediateUrban technology is a clear example, as is the Penang Centres--TheirRolein Nationaland RegionalDevelopmentin the Third World, IIED,London,there are very few examplesof (Malaysia), North Sumatra (Indonesia),South- effectiveconsistent and coherentstrategiesfor the promo- ernThailandtriangularcooperation,involvingthe tion of smalland mediumsized towns.Where explicit cities of Medan. Penang and Phuket. These re- nationalstrategies to do so have beendeveloped, these - cent trends are leading to a redefinition of what were often not consistentwith macro-economicpolicies impactingin the oppositedirection. Forinstance.overall national urban strategies' responses should be nationalinvestmentstrategies such as import sut~stitutionled vis-a-vis the traditional concerns of growth and growth behind protectionistbaniers (tariffsand quotas]has equity. On both these counts it appears that na- generallyimplicitlyfavoured metropolitanareas at the tional governments' urban strategy increasingly expense of smaller towns and their ruralhinterland. gravitates towards one of enabling and support 'See: UMPworking paper:Options for urban poverty rather than a directive one. Obviously, the room alleviation actions at municipal level, draft, August 1994. for effective and efficient direction from the SAsexemplifiedby the NotionalUrban DevelopmentPolicy FrameworkStudy in'Thailand.which producedsignificant national level is less as globalisation of Asian inputsalong these lines for the 7th Five-yearNational economies proceeds: Similarly, it is increasingly Development Plan (1992-1996).InIndonesia,a morerecent recognisedthat effectiveurban poverty allevia- UNDPIUNCHSsupportedstudy, entitled"Framework for the tion calls for action not only at national, Urban PolicyAction PlanRepelita Vl",Draft,June 1994 developeda similartrain of thought. macroeconomic policy level, but also at the lo- 82 China:SmallTowns Development Planning lmplicafions a) the government could allocatesuchfunds as a fixed capital grant to selected local govern- ments on the basis of a formula, for instance on Nationaland LocalDevelopment the basisof population,on the basis of indicators Planning of local poverty and/or physical infrastructure deficiencies, on the basis of indicators of the lo- National planning in most countries in the region cal government'sfinancial viability or on the ba- has comprised variations of multiyear develop- sis of a combination of such factors; ment plans (mostlywith a 4-5 years time horizon, mostlyfor fixedperiods),complementedby gov- b) the governmen! could provide such funds to ernmentcapitalprojectapprovalproceduresand selected localgovernments by way of matching annualbudgetingexercisesto concretizegovern- or incentive grants for local investment ment capital spending. The core of these exer- programmes,eitherona cross-sectoralbasisorfor cises has consisted of sectoral allocations in the specific types of sectoralinvestments: central government capital budget, both in the multiyear plans and in the annual budget exer- c) the government could provide its support in cises. kind through specific projects executed by cen- tral government departments; the government At locailevel,similarsystematic planningexercises could requirelocal governments to borrow such have been carriedout for some of the major ur- support funds according to set terms, conditions banareas in the region,but more often than not and proceedings. Obviously these types of sup- capital budgetingis not done on a multiyearba- podarrangementsarenotmutuallyexclusive,and sis and does not include provision for project in many countriesa combinationof such options funding from other than the local government's is usedside byside. own resources. What is important, however, particularly in a What the above discussion in the previous sec- situation where increasing emphasis is placed tion seems to suggest, is that there is a need for on local level planning and priority setting, is a changeinemphasis.The nationalplanningsys- that these modalitiesare transparent and clearly tem as it has evolved is still useful for the pur- understood by local government, so that pro- pose of estimating the balance between pro- posed investments under these funding arrange- jected nationalinvestment and recurrentexpen- ments can be easily integratedin the local plan- diturerequirementsandresourceavailability,both ning process. on a medium term and on an annual basis. This should be done both on an aggregate, macroeconomic basis, as well as from the na- Rural-Urban LinkagesandSmallTown tional government's financial viewpoint. Addi- Development tionally. existing procedures for project prepa- ration,appraisalsand approvalsat nationallevel The rural and urban sectors both require devel- will still be needed for large investment projects, opment funds, but it is not necessarily true that which have a national or regional orbit, such as they compete for funds. Development of both major airport or seaport development, national sectors need not necessarily conflict, but can highways, etc. actually reinforce each other, particularly if an urban development strategy placing greater However, central priority setting for localised emphasis on the development of smaller towns types of urban infrastructureinvestments funded at the rural-urban interface is pursued. Smaller by the central government, such as local roads, towns and cities often represent better locations water supply, sanitation, flood protection, etc. for agro-based industrial activity in view of couldbe doneona generic basis.Thiswould pro- greater proximity to agricultural production vide for central government support investment centres and for the same reason are better funds for local urban infrastructureinitiatives, equipped to provide services for the modern- through which the central government could ar- izationandimprovementof agriculture.Thesearch ticulate its regional and sectoral priorities. This for viableintermediategrowthcentres,the devel- can be done in severalways: opment of which could be supported at least partially through external assistance,is consistent with such a strategy. Theme Paper:UrbanDevelopmentStrategie!s, Planning & Decentralisation:EmergingTrends 83 As agricultural development proceeds and the FiscalIncentivesfor Industrial rural economy emerges from subsistence farm- Developmenf ing to semi-capitalist forms involving the use of modern inputs and technology and oriented to- wards marketing of produce, the prospect for Fiscalincentiveshavebeenusedinseveralcoun- stronger urban-rural linkages increase greatly. tries in the region to promote the location of in- For example, in Pakistan the agricultural sector dustrial unitsinrelativelyunderdevelopedparts in has reached a stage where the commercial cul- the country. Given that industry is a major com- tivation of cash crops like cotton, sugarcane, ponent of the economic base of towns, such in- edible oil seeds, fruits and vegetables has in- centivescould playa majorroleininfluencingthe creased greatly and in which increasingly fer- pattern of urbanization. However, the effective- tilizer, pesticides, tractors, agricultural ma- nessof such fiscal incentives, both from the view- chinery, etc., are being used to raise yields. This pointof the impact onthe levelof investmentand phenomenonis perhapsthe most pronouncedin on locational choices has not been very high in the canal ~rrigatedareas of Punjab province, most countrieswhere such incentiveshave been which has examples of small- to medium-sized provided.If comparativeeconomic advantages cities (Gujrat, Daska, Sargodha, for instance), of a particular location are significant, industries which have strong backward and forward link- would locate there anyway. If there are no com- ages with their rural hinterlands. Much of this parative economic advantages, industries are development is private-sector driven and needs unlikelyto be attracted to an unfavourableloca- to be suppoeed by local outhoritiesthrough pro- tion, no matterwhat fiscalincentives are offered. vision of infrastructure which promotes rural- The lesson of international experience in this re- urt~anlinkages. Initially, such linkages are likely gard clearly isthat suchincentivesareonly effec- to be marketing and service related and could tive at the margin, as the example from Pakistan grow to administrative and cultural linkages. (Box 1 above) illustrates. What is generally more important and effective is to remove regulatory Therefore, a programme for development of in- and administrative market impediments and to termediate-sizedtowns must explicitly include providesupportive infr~structure.~ as one of its objectives the promotion of rural- urban linkages. A number of selection criteria Local lnvestment Planningin an Inter- could be used for identifying settlements which GovernmentalSetting7 have the greatest potential for creating these linkages: 'This section focuses on multisectoral investment planning (MSIP)at the local level. However, as a) settlements should be located in areas with noted above, local authorities do not exist in a relatively developed agriculture and cropping vacuum. They are part of an intergovernmental patterns which involve significant marketing of system. lnvestment priorities for urban develop- outputs. ment may be set by nationalor provincial levels of government. A large part of local investment funding will continue to come, either directly or b) settlements ought to be relatively small, with indirectly, from these higher levels of govern- populations generally below 500,000. m e ~ ? t . ~ c) they should, however, be large enough to have'significant institutionalpresenceeitherat the provincial or local levels. It would be advanta- geous, assuch, ifsuchtownsaredistrict headquar- ters. This would ensure that some administrative linkages already exist with the rural hinterland. d) the existing local network of farm-to-market 5ee: Jorge E. Hardoy and David Satterthwaite: Govern- roads should be sufficientlydeveloped. ment Policies and Small and Intermediate Urban Centres, in: Hardoy and Satterthwaite. eds. op. cit.(l985), Chapter 8, pp. 335-397. e) if possible,the selected settlementsshould al- readyhavesomeunitsengaged inmanufacture1 For a more elaborate discussion, see: George Peterson, G. Thomas Kingsley, and Jeffrey P. Telgarsky: Multi repair of agricultural machinery. Sector lnvestment Planning. UMP Working Paper nr. 3, June1994. 84 China:SmallTowns Development Incentives for industrial location in Pakistan Sindh, there is a general ban on any new unit Suchfiscalincentivesin Pakistancomprisepri- in Karachi, Dhabeji and Gharo, unless it can marilytwocategories:a]tax holidayswhereby only be established at these locations (shio- a new unit is exempt from the paymentof in- building and repairs, ship breaking, sea suit, come tax for a specified period, and b) cus- canning ~ npreservationof sea food) or has d toms duty exemptiononimportedmachinery. downstream links with major investments like Other incentives which have occasionally the steel mill (engineeringworkshops! or has been offered include exemption from pay- a localizedmarket (iceand coldstorage, bak- mentofimportduty onrawmaterials,zerorat- eries, prefabricatedhouses] or represents the ingof salestax onoutput,concessionaryterms application of complex, large-scaletechnol- of financing including a higher debt-equity ogy [petrochemicals].Inthe caseof NWFPand ratio,taxcreditsonsharecapitalanddiscounts Balochistan, there is no negative list of on purchase of electricity. Tax holidays are industries.Several studies conclude that ex- available only to investments made in desig- plicit locational incentives have had a limited natedindustrialestatesuptoa particulardate. effectivenessininfluencinglocationalchoices TI ~eperiodoftaxholidayvanesfromthreeyears in far-flung backward areas, but that they to ten years, depending upon the locationof have beeninfluentialin twinging aboutspatial the estate. Estatessituatedin more backward deconcentration in metropolitan regions. A areastendtoenjoy a longerperiodoftax holi- perhapseven more striking conclusionof vari- day. Tax holidays are also offered at the re- ous studies on fiscal incentives is that little gional level. All industrial units within specific success hasbeenachievedinraisingthe over- administrative jurisdictions are eligible for this all level of investment in the economy. 'The exemption, meant to cover backward areas. majority of projects benefitting from fiscal Accordingly, virtually the entire province of incentives are diverted investments: i.e. Balochistan. NWFP, and selected notherndis- where even in the absence of fiscal conces- tricts are covered by this scheme. In addi- sions the net present value of profits was tion, some backward areas in the more in- large enough to justify invesyment in a de- dustrially developed provinces, Sindh and veloped area elsewhere in the country. Only Punjab, fallunder the purviewof this scheme. a small part of the investment generated by Recently, the Government of Pakistan has the incentives can be considered as net new introduced a tax holiday for promoting rural investment (negativenet present value in a industrialization, with the objective of stem- developedareaintheabsenceofconcessions]. ming the tide of migration to cities. Indus- It appears, therefore, that the bulk of the tax trial units located beyond a certain minimum savings (net of any additional private infra- distance from municipal limits can avail this structure costs] have benefitted industrial facility. The customs duty exemption on ma- owners in the form of transfer payments. The chinery largely overlaps with tax holidays. regionally differentiatedscheme of incentives Notable exceptions are industrial estates lo- also seems to have bypassed intermediate- cated in the cities of Karachi, Lahore and sized towns which have some agglomeration Islamabad Capital Territory.Complementing economiesand could be cost effectivein the these fiscal incentives, the Government has provision of industrial and shelter-relatedin- instituted several regulatory measures to frastructure. Given the proximity of some un- restrict investment in developed areas, pri- derdevelopedareas to these towns, there has marily through banning the establishment of been a diversion of investment away from certain industries. For example, in Punjab, these intermediate cities to backward areas, no industrial unit is allowed to be set up in often probably with higher costs of infra- Lahore district with the exception of export- structure provision. (source: Asian Develop- orientedindustries (exceptionsmay be made ment Bank, Pakistan Urban Sector Profile t ~ yGovernment on a case-by-case basis).In Study (draft). 1993) - - -- Box I Theme Paper:Urban DevelopmentStrategies, Planning& Decentralisation:EmergingTrends 85 Sharing lnformatlonon CapitalProjects Supportfor Cross-SectoralLocal betweenLevelsof Government Planning In many countries, central government and/or Real-lifeproblems, as they arise in urban areas, provincialministriesstill bear the principalrespon- donotfallintomutuallyexclusivesectoralcatego- sibility for local-level investment. At a minimum. ries. Nor do they respect the administrative divi- localauthoritiesneedto heaccuratelyandtimely sions built into central government ministry struc- informedabouttheseprojects.They thencanplan ture. They logically require a cross-sectoralplan- theirlocalcapital budgetaroundthemajorinvest- ningand action response. Localauthoritiesoften ments beingput inplace by others. Inany kindof are able to see these connections,but their abil- integratedplanningprocess,decisionsabout land ityto respondthrough public action ishampered development or water and drainage systems bythefact that they mustobtainfunds or author- needto becoordinatedwithnewroad construc- itytoactfromcentralgovernmentagencieswhich tion. arefocusedexclusivelyontheirindividualsectors. Emphasis on rural-urban linkages would also re- ' Priority-setting for local projects will be greatly quire the consideration of relatively unconven- influencedbythe kindsof complementaritiesthat tional investments for inclusionin the local urban arepossiblewith the large-scaleinfrastructuresys- development investment programme.This could tems beinginstalledby nationalgovernment.Per- includethefollowing: hapsof evengreaterimportance,if localauthori- tiesknowthat a majorlocalinvestmentisplanned (i) FarmServices-cum-CommunityCentretopro- byhigherauthorities,they canmonitoritsprogress videimprovedaccessto institutionalcreditaswell and help shape the project to fit locally defined as to other factor markets, and to disseminate needs. A routine system of intergovernmental marketingand technical informationto farmers notification should be established. Without it, experience shows that central ministries will, (ii) We~ghBridges at the product markets to en- from time to time, neglect to inform local au- sure better returnsto farmers thorities of their plans in a timely way. (iii) Upgradingof SlaughterHouses (iv)Upgradingof Busand Truck Terminals IntegratedPubllcInvestmentSystem, BajaCalifornia, Mexlco (v) RecreationalFacilities Theproblemof intergovernmentalinformation (vi) Construction of relatively low-quality regarding public works projects is being ad- Guest Houses dressed by the State of Baja California in its lntegratedPublic InvestmentSystem. The sys- (vii) Construction of tem generates monthly reports on the status of all public works underway, or planned for constructionstarts, in the state. Itis used as a (a)Fish and Meat Market diagnostic tool for the timely delivery of pub- lic works. The d a h generated by the system (b)Rental Shops . are usedto prepareexecutivereports for the Governor and state authorities, and poster- (c)Livestock Pens sized information sheets displayed in public buildings throughout the state. The system is (d)Wholesale Markets now being modified so that, following each monthly update, informationon individualur- ban areas in the state will be automatically downloaded to the city planning authorities in larger cities. 'See: WilliamDillinger,Decentralisationanditslmpllcatlons for UrbanServicesDelivery.UrbanManagementProgramme publicationnr. 16, 1994.This report Identifiesintergovemmen- taltransferreformas one of the mostimportantareasfor Box 2 actiononthe decentralisationagenda. 86 China: SmallTowns Development Supporting Local Budgetary Flexibility Deceniralisatlon and Inter-Sectoral Planning Awell-functioning MSlPsystemrequiresthat local in the State of Karnataka, India authorities have discretion over the size of the In 1985, the Karnataka state government capital budget, as long as they are willing to fi- transferreddevelopmentresponsibilitiestodis- nance project expansion from their own re- trict-level administration. The state govern- sources.Someadditionalrevenuesalmost always ment also appointeda number of senior civil can be raised from better tax administration. service officers to staff each council to build Integratedprogrammesofurbanmanagementim- up their capacity. Most importantly,the rep- provement typically assist cities in improving resentatives of central line ministries in each taxcollectionsandexpandingthetax baseatthe district were madedirectly responsible to the same time they introduce new capital planning district council. District councils then were methods. givenresponsibilityfor formulationand imple- mentation of the district development plan, However, local governments also need the flex- formerly a state responsibility.Under this ar- ibilityto raisetaxrates,shouldthis beappropriate, rangement,districtcouncilscanidentifycross- and to employ market-basedfinancing mecha- sectoral needs, draw up plans to respond to nismssuchas userfeesor bettermenttaxes. Often them, and enlist the support of the different centralgovernmentsstill restrictlocalcontrolover lineministriesthroughtheirrepresentativeswho this partof the localbudget.A caseinpointisthe report to the council. The system has pro- property tax: the authority to set local prop- duced a good deal more flexibility for cross- erty tax rates locally is not given to local gov- sectoralplanning.However,localinvestment ernments in most countries in the region, where planning still is subject to national and state such tax legally is still a national (such as e.g., level sectoralnorms. Indonesia) or provincial [e.g., Pakistan) tax. Box 3 Governments have followed different strategies inenhancinglocalauthorities' ability to generate Even in routineinvestments, the functional sepa- revenues. Often, decentralization has involved rationof central ministries may impedecommon increasingthe nationalrevenue-sharingamounts sense coordination and prioritisationat the local to which local governments are entitled. Such level. In Ghana, roadside drains are installed by steps have strengthened local government fi- the Transport Ministry at the time it t~uilds nances, and increased their ability to perform roads. Other types of drains are the responsi- capitalplanningandinvestment.However,these bility of another ministry. The Transport Min- measuresdo notaddresslocalgovernments'right istry has received more capital funding than to choose the size of their budget to be financed other agencies. As a result, in most of Ghana's from own sources. In some countries. devolution towns, the only drains are to be found alongside of serviceresponsibilitiesto the locallevelhas also roadways,eventhoughthis hasproduceda drain- beenaccompanied bygrantinglocal authorities age systemthat leavesmost of the towns' needs new discretion to set tax and fee rates or to tap unattended. In most countries in the Asian re- additional tax bases. In some instances, central gion, basic responsibility for investment in most governments have gone so far as to providesig- urban services is devolved to local government, nificantincentivesfor greater localrevenuegen- which is responsible for establishing the cross- eration.InPakistan,for instance,the 1991 National sectoral linkages it believes are critical. How- FinanceCommissionawardadoptsaone-for-one ever, full decentralization of this responsibility matching grant system. Every additional rupee is unlikely to occur. Even so, other kinds of in- that a local authority generates through restruc- tergovernmental arrangements can support lo- turing of its local tax system, will be matched cal int.ersectoral planning. The basic require- by the central government with an additional ment is that local authorities be encouraged to rupee of transfer payments. tackle problems across sectoral lines, and then be free to recommendsolutions that involve co- ordination among different central-level minis- tries. Theme Paper: UrbanDevelopmentStrategices, Planning 8, Decentralisation: EmergingTrends 87 Inter-GovernmentalCooperation in ITheMunicipal Management Improvement EstablishingNew InvestmentPlanning Programme in Sri Lanka. Approaches-Indonesia's IUlDP as an From 1985 the Government of SF'~la.nkahas Example embarked on an ambitious programme* Actionsof the kind described above helpset the improve municipalmanagement in its 51 Ur- framework for local multisectoral investment ban LocalAuthorities (ULAs)within a broader planning and project selection. Except for the policy of decentralisation and strengthening seconding of central ministry staff, they do not of local government. Support inputs in the bythemselvesaddressthe problemof inadequate programme are largely technical assistance capacityatthe locallevel,or localauthorities'lack and training, managed and coordinated of familiarity with the kinds of planning methods through an UrbanProgramme Unit (UPU) spe- suitable for an environment where they have cially establishedfor this purpose in the Min- greatercontrol.Tochangeactualpracticea more istry of LocalGovernment, Housingand Con- direct collaboration between central and local struction. authorities is needed. This comprehensive ap- One of the programme's key features is that proach to planning change is illustrated by the it seeks municipalmanagement and finance Integrated Urban lnfrastructure Development performanceimprovementbeforesignificant Programme (IUIDP)adopted in Indonesia. new capital investmentsare made. Foreach ULA participating in the programme perfor- Untilthe mid-1980s,virtually allurbaninfrastructure mance improvement plans are drawn up: a inIndonesiawas planned t ~central government y multiyear plan and a four-month plan. The agencies in Jakarta (primarily by the Ministry of plans contain a base line review identifying Public Works) and implemented by their field of- problems and potential solutions. Based on fices in the provinces. The programmes of one this review an action plan is designed for central office (e.g., water supply) were seldom improvements in areas like local revenue coordinated with those of another (e.g., drain- generation,financialreporting,management age),eitherspatiallyor temporally, and localoffi- procedures, staffing, operation and mainte- cials had littlechance to influencethem. nance, as well as for preparation of invest- ment plans, if required. For each such ac- As urban areas began to grow much more rap- tion, area targets are set as well as dates idly, there was recognition that this approach for completion. 'The plans are formulated in could not be sustained logistically, let alone re- a process of discussion and negotiations be- spondsensitively to the varying needsof different tween the ULA and a technical assistance urbanareas.Increasinglycentralgovernmentof- team from the UPU. ficials came to believe that the only satisfac- Inimplementingthe programmethe govern- tory long-term solution would be for local gov- ment relieson an incentivestrategy,inwhich ernments to assume full responsibility for pro- it allocates an increasing portion of central viding (and largely financing) their own urban governmentgrants for local government de- services. This approach was endorsed in the velopmentto municipalitieswhich havedem- National Urban Development Strategy (NLIDS). onstrated increased performance in the However, it was also clear that few of above areas. At the same time substantial Indonesia'slocal governments then had the ca- technicalassistanceand training advocacy1 pacity to assume this role effectively. The Inte- dissemination as well as technical training grated Urban lnfrastructure Development is provided to support the initiation and con- Programme (IUIDP)was a response to this di- tinuing implementation of the programme. lemma.It is a phasedapproach to integratedin- Both these features underscore the strong vestment programming and decentralization in government commitment to the programme which the central government supports local which is assisted by UNDP and IBRD. capacity buildingat the same time that it works with existing local staff in planning and imple- I I menting investment programmes. In its ideal- Box 4 ized form, the process entails the following steps: 88 China: SmallTowns Development 1. Meetingsareheldwith provincialgovernments pared for urban areas in all 27 provinces, cover- to review NUDS analyses and prioritize urban or- ing 56%of the urban population by the end of eas for attention 1993. 2. Projectteamsintheselectedtowns (localstaff Effortshave been madeon a continuingbasisto with technical assistanceprovidedfrom the cen- improve the process. For example, the initial tre) review and update local master plansor de- guidelines and manuals have been regularly re- velop a new "structureplan"where noneis avail- vised based on operating experience. A new able emphasisonoperationsandmaintenancewasin- troducedthroughthe PerformanceOrientedOp- 3. Teams then usethose plans as a guide in de- erations and Maintenance Management Sys- veloping a proposed local multiyear investment tem, which was designedand tested in eight cit- program [PJM) integrated across several sectors ies.Also notablewas the effort by the Roadsand andconstrainedbylikelyresourceavailabilitydur- Highways Directorate General (not initially in- ing the PJMperiod cludedin the original programming)to shift virtu- ally all urban road planning into the IUlDPframe- 4. The teams are also required to prepare a work. completefinancingplan,basedon projectedre- source availability during the PJM period (in- Partly because initial targets were so ambitious, cludinga planthat coversthe possibleenhance- there have been a number of problems in ILllDP ment of localrevenues)andonresponsiblelocal implementation. Particularly in the early years, government borrowing, as well as on probable centralgovernment sponsoredconsultants often support from the central budget and/or exter- dominatedPJMpreparation,ina numberof cases nal donors without providingadequateopportunityformean- ingful involvement of local officials. Many loco! 5. Plans are also preparedfor building a com- governments have not yet internalized the pro- mensurate capacity of local government to as- cess or developed the capacity to operate it ef- sumeincreasingresponsibilityforinfrastructurede- fectively. It also became clear that the initial velopment, operation,and maintenance guidelines were too cumbersome and did not permitenoughflexibility to adapt to varying local needsand priorities. 6. On the basis of the multiyear PJMs, indi- vidual cities prepare annual budget requests Nonetheless,IUlDPhas generally been regarded 7. The programmesand budget requestsso de- asa majoraccomplishment.Itsbasic characteris- fined are reviewed at the provincial and central tics, integratedplanningacross sectors basedon levels and decisions are made about the alloca- city-specific conditions, the linkage to financial tion of central loan and grant funds. discipline through revenue improvement action plans,RIAPs,andto capacity buildingthroughthe To date, IUlDP has been limited to functions that local institutional development action plans, traditionallyhadbeentheresponsibilityof theMin- LIDAPs, in and of themselves have been a dra- istry of Public Works DirectoratesGeneralfor Hu- matic improvement over the approach of the manSettlements (watersupply, sanitation, drain- past.Also, efforts continue to be made to rectify age, neighbo~rhoodimprovement)and Roads problems as they are identified by revising IUIDP andHighways(urbanroads).Itwas reasonedthat guidelines. trying to cover morefunctions at the start would add more complexity and threaten programme A number of steps have been taken at the na- viability. Other functions could be added later tionallevelto reinforceandinstitutionalizethe pro- after the validity of the IUlDP approach had cess.TheMinistryof HomeAffairs presentlyrequires proveditself. that localgovernmentsthat havePJMsand RlAPs developedthrough IUIDP,use them, as the basis IUlDPhasnowbeenimplementednationwideun- for their submissions in the traditional annual der guidelines initially issued in 1985 and peri- budgetnegotiationswiththecentralgovernment. odicallyupdatedsincethen. PJMshavebeenpre- Similarly it now prescribes the development of LIDAPsas a routine requirement for all local gov- ernments. Ministry of Public Works instructions Theme Paper:UrbanDevelopmentStrategies,Planning & Decentralisation: EmergingTrends 89 now require that all agencies within the Ministry have been an attempt to force coordinationby conform their own investmentplansto local PJMs combiningina single masteragency the respon- where they exist. More important, perhaps, than sibility for planning,financing, and actually build- instructions on paper is the political power the ing all of an urban region's major infrastructure existence of a locally developed PJM creates. In works, as well as owning and developing the the early 1980~when local governments had no region's open land. Some of the Metropolitan coherent capital improvement programmes of DevelopmentAut;ioritieshavegrown to be large their own, they had little rationale for complain- andpowerfulorganizations.'TheKarachiDevelop- ing about a central agency implementing a ment Authority, for example, in 1991 had 8,996 project in their territories without sufficient prior employees and, over its lifetime, had had own- negotiation. Now, when a PJM exists, there is a ership and development responsibility for some sound basis for appealing to any central agency 800,000 building plots. However. the experi- initiative that does not conform to it. Interviews ence with MDAs demonstrates that consolidat- indicate that such appeals generally are upheld ing capital-relatedfunctions under a single roof and that, accordingly,central agencies are pro- doesnotguaranteeeffectivecoordination.More- gressivelylesslikelyto try to initiateprojectsincon- over, the MDAs have come to be viewed as mo- sistent with PJMs. nopolisticbureaucracies,disdainfulof electedlo- cal government. Eventheir financialsurvivalnow AlthoughIndonesia'splanningreformsarespecific is in question. The MDAs have relied to a great to its institutional setting, the approach to inter- degree on profits from land sales to sustain op- governmental collaboration can be applied in erations. As the explosioninlandpriceshascooled other settings. It is not sufficient for central gov- in some metropolitanareas, as a result of finan- ernment merely to hand over responsibilitiesand cial liberalizationin competing markets, some of funding to localauthorities.Theyalso needtosup- the seemingly guaranteed income of the MDAs porta programof capacity buildingwhich equips has disappeared. local authorities to performtheir new functions. It now appears that the answer to horizontalco- Indeed, a number of similarinitiativeshave been ordination lies not inthe creation of massive insti- embarked on, both in the Asian region and else- tutions responsible for all development-related where, having similar features of multisectoral activitiesthroughout the metropolitanregion, but investment programming, intergovernmental rather insimplification of duties. There is needfor collaboration decentralisation of responsibilities some institutionat the metropolitanlevel to take andlocalcapacity building? responsibilityat least for compilinga single capi- tal-investment programme from the project lists of individualjurisdictions, wrapping these in an lntergcrvernmentalCoordinationat explanatory text with accompanyingmaps, and LocalLevel enunciating the basic policies that are shaping Vertical integration between different levels of investment selection. 'This body should simulta- governmentisnot the only challengeto intergov- neously have strong links with local government ernmental planning. Coordination is equally im- and with nationallstategovernment. It does not portant betweenthe differentindependentjuris- have to have infrastructure construction and fi- dictionsthatoftencompriseanurbanarea.Asimi- nancing responsibilities,or be chargedwith met- lar need exists where towns are administratively ropolitan-wideland development. part of a predominantly rural district. Once the entire set of planned capital projects Nofullysatisfactorysolutionto the problemof hori- affecting an urban region has been laid out in a zontal integrationhas beenfound.The Metropoli- single document, conspicuous incompatibilities tan Development Authorities (MDAs)created in amongprojectscanbepinpointedandattacked. several of the large urban regions of South Asia Appropriatestrategiesfor tying together sectoral investments can be debated. The appropriate institutional framework for doing this will vary by urbanregion. At the start, an adhoc structure to * Fora range of examples. see: EemielA. Wegelin, IUlDPin a supportvoluntarycooperationispreferableto cre- comparative internationalcontext, in: Hendropranoto ationof yet anotherformalinstitution.UnderIndia's Suselo, John L. Taylorand EmielA. Wegelin, eds. (1 995): currentdecentralizationefforts,the CalcuttaMDA Indonesia'sUrbanInfrastructureDevelopmentExperience: has itselfevolvedin this direction,sheddingmany CriticalLessonsof GoodPractice,Jakarta. 90 China: Small Towns Development of its direct construction responsibilities and be- one another,increasinglyface localpovertyand cominga metropolitanplanningagency,respon- environmental problems and, (2)to finance their siblefor area-widecoordination. investment programmes, increasingly have to rely on local resource mobilization. Similar institutional changes at the local level are often also required with regard to small and Adjusting to these realities, governments in the medium-sized town development. The existing region, as elsewhere. have embarked on local government system is generally compart- programmes in support of gradually devolving mentalized, with district administrations cater- responsibilitiesfor localinfrastructuredevelopment ing oniy to rural interests and municipal gov- to municipal levels, within certain boundaries ernments exclusively responsible for urban ju- imposed, such as the need to be financially re- risdictions. Consequently, there is little com- sponsible and the need to target infrastructure monalityof interests.At theinterface,inthesmaller investments which will attract private venture towns, there is a need for coordination mecha- investments and to capitalizeon rural-urbanlink- nisms to ensure effective exploitation of rural-ur- ageswhichwill helpgeneratejobs for growthand ban linkages. Also, urban local governments poverty amelioration.l o would need to be convinced of the significant revenuepotentialthat exists in licenses and fees There appears to be little long-runrational alter- chargedon services offeredto residentsof proxi- native, from the point of view of central govern- mate rural areas. In addition, there is significant ments, but to continue to support local govern- scope for involvementof the local privatesector ments in their development strategies. Increas- in many of the rural support project investment ingly, economic activity is concentrated in eco- types suggested in section 4.2 above in so far as nomic hubs in urban areas and their hinterland, they are commercialin nature. withnationalboundariesdeclininginimportance from an economic policy perspective. Conclusion This means that central governments must be As a result of the international economic liberal- ready to (1) support MSlP processes at the lo- izationthe chance of possibleadverse impact of cal level, (2) adjust their legislative and regu- macroeconomic policies on small towns devel- latory frameworks accordingly (particularly opmenthasreduced:animportsubstitutionpolicy with regard to local government functional re- behindprotectionist walls is increasingly less fea- sponsibilities and the financial resources re- sible.Therefore,evenintheabsenceof anexplicit quired to perform these functions), and (3) pro- policy to support small towns development, this vide capacity buildingsupportto suchprocesses. less distorted economic environment will gener- These measures would help ensure that their lo- atesignificantly moremarket-drivenopportunities cal governments are as best equipped as pos- for smalltowndevelopmentintheyears to come. sible to compete internationally and to combat local poverty and environmental problems. Globalandregionaleconomicanddemographic trends pushfor nationalurbandevelopmentstrat- Strategies of fiscal incentives to influence the egies in the region (1j to increasingly rely on location of investments work best in.conjunc- and support localinvestment programmingstrat- tion with support for MSlP processes, whereas egies, as urban areas increasingly compete with such strategies are increasingly unlikely to be successful in isolation. laIt is clear. however,that the path towards decentralisation will not be easy.As Oillinger. 1994, op. cit.observes (p.4): What is slow and difficultis theworkingof new regulatory relationshipsbetween centraland local government: the Ernie1A. Wegelin conversionof what had beenannual budgetarytransfers ~ l ~coordinator b ~ l within a centralgovernment intointergovernmentaltransfers that are transparent and predictable.and the development L'NDP/UNCHS/World Bank UrbanManagement of credible local politicalsystems. Programme. Prosperity & Sustainabilityof China'sTowns: Lessonsfrom North & South John M.Courtney Introduction China's geographically uneven economic growth, combined with the knowledge revolu- T his is the era of the town in China's develop tion basedonthespreadof telecommunications, ment.The rurallurbaninterfacewill become is producinga vast floating population that pre- a majorforce for the nextwave of economic sents an additional potentialwurce of socialdis- development.The prosperityand sustainabilityof order in the major cities and increasingly ar- this new frontier of economic and socialchange gues for alternatives through the strengthening is dependentupona soundprogramwiththeright of the economic and socialbaseof China'ssmall incentives to support job creation, urban service towns. provision,the managementof the urbanenviron- mentandthemaintenanceof a qualityof life.Key Forfurther detailsonthefour majorissuesof China's issues to consider are: towns see Annex A. In the pursuit of prosperity it is essential The Global View that the s~ecialvalues that are uniquelyChinese are not lost. Social and moral C O S are part of ~ Today morethan halftheworld's populationlives the pursuit of unbounded prosperity. in cities and towns: by the year 2025 more than two-thirdsof theworld'speoplewill doso.Thestress Prosperity and traditional cultural values are of such population growth is overwhelming. De- inconflict inthe presentlyemergingurbanChina. spite growing investments in environmentalinfra- -Withprosperity there are costs and the abuses structure,approximately380millionurbanresidents inherentinunbridledeconomicfreedom.Doesthe inthedevelopingworldstilldo nothaveadequate small town providea middle ground for continu- sanitation, at least 170 million lack access to a ityof Chinesevalues and cultureat thesametime nearbysourceof safedrinkingwater. achieving prosperity and sustainability'? Cities in both the North and the South are living China's small towns remain a repository of with ongoing environmentaldegradation. Llrban important Chinese values. In the rush for pros- populationgrowth is universalon this planet and perity in the major urban centers it is clear leads to common problems:congestion, lack of somethingis being lost. money to provide basic services, a shortage of tiousing, declininginfrastructure,andoverworked and underfunded local governments. Despite these undeniable facts, urban environmental 91 92 China:SmallTowns Development problems,the BrownAgenda, oftentakes a back "Environmentand Sustainability" usually conjures seat in global debates. Yet, the human face of imagesof nature, ratherthanof the built environ- the urban environment, as reflected in the day- ment of cities--their roads, sewers, houses, and to-day problems of the individuals who live in businesses--orof human interactions with and highly polluted areas, is inextricably linked to within the built environment. Since Rio, discourse the highly publicized Green Agenda of preserv- about environment has focused on the Green ing the world's natural resources. Agenda of natural resources and biodiversity. However,to a large extent, it is human activities The critical nature of urban environmentalprob- thatcreateenvironmentalreality.Humanconcen- lemsraisesthequestionof whether citiescancon- tration in cities and towns leadsto cumulativeef- tinue to be desirable habitats.Can cities remain fectsnotonlyonthe naturalenvironmentbut also productive when living conditions become so on the urban environment, in which millions of deteriorated?Must financial well-being be sacri- people live every day and China's towns are no ficed to make cities better places to live? Most exception. importantly,why arethepoorinbothNorthernand Southern cities most at risk from environmental The traditional logic of urban agglomeration decay?What canChina learnfrom these experi- economies,whichhastraditionallyneglectedthe ences. environmental consequences of urban growth, has beenchallenged.There hasbeena focus on Urban Environmentand Sustainability the increasingly critical nature of urban envi- ronmentalproblems, showing that different kinds In recent years, more "accommodating" defini- of environmental problems vary with income tions of sustainable development have evolved. level (seefigure2 and table I], andtheir relation- The common trend and theme has been to ac- ship to urban economic growth. Of primarycon- knowledge the strong linkage between environ- cern is the impact of environmental problemson mentalpoliciesandeconomicdevelopmentpoli- the residents of cities and towns, especially the cies.Sustainabledevelopmentrecognizesthatthe poor. Degradation and depletion of resources economyandtheenvironmentare not necessar- haveserious implications for the future viabilityof ily in conflict, but are irrevocably intercon- cities. These problems are faced by all cities nected. andChina'sarenoexception.Howdowe reduce some of these pressures and provide a real al- Clearly,theconcept of sustainabledevelopment ternative? Small town development in China is hasserved as the catalystfor seekinga betterun- anoption. derstandingof therelationshipsbetweenenviron- ment and development. Reintroducingthe con- "Are cities sustainable?" Most major cities, ceptof carryingcapacity,itcan besaidthat "en- and manysecondary ones, do not livewithin rea- vironmental protection...is an investment in the sonablepatternsof resourceconsumption.Nearly economic carryingcapacity of urbanareas. all urban areas face increasing marginal costs for such basic resources as water, where Forcitiesindevelopingcountries,achievingeven overconsumption drives utilities to seek water minimallevelsof economicgrowthiscriticaltosur- at longerdistancesandto useincreasingamounts vival.Acknowledgingtheroleand importanceof of energy to transport it back to the city. It is cities for economic growth, the World Health Or- the poor who suffer most from these increasing ganization (WHO)recommends costs, either by paying relatively higher ser- vice fees or by having insufficient service, be- "susfainabklAtxrndevdopmmP' cause cities supply primarily areas that can af- shouldhaveasitsgoalthattowns ford to pay for the service. 'The fundamental is- continuetosupportmoreproductive, sue is not whether cities are sustainable, but stakandinnovcrtiveeconomiesyet how to make them so. Human behavior deter- dosowithmuchlowerlevelsof mines the quality of the urban environment and resomeuse." the quality of the urbanenvironment determines Sustainable developmentis an ongoing, iterative the quality of human life in cities. Small towns innovative and interactive process and not sim- inChinaprovideanopportunityto accommodate plyan endresult. "Thequestionisnotwhether cit- future urban growth in a quality urban environ- ies are sustainable but rather 'what needs to be ment. doneto improvetheir sustainability.'" 'Theme Paper:Prosperity& Sustainabilityof China'sTowns: Lessonsfrom North& South 93 Social Infrastructureandprograms adaptation ofruralmigrantsto urban living. Theconsequencesofinadequatesocialinfrastruc- Implementprograms,targetedatensuringthe ture havebeenrecognizedwith the rapidgrowth sustainability of urbandevelopment; givespecial of urban populations. Programs on urban infra- emphasisto "high-yield"programs,includingadult structure already unable to meet the needs of literacy,primaryeducation,preventivehealthpro- existingresidentsare nowstretched to the break- grams,andurbanextensionservices;promoteand ing point. Urban immigration will continue, and support trainingandapprenticeshipprogramsfor human, institutional, and financial resources to technicaltraining.Amongsocioeconomicgroups, address increasing needs are likely to remain give priority to ensuring the availability of ad- limited. equate servicesfor women, the poor and disad- vantaged. The challenge is to develop innovativeinterven- tions to overcome these limitations. China's Accelerateeffortstoimproveinformation,and small town development provides such an op- accessibilityto information,on the benefitsofim- portunity. A renewed focus on effective land- provements in education and health, the avail- useplanningmustincludeadequateenvironmen- ability of services, and the costs of these services. tal infrastructure--water,sanitation, drainage, Give priority to poor communitieswith presently transportation,and solid waste management, in limitedaccess to such information. addition to a sound socialinfrastructurecapable of alleviating hunger, homelessness, ignorance, Forfurther detailsseeAnnex B: UrbanServicePro- anddisease. vision--Getting the incentivesright Thereisampleevidencethatwhenpeoplefeel a sense of involvementin their communities, and Peopleand Place realize that their own efforts can make a real Chinesetowns aredistinctfromthoseofotherde- contributiontobetterconditionsandprospectsfor veloping countries in that they performthe func- themselves andtheir children, they are prepared tion of storage reservoirs.The towns havehelped to assume their share of responsibility for shaping to reducemassiveruralpopulationexodus to the the future of their communities." cities. While the towns have many rural migrants, it is not clear whether such towns can satisfy the Cities and towns in developing countries do not needsof the ruralpopulationfor urbanamenities needto blindlyfollow Western modelsin manag- and better payingjobs and thus prevent the mi- ing urban growth in an environmentally sustain- grantsfrom movingultimately to the cities. able and prosperousway. They should be urged to use their own reservoirsof accumulated tradi- As urban populations continue to grow through tional knowledge and local experience, supple- natural increase and migration, the capacity of mented with technologies and techniques from cities to absorb the additional burdens is cdlled external sources when appropriate, especially intoquestion.Traditionaleconomicreasoninghas those that substitutelocalhumanskills for capital. argued for concentrated urban growth: cities China has such resourcesand know how. concentrate labor and resources, resulting in economies of agglomeration; increasing urban A human resource development program that productivitysupports increasing populations.Cit- would help strengthen the social infrastructure ieswill continuefo grow until "negativeexternali- would include: ties" outweighproductivity. Updateof the objectives for humanresource Environmentaldegradation, resource depletion, development and should be linked with and an erodingquality of lifeare the mostvisible sustainability concerns and include the need for "negative externalities" of urban economic and individualfulfillment, aswell as social productivity physicalgrowth. What arethe environmentallim- andlabormobility.Particularlyruralto townmove- its to growth? Is there a need to revisit assump- ment. tionsof economicand planningmodelsinlightof environmental priorities?China has such an op- Updateinventoriesof urbanand ruralhuman portunity with its Small Town Development. resources and highlight issues and opportunities; includeanalyses of successes and failures in the 94 China:SmallTowns Development Sharing Security and Prosperity of theprivateautomobile.AlthoughtheEuropean modelis assumed to be more efficient in termsof Foodand water resourceswill be the mostsignifi- land use and transportation energy, the newer cant influences on urban growth in the near fu- Americanand Australian models reflect the real- ture.Theworldfood balanceischangingas food ityof mostrecenturbangrowthinbothdeveloped production falls and rising food prices favor the and developing countries. In these cases most countryside and small town scarce water re- travel occurs within and among suburbs and is sources may preventrampant urban growth. On difficultto addresswith public transport.Develop- the other hand environmentalproblems inherent ingcountriesshow a highrateof privatecar own- in the consumptionof energy, nutrients,and ma- ership and have developed sprawlingcity forms. terials can be overcome by changesin technol- Urban sprawl is particularly detrimental to the ogy and practices.Chinahasa historyof concern poor, who often are stranded in areas ill-served about the balance of man and nature. by public transport, making access to jobs even more problematic. While planned suburbs usu- In terms of water resources, tremendous urban ally are served by public transportation, un- water shortages are causing cities such as Tokyo planned suburbs, where the poor are likely to to importwater on a massive scale from increas- live, rarely have access. China must learn from ing distances. Other cities, such as Mexico City, this experience. are depleting groundwater resources and caus- ing irreparable environmental damage. Rising The U.S. National Llrban Policy, Empowerment: A water costswill lead to water efficiency,and ulti- New Covenant with Americas Communities pre- mately, will constrain urbanization. Decentral- sents a compellingnationalvision for connecting izedtown development enables water resources poorfamilieslivingindistressedcommunitiesto the to be addressed more systematically. opportunitiesthat exist in-the larger metropolitan region. The National Urban Policy is founded on Cities disrupts nutrient cycles as nutrients go four operatingprinciples. to cities in the form of food and are not returned to the land in the form of fertilizer. However, It links families to work technology and changes in practices can over- It leverages privateinvestment comethe problemsof nutrientdepletionand con- Itis locallydriven sumption of materials. Shanghai, for example, It demands a rebirthintraditionalvalues has made concerted efforts to return nutrients to thesoilaroundthecity and hasbecomea veg- and offersa blueprintfor implementingthese prin- etable exporter. Calcutta produces twenty tons ciples through economic policies that promote of fish per day with the help of nutrients re- sustainableinvestmentsthat helppoorpeopleand trieved from the sewage system. Increased use distressed communities share in the fruits of an of recyclable materials and a shift by industries expanding nationaleconomy. away from primary dependence on raw materi- als to dependenceonrecycledmaterialsarerec- The Clinton Administration National Llrban Policy ognitions of environmentalimperatives. addressessomeof the sameissuesthatChinamust contend with in its small town development. A shift in the pattern of industrial location away from natural resources and closer to cities offer- Sharing the fruits of Chinas Expanding . ing recyclables, may be a source of sustainable National Economy: Conclusion and growth for cities and towns, providing jobs, in- come, and contributionsto the tax base.Inaddi- Recommendations tion industriesbasedon recyclablescanimprove the urbanenvironmentbyusinglessenergyinpro- The Asian experience in dealing with urban de- cessingand transportand reducingthe amounts velopment problems is in contrast to Australia, of municipal solid wastes. China has a long his- Europe, and the United States. Examples assure tory of attention to such matters. continual urban economic growth and progress and do not consider the possibility that cities in The traditional Europeanurban form, character- boththeindustrializedanddevelopingworlds may ized by a high-densitycity center served by pub- decline and decay. The fundamental question lictransportation, contrastswiththeAmericanand should be how best to integrate a reduction of Australian pattern of urban sprawl based on use urban poverty and environmental degradation Theme Paper: Prosperity & Sustainability of China'sTowns: Lessonsfrom North & South 95 into sustainable economic development initia- DevelopingRegionalSolutions: Becausethe des- tives. Although many Asian cities face environ- tinies of China's cities and towns are inextrica- mental problems similar to those in Australia, bly linked, regional solutions must be developed Europe, and the United States, differences arise to respond to the interlinked urbanlrural prob- from their different resource endowmenrs and lems that are now emerging. different stages of development. Due to the na- tional primacy of most Asian cities, industry and Building on the competitive advantage of Small populationtend to be moreconcentrated than in Towns: Because the key to building prosperous Western cities. Thus, Asian cities face more in- communities lies in establishing self sufficiency tense and serious environmental effects from China's future national urban plan should build urban economic growth and long-term upon the strengths of urban areas, especially the sustainabilityand prosperitycomes into question. towns. What works in Asia might not necessarily work Promoting Environmentally Sustainable Urban in developed countries. However, it is critical Development: Because China must preserve its to develop cost-effective and implementable stock of natural resources for future genera- policy measures that are consistent with the tions, the urban solutions must sustain long-term social values of the respective communities. economic growth while protecting and improv- Chinamustthereforedevelop a uniqueapproach ingthe environment.The developmentof China's to the long term prosperity and sustainability of small towns should be an integral part of this its small towns. An approach that responds to (wends. China's special socioeconomic conditions is es- sential and above all that draws on the experi- Annex A ence of others, both good and bad inthis impor- tant commitmentof the development of its small Prosperity and Sustainability of Small towns. Towns in China's Regional Development Major issues for develop in^ prosperity and sustainability in China's small towns will be 1. Urban Environment i. creating the right conditionsfor prosperity China faces special development challenges in in the small towns these small towns with a need to imwrove infra- structureand satisfy a largerealdema'ndforhous- 2. Creating a vision of a quality life in Chinas ing and urbanservices that requiresizable invest- small towns and how to achieve it ments. It is now a question of how to meet the demands for rapid growth of infrastructure with 3. Making a moral commitment to long-term adequate policy responses for effective urban sustainability of the small towns and environmentalmanagement. 4. Promoting economic development, job Cre- SocialInfrastuctureand Programs ation and social opportunity in small towns Withthe expansionof productionand continuous 5. Changing attitudes and behaviour towards increaseinpopulation,manyof the Chinesetowns small towns resulting from improved informa- have suffered from inadequate social facilities. tion flow sanitation and water services, and powersupply. Currently the Chinese government is unable to 6. Supporting and strengthening of traditional provide financial assistance for town develop- Chinese values through the small towns program ment.As most of the towns are unable to gener- ate adequate funds of their ownto maintaineven 7. Accepting the possibility that the process of the presentlevelof urbaninfrastructure,the exist- change will be disjointed and incremental. 'This ing urban facilities are likely to face increasing should not be seen as a limitation pressure as the towns grow in population. To im- prove the towns' funding situation, government A plan of action for China to develop a prosper- policies and actions are needed to ensure that a ousandsustainabletownsprogramwouldinclude: higherpercentage of thetaxescollectedfromthe 96 China: SmallTowns Development town enterprises is used for town development their first contact with the urbanway of life, and and that local resources are mobilized and in- where theyfind basic health,education,andrec- vested locally. reational and social facilities. People and Place Annex B - Chinese towns aredistinctfrom thoseof otherde- Urban Services Provision veloping countriesin that they perform the func- Geffing the Incentives Right tion of storage reservoirs.The towns have helped to reduce massiveruralpopulationexodus to the Urbanizationis proceeding rapidly, and it is pro- cities. While the towns have many rural migrants, jected that by theyear 2020morethanhalf of the it is not clear whether such towns can satisfy the populationof the developingworld will liveincit- needsof the ruralpopulationfor urbanamenities ies and towns. Yet even as cities increasinglybe- and better payingjobs and thus prevent the mi- come the focus of economic and population grants from movingultimately to the cities. growth, they do not deliver on the promise of a better quality of life as expected. The quality of Small towns have emerged as the most dynamic major services is poor. Millions of urban residents elementof China'snationaldevelopmentandur- do not havepotable water neartheir homes,ba- banization in the postreform era. This has been sic sanitationisoftenlacking,andaccessto health madepossibleprimarilybythe openmarketpolicy services and education pose serious problemsin towardthetownsandtheirgrowingeconomic ac- many cities. tivities. If the current policyis allowed to continue for an extended periodof time, it is likely that the Failuresin the coverageand quality of urban ser- towns will assume a more important position in vicesindevelopingcountriesare the resultof more China's urbanization and development. China's thana lackof resources.Theevidenceshows that, cities are still among the most egalitarian in the in many cases, the resources devoted to urban world. services are substantial but used inefficiently'. Therefore, it is essential to look to the system of mobilizing and managing these resources, i.e., Sharing Securityand Prosperity the institutional arrangements for urban service delivery. Over the last several years and for a By the end of 1984,some 33 millionsurplus labor- variety of reasons, the way governments ad- erswere employedinenterpriseslocatedintowns minister delivery of urban services has been and rural market centers. They constituted as reexamined. Of the seventy-five developing much as one third of the workers in some towns. countries with populations over 5 million, all but Sincethe 1979economicreform,numerousrestric- twelve have initiated some form of transfer of tions on the development of the rural economy p,ower to local governments. At the same time, have been lifted, and the state has permitted in- the role of the private sector in many areas tra- dividuals,families, andgroupsof personsandpro- ditionally reserved for government is being re- duction units to invest their capital in secondary assessed. and tertiary activities for profits. 'The task of achieving the right mix of incentives The main economic activitiesof the towns today to promote.better urban service delivery in any go beyond their traditional marketing functions. given country does not lend itself to universal Theyare notonly the nodesfor the collectionand blueprints or recipes for success. A range of distributionof goods,they have also become the considerations must be balanced to find the ap- centersfor ruralindustrialdevelopmentsince 1982. propriate scope, speed, and sequencing of the The revitalizationof towns since the reforms has reform process in a given country. also brought back their traditional cultural func- tions. 'The towns are again the centersfor the dif- Although the processof reformwill not be simple, fusion of modern values and technology to the the potentialpayoffsare high.Managingand pro- ruralareas. 'They are the places where rural festi- tectingthe urbanenvironmentmaybe eithervery vals are held, where most of the peasants make costly or simply ineffective if the capacity to de- liverkey urbanservicessuch as clean water, sani- tation, waste collection, and efficient transport cannot be rapidly expanded in the future. Well- Theme Paper: Prosperity& Sustainabilityof China'sTowns: Lessons from North & South 97 performing,demand-drivenurbaninstitutionsare ply systems, for example, households are forced critical to this expansion. Strong institutionsin ur- to purchasewater from vendors, at several mul- banareasandsoundintergovernmentalarrange- tiples of the costs of piped water systems. ments are critical to the effective management of airandwaterresources.Finally,if urbanservices ource: e er r an Services: Finding the Right Incen- 'Onnot be made responsiveto ives TheBd~rldUBEnk.Washington, D.C. ,995 andfinancedsustainably,thenthe evidencesug- gests that it is the poor who will suffer most from the supply rigidity and implicit rationing that fol- References lows. 1.MakingDevelopmentSustainable.The World Bank Group andthe Environment, 1994. Cities do not deliver on the promise of a better 2.The HumanFaceof the UrbanEnvironment:A Report to quality of life to the extent they could. Despite theDevelopmentCommunityontheSecondAnnual the relativelyhighincomesof urban populations, Conferenceon EnvironmentalSustainableDevelopment, the quality of services in major cities is poor. 1994.Ed. lsmaelSerageldinand MichaelCohen. April At least 170 million people in urban areas lack a 1995,The World Bank,Washington,D.C. source of potable water near their homes, and 3. BetterUrbanServices: Findingthe RightIncentives.The in many cases, the water that is supplied is pol- World Bank,Washington,D.C., July 1995 luted. Nearly 350 million people in urban areas 4.China: A NationinTransition.Ed. Debra E. Soled. lack access to basic sanitation--inmany large CongressionalQuarterly Inc.Washington,D.C., 1995 cities in developing countries, less than 70 per- 5.GoverningChina: FromRevolutionthroughReform. cent of municipalsolidwaste collected and only KennethLieberthal. 1995 50 percent of households are served. In Mexico City the average commute to work is between 6. China Wakes: The Strugglefor the Soulof a RisbgPower. NicholasD.Kristoff 8, SherylWidun 2.5 and 3.5 hours. Although data on the cover- age of education and health services in urban 7. ChinaPop. JianyingZha. NewYork Press. 1995 areasOre the aggregate 8. Who WillFeedChina. World Watch EnvironmentalAlert tics for developing countries are disturbing: in Series. LesterBrown, 1995 half of low-illcomecountries. fewer than half of 9.Evening ,-hatsin Pmbing ,-.,inart school-age children are enrolled in primary Perrvlink, 1992 schools. 10. Beijing Striding Forward to the 21st Century. Beijing Municipal Institute of City Planning and Design, These service failures have wider economic and December 1992 distributionalimplications.Improvingurbanservice deliveryis essentialto any strategy to protect the urbanenvironment.Recentworkontheinfrastruc- ' In Jakarta. Indonesia, 800,000households have turesectors notesthat a lack of accessto, or the installed septic tanks at a cost equal to three times the amountthat wouldhavebeenrequiredtoprovide unreliability of, infrastructure services can have Connectionstocondominialpipedsewerage~ adverse effects on growth, forcing firms to seek more expensive alternatives, which may in turn haveunfavorableimpactsonprofitsand levelsof productionand consequentlyon investmentand job growth. Service failures also have distributional implica- tions.The economicbenefitsof urbanizationhave not beenuniformly distributed.As countries have urbanized,poverty hasurbanizedaswell. Itisnow roughlyestimatedthat about25 percentofurban populationsis poor, which represents about 400 million people. Failures in urban service delivery disproportionately affect the poor. As a result, John M.Courtney many poor householdsmustresortto alternatives Schoolof Urbanand Regional Planning that often imply not only lower quality but also Universityof Southern California higher costs. In the absence of piped water sup- LosAngeles, California 90089-0042 98 China:SmallTowns Development PROSPERITY DEVELOPMENT AND SUSTAINABILITY A Case Study in Shenzhen, China Xiaochen Meng Abstract 1. Arable land is decreasing rapidly and is ac- companied by the agricultural shrinkage. Grain supplynowdependsonimportsfromnationaland Shenzhen is a municipality consisting of a special internationalmarkets. Evenfor vegetables,onlya economic zone and 19 towns. It has experienced third are locallyproduced. fast economicdevelopmentinthepast 15yearsbut hasalsosufferedfromlandmisuse,agriculturalshrink- 2. The land development boom has been ac- age and environment degradation. Thhis paper starts from the economic boom in the 19 towns, companied by land waste. Huge areas of land analyzes the accompanying land-use problems. arelyingdenudedof topsoilwithout greencover, pointsout the economic, social and environmental nolongersuitableforfarming,andarenotneeded effects,andconcludeswiththeimportanceof land- for new construction.'This is a waste of an impor- use and management policy for sustainahlity. tant agriculturalresource. 3. Irrationalland-usepatternsreflectthe current Introduction irrational economic structure and the lack of sound market analysis. Large areas of ruralland S henzhenis a city consistingof a specialeco- are transformed for manufacturing and com- nomic zone and 19 towns which are or merce, but infrastructureand public services are gan-ized into two districts, Baoan and in short supply. Longgang(B&L).ThetotalpopulationinB&Lis 1.88 millionandlandareais 1962sq. km.Inthe past 15 4. The environment is threatened by unsound years,thesetownsexperiencedfasteconomicde- land development.Cleared landcauses soilero- velopment,butalsosufferedfrommanyproblems. sion that leads to increased silting of rivers and One of the most serious problems is land use. flooding. The main issues and side effects are: 5. Landrevenuesprovide an unstable base be- cause of the special social economic structure consistinf of local landlords, migrant laborers, andHongKongenterpreneurs. 100 China: SmallTowns Develowment GDPof 19Towns (1980-1994) the annual growth rate exceeded 40%. 12 the highest being 10 60% in 1991. Only in one year was the 8 .-0 -E rate under20%. 6 c 2. At the be- ? 4 ginning of 1980s. 2 these towns were 0 typical rural areas 1980 1982 1984 1986 1988 1990 1992 1994 with 75%of laborers 1981 1983 1985 1987 1989 1991 1993 working in the fields. Year Since then, the in- dustrial structurehas Figure1 rapidly changed. Thesecondaryindus- Fromthe experienceof B&L districts,many lessons try GDPincreasedfrom 12%to 55%,and became can bedrawnfor towndevelopmentnationwide, the most important part of the economy. Primary includingtransfemnglandfromruralmanagement industrydecreased to 11% (Fig.2).In 1994,77%of systemsto urbansystemsina timely r7'lannerl plan- laborworked in manufacturingand construction. ning before developmentfsetting UP an arable Only 2.7%remained in agriculture. These figures land protection Program, and strengthening 10- highlightthe industrializednoiureof the area. cal landmarket managementand regulation. 3. GDP per capita improved significantly, from The Economic Boom 1980 to 1993. Populationincreased from 239,000 to 11.76millions,at thesametime, GDPpercapita 1. Since the economic reform and opening to increasedfrom 518to 6,501 yuan ($783)(Fig.3).It the outside world in late 1970~Shenzhen's was about 1.5times largerthanthe nationalaver- economyhasrapidlyexpanded.Thetowns inB&L age of 2644 yuan2($318).Inthe same period, ru- districtsfell behindthespecialeconomiczone, but ral average income per person also increased also started taking off at the beginning of 1990s from 152to 3,692 yuan, more than twice the na- (Fig.1).In the 15 years from 1980-1994, GDP in- tional average. creased from 123millionto 12billion'. For 6years, Rapid economic devel- opment is accompanied GDP Structure of 19Towns (1980-1994) by many problems and one of them is land-use 80 I , I , I management. I I I I , I seconaary lnausrry Land Use Problem and its Effects 1. Decreaseof arabie land. One of the costs of - economic development '--. is the loss of arable land. In the past 15 years, ar- A-- 0 able landin 19towns de- I I I I I 1 I 1 I I I I 1986 1988 1990 1992 1994 creased from 28,600 1981 982 1983' 1985 1987 1989 1991 1993 hectares to 4,300. Only Year 15%of the arable land was left (Fig.4). 'There are three peakperiodsof loss, Figure2 each progressively Theme Paper:Development & Sustainability--aCase Study inShenzhen, China 101 Land Use in Baoan & Longgang Districts Towns Towns Built-up Area FlattenedArea Flattened/Built-up (sq. km.) (sq. km.) (sq. km.) Xixiang Fuyong Shajing SoawQ Guargmhg Gongming Shiyan Longhua Guanlan Pinghu Buji w n g Lowwng Pingshan Kengzi Pingdi Kuichong Naxx> m - - Table 1 greater (Fig.5). In the last peak (1992-1993),an- ing for non-agriculture construction but with the nualratesof decrease were33%and44%respec- depressed real estate market, they just remain tively. By the end of 1993,the ratioof arableland flattened and unused. The area of cleared flat- to agricultural populationwas 0.28 mu (0.046ac), tened land is close to the total built-up area of 17% of .thenationalaverage. the 19 towns. For 9 of the 19 towns, cleared and flattened land exceeds their built-up area, Accompaning the loss of arable land was the and the highest, Longhua and Kengzi, is over decrease in grain production, from 110,000 tons 200% (Table 1). in 1980to 5.100in 1994, a 95%loss.Where did the farm land go? According to the survey in 1994, Inaddition to this landwaste, the built area land 43%of arable land was transferred to non-ag- use is also inefficient. There are many empty riculture use; 13%was occupied by rural hous- new buildings and half-built buildings along the ing; 27%was transformed into fish ponds and or- mainroads.The emptyfactory buildingsaccount chards. It is reasonable that farm land be trans- for over a millionsq. meters.InBaoandistrict, only ferredto other useswithhighermarginalrevenues. 15%of the housesinthe marketweresold in 1994. But has this land been used well and created This situation results from fhe hot realestate mar- greater returns?Infact, no. ket in the early 1990swhich ignored the real de- mand. Many real estate companies wanted to 2. Land waste. According to the land use sur- rapidlymakemoneyfromspeculation, addingto vey data in 1993-1994, the developed land in the chaos in land management and the weak- B&L districts was 337 sq. km. including 161 sq. nessof imperfectregulation.As a result,consider- km. of cleared and flattened land, 48% of the ablelandresourceshavebeen wastedandcom- total. Shenzhen is a hilly area with many small poundedby unsoundrealestate development. hills under 100 meters in altitude. These small hills are flattened and cover the surrounding 3. Irrationalland-use structure. Inthe total built- farm land.The green cover is destroyedon these uparea of the 19towns,manufacturingand com- flattened lands and they are no longer usefulfor merciallandoccupy 53%;housing38%;and pub- agriculture. These cleared land areas are wait- lic service and infrastructureonly 9%(thelowest is 102 China:SmallTowns Develo~ment GDP per Capltain B&L nual soil loss of 960,000 tons, (1340tons per sq. km3). Most rivers in Shenzhen area are quite small so eroded soil are deposited in these rivers, raising the river beds higher and causingfloods.Starting in the 1990s. floods in- creased year by year and have become a threat against eco- Year nomic development and people'slives. Figure3 5. Special social 4.4%).With an average of only 6.8 sq. meters of structure. Large scale land development in B&L public land per capita, all towns are in serious districts occurredunderthe newmarketeconomy. need of publicfacilitiessuchas libraries, hospitals, Regardlessof thelegality,mostlandrentgoesinto sportsgroundsand parks.Mosttownsdo nothave thepeasantspockets.Withtheincreasedincome, good watersupplyandsewagesystems,andsani- they nolongerwork inthefield, norrunbusinesses, tation is very poor.This is the result of haphazard or work infactories.They collectrentandbecome land development without planning.High profits landlords. On the other hand, hundredsof thou- attract companiesto investmoneyinhousingand sands of rural migrants are working for Hong factory buildingconstructionand without paying Kong enterprises in the buildings that the peas- for public facilities and urbaninfrastructure. ants built.The averagemonthlywage perworker is 300-400 yuan and living conditions are 2 sq. 4. Environmentdegradation.When hillswere lev- m. per personwith 12people per room in a dor- elled and surrounding farm land was covered, mitory. This unique socioeconomic structure is soil was dispersed unevenly.The levelsof lots are made up of approximately 19% local landlords, different andwhen the rainyseason bringsabout 80% migrant workers, and 1% Hong Kong en- soilerosionona largescale.Takingthe Baoandis- trepreneurs. Because the latter two fluctuate, trict as an example, we find the manmade ero- the structure is unstable. Hong Kong entrepre- sion area is 128sq. km., adding to the naturalero- neursarrivewith export contracts, rent space ina sionarea204sq. km., resultingina soilerosionarea factory building,employworkers andleavewhen of approx 47%of the total land area with an an- they finish the contract. New entrepreneurs will come with new con- tracts. However with costs increasing in Arable Land(1980-1994) Shenzhen, more and more enterprises 500 have moved to other V) places in the Pearl 400 River area. Migrant S workers are single 2 300 6 young people and of- g ten change jobs. Be- 200 B cause they do not 0 100 have families with I them, theyleavewhen 0 factories move to 1980 1982 1984 1986 1988 1990 1992 1994 other locations. Local 1981 1983 1985 1987 1989 1991 1993 landlordsconstructthe Year buildings and houses Figure 4 ---- ----- - - - - -- Theme Paper:Development& Sustainability--aCase Study inShenzhen. China 103 forrentand are notengagedinthe management cially the public facilities. Without planning, re- of factories.When the factories move, they have sources are unavoidablywasted. Urbanplanning onlyemptybuildingsleft.Thissocioeconomicstruc- inShenzhenwas limitedto the special economic ture cannot support long-termsustainable devel- zone before 1993.When planners began to con- opment and will undermine prosperity in the re- sider the 19 towns in the municipal master plan, gion. they found that the existing land development hadextensiveproblems.Almost every villagehad Policy and Management Issues developed manufacturingand the dispersed lo- cationsmadethe infrastructureconstructionvery 1. Transfersbetweentwo land-managementsys- costly. The road system was formed already, so tems. 'There are two land-managementsystems that when pipes were laid, roads had to be dug in China, urbanand rural. Urban land belongs to up again. It is very difficult to adjust the spacial the nation and is distributed the government distribution and rationalizeland use because the through planning and the market. Rural villagers peasantsdo not like to give up land that is under omsural land belongsto the and they have to their control. get government approval when they change fromfarm use to non-agriculturaluse.Thegovern- 3. Protecting arable land with right measures. ment has the right to take over farm land for ur- China has a huge population but limited farm bandevelopmentwithcompensationto the peas- land, Food production is a crucial issue and will ants. Inplaceswith highratesof economicdevel- bea disasterif thearablelandis notwell protected opment likeShenzhen, overdevelopmentof land fromunsoundtowndevelopment.Shenzhengov- andwaste occur if themanagementsystemdoes ernmentcreated the arablelandprotectionplan, not enable the timely transfer from rural to urban. to keep 300,000 mu (20,000ha.) of farm land for Peasantsoftendeveloplandwithoutplanningand food production.However the quota was subdi- without approval,which creates problemsfor the vided and allocated to every district, and further managementandfuture development.Shenzhen to every town and to every village. Villagers set up two districts for the 19towns and incorpo- choose land not according to land quality and ratedtheminurbanmanagementsystemin 1993. bestusebutlocation.Landnexttoroadsandbuilt- Later, the municipalgovernment issued the land up areas was developed for marketsand the ar- management regulations that allow every rural able landinremote areaswas kept, usuallybeing household to keep 100sq.m. of land for housing, of poor quality, of small size, and dispersed. In 200-300sq. m. for public facilities, and every per- many villages, the land allocation could not be son to use 100sq.m. for non-agriculturaldevelop- implemented.This is not the right way to protect ment.Whentheseregulationswere issued,the de- arable land,we have to find betterways to do it. veloped landarea inallof the towns hadalready exceeded these quotas. In some towns, it was more Arable Land Lost EveryYear than 100%over the quota. The regula- 80- I I I I I I I T tions could not be u implemented. When 60 - peasants saw the a huge land benefit, it - became very diffi- 40 V) cult to take the land from their hands. 20 I 2. Planning for de- 0 . I I I I velopment.Townde- 1980 1982 1984 1986 1988 1990 1992 1994 velopmentrequiresa 1981 1983 1985 1987 1989 1991 1993 master plan to orga- Year nize land use for dif- ferent industries and ~i~~~~5 infrastructure, espe- 104 China:Small Towns Development a 4. Sfrengthenlngmanagementandregulation.In to sustainabledevelopmentis to achievegreater the hot real estate markets of the early 1990s. prosperitywithlessresourcesandestablishharmo- many companies and enterprises were involved nious relations between human society and na- in land development in Shenzhen. Driven by the ture. Whether China's economic development attractionof hugeprofits,manyillegalprojectsoc- moves toward sustainability or stays in a high re- curred. According to investigationsin Baoan Dis- source-consuming mode, the role of small town trict4,of the total 173 real estate projects, 29 or development will be decisive. only 17%are legal. According to government regulations,rural collective-owned land is not al- lowed to be marketed. However, of the 173 IStatisticalYearbook of Shenzhen 1995. Statistical Yearbook of China 1994. projects, 115or 67%used collective-ownedland. Department of Urban 8, EnvironmentalScience, Peking This situationisa problemof managementand of University. Study on EnvironmentalPlanningof Baoan imperfectregulations.Shenzhenhas set up three District, Shenzhen City. levels of land real estate market. The first level is Baoan District Government. The Investigation Report of Real Estate Market in Baoan District, 1994. controlled by government that decides on the amount of land for development every year ac- cordingto the predictionsof economicdevelop- ment and land market demand. Studies are needed in this area to analyze and predict the market. Conclusion Town development in Shenzhen has many achievements,t~utat the same time, hasbrought with it many problemswhich threaten economic and environmental sustainability. Lessons should be taken from the Shenzhen experience in land policyand urbanmanagement.The interfaceof the urban and ruraleconomyare thesmall towns and they will play an important role in China's economicdevelopmentandurbanization. Asound ProfessorMeng development model for small towns will have Department of Urbanand Environmental direct effects nationally because of their large Sciences numbers,wide distribution and close proximityto Peking University, Beijing 100871 the natural environment and resources. The key P. R. CHINA Prosperity, Policy Reform and Town Developmentin China Zhaoliang Hu Abstract The Concept of Town I Thereformpolicyandopennessto the outsideworld n China, towns are those administrative units hasacceleratedtown development inChina.From that have a town government, and are 1983 to 1994, the number of statutory towns in- refereed to as statutory towns. This paper creased from 2,786 to 16.210. 1,100, an average of newtownsperyear.Thetotalpopulationof thetowns examines statutory towns. According to inter- increasedfrom45Mto 107M.Buttheaveragepopu- national standards, towns are small cities, which lationpertown decreasedbecauseapproximately are a basic part of the urban system. Usually 30 largetowns havebeen upgradedto municipali- towns are divided into two categories in China: ties everyyear. large towns which are the centers of counties and districts, and small towns. 'They form two Policies that have favored town developmentare: (a)openness to the outside world at different lev- levels in China's urban system. The standards els including setting up special economic zones. for statutory towns are: opening the coast areas, river valley areas and border areas; (b) reforming the economic system includingseparating politicalund economic man- a. The place where county government is lo- agement and establishinga market economy: (c) cated; agricultural refom including setting up a respon- sibility system, developing township enterprises andcommodityproduction:(d)populationpolicies b. Townshipswith total populationunder 20,000, including household registration reform. labor but with non-agriculturepopulationinthe central * market and technology market improvementsand built-uparea of over 2,000; family planning. Town development in Chino still has o longway to c. Townships with total population over 20,000 go because (1) the agricultural labor is still 70% and the non-agriculturepopulationinthe central of the total and is a strong driving force for town built-uparea over 10%; development: and (2)the implementationof policy refom is a gradualand unbalancedprocess. 106 China: SmallTowns Develowment - d. In ethnic areas, remote areas, mountain ar- cording to this source, the number of statutory eas, small mines, small ports, tourist areas and towns increased from 2,786 in 1983 to 16,210 in bordertrade ports,statutory towns can be estab- 1994, 5.8 times within 12years. The populationin lishedwhen necessary eventhough non-agricul- towns reached 106.71M in 1994 from 44.86M in ture populationis under 2,000.i2 1983,an annualgrowth rateof 7.5%.Town popu- lationnationally increasedfrom 4.4%to 9.1%. Under the category of statutory towns, there are many places where there is a concentration of Town populationwas 41.7%of total urban popu- non-agriculture activities. Some could be towns lation in 1994. The increase in urban population based on international standards, but in China, from 1983 to 1994 included two-thirds in towns. theyaretradetownsandareincludedinruralarea Towns are an important part of the Chinese ur- statistics. banization process. Policy Reformand Town Prosperity ChangesinTown Household Registration Aseriesof policyreformshaveimprovedthe pros- Year Town Town Urban perityof towns. The most importantones are: Number Population Population (million) (%) (%) a. Ruraleconomic reform. Policies have drawn 1983 2,786 44.9 4.4 14.6 surplus labor to the towns: e.g., setting up of the production responsibility system, develop- inga commodity economy, township enterprises, allowing labor migration, long distance trading. b. Adjusting town standards. After the adjust- ing of statutory town standards in 1984, the number of statutory towns increased. c. Openingondifferentlevels.Somespecialeco- nomic zones were opened in 1980, followed by the coastal area in 1984. In 1992, some river and border areas were also opened to the outside world. These areas prospered, the economy im- proved, and the towns increased in scale and number. d. Economic system reform. Commodity, real estate, labor, technology and finance markets were set up gradually. Reform forced enter- prises to operate within economic laws. Admin- Table 1 istrationand economic management were split. Reform, from planning to a mqrket economy, is a complicated process. Adding to the variety of Importance of Towns Is Not Reflectedin differences among regions, the process of re- HouseholdStatistics form hasbeenlong,unbalancedandincremental. These aspects are also reflected in the develop- The town populationrecorded in household sta- ment of towns. tisticscontainsonlythenon-agriculturepopulation. With the development of the market economy, 3. Towns and HouseholdStatistics theactual townpopulationexceedsthestatistics. China hasa three-thousand-~earhistoryof house- a. Mostpeopleintheagriculturalsectorwho live hold registration management. Householdstatis- intowns are working insecondary and tertiary in- tics are the main source of populationdata. Ac- dustriesnowadays.The householdstatisticsrecord 'Theme Paper:Prosperity,Policy Reformand Town Developmentin China 107 e. Atemporary-popu- Land-usein BaoanEL LonggangDistricts Towns lationsurvey made in Beiiina in 1994 found that actual Towns Built-upArea FlattenedArea FlattenedIBuilt-up temporary populationwas 5 (sq.km.) (sq.km.) (sq.km.) times the census. Xixiang Fuyong f. The investigation of Shajing Jiangyin city, Jiangsu Province found that 43%of songgang Guangmhg the town population com- mutes every day. They live Gongrning Shiyan insurroundingruralareasbut Longhua work in towns, like the com- Guanlan muters in developed coun- Pinghu tries.Theyarenotreflectedin Buji the above statistics.Accord- ing to the study in Jiangyin, Henggang non-agricultureresidents in Longgang Pingshan the household statistics are Kengzi only a third of the numberof Pingdi people who are actually Kuichong working in the town.6 Nun3 mew Unbalanced Distribu- tion and Table 2 Development The level of development of towns in China is re- them still as ruralpopulation,because the popu- gionallyunbalanced.Accordingto the household lation classification in statistics reflects the differ- statistics of 1994, the highest proportion of town ence inresidence, not occupation. population to total population was 16.2% in Guangdong,and the lowestwas 3.2%inTibet.The b. Immigrantsto the towns are not registeredas unbalanceddistributionof towns is a reflectionof urban residents.'They are classified as temporary unbalancedeconomic developmentamong re- population. Infast developing areas, the tempo- gions. There are two types of areas that have a rary populationhasexceededthelocalresidents, high levelof town development: by 3-4times insome towns in the PearlRiverarea and 1-2times in Zhejiang.3 a. East coast areas like Guangdong, Hainan, JiangsuandZhejianghadtownpopulationsabove c. In the census of 1990, the temporary popula- thenationalaverage.Theseareas benefittedfrom tion livingintownsfor morethan 1 yearwere clas- the fast economic growth of market economy sified as part of the town population.The census after reform, so town population increased rap- data are close to reality. According to the cen- idly. Guangdong and Jiangsu have the highest sus, the'urban population in 1994was 343M, 29% town po~~lationincrease during this period. of the total, 31%higher than the householdstatis- tics data.45Based on this proportion, the town b. Northernindustry,miningandforestryareaslike populationin 1994should havebeen 12%of total Heilongjiang,Jilin, NeimengandNingxia,alsohave population. town population proportions above the national average. Because of the industrial structure, the d. Therewere37,196 trade townsin 1992with av- proportion was already high before the reform. eragenon-agriculturepopulationof 398pertown. Towns inthese areas did notdevelopvery fast af- The totalwas 14.8MAddingthisto thetownpopu- ter reform. lation, the national total would be 13% or 1.4% more than the statistics. 108 China: SmallTowns Development I I~ hdirectionof reformof the populationmanage- e Survey in2 StatutoryTowns and 26 Township ment system should be: first to classify rural and Centers,Jiangyin, Jiangsu7 urban population according to their residence; and second to classify agriculture and non-agri- Total Non- Agriculture culturepopulationaccordingto their occupation. Population Agriculture This will reflect the reality and integrate rural and Residents 1 78,170 114,855 66,315 urban household management, and improve town de~elopment.~ Temporary 22,148 13,028 9,120 Commuting 150,926 The Constraintof Township Enterprises DistrCbutionon Town Development Total 351,244 Township enterpriseshavehadrapidgrowthsince I I economic reform.They have become an impor- Tabie2 tant driving force in the nationaleconomy; how- ever, they are very dispersed in location. There With deeper reforms and wider opening to out- were 20.8M enterprises in 1992, most of them side market, inlandareaswill have a high growth located in traditional villages. periodin the future andwill be accompanied by the highgrowth of town population. The advantages to locating an enterprise in a village are low start-up costs and convenience 'Che Restraintof Household Registration of taking care of the farm. But the major disad- vantages are: (a) Proximity: They are close to Policy on Town Development the village but far away from market, creating The householdregistrationsystemis a seriouscon- difficulties for the supply of materials and in- straint to town development. The effects are as formation. (b) Dispersion: It is difficult to ob- follows: tain reliable infrastructure for the enterprises in dispersed locations. (c) Duplication: Basic in- dustry is duplicated and competed among vil- a. Because rural migrants cannot register in lages;. (d) Pollution: Small scale and backward towns, they are discriminated against in both employmentandeducation, . technologydo nothavetheabilityto managepol- lution. (e) Inefficiency: Infrastructure occupies large areas of land but is not efficiently used. b. Migrantscannot change their householdreg- According to the investigation in Kunshan, istrationfrom ruralto urban, so they keeptheir ru- Jiangsu, the agglomeration of non-agriculture ralhouseand land.This presentsa majorobstacle land use can save 5-10%in land and 10-15%of to the scale economy of agriculture. investment in infra~tructure.~ (f) Personnel complications: It is difficult to run an enterprise c. Withtheregistrationconstraint,manypeasants with market standards with the interventions runtheir manufacturingenterprisesinvillages.The of the political and administrative leadership in dispersionof secondaryindustryinsmallvillagesis villages. This makes the personnel relations very not only inefficient,but also'slowstown develop- complicated in the town en'terprise. ment. Disperseddistributionhasbecomeanobstaclefor Theaboveconstraintshavebeenweakenedwith the further development of township enterprises. the economic reformsand the settingup of mar- The only way to step out of ruralcommunity con- kets, likecommodity, material,labor,technology trols is to build industrial zones and establish the and realestate markets. I I The Constraintof the Constitution Town Population as a Percentage of Total OnTown Development Population in Household Statistics The statutory town is both a residentialand Provinces Municipalities Autonomous Regions administrative unit. According to the stan- 1 983 1994 1994-1983 dards set by the State Councilin 1982.cen- tral economic towns with GDP over 200M National Total 4.4 9.1 4.7 yuan and non-agriculturepopulation over 60 thousand can be upgraded to munici- palities. There are many towns at present Beijing 3.5 6.9 3.4 which have achieved this level but still re- Tianjing 1.6 5.1 3.5 main at town level. For example, Shengze, Hebei 1.4 5.6 4.2 a big town in Jiangsu, is one of the four na- Shanxi 2.8 9.O 6.2 tional silk export baseswith a populationof Neimeng 10.8 12.5 1.7 80,000.ItsGDPin 1993wasover 1500Myuan, Liaoning 7.7 9.2 1.5 among midsize cities levelsand higherthan Jilin 13.2 14.3 1.1 some county capitals in the northwest. Heilongjiang 10.8 15.1 4.3 Longang, a large town in Zhejiang, is the Shanghai 5.6 10.7 5.1 economic centerof Aojiang rivervalleywith Jiangsu 3.6 11.4 7.8 populationof 135,000.There are also some Zhejiang 5.0 11.0 6.0 large and powerful towns in the Pearl river Anhui 3.3 7.4 4.1 area. Fujian 5.5 9.6 4.1 Jiangxi 5.2 9.6 4.4 Therearetworeasonsthat these largetowns Shandong 2.0 7.8 5.8 could not be upgradedunder the constitu- Henan 2.4 5.8 3.4 tion. (1) Usually municipalitiesare set up on Hubei 4.1 8.5 4.4 a county basis. County government loca- Hunan 4.2 7.1 2.9 tions are municipalgovernmentseats.Those QJwlCw 5.2 16.2 1 1 .O towns that are not the seats of county gov- Guangd 4.2 9.O 4.8 ernment will maintaintheir positionas towns Hainan 13.3 in this process. (2)The higher level of gov- Sichuan 3.8 8.7 4.9 ernment such as county or municipality do Guizhou 3.6 6.9 3.3 not liketo upgrade these towns becauseof Yuannan 3.3 8.0 4.7 the financial implications. Upgrading large Xizang 3.5 3.2 -0.3 towns to municipalitieswill weaken their fi- Shannxi 4.2 7.7 3.5 nancialinfluenceascentersof revenuecol- Garw 3.8 6.7 2.9 lection. Qinhai 3.8 9.2 5.4 Ningxia 4.2 10.9 6.7 The side effects of these large towns that Xinjiang 7.4 9.0 1.6 could not be upgraded are first, the num- ber of towns is quite large and not suitable Table 3 for inclusion in the urban system; second, mostrevenuefromthesetownsisturnedover economies of scale as well as the externalities. to higher government so that they do not have Theseindustrialzoneswillpromoteprosperityinthe much moneyfor investment inthe town.'' towns and small cities. 1 10 China: Small Towns Development References I TheState Council, RatificationCircularonAjusting the 1. The investigationgroup of town developmentand Standardsof StatutoryTowns Proposedby the CivilAdminis- tration, 1984. migrationin coastal areas of China,Town Development andMigrationin CoastAreas of China, China Financial References3 EconomyPress, 1989 Zheng, Kunshen, TheSituationand Developmentof SmallTown Constructionin RuralAreas,inReferences5, 2. Zhou. Erliuet 01.. The Studyof RuralandUrban CoordinatingDevelopmentPeople' Pressof Zhejiang, pp165. 1991 The National Statistics Bureau, The Abstract of Chinese Statistics, China Statistics Press, 1995. 3. Gu, Chaolin,ChinaUrbanSystem. BusinessPress, 1992 References 9. 4. Shen,Yimin et al., Migrationof China,ChinaStatistics References8. Press, 1992 The Statistics Bureau of Jiangsu Province, "Sample 5. Studygroup of theState Council,Town Development Analysisof Towns", Town RegionalAnolysis, ChinaStatistics Policy and Practice, China Statistics Press, 1994 Press. 1987. Ma, Kai, "Reform Deepeningand Town Development", 6. Hu, Zhaoliang. "The Adjustment of AdministrationPosition inReferences5,pp17. andTownDevelopment".UrbanStudies, No.1,53-55, 1994 References5, pp51.57. 7.GeorgeC.S. Lin, LaurenceJ.C. Ma," The Roleof Towns in l o References 6. ChineseRegionalDevelopment:The Caseof Guangdong Province". International Regional Science Review, 17- 1; 75-97, 1994 8.Laurence J.C. Ma and Ming Fan," Urbanizationfrom Below: The Growth of Towns in Jiangsu, China". Urban Studies, Vo1.30, No.10, 1625-1645, 1994 Professor Hu Department of Urban & Environmental Sciences 9.Hu. Zhaoliang, Peter Foggin, "Chinese Cities after Reforrnand Openingto the OutsideWorld". China City Peking University, Beijing 100871 Planning Review, Vol.11. No.1, 12-24. 1995 P. R. China PART 11. SUMMARY OF CHINESE WRITTEN CONTRIBUTIONS OfficialSpeeches Compliedby John Burfield Official Speech 1 yet changed.Localgovernmentmanagementis still unableto cope with overall planningand re- sponsible administration. The domicile control Backgroundand Policy Guidelines of system, the land management system and the the Reform of China's SmallTowns social security system are all in need of updat- ing and improvement.Weak town planning and the tendency to permit leapfrog and ribbon de- Zhang Haoruo velopment causes great difficultieswith the pro- vision and maintenance and servicing of infra- In the 1950sthe government of China adopted structure. policies restricting free movement of popula- tion between rural and urban areas compelling Recognitionof these prot~lemshasledto a set of farmers to produce more and thereby driving reform policy measures being attempted on a prices of produce down. This resulted in low in- pilot basis in 57 towns. Numerous changes are come andconsumptionlevelsinthe urbanareas beingattemptedincluding: and contributed towards realizing the States In- dustrial targets. The success of the industrial- * ization policy was at the cost of rural economic The strengthening of the capacity of lo- cal governments by improving planning, development which led to excessive surplus rural labor of more than 120 millions increas- introducing innovative investment plan- ing by 10 millions annually. This led to mass ning,updating residencecontrolsand in- migration towards the cities together with at- troducing new land management ap- tendant problems. The siting of industries in ru- proaches in the case of the disposal of ral areas frequently exacerbated the separa- farm lands by immigrants to the towns. tion between rural and urban society. More re- * cent policy reforms, while encouraging more The improvingof revenuemanagement, rapid developmenthas shown that the separate accuratecostforecastingandresponsible pattern between rural and urban areas has not fiscalmanagementbyintroducinggreater controlt ~ county levelis recommended. y Zhang Haoruo- First Vice Chairman, State Commission for Restructuring Economic Systems 112 China: SmallTowns Development * Thereformingof the socialsecurity system ment is now thought to be the appropriate ap- the promotion of holdingshares in public proach. The current domicile registration re- enterprises,and the merging of small en- quirements mitigate against rural urbanization. terprises to counter dispersion are being considered. The Ministry of Construction is responsible for the planning and construction of small towns. * 'The strengthening of rural service net- Almost every small town now has a sanctioned works and the development of trade or- development plan which guides organized de- ganizationsalongwith savings banks and velopment. Legislation with regard to city plan- cooperativesisto beencouraged,andwill ning,the PlanningConstructionandManagement all contribute to the improvement of the of Villages and Market Towns and the Ministry's investment climate. The absorption of own Regulation for Town Planing have all been rural migration will only be possit~lein promulgated since 1990. The Ministry supports backward and weakly managed small the pilot project approach with the following towns after heavy investments are re- objectives: alized in urban infrastructure. The pilot towns involved will then provide an ex- * small towns shouldbedevelopedwithina ample for other small regional planning context; * their development is closely related to broader economic and social issues; OfficialSpeech 2 * they should be plannedwith a view to ra- tionalizing land use and protecting the Speech at the Opening Ceremony of environment. InternationalSeminar on China Small Towns Development Eachof the 2200countiesinChinahasbeenasked to select 1 or 2 small towns for experimental programs. The aim is to have 5000 small towns Mr. Mao Rubai by the year 2000, and 8000 by the year 2010 which are to have a modern and proper layout In 1979 it was decided to reform the economic with sufficient infrastructure to respect the system,abolishthe peoplescommunesystemand urban environment. link remuneration to output. This change gener- ated incentives which greatly improved the ur- The degree of attentionbeingpaidto the devel- baneconomy,solvedthe problemof food supply opment of small towns by the government can andencouragedthedevelopmentof townshipen- be seen by referring to the important invest- terprises. In spite of these improvements it has ments made by the Ministry of Finance, the been found to be necessary to coordinaterural Peoples Bank Of China as well as the Ministry of and urban reforms. Small town development is Construction . Major efforts are being made to seen as supporting the development of modern stimulate and increase investments in small agriculture as well as township enterprises. towns, to improve landuseplanningand the bal- Modernagriculture depends for its services upon qnced integration of community facilities and rural centers and is seen as a large scale pro- services, to plan comprehensively- carefully duction operation which causes a shift in sur- coordinating the inputs of different actors in the plus labor. Small towns and rural industrializa- process, improving administration systems of tion need each other. But thus far this has re- small towns, and to reform policies regarding sulted in higher unit production costs as well as the domicile requirements and social security environmental problems, due to shortcomings in system. spatial distribution and infrastructure, which gives rise to congestion. Planning for the group- ing of industries as part of small town develop- -~ Mr Mao Rubai, Vice Minister of Construction OfficialS~eeches113 OfflcialSpeech 3 OfficialSpeech 4 To Brlng Rolesof the Agricultural Bankof Promotingthe HealthyDevelopmentof China into Full Play and Promote Urbanizationin Rural Areas Abide by Developmentof SmallTowns in ~hina-~---Scientific Law and Pattern He Linxiang Li Bauku The Agricultural Bankof China is one of four state The successful accomplishment of the eighth 5 ownedcommercialbanksandisengagedmainly year plan, and the launchof the 9th5year plan in financial services in rural areas. It has fifty is a significant time to chose to hold this semi- thousand branches and has business linkages nar. world wide. The bank is concentratingon farm- ing and animal husbandry, township enterprises China has an urbanization rate of 28.7%and by and commerce.The bank has beeninstrumental the end of 1994 had 622 cities. In the rural ar- in encouraging township enterprises to regroup eas there are more than 55,000 small towns, withaviewto acceleratingdevelopmentinthose grouped into 16,702 administrative units of gov- towns. The bank hasalso provided funding for ernment . Small towns are where people take technical improvements in existing township up non agricultural activities and live together enterprisesand promotingcommerceand indus- with township enterprises , commerce and in- try. The bank has not only boosteddevelopment dustry. The small town is a link between the in small towns but also makes the distinction countryside and urban tiving. The sclrplus agri- betweenlongandshort term development. cultural labor forms 50% of the total rural la- bor force. By the year 2000 there will be 200 The ninth five year plan for the year 2010 million rural workers that have abandoned the emphasises the strengthening and prioritizing of landandseek urbanstatusandopportunities.This agriculture, as well as the integrating of town- translates into 300 or 400 new cities each with ship enterprises with the development of small a population of between500 thousand and one towns. The bank intends to follow the principles million. At end 1992 China had 32 big cities of the plan and provide assistance towards sus- (population of 1 million+) and 41 of between tained developmentof small towns which act as 500,000 and 1 million, as well as smaller towns. influential links between the rural and urban The development of small towns is essential to economy. promotethetypeof urbaniiationneededto take upthe floating populationand to promoteindus- The bank adheres to the principleof cost effec- try and enterprises. tivenessand takes intoaccount the diversityand different needs of local conditions. Short term There are important problems of distribution, credits for the development of commercial resi- number and scale of small towns. dential buildings is a priority in relatively de- veloped towns. In less developed areas the em- As the speedof urbanization largelydepends on phasis would be more towards guiding cost effi- economic growth, experience has shown that cient enterprises to form phased linkages and administrative interference plays an important providing credits to service industries and mar- part. Large towns tend to extend beyond the kets. reachofgovernmentmanagementwhereassmall towns which have little scope for development The bank is committed to strengthening coop- tend to be overburdened by government.There eration with the departments concerned in the are difficultiesinherentinprovidingcapitalfor the developmentof small towns and participating in development of infrastructureof small towns be- the planningfunction. The development of small cause of a weak economic base. Government towns will result in a localizedexpansion of finan- has attempted to provide policy guidelines to cial activities. He Linxiang, Executive Vice President of the Li Bauku, Vice Minister of the Ministry of Civil Agricultural Bank of China Affairs 1 14 China:SmallTowns Development ensuredevelopmentof smalltowns, butthe physi- OfficialSpeech 5 cal and socialbarriers betweentown and coun- tryside ,domicile registration and status, are all obstacleswhich needsolutions. Basic Ideason the Reformand Improvementof the Managementin Developmentprinciplesinvolvethe reformof the System of DomicileChina'sSmallTowns micro organization of the countryside .The Min- istry of Civil Affairs believes that the size of the large cities must be controlled while me- MouXinsheng dium and small cities develop, taking into con- sideration social and economic benefits, avoid- Chinaisa countryof 1.2billionpopulationofwhich ing mass action and aimless development which 900 million are in rural areas. The reform of the will slow progress. Greater emphasis is needed domicilemanagementsystemis anessentialstep to develop network patterns of cities and small in the development of Chinas small towns. The towns. Imbalancebetweenregionsismarkedand current domicile management system which planningpolicies need to narrow these regional gradually developed since the founding of the differences. The Ministry finds that broad poli- Peoples Republic no longer meets the needs of cies and plansfor urbandevelopmentare weak- the current situation. The 14th party congress ened by inadequateresearchand planning.This pointed out and provided a clear direction for resultsinrandomandshortsighteddevelopment. the reformof the domicilemanagementsystem . Thethreemainpolicydocumentsconcernedwith Somelocalitieshavecarriedout pilotreformsand urban policy are insufficient. Standards which won public support. Conditions are now ripe for takedifferencesof geographyandeconomicsinto generalreformof thesystem.Theguidingprinciple consideration are needed. Pilot studies and will beto categorize accordingtc residenceand projects are neededwith a view to the develop- occupation Policies on transfer of domicile are ment of an urbanization strategy which takes beingreadjusted.Localgovernmentswill beable the social ,economic and other realities more to give priority to certain categories of settlers. fully into consideration. Reform of registration and management of recordswill beimproved.Thepolicewill berespon- sible for establishing domicile management of- fices. This reform and upgrading of the system covers many facets of public administrafion and will involve security organizations and community leaders to provide material support to the ef- fort. Mou Xinsheng, Vice Minister of the Ministry of Public Security OfficialS~eeches115 OfficialSpeech 6 The planning of small towns is inadequate and leads to irregulardevelopment.There is a rushto establishindustrialandcommercialzonesleading Scientific Planningand Positive to wastage of arable land, conflicting develop- Guidance to Promotethe Healthy ment leading to high cost transactions. Properly Developmentof SmallTowns plannedtown layoutsarefundamental,andneed governmentregulationandguidance. Inbuilding a socialist market economy spontaneous and Ma Kai unchecked development cannot be allowed. Governmentguidanceinplanningshouldneither The next 15 years will be of major importancein restrict development nor encourage rash devel- China's development and reform when industry opment, but shouldserve to guide development becomesmatureandthemiddlephaseof urban- within a regional context. Regional integration ization is begun. Urbanization is currently at the requiresinterventionsat programandadministra- level of low income countries while industrializa- tive levels.Standards and guidelines for land use tion hasmaderemarkableheadway.This lagpro- andthehandlingofwastesarisingfromthoseuses duces economic and social problemswhich af- is particularly important. fect industry and the quality of life.This problem needs resolutionduring the next 15years. To promote the rational development of small townspoliciesconcerningplanningandtownad- More rural industry located in small towns with ministration, domicile registration, land use and populations ranging between 30000 to 50000 socialsecurityshould bedevelopedcomprehen- reflects Li Peng's thinking in 1992. During the sively, thus reducing heavier social charges. next 15 years China will change from an ex- tended growth mode to an intensive one. Small towns will clearly play an important role in this change. With the small share of arable land per capita,economyof scale andgreaterefficiency OfficialSpeech 7 can only take place by reducingthe numberof farmers. Dealing with this problem and the re- EffectiveUseof Science and Technology sulting migration to the towns and cities leaves little choice but to develop the small towns for Promotingthe Socioeconomic rather than the large cities. The development of Developmentof SmallTownships small towns would effect a change in the eco- nomic growth mode. Ruralindustriesaccount for Wang Baoquing output value of 40%of the nations total. 50%of total exports comes from rural industries. Prob- lems such as scattered and extended develop- The rapid development of small townships has ment, small scale operations and high environ- revealed serious problems Absorption of the mentalpollution,poorcommunications,inappro- 300, 000 migrants foreseen in the 1984 policy priate land use and a high cost of transactions of food self sufficiency fell short due to limited have prevented rural industries from achieving absorption capacity . Land use requirements in economy of scale.Achangeinthe growthmode small towns have proved to be nearly 3 times oftheeconomyasawholewouldbeachievedby greater than inout county situations and nearly regrouping rural industries and combing re- 9 times higher than average county use.'The sourcestowardsconcentrateddevelopment.The migration of people into small townships occu- development of small towns is of great impor- pies 10000 more square kilometers than simi- tanceinachievingfundamentalgrowthinChinas lar migration to medium sized towns. 'The de- national strength. centralization of rural industries causes heavy pollution. The scattering of rural industries is a Wang Baoquing.DeputyGeneralDirector,State Ma Kai, Vice Chairman, State Planning ScienceandTechnology Commission, Commission Departmentof ScienceandTechnology 1 16 China: SmallTowns Development brakeupondevelopment.Anaturaldevelopment OfficialSpeech 8 process should be fostered in which those more favoredplaceswill expand and prosper. 0bservationontheQueslionof If China's Agenda 21 is to be sustainable , rural Reformingthe Administralive industrializationand urbanization must be pri- ManagementSystem of the SmallTown orities. This calls for the adoption of all aspects of development towards prosperity to incorpo- rateandemploysystematicmethodsof planning. Gu Jiaqi Other objectives call for transformation for low-techinto high-tech. In 1992, pilot projectsfor Small town patterns of development are largely integrated social development have been initi- based upon the location of secondary industry. ated, half of which are insmalltownships. Much of the growth of small towns for example those of Jiangsu Province is basedon the devel- opment of small enterprises. The local bazaar While preservingrapid economic development, economy inthose cases has expandedand their new and appropriate technologies are encour- surpluses are now exported. This has led to the aged. Improving the quality of human resource development of transportation hubs which has developmentthrougheducationtechnology and had positive impact on the development of the culture ,adequate food and housing, and public rural economy. Similarly the pattern in which services are being strengthened. Urban analysis industrialand mining enterprises have improved will strengthen the impact of land use zoning, their own infrastructure and gradually formed with urban infrastructure planned and carried a pattern of support and complementarity. out comprehensively rather than piecemeal. In- dustry is the basis for rapid economic develop- ment, and cleaner productiontechnologies, en- Tourism has acted as a leading factor in many vironmental protection and social infrastructure cases leading to improvedinfrastructure related willbeprovided.Computerizedmanagementsys- to commerce. Examplesof growthand develop- temswill t ~ introducedon a pilot basis.The State e ment in suburban areas where industry has ben- science and Technology Commission will be efited from locationaladvantage with the larger working to enhance modernization, industrial- city and formed a foundation for the further de- izationand the integrateddevelopment of small velopment suited to the conditions of the sub- towns. urb. As reform and development of the rural areas remains an arduous problem, only by address- ing the issues pertaining to the small towns can these problems be attacked. Lack of planning and scattering of development has led to poor control of pollution, low effectiveness of infra- structure and energy use. The growing surplus labor force of over 160 million will inevitably be mainlyabsorbedby the smalltowns.The small towns can also act as extensions of knowledge and technology in developinghighyield agricul- ture. These cpmplex problems can only be re- solved in line with the socialist market economy through reform of the administrative system, eliminating obstacles and bringing about faster andsounderdevelopment. Gu Jiaqi, Vice Minister, Ministry of Personnel -- ---- - -.- OfficialS~eeches117 Thesmalltownsneedtheirownadministrativesys- OfficialSpeech 9 temwhichshouldbegrantedbythecounties.The small towns should have their rights of decision defined: what should be government, -what TO Improve the FinancialManagement should be enterprises -what should be the mar- Systems of the Township Government IS ket. The towns would provide comprehensive an Important PrecondiHonfor Promoting managementof social,economicandculturallife. the Developmentof small T~~~~ This would mean an enhancement of government's role in providing public services. Town governments should add servicing insti- Ms. Goo Ying tutions from the county government such as agricultural extension and veterinary services, and strengthening the towns capacity for per- sonnel management.The county would retainits The hierarchy of government budgetinginChina prerogativesso far as guidelines standards, etc., is in 5 tiers: central government, province, pre- and would support the towns efforts to become fecture, county and township. 90% of the small more efficient. Administrationwould be stream- towns provide elements of government. There- linedand the budgetsystemreformedto enable fore rational budgeting is the basis to healthy small towns to manage their own budgetary af- plannedgrowth,strengtheningmanagementand fairs and expenditures. Land use planning in investing in projects. Small towns exercise a which government monopolizesthe landmarket ripple effect on their hinterlands which in turn needs reform The domicile registration system determines the economic development of the would incorporate incentives for rural labor to town. Therefore small towns, in order to fulfil transfer to industries and businesses in small their properfunctionneeda propertown budget towns. Work on this complex task is included in and the strengtheningof the exchequer can en- the 57 towns pilot project. In addition, reforms hanceandexpandthetownsautonomy. are needed to the social security system, the ownership of town enterprises and investment Improving the towns financial system to enable mechanisms. the town to support development is an impor- tant task. Recent experience has shown that a Every small town should develop its develop- town financial department -whether it features ment plan in accordance with its resources. management of markets, trading, commodity circulation which brings about growth, or else developing rural industry, establishing mini in- dustrial zones, demonstrates that investment in infrastructure, support of rural industry through the use of revolving funds, etc. and the growth of wholesale markets plays an impor- tant rolein speedingup development.This leads to a favorable investment environment. Town- ship financial departments have actively sup- ported the reform of the social security system and contributedto a well coordinated develop- - ment system. Overall development of township - economyhasbeenuneven,someintheWest hav- ing considerable financial difficulties. Basically town finance is for feeding the population.Many towns fall even to do this and are in debt and have insufficient skill and control to engage in developing the town. Insome counties the lion's Gao Ying, Deputy General Director, Ministry of Finance 1 18 China:SmallTowns Development share of revenue is taken away from the towns. Official Speech 10 Thisseriouslyinhibitssmalltowns, andreducestheir ability to develop. DeepeningRuralEconomicSystem Budgetaw practices are not unified. Loopholes Reformto QU~Ckenthe Pace dSmas exist side by side with great difficulties. Nearly Town Development 40% of funds raised in 1994 were not incorpo- rated into township finance. Wan Baorui Small towns have to seek ways of developing themselves at the same time as serving their Accelerating small town development is a logi- cal outcome of the economic system reform of hinterlands.'Thetownfinancialdepartmentshould reflect the requirements of comprehensive de- the 1970s. Firstly remuneration became linked velopment in their policies and functions. Rev- to output which made farmers part of the eco- nomic system while the commune system was enue distribution between central and provin- cial tiers of government have been rationalized. eliminated.This hascontributedto therapidgen- eration of rural labor surpluses which in turn This is not the case for lower levels of govern- ment . The Ministry of Finance is currently emphasise the opportunity and need for indus- try and township enterprises to quicken small studying the regulationof a revenuesharing sys- towndevelopment.To increasethesupplyof agri tem below provincial level, moving towards giv- ing support to the principle that the town man- products, greater investmentis neededto trans- fer labor to secondary industry. However, fluc- ages its own affairs, combining financial power with functional power, giving priority to enrich- tuationofpricesandthereducedcapacityoftown ingthe town before the county. enterprises to expand and absorb additional la- bor makes the task a difficult one. The guiding principle for small town development should re- Fundmanagement,replacingfeeswithtaxesand sult from centralized and grouped industrial achievingincreasedtransparencyarethe ot~jec- development in order to develop industry and tives. Overall, current experiments for com- urbanization jointly, in which stronger con- prehensive reform seek to set a standard for nection between urban and rural markets will taxcollectionandmanagement. contribute towards the develo~mentof ~ublic service and infrastructure. Inmany economically developed regionsindus- trial development is the basis of small town de- velopment. There are many examples of devel- oping towns where despite limited public sector support self evidentlocaladvantageshavegen- eratedsupportandfoundfundingsourcesonthe principle of investor ownership. 'There are many examples of localities allowing full play to local, initiatives and creativity, reform in the domi- cile registration system, social security sys- tem, etc. There are examples of small town developments which have made remarkable progress thanks to the involvementof government at all levels- overall planning, leadership, infrastructure plan- ning and execution, and a clean environment. ... Wan Baorui, Vice Minister of the Ministry of Agriculture. OfficialS~eeches119 Serious impediments include land use, floating important force for rural modernization. The de- employment and the domicile registration sys- velopmentof small towns together with the nec- tem. The relationship between small town de- essaryreformis contingentuponthe landsystem. velopment and the growth of agriculture should be properly handled. The main criterionfor judg- With 22% of the world's population to feed but ing the success of the development of a small only 7% of the world's arable land, the town is to ascertain whether the rural economy husbanding of this resource is a necessity. This has developed as a result and farmers' incomes will meanredevelopingand intensifyingthe land increased.Thelocaleconomy andthesmalltown use in towns, land reclamation and protecting should interact with each other. The strength- arable land. Prior to the sanction of any towns ening of organizationand leadership, better co- development plan, after all necessary planning ordination between departments are necessary conditionshave beenfulfilled, the landmanage- to facilitate relevant policies for development. ment department will implement what reforms are necessary. Any adjustments required by the town authorities will need to be submitted for approvalto the landdepartment. OfficialSpeech 11 'The main task of the land management depart- ments are submitting working papers, exchang- SmallTown Construction-Reformon ing information with other departments, coor- Small Towns Land UtilizationSystem dinating policies and examining issues. Promotionof China's Rural ModernizationProcess Official Speech 12 Liu Wenjia Since 1987 the government implemented the Establishmentof a Set of Statistical reform of land use, targeted to the market opti- Indicatorsand UrbanizationInformation mizing distribution, protecting agricultural land Monitoring System for RuralTowns of and the natural environment etc. The reform, after 8 years has proved to be very successful, China to Suit the Need of New Situation especially in the central and western parts of of Reform and Development China. Inits attempts to protect arable land em- phasishas beengivento landreclamationwher- Lu Chunheng ever feasible. The development of small towns is the correct road for the absorptions of sur- plus agricultural labor. Farmers are now able to Mosturbanizedcountriesof theworldexperienced obtain land within urban areas as a result of the a favorable environment of industrializationand reform. Shortage of investment for town infra- manageablepopulationsizewhich absorbedthe structure has hampered development. But now, rural population into large and medium cities. land leasing funds are being mobilized. Experi- China's conditionsare quite different,with a rural ence now shows that the land utilization reform populationofover 900 million.Theheavypressures has provedto makeanimportantcontributionto of this populationand the absorptioncapacityof the developmentof small towns. Some problems the laborforcearetheproblemsChinafaces.. The persist, and there is a tendency to make money surplus populationsimplycannot beabsorbedby throughlandspeculationand neglecttheprotec- the largeand mediumsized cities.Improvingthe tion of arable land. The planning of small towns, opportunitiesfor employment inthe rural areas is and the organization and coordination is weak. the approach which will absorb this large popu- The reform of the land system has become an lation. Rural urbanization is a concept we have Liu Wenjia, Deputy General Director, State Lu Chunheng, Deputy General Director, State LandManagementBureau Statistical Bureau of China 120 China:SmallTowns Development studied, togetherwith afullinformationgathering system. The small towns drive their local econo- mies andradiateinfluenceinto the hinterland. This official speech goes on to present a discus- sion basedon the town categoriestogetherwith statistical information. It points out that the sta- tistical work and study on towns is very weak, the systematic collection of data or procedures for measuring towns or rural urbanization being inadequate. 'The statistical system has been set up at township level but is designed to measure the overall situation. Basic urban statistics re- main only estimates. An indicator system is requiredthat will enablecase analysisandevalu- ationontowndevelopment to becaniedout,and progress monitored. Internationalcomparison in matters of urbanism makes statistical indica- tors indispensable.The speech then continuesby presenting a draft set of Statistical indicators for rural towns and outlines a Rural Urbaniza- tion Monitoring System. Mr. Lu drew attention to the availability of the paper "Preliminary framework of the set of Statistical Indicators for Rural Towns." Academic Papers Compiled by John Burfield Academic Paper 1 bythefarmersafterthecommuneperiodreleased a largepartof the work force. Laterthis labor be- camepartof amoreproductiveworkforcelargely On Developmentof SmallTowns dueto the individual'sown initiatives. Professor Fei Xiaotong* Theinitialgrowthoftheenterprisezoneinthe Pearl River Delta was due to the introduction of small enterprises from Hong Kong following reform. In This paper outlines the context of small towns, the country as a whole however there was no and describes the communitiesand activities of contact with overseas Chinese, and investment the households which form village communities, funds were scarce. contrasting today's situation with that during the peoplescommuneperiodand the processof rural economic development. With the develop- The paper describes the next stage of rural de- ment of industry during the 60s large numbers velopment as small factory enterprises setting of rural population were drawn to new job op- up in the rural areas, thereby rejuvenating many portunities. At this time a domicile registration of the small towns . This is a category of new systemwas established with the purposeof con- small towns, and introduces the 3rd stage of trolling food distribution. "Small town" in cur- ruraleconomicdevelopment. rent usage means a new and transitional com- munity which is changing from rural to urban. It The new small towns are becoming exchange has brokenaway from the natureof a ruralcom- centers and have established trading ties with munitybut not yet become urbanized. distant places, and are partof the global market place as well as having ties with larger cities. The paper then outlines the development of ru- Thus there is a consistency in the emergence of ral society and the economy during the period small towns coupled with complexity. Under- from the 70s until today. The initiatives taken standing this situation is a prerequisite to de- signing the overall program. Professor Xiaotong. Vice Chiarman of Standing Committee of the National People's Congress, Professor, Beijing University 122 China: SmallTowns Development Rural small towns provide a reservoir to mitigate absorptionsof laborinthesezones hassloweddue and contain the impact of mass migrationto the to competitiondemanding technicalinnovation cities.Issuesof land,populationinfrastructureand andcapitalintensiveinvestments.Thedispersalof superstructureare discussed and concludeswith enterprisezones leadsto wastage inemployment a plea for architecturalsociology to be taught. opportunities which could have been achieved by concentration. This discussion leads Professor Chento advocate that a realistic way to accom- plish large scale transfer of surplus agricultural la- bor to secondary industries is to develop small Academic Paper 2 towns. Professor Chen concludes that the devel- opment of small towns will attract some of the in- dustrial investments being currently scattered Developmentof Small Towns Is an which will also modernizeagriculture. Important Meansfor Agricultural and RuralModernizationin China Professor ChenXiwen Academic Paper 3 China's modernization is dependent upon agri- cultural and industrial development, as 70%of Urbanization:The Opportunities and the population live in rural areas. Challenges Faced by Rural Developmentin China Professor Chens paper provides a summary of populationgrowthandthe placeof agriculturein the economy at the time of the founding of the DuYing Peoples' Republic. The large scale industrializa- tion started in the 50s quickly developed a mis- Against a backgroundwhich takes thestandthat match in that while agriculture's contribution the internal contradictions which obstruct the to GNPdropped the ruralpopulationbecame 82 development of both agriculture and the rural % of the total. The requirements of the domicile economy need resolution, this paper attempts control system are describedand the impact of to analyze challenges to rural development, ur- the relative loss of arable land on a per capita banization strategies, policy adjustment and in- basis.The paperdescribesthe onsetof economic stitutional innovation. Analysis is provided reform in the 70s when the ever decreasing ar- which indicates that combiningproductionfac- able land and the domicile permit system which tors to help them flow freely and sustain the restricted migration to the towns led to the growth of rural employment and farmers in- farmers having no alternative but to set up en- comes is a way out of the dilemma. The paper terprises in rural areas with their own funds. recommends that adjustment in rural industry 'Thus a dual system obtains in which government and employment shouldnot only be carriedout is investing in cities and large towns, and indus- within the context of agriculture and rural de- trialization is being financed in rural areas by velopment, but should incorporate adjustments farmers as principal investors. This second does to both rural and urban areas, with Urbanization not contributeto the concentrationof enterprises as the centerpiece. This is dramatically differ- and population. and is a demonstration of the ent from the agricultural reform in the 1980s. urbanization process lagging behind industrial- ization. This will produce a protracted negative A strategy is outlined which addresses urbaniza- effect on the optimization of China's entire in- tion which lags behind and industrial structure dustrial structure and employment structure. whichisunbalanceddue to the excessiveexpan- sionof secondary industry. A discussionof growth and the distributionof en- terprisezonesfollows and it is arguedthat without ManufacturinginChinaiscomparablewithmiddle the development of these enterprise zones the income economies, forming a unique patternof employment situation will deteriorate. The rapid Industrializationbeing well ahead of Urbaniza- ProfessorChen Xiwen. Director of the Rural Development Du Ying, Deputy Director General. Research Center for Research Center, State Council. Rual Economy, Ministry of Agriculture. Academic Pa~ers123 tion. Chinese cities and their enterprises are theAcademic Paper 4 product of administrative forced resource mo- bilization rather than the free flow of produc- tion factors. This is the fundamental cause of 'The Role of Governmentin'Township underdevelopment of urbanization, which has Development and Its PolicyDesign inhibited the development of tertiary industry, prevented industry from taking advantage of Liu He* concentrating efficiencybut also weakened the functions of the city and its capacity to absorb rural immigration. Director Du points out that Giventheneedtosolvesmalltowndevelopment, excessive decentralization in the siting of rural it is necessary to formulate a policy with which industries has caused inefficienciesof land use. governmentcanguideandpromote propertown Transportation , scale of business development development. Analysis of 47 small towns dem- and resultingenvironmentalpollution and waste onstrates that A) A farmer can earn 30 times of resources, now suggest that China has en- more income by working in industry. B] Little tered a phaseof accelerated urbanization. funding for small town development comes from the public sector.Investment capital comes from * land sales with some local funding. Clearly the Onlybythepromotionof urbanizationcan central government policies on investment ac- agricultural productivity be raised by im- tivities have little influence at this level. C) provementin agricultural management. Our survey showed that there needs to be an * Only by the promotion of urbanization outstanding person to coordinateand deal with different interest groups and attracting talent can the overall efficiency of rural indus- in the process. 'This spontaneity, however, is try be improved. frequently at the cost of loss of arable land and environmental deterioration. Where markets * Only through the promotion of urbaniza- cannotdeliveroptimaloutcomesgovernmentin- tion can the development of tertiary in- tervention is necessary in those areas on a short dustry be promoted in order to rational- term basis. Government guidance is needed to ize the industrial structure. Clearly this support urbanplanningoperations,togetherwith will exert fundamental importance to the legal, environmental and fiscal guidance. Resi- change of development strategy for the dential registration and social security issues whole nationaleconomy. Inorder to pro- require new policies. Our program is to expand mote urbanization it is necessary to re- 500 small towns to medium cities of up to move the institutional constraints on ur- 500,000 each, over a period of 10 to 20 years, ban development. The main task is to while ten thousandsmalltowns developtheir own changethemechanismandmovethe ur- functional identity. Different guiding principles banizationprocess onto the path of mar- will apply to distinct regions. Small towns will ket economic operations. Guidelines for be prioritized in allocation of resources by the urbanizationshould be basedon the na- state government, and towns administration will tional condition as well as the general bestrengthened. rule. Self development mechanisms are necessary. The domicile registration system must be reformed, labor markets needto be opened free of discriminatory practices. Those things which can be achieved through market operations should be separated from government, and policies formulated to enhance the town financial management system. Liu He, Deputy General Director. Long Term Planningand Industrial Policy, State Planning Commission. 124 China: SmallTowns Development Academic Paper 5 Academic Paper 6 Problem of Planningand Constructionof SmallTowns Constructionand Rural SmallTowns Modernization -on Roadof Rural Modernizationwith Chlnese Zou Deci Characteristics The imbalanceddistributionof smalltownscovers ProfessorGao Chengzeng awiderangeof developmentandlivingstandards and conditions. Many are single industry depen- 'The vast majority of China's population of farm- dent "company towns" with a sub category of ers is afflicted by poverty and backwardness. exportpromotiontowns. Specializedmarkettowns Rural modernization is a prerequisite to China's andothersdependentuponindustriesand leisure. modernization. The public sector is currently Isolated towns encounter difficulties in develop- unable to invest in enterprises capable of treat- ment, towns which are inter-linked grow faster. ing jobs sufficient to absorb a significant por- 50%of China'ssmall towns contain a population tion of the rural labour force. While township between 10000to30000andmostsmalltownships enterprises have demonstrated encouraging have developed into towns during the past 10 progress this approach should be pursued in a years. These trends suggest that adaptability of concentratedand coordinatedfashion. The cat- infrastructure and transport planning needs inte- egory of Small Town can be sub divided into - grated planningon a different basis than in the County level town, - township level town ,- largecities. Designissuesarise with regard to suit- village level town and trade centers under town- able housing,transportationandsocialand com- ship jurisdiction. The focus of investment and mercial equipment and facilities. Municipal ser- developmentshould be the townshiplevel towns vices such as waste disposal are becoming in- with some village level towns, approximating creasingly important. The weakness of the plan- 40% of the total number of small towns which ningprofessioninChina limitsthe anticipated de- arethelinkbetweenthecountrysideandthe cen- velopmentof modesof transportation,malltowns tre for urban services. Small towns are infor- to 16000in numberin the foreseeablefuture. mation centres, distribution centres, production and service centres. Prof. Gao then proceedsto describe the ninedif- ferent types of Chinese small towns and argues that a small town's physical being is not only the result of economics technology culture and art, but also the result of modernization in the rural areas. Finally he recommends structural reform in all towns in order to carry out reform of the domi- cile registration and social security systems, and land reform. Zou Deci, President of China Academy of Urban Planning ProfessorGoo Chengzeng.ScienceandTechnologyCorn- andDesign. mission, Ministry of Construction. Academic Paoers 123 Academic Paper 7 quarters of the gross ruraloutput value of China. Most of this is derived from non agricultural in- dustries. The Value incrementProfitof land Capitaiwith Its Allocation Results are uneven. The disparities between the eastern, central and western economic belts of Chinaarewidening. Messrs. TieJun Wie and ShouYin Zhu 'The denselypopulatedeasterneconomic Fixed assets in the towns and villages of China belt consists of 12 provinces and con- did not exist as state property but belonged to tains densely populated coastal areas the collective. Previous to the reform ,central with advanced economies, and covers governmenttook the full surplus productionfrom 14%of China's total area, containing agriculturethroughthehighlycentralizedplanned 41% of the overall population and 32% economy system inthe processof accumulating of the arable land, equivalent to 0.64 state capital. But none of those assets were in- acres per capita. vested in the rural area.-apart from some in- dustries which were controlled by different parts of the government and located in the rural ar- The central economic belt refers to 9 eas. The total social assets in the rural areas provinces including inner Mongolia and were characterized as "collective propertyw- accounts for 30%of China's total area, neither private nor state owned. Land resources 44%of the arable land equivalent to 1 are scarce. Now with a market economy, the acrepercapita. more scarce the resource the higher the price. Thepapergoesonto examinethe PrimitiveCapi- The western economic belt totals 9 prov- talAccumulationof theGovernmentandtheim- inces in the south west and north west, plications on the physical development of small accounts for 56%of the total land, 23% towns. of the total population and 24%of the total arable land, equivalent to 1.3 acres per capita. The ratio of gross industrial output betweenthe eastern, central and western parts is 7:2:1, and gross rural Academic Paper 8 production 632.4: 1 Slow urbanization in the western belt is serious. Rural to The EasternPart Leadsthe Development urban migration is moving from north- west to south east, the floating popula- of the Western Partand in a Bidto Push tion having increased in size 21 times Forwardthe Urbanizationof RuralAreas since 1982. The time has come to push inChina forward the development of the western partof China andchangethe preferential policies for the eastern part. The Euro- Professor Bai Renpu Asia continental bridge enhances the re- gional advantages of the western areas "The Eastern Part leads the Development of the Continuingtheeconomicdevelopmentof Western Part, and in a bid to pushes forward the eastern areas and focussing efforts the Urbanization of Rural Areas in China." on the western areas is to "stress two ends" which will ultimately reach the In 1979, 2600 settlements in China were desig- county's development goal for all areas. nated as Towns. By 1994 this number had in- creasedto 16,433. China's ruralpopulationnum- bers 920 millions- one designated town for 56000 population. Currently one fourth of the rural labour force are working in secondary and tertiary industries with an output value of three ProfessorBai Renpu, Institute of Rural Development, China Agriculture University. 126 China: Small Towns Development Academic Paper 9 Academic Paper 10 The Key Pointsin EstablishingStatistical CurrentSituation and Motivationof Land Index Systemfor China SmallTowns Marketof SmallTowns in Southern Development Jiangsu Province--Casestudies of Cities Jiangyin, Zhangjiagangand Kunshan Professor Zhou Yixing ProfessorYu Wenhua There are no stable and rationalized statistical criteria available to provide answers with re- The first way of developing a land market insmall gard to small towns in China. Since the Peoples towns in China is by direct promotion by the Republicwas established 4 censuses have been township or city government. The other is for carried out but each time with different statis- the local government to follow the central gov- tical criteria. After each census state govern- ernment guidelines. ments had to revise the published data. In 1991 the fourth census achieved accuracy without Generally local government's motivation in de- providingscientificcertainty,andcannot beused veloping a land market is for short term gains on a comparative basis. Differences in criteria through different land pricing strategies. The for definitions for small towns-for example effect of these land pricing strategies on land some towns with a population of more than efficiency is not remarkable. 100,000 are considered small towns, whereas some cities with less than 100000 population are not considered small towns. There is not a Prof. Yu Wenhua provides tabulated survey ma- generally accepted criterion for small towns. terial for the towns named covering surface ar- eas, prices, and land use cost comparisons, Overboundingandunderboundingproblems-the inclusion of extensive rural areas within town analysis of land users, and differentials of land administrative areas and the inclusion of agri- costs. cultural population within the jurisdiction of towns distorts statistics are common. Accord- Heconcludesthat landsupplyinthose namedcit- ing to the 1982 census 20.6 % of the population ies is mainly affected by local government pref- was urban. But the third census in 1990 pro- erences and not a market. vides the percentage of 53.2% urban . It is the fourth census which provides the criterion that Most land development activities are monopo- the urban populationaccounting for 26.23 % of lized by local government and the existence or China'stotal population. impact of a land market on allocation is limited. Prof Zhou Yixing proceeds to make recommen- dations for developing a national statistical in- dex system and provides adjustments of popu- lation distribution between rural and urban on an annual basis starting in 1949. ProfessorZhou Yixing, Department of Urban and Regional Science, Beijing University. Professor Yu Wenhua, Beijing Agriculture University. Academic Pa~ers122 Academic Paper 11 Estimationof the Dual Urban-Rural Socioeconomic Structure Will Accelerate & ImproveUrbanizatlonin China Professor Ye Shunzan Professor Ye's paper identifies an apparent anomaly betweenthe investment and growthof industryinChina and the laggingpaceof urban- ization. He points out that the domicile regis- tration system contributed towards the rapid industrialization of the country, but is now hin- dering the necessary evolution of social struc- tures. He points out that whereas the perma- nent populationin medium and large towns has increased at a faster rate than the small towns which only officially contain 21% of the total urban population, in reality it amounts to about 60% of the total urban population. The contin- ued existence of separate urban and rural so- cioeconomic managementimpedesfree move- ment of labour and actually hinders the devel- opment of small towns. Another result is the increasing amount of non productive arable landwhich is caused by farm- ers abandoning their land in the rural areas, t~ut being allowed to retain their domiciliary regis- tration although the landgoes out of production. A secondary effect is the additional burden that this is placing upon transportation systems caused by the retention of native domiciliary status, as well as the need to be present in the non domiciliary workplace. Despite improvements in recent years the basic problem remains that outward migrationis caus- ing desolation in the rural villages and the mi- gration to the large cities is paralysing urban systems. The author recommends the develop- ment of a unified residence registration system which would permit migratory movement within county jurisdiction but be strictly controlled beyond thecounty.This would havethe effect of accelerating the developmentof small towns by providing permanent residence to county rural Professor Zhou Yixing, Department of Urban and Regional Science, Beijing University. Researcher. Instituteof Geography of Academy of Science 128 China:SmallTowns Development PART 111. SUMMARY OF WORKSHOPS AND CONCLUDING REMARKS Elementsof a Workable Town DevelopmentStrategyfor China: An Overviewand Key Conclusions Andrew Hamer T hisSeminar onTown Dev?iopmentinChina requisitepermitsquickly--subjectonlytoconstraints has resulted from fortuitous coming together affecting public welfare, such as environmental of severalgroups interested in one subject: and health hazards. Their obligations to govern- the Interministerial Leading Group on Town De- ment infinancialterms should be limitedand rig- velopment that brought, under one roof, an un- orously codified.The rightsof entrepreneursto set precedented array of Government agencies to up businessesand hirestaff should be free of po- tackle the issues involved; the generous finan- liticalandlegalinterference.Inthis particularcase, cial and organizational support of the Govern- prior residenceinanother locality (suchas a rural ment of Switzerland and interest of the World area) should not be used as an excuse to deny Bank. full local citizen rights to new entrants into the economy. TheTownReformAgenda canbeusedtodevelop a full-fledgedmodelfor completingthe UrbanRe- Morespecifically,bycompletingtheTownReform formAgenda onanacceleratedbasis.'This means Agenda rapidly, the way will be paved to solve stressing the value of private/public partnerships oneof China'skeydevelopmentobstacles-trans- in developing infrastructure CIS well as the impor- forming its cities while integratingthe rural popu- tance of greater local autonomy for town gov- lationinto anever-expandingurbanworld, under ernmehts. Institutinglegaland regulatoryreforms conditionsof extraordinary expansion which will that endthe stigma attached to those onceborn see400millionmoreresidentsadded to the popu- with a rural hukou but destined for an urban ca- lationof citiesand towns by 2010. reer is also an element of this agenda.The move to a market-orientedeconomy with "small gov- Informationis a form of infrastructure. Seizing the ernment"inmind-at leastatthelocallevel-means opportunitytodramaticallyexpandthecollection, that property rights reformsare vital .The driving analysis, dissemination and use of data, and al- force for economicgrowthin most towns is either lowingthesetoinfluencepolicymakingina timely the privatesector or the cooperative and collec- manner will dramatically improve the perfor- tive sectors.All these needto enjoy a largemea- mance of local governments and the necessary sureof ownershipandmanagerialindependence oversight by higher-level authorities. Local and from government. They should be able to obtain 130 China: SmallTowns Development regionalauthoritiesneedto payspecialattention cannot be ignored or "solved" by a Town Devel- to monitoringand actively usingdata on popula- opment Strategy.A leading group on urban de- tion,employment,incomesand landusepatterns. velopment is needed. Benchmarkingis a process meant to continually Internationalexperience validates the fact that comparethe performanceof an enterprise,town local decision makers, given proper incentives bureau, or town administratoragainst the tough- and training, are the best suited to deal with est competitors. It involves continually collecting setting financial local priorities. information on both relevant inputs and outputs. These can then be considered measurementsor It is possible to consider seizing the opportunity "benchmarks"to be equalledor exceeded in the provided by the "economic growth dividend" to quest to create local centers of excellence. providelong-termfinancingfor criticalbottlenecks China'stown leadersand the provincialand cen- to town development, particular investments in tralsupervisorsshouldinstitutesuchacompetitively water supply, wastewater treatment,and the dis- basedsystemtoinspireboththe bestand theleast posalof solidand hazardouswastes.Thereis long- capable among the target towns in any experi- term financing that goes well-beyond conve- mental programof reforms. Later, the process of nience. Much infrastructure is "bulky" in size, re- benchmarkingcan be adopted for all towns and quiring funds, and generates benefits shared by cities across China.'This is a critical issue now that many generations (aswell as new migrants).It is preferential policies are being phased out and ideallysuitedfor financingovertime,withthe cash localities will have to adapt to a socialist market flow proceeds (drawnfrom tariffs or locales and economy where good performers reap rewards fees) providingthe collateralneeded to guaran- and laggardssuffer. tee repayment. Experience elsewhere suggests that higher-levelgovernments give this responsi- Recasting and setting aside the role of govern- bilityto commercial banksand that localitiesand ment as the giver of "Scientific Urban Planning their lenders be advised no "bailouts" would be Norms" is now timely. Norms should be flexible provided in case of bad performance. Instead guidelines that emerge from trial-and-error ex- higherlevelgovernmentscould threaten, at least perimentationthat combinetechnicaland politi- during a transition period, any nonperformers (in cal constraints. repaymentterms)withstiff politicaland economic penaltyruthlesslyenforced. With the abolition of scientific norms and the re- placementof thesewith guidelinescomes a new Any long-term borrowing would need to link the responsibility at the local level. Public invest- financing to sustainable cost-recovery strategies ments must be carefully crafted,and preceeded .from beneficiaries based on well-defined and by good feasibility analyses. "Plan for tomor- understoodfees and taxes whose collectionand row but build for today" remains a critical dic- useare carefully monitoredbysupervisory bodies tum. The cemetery of unoccupied industrialand at higher levels of government. Self-financing high-technology parks dotting China's country- could also lay to rest the presumption that subsi- sideisevidenceenoughthat truly demand-driven dies are the birthright of urban citizens. Greater analysis cannot be ignored. local autonomy and accountability are inter- twined themes that cannot be avoidedinthis ac- Thetimehascometo acknowledgethat the mas- celerated process to give proper direction to fu- sive wave of urbanizationfacing China ovei the ture urbanization. The opportunity also exists to next 15 years makes town development, city recast local municipal and public utility budgets development,and regionalinterjurisdictionalde- into planning documents that are multi-year in velopment all relevant and nonsubstitutable el- actual and forecasting terms. These documents ements of a comprehensive urbanization strat- should (1) separate recurrent expenditures from investment ones; (2) detail all sources of revenue egy. and expenditure; (3)providepredictionsof future amounts to be expended over the next two to Very specifically, promoting towns will provide three years; and (4) set prioritiesand revisethese some rural migrants with alternatives to moves annually. The public at large or at least citizen to metropolitary regions; t~utthese regions will advisoryreviewboardsshouldbe allowed to par- continue to face rapid growth challenges that ticipate in this process, empowering citizens and providingyet another layer of accountability. Elementsof a Workable Town DevelopmentStrategyfor China:An Overview & Key Conclusions 131 Experience across countries suggests that cross- cess of rural-to-urbantransformation.That task, in boundary issues--asurbanization spills over or- any case, is beyond the intellectualand mana- tificial administrative boundaries--that cannot gerialscopeof a smallgroupof governmentcad- beavoided.Coordinationandenforcementmecha- res. "Winnerswill self-selectthemselves and justify nismsare needed to avoidenvironmentaldegra- encouragement.Effortsto promoteunsustainable dations, duplication of facilities, and the unnec- "model"towns that suit only politicalpurposesbut essary conversion of agricultural land to urban lack a sound underlying economic foundation is uses. self defeating. Trainingadministratorslocallyinshort order to run Finally, China has outperformed all other transi- 15,000 statutory towns and 50,000 nonstatutory tion economiesby ajudicious combinationofex- townsisa dauntingchallengeneverbeforefaced perimenting, summing up and developing rel- inthe historyof urbaneconomic andpoliticalde- evant nationalenablinglegislation.Adanger ex- velopment.China, largeasitis, mustdevelopthe ists that, leading group structures aside, unco- capacity to train trainers, and providethese insti- ordinated and "propriety" experiments will be tutional vehicles to quickly spread the technical, undertaken by the various ministries and com- priority-setting,andfinancialskills neededto make missions involved in their "own" set of towns. thisgreaturbantransformationproceedsmoothly This can only be counterproductive. The greater andwith minimumdisruptiontosocialstabilityand value added would come from coordinated ex- the overall livingenvironment. periments concentrated in a limited set of loca- tions for a limited period of time. 'There is little The legacy of the Planned Economy is still in our if any value in letting each government agency midst.There are still too many policy makerswho try out partial experiments in locations of their wish to predetermine--in a way that disregards own choosing, making the "summing" process marketforces--whichtownsshouldgrow andhow difficult and time consuming. This approach is large they should be in size. Internationalexperi- one China cannot afford, given the rural-to-ur- ence suggests technicians, usually sitting in capi- ban avalanche underway. Where state-of-the- tal cities, are very poorly equipped to outguess art experiments are to take place, they should the market. Economic growth ,and the popula- beconcentratedina manageablenumberof lo- tionitattracts, issensitiveto thelocationsinvolved cationsthatcanbemonitoredt ~theleadinggroup y and demand-driven pressures to expand. The as a whole. Incased experiments and local au- coastal and the metropolitan clustering of fast- tonomy strategies can only succeed if central growing towns and citieshasa soundrationalein and provincial officials recognize their respon- market terms that cannot be disregarded.Trying sibility: to enable change and facilitate reform to eliminate geographic disparities with costly while providing the legal and regulatory frame- and unsustainablefinancial incentiveshas never work that sums up the best results of experi- worked, worldwide. In particular, infrastruc- ments and gives them permanent legitimacy. ture developmentstrategies that promote"geo- graphic equity" are a dangerous basis for ac- Andrew Homer tion, given limited public resources. Provided Principal Economist proper incentives, financing mechanisms, an China and MongoliaDepartment overall policy framework, and adequate train- World Bank ing--thereis no need to "micromanage" this pro- 132 China:Small Towns Development Summary Remarks KatherineSierra Beijing, November 17, 1995 Ladies and Gentlemen: ingon towns'comparative advantagesis another lesson. Strategies must be flexible in recognition I have been asked to summarize the conclu- of regional, economic potentialand constraints. sions of this internationalseminaron town Finally,towndevelopmentmustt ~integratedinto e development. an overall strategy for urban and regional devel- opmentsincetownswillinevitablybeonlyonepart This is a dauntingtask since the themes discussed of the urbanization story. weresorich,thediscussionsso lively,andthe points of view diverse. To put these conclusions in per- These are some of the many challengesstill to be spective,it is usefulto remindourselves of the rea- faced. BothChineseandinternationalexperience sonswe came togetherforthisseminar. We hoped highlight the overriding importance of ensuring to explorethe experienceto dateontown devel- that this programis accompanied by a coherent opment in China to look at international experi- comprehensive policyframework.Iwouldnowlike encefor usefullessonsandto prepareanagenda to turn to that policy agenda. for the work. We have learned that much which holds back Ibelievewe have been successful on all three of town development involves deficiencies on the thesefronts. First,our understandingof the experi- "software" dimension. Among these one can un- ence to date has been greatly enriched by the derline the following aspects: interventions of both central and local govern- ment, as well as those of the academic experts There is a need for legal and regulatory reforms who joined us this week. that empower migrants and enterpriseswith the rights necessary to maximize the positive impact Second, the review of international experience on local development. Particularlyimportantare has been useful in pointing out ways to improve increased access to permanent town residency the chances for a successful outcome. Interna- rights for migrants. Ownership rights, and dispute tional experience shows that infrastructure-led resolutionproceduresfor privatecooperativesof town development schemes are not successful. TVE ventures must also bestrengthened. Instead, success lies in giving responsibility and demandingaccountabilityfor towndevelopment at the lowest levelof government possible. Build- 134 China: SmallTowns Development Urbanlanduseandrelatedinfrastructureplanning surance system would put into play both house- should be improved at the local level. Current hold resources as well as contributions from em- practices often lead to the development of ser- ployers. Itwould yield modest levels of security in viced land well ahead of demand and the un- case of loss, reduce the number of health care necessaryuse of agricultural land resources.This emergencies, and reduce income due to retire- problemarises in part because economic and fi- ment. nancial management tools available in other countries and certain Chinese cities are not well Monitoring key indicators,evaluating their signifi- understood.Physicalplanningmustalso bemade cance, and using information to mold policy, is moresensitiveto market forces, so that supply re- an important aspect of reform. Informationis a sponses followclear evidenceof demand.Towns form of infrastructureand cannot be neglected should be able to adjust their land use plans to any more than conventional physicalworks. reflectshifts in demand. Eachitemon the reform agenda calls for a reori- Infrastructure and other local services cannot entationof governmentfunctions.Awellfunction- serve market drivendevelopmentsimply through inggovernmentisa criticalelementwithoutwhich improved use of tools. Resource mobilization the reforms will fail. However, for local officials to mechanismsmustbeexploredwhich providepre- function properly, training is absolutely critical. A dictableandfairways to payfor bothinvestments final agenda item, therefore, calls for the assess- and operational or maintenance expenditures. ment of remainingneeds and the preparationof Beneficiariesshould pay for services,where prac- relevantmaterialsand staff to implementtraining tical, as if they were commercial in natures. The agenda. scope for private provision,managementand fi- nancing of infrastructure and services should be All of the recommendationslisted so far give lo- explored. In doing this the private sector should calities more autonomy to decide their own af- besubject to competitionandshouldwork under fairs within a broad framework which is provided a regulatory environment which ensures that the bythe state and provinciallevelsof government. public interest is served. Other recommendations call for greater coordi- nationamong different levelsof governmentand Currently enterprises help finance town develop- greateraccountabilityonthe partof localauthori- ment through arrangements whereby they re- ties. The environment is a key area for which this spond to ad hoc demands from town leaders.As recommendation is immediately relevant. Inad- towns develop, this is not likely to be sustainable. equate planning monitoring and enforcement Towns should move to replace this with a more have created serious and growing environmen- equitable and transparent tax and fee regime. talproblemsinandaroundtowns.Solidwastesare Enterprisesshould beable toforecastthe sizeand disposed of in a haphazard manner. Industrial natureof their paymentsto the towngovernment wastes including hazardous chemicals are and to local public utilities.Inreturn, the financial dumped without pretreatment.Air pollutionfrom bureaus responsiblefor town resources mobiliza- local factories threatens public health and agri- tion would have dependable sources of funds cultural productivity. Unlike other reform items, whose amountwould beforecastwithconfidence environmental policies and improved enforce- in the preparationof multiyear financial plans. ment must be marched by significantphysicalin- vestments to be successful. But, given improved Improvedand morepredictableflowsofrevenues economic and financial management better re- will also facilitate pilot experiments in longerterm source mobilization, and a clearer definition of financing of infrastructure projects. Such experi- property rights, towns can overcome this chal- ments would allow China's towns to match the lenge. long list of infrastructure assets with term financ- ingof thoseinvestments.Experimentscouldinvolve What then will be the role of the World Bank in the commercial banks as well as the well super- implementingthis agenda? Basedon our review vised issuance of town development bonds. of experienceto date and the results of this Semi- nar, we believe that there is a strong basis for co- Social insurance mechanisms must be gradually operation. In particular,we believe that our role put in place so as to extend the social safety net could be to help bring together the various ex- to towns, thus ensuringsocialstabilityinthe transi- perimentsunderwayintoa comprehensivepolicy tion to a market-orientedeconomy.The social in- framework, backed up by an action-oriented Summary Remarks 135 implementation plan. Comprehensive reform is ture developmentmight also be supported.After needed to fully exploit the economic potentialof this seminar, we will begin discussionswith the rel- China's towns while ensuring social and environ- evantauthoritiesonthe principlesfor andavenues mentalsustainability.We areinterestedinworking of cooperation. We look forward to working with with the concerned Ministries to further develop you to put the conclusionsof this seminar intoac- theagenda.Wearealso interestedinworkingwith tion. local governments who are committed to intro- ducing relevant reforms. We believe that to be successful, towns must concentrate first on the software parts of the agenda. Key to this will be institutional development of local governments, KatherineSierra and the monitoring and evaluation of the small Chiefof the China and Mongolia Division town program.To meet the objective, infrastruc- World Bank. 136 China:SmallTowns Development Summary and Findings John Burfield T he two workshops, took place on Novem- enues to governments, togetherwith the paucity ber 16. They were held in paralleland the of competentlytrained smalltown officers,areis- focusofeachevolvedon a moreoperational sues of the utmostimportance. leveland broughtoutadditionalconcernsex- pressedby town administrationofficialsaswell as Concerns expressed in Workshop 1 included - technicalandprofessionalmembersof designand planninginstitutes. 1. Infrastructureandequipment-while theplan- ning of urban infrastructure was stated to have The concernsexpressedfocusseduponthe plan- improvedsince masterplansnowneedapproval ningand provisionof infrastructureand itsfinanc- bythe NationalPeople'sCongress,standardsand ing, the household registration system, and its guidelines arelackingbothfor the provisionof ur- broadimplicationsuponurbandevelopmentand ban infrastructure (watersupply, sewerage, solid the institutionalweakness of the local authorities and liquid waste management) and municipal in general. services ( local schools, primary health care ser- vices, marketsetc.).Concernwas expressedthat As the conference and workshops unfolded, it the recovery of costs for these facilities and ser- became clear that the importance of public fi- viceswas notbeingchargedto the beneficiaries, nanceandadministrationinfacilitating(orimped- and the fact that guided landdevelopmentwas ing)urbandevelopmentingeneralandinprovid- not being generally incorporatedinto the plan- ing a supportive environment for specific urban ningfunction inorder to relatedevelopment ob- projects, was recognised, whether funded by in- jectives to potentialfinancialresources.The ratio- ternational agencies, the public or the private nalplanningandfinancingof infrastructureinvest- sectors.Itbecameevidentthattheabilityof small ments assisted t ~ yguidelines and standards in towns to maintain and expand their stock of ur- termsof performancetargets,demandresponse, ban infrastructurein response to intense popula- appropriatetechnologyandfinancialassessments tionpressure,dependsuponastuteadministrative were perceivedas major areas of concern. and managerial skill with financial resources on theirpart.The mismatchbetweentheresponsibili- 2. Local government revenues are largely de- ties of smalltowns to provideservices on the one pendentuponcentralgovernment transfers. Rev- hand, and their authority to raise revenueon the enue raising capacity at the local levelis limited other, the issueof allocationof functionsand rev- to license fees and local administrative charges. 138 China: SmallTowns Development Investment planning at the local level is con- 3. Institutionalstructures involvingtown, munici- strainedbythe nonavailabilityof longterm loans, pality county and prefecture levels leading to credit being limited to short term financing from negative competition for and dilution of limited institutions such as the China Agriculture Invest- resources; ment Corporation. Local governments need to enhance their own revenues in order to achieve 4. The line management system which renders greater fiscal responsibilityand greater capacity the town mayor's office impotent in areas del- to plan and manage each town'sdevelopment. egated by centralagencies ( e.g. Finance,Con- This was identifiedas animportant area. struction etc.); 3. Concernwas expressedwith regardto heavy 5. Inabilityto systematically apply cost recovery levelsof atmospheric pollutioncaused mainly by and user charges and the growing habit of fund- the combustionof coal, aswell aswater pollution inginfrastructurefor the existingtownareasbythe causedbyintensiveuseof chemicalfertilizers.The proceedsfromlandsales,intendedtosupportnew adequacy and application of the existing envi- peripheralgrowth; ronmental regulations was questioned, require- mentsfor complianceandenforcement,whether 6. Difficultiesarising from the complexitiesof the by the state or other meanswas stated to be in- householdregistrationsystem such as dual domi- appropriate,andcurrent exploitationof loopholes cile, and the applicationof socialsecurity mem- incurrent practicewere saidto runcounterto en- bership and benefits; couraging private enterprise. 7. Limited purchasingpower of the population; 4. A number of issues with regard to land use matters was raised, including the domination of 8. Localexpenditures were stated to be gener- the State in determining compensation matters ally larger than deposits and local lending by particularlywithregardto transfer fromagricultural banks exceededtheir guaranteedresources; to urbanuse.The demand for landis clearly influ- enced by the diversity of situationswhich obtains 9. Overemphasisoninvestmentsgivingshortterm inChinassmalltowns; Distortionsinlandpricesare payoffs to the exclusionof long-term investment attributed to a number of causes ranging from planning; overinvolvementof the publicauthoritiesinsome instances, to inadequate regulation or obser- 10. Limitedemployment possibilitiesfor ruralimmi- vance of privatesector dealing inothers.'The key grants due to lack of skills. issue of land and land pricing is recognised as a major concern for town development, but the Theexpertsrespondedtotheseissuesandthrough resultsof recentlyinitiatedrevisionsinthissubsec- open discussion the following issues emerged as tor do not appear to be widely understood. crucialelementsaffectingtowngrowthandman- agementandsuggestingthe needof furtherstudy In workshop number 2, the following main con- and attention. (1) The planning and provision of cerns emergedfrom the discussions- infrastructureand itsfinancing, (2)The household registrationsystem and its broad implications (3) 1. Weak institutionalcapacity of town adminis- The institutionalweakness of the local authorities tration, including inadequate funding, nonavail- in general. ability of funds due to excessive retention of tax revenuesby higher echelonsof government; Findingsof the Workshop 2. Weak and insufficientlytrainedstaff for urban I. 'There appears to be a strong need for town administration, practicaldifficultiesof staffingand development to take place with better linkages career development due to personnel selection and understanding of development in other and recruitmentby higher levelsof government; towns.Thissuggeststhat towns bedevelopedina regional context. The interrelationship between Workshop Summary and Findings 139 localgovernment,theprivatesectorandthecom- + Makerecommendationsfor re-evaluatingthe munity needs strengthening.'The current process effectivenessof theoverallhouseholdregistra- of rapidchange requiresinterventionsat alllevels tion system, examine options for its overhaul of government. and redesign.The objective would be to re- duce the inefficiencies and anomalies in the 2. Interdepartmental relations need to be current system. strengthened and towns need to develop rela- tionshipsandlinkagestodevelopdialogandstron- + Establisha programforthetrainingof localgov- ger exchanges. The current top-down system ernmentofficials.'Thiswould includecurriculum needsto beaugmentedat town levelbybottom- development,in service training, fellowships. up systems which would encourage the greater use of local initiative and responsible manage- + Developa program of local government ad- ment and reduce duplication. ministrative reform and strengthening to de- velopcapacity for the growthenvisagedand 3. Existing town management organizations the evolutionof local economies. have not been designed to perform or adapt to the newtasks envisagedinthe nextfew years.The + Developan action policy for the training and humanresourceselement which is crucial needs adaptation of ruralimmigrantsto providethem major and rapid improvement. In addition, any with employableskills. strengtheningof thetowns managementsystems will also require MIS, GIS etc. to enable them to + Identify and develop criteria for the selection perform their evolving tasks of investment plan- of towns which are demonstratingstrong de- ning.This planningwill involve: velopment potential, enabling future invest- mentsto be plannedfor priority projectsiden- - structuring plans to bring together subsector tified in the individualtown's master plans. investmentprogramsandexamineimplemen- tation capacity and resources; The ReformCommissionshould continue with the steady and deliberate pace which has already - prioritizinginfrastructureprojectswhichemerge accomplishedagreatdealof progresswhile gen- from the structure plans; erally maintainingthe stability that is a necessary prerequisite for urban reform. The market ap- - fundingpriority projects: local, centraland ex- proach calls for a holistic approach with both ternal; central and local authoritiesplaying their roles. - Developingan appropriateO+M capacity; - Delivering urban services and their planning, funding and operationalmanagement; - Developing an evaluation capacity to iden- tify and monitor targets and objectives to as- sist the practical aspects of rapid change. Nextstepsfor consideration The Reform Commission is well-placed to initiate theformulationof astrategictaskforceto develop a planof action.Thetaskforcewould identifyeco- nomically and financially viable priority projects which are environmentallysoundandrelevantto the rapid changes envisaged; Itwould 140 China:SmallTowns Development List of Participants 1995InternationalSeminar on China SmallTown Development November 13-17, 1995 BeijingNew Dadu Hotel NAME AGENCY TITLE Leaders from Sponsors Zhang Haoruo State Commissionof Restructuringthe EconomicSystem Vice Chairman Shao Bingren State Commissionof Restructuringthe EconomicSystem Secretary General Moo Rubai Ministryof Construction Vice Minister He Linxiang Agricultural Bank of China Vice President Li Dianjun Agricultural Bank of China Vice President A. Pellegrini Dept.of Transport & UrbanDevelopmentof World Bank Director P. Bottelier World Bank Resident Mission Chief of Mission K. Sierra World Bank Dept.of China & Mongolia DivisionChief D.Ahmad World Bank Resident Mission Chief of Unit UliSigg Embassyof Switzerlandto China Ambassador Officersfrom Chinese Ministries DuanYingbi China CentralFinancialOffice Deputy Director MouXinsheng Ministryof PublicSecurity Vice Minister Ma Kai State PlanningCommission Vice Chairman Li Baoku Ministryof CivilAffairs Vice Minister Gu Jiaqi Ministryof Personnel' Vice Minister Wan Baorui Ministryof Agriculture Vice Minister Li Yuan State of Administrationof Land Deputy Director Ma Kewei State of Administrationof Land Deputy Director Lu Chunheng StateStatistical Bureau Deputy Director Wang Baoqing StateCommissionof Science Deputy Director Gao Ying Ministryof Finance Deputy Director ChineseExperts FeiXiaotong StandingCommitteeof the NationalPeople's Congress Vice Chairman ZhangWenfan Ministryof CivilAffairs Director Chen Xiwen The Development & ResearchCenter underState Council Minister 142 China:SmallTowns Develo~ment NAME AGENCY TITLE DuYing Research Center of Ministry of Agriculture ViceChairman Liu He State PlanningCommission Deputy Director Zou Deci Academy of UrbanPlanning8, Designing President Goo Chengzeng Ministryof Construction Professor Wie Tiejun Office of Agricultural Reformunder MOA Deputy Director Bai Renpu Universityof Agriculture Instituteof RuralDev. President Zhou Yixing Peking University Director Participantsfrom the ForeignAgencies KathyOgawa World Bank Resident Mission Coordinator Zong Yon World Bank Resident Mission Project Officer Li Chunvan World Bank Resident Mission Assistant Hu Biliang World Bank Resident Mission Project Officer A.Rodrigues UNDP Deputy Representative Wang Yue LlNDP DivisionChief Chingboon Lee UNDP FirstSecretary UlrichEckle EuropeanCommission FirstSecretary Laurence Guez EuropeanCommission Proiect Officer StephenMegurk FordFoundation Project Officer ForeignExperts A.L. Laquian Universityof BritishColumbia, Canada Professor R. Frenkel Yogyakarta Urban DevelopmentProject Team Leader J Burfield UrbaplanLausanne PrincipalCoordinator P. Nicolas UrbaplanLausanne, Switzerland Managing Director EvelineWaas UrbaplanLausanne,Switzerland ProjectOfflcer E. Wegelin UNCHS-Nairobi Professor H. Pasha College of BusinessAdministration of Karachi, Pakistan President D.Satterthwaite Instituteof GlobalEnvironment8, Development, London Researcher D. Dowail Universitvof California, Berkeley, USA Professor A. Bertaud UrbanDevelopmentDivisionof World Bank PrincipalPlanner J. Courtney Universityof SouthernCalifornia, USA Professor A Homer Dept.of China 8, Mongolia, World Bank Principal Economist K. Sierra Dept. of China 8, Mongolia, World Bank DivisionChief ChineseParticipants Zhang Luxiong RuralDepartmentof SRC Deputy Director Shi Wanli RuralDepartmentof SRC Deputy Director Li Tie RuralDepartment of SRC PrincipalCoordinator Zhu Hongda Rural Departmentof SRC DivisionChief Wang Qiang RuralDepartmentof SRC D.ivision Chief Yu Yanshan RuralDepartment of SRC Clerk Wang Zhichen Rural Department of SRC Director Zhang Xiaowen RuralDepartmentof SRC DivisionChief Jiao Xueli RuralDepartment of SRC Clerk Yang Jun Rural Department of SRC Clerk Zheng Kunsheng Village 8, Town Dept., MoCon. Director Pan Xiuling Village 8, Town Dept., MoCon. DivisionChief He Xinghua Village 8, Town Dept., MoCon. Deputy DivisionChief Xu Zongwei Village 8, Town Dept., MoCon. Deputy DivisionChief Moo Mingai FinancialDept., Ministryof Finance Clerk Li Baojin Deputy DirectorChief ~. AgriculturalBank of China Li Bing AgriculturalBank of China Clerk Annex 143 NAME AGENCY TITLE ZhangWei Agricultural Bank of China Clerk LiYaodong Ministryof CivilAffairs Deputy DivisionChief Zhang Sen RegistrationDept., Ministry of Public Security Deputy Director Shen Tirui RegistrationDept., Ministry of PublicSecurity DivisionChief Chen Wenjun SPC Clerk Song Zheng SSTC Division Chief Xu Jun SSTC DivisionChief Zhang PeiZhi 'The 3rd Dept, Ministryof Personnel DivisionChief Pan Xiaojing World Bank Dept., M.of Finance DivisionChief Guan Hong Local Dept., Mof Finance Clerk Ma Li Officeof Rural Reform, M. of Agriculture DivisionChief Zhu Shouyin Office of Rural Reform, M. of Agriculture Associate Researcher Zhang Naigui StateAdministrationof Land Deputy Director Liu Yujie State Administrationof Land Deputy DivisionChief Zhang Yu State Administrationof Land Director Xian Zhili State StatisticalBureau Deputy Director Liu Chunxin State Statistical Bureau DivisionChief Zhang Ronghua CPC Secretary Li Haiting CPC Secretary XieYang RuralDept.of Development & ResearchCentre Deputy Director Yang Zhaodi ExchangeCentreof MOFTEC DivisionChief Yan Jiantao Exchange Centreof MOFTEC Project Officer HuZhaoliang Peking University Professor Meng Xiaochen Peking University Associate Professor Ye Shunzan Instituteof Geography of Academy of Science Researcher Ma Rong Peking University Professor LiuShiding Peking University Professor Yu Wenhua BeijingAgriculturalUniversity Teacher BooZhongxin ChinaAir. Investment8.Trust Co., HainanBranch Director Li Zuojun Dept.of Dev of ClTC Director Zhang Bo HengtongCo BeijingBranch Gen. Manager LiZhengyan Xinhua NewsAgency Correspondent Zhang Jianping Xinhua NewsAgency Correspondent Xia Jun People's Daily Correspondent Zhang Shulin People's Daily Correspondent Wang Chengjian CCTC Correspondent Xu Baojian Economic Daily Correspondent Zheng Xiuman Peasants' Daily Correspondent LiShiyi China's ReformNewspaper Deputy EditingChief Shi Keyi ReformMagazine Correspondent Ma Hong Construction Magazine EditingChief Wang Lei ConstructionMagazine Correspondent Chen Gongde China'sConstruction Newspaper Correspondent Li Junhua BeijingCommissionof Restructuringon EconomicSystem (CRES) Director Liu Xuan BeijingCommissionof Restructuringon Economic System (CRES) DivisionChief ShenYubao Changping County, Beijing Deputy Magistrate Yang Guochang XiaotangshanTown, Changping County. Beijing SecretaryGeneral FanYushan Fuyang Prefecture,Anhui Province Vice SecretaryGeneral Liu Biaowei DigangTown, Wuhu. Anhui Province Town Adminislrator Zhang Qigang DigangTown, Wuhu. Anhui Province Director Zhu Yunze DigangTown, Wuhu. Anhui Province Manager Liu Chuanhui MaojiTown, Huainan,Anhui Province DeputyTownAdministrator Sun Li ChangchunCRES, Jilin Province Deputy Director 144 China: Small Towns Develo~ment - NAME AGENCY TITLE Li Shenli Yushu Commission of Restructuring on Economy, Jilin Deputy Director WuZhenao Jiutai City, Jilin Vice Secretary Gen Li Chengzhi KalunTown, JiutaiTown, Jilin Clerk Gao Shixing Jinlin Construction& InvestmentCo Vice President Wang Peijin CRES of HubeiProvince DivisionChief GanTixing CRES of Huanggang Prefecture, Hubei Director HuangZhichao Xiaochi Town, Huanggang, Hubei Town Administrator Wu Xinguo CRES of HuangmeiCounty, Hubei Director Wu Zhengting Jinsha ConstructionCommission. Hubei Deputy Director Wu Xianhuai NiekouTown, HuangpiCounty, Hubei Vice Administrator Chen Renjun GuanyindangTown, Jinsha. Hubei Town Administrator Wang Qiwu GuanyindangTown, Jinsha. Hubei Vice Administrator Wang Jigi CRES of Jinsha, Hubei Deputy Director HuangZishu Xiaojinkou Town. Huizhou, Guangdong Province Vice Administrator Luo Diannan MazhangTown. Zhanjiang, Guangdong Town Administrator Wang Chuanqi CRES of Dalian,LiaoningProvince DivisionChief An Wanxi PikouTown, Dalian Town Administrator Chen Biyan CRES of Guizhou Province Vice Chairman Ye Wenbang CRES of LiupanshuiCity, Guizhou Director Li Panshou HongguoTown, Liupanshui, Guizhou SecretaryGeneral Chen Changfa Xiaohe Town, Guiyang City, Guizhou Administrator He Hongmin MaotaiTown, Renhuai,Guizhou Administrator Lou Hong MaotaiTown, Renhuai, Guizhou Administrator Zhang Zhanyi Shengfang Town. Bazhou City, Hebei Province Manager Wang Hanmin Li County, Hebei Magistrate Xu Huaiyu LiushiTown, Li County, Hebei SecretaryGeneral Liu Liqiang LiushiTown, Li County, Hebei Vice Sec Gen Wu Jianbin ChenyuTown, Yuhuan County, Zhejiang Province SecretaryGeneral Lin Zhengbo ChenyuTown, Yuhuan County, Zhejiang Province Deputy Director Xu Guanfu Xunqiao Town, Shaoxing, Zhejiang Vice Administrator Ye Jiantang BaoyeConstructional& IndustrialGroup Co, Zhejiang Director Shao Lichun CRES of FuyangCity,Zhejiang DeputyDirector Wu Zixing HuzhouIndustrialCommission, Zhejiang SecretaryGenerai Wu Bolin Xili Town, Huzhou, Zhejiang Vice Administrator Wu Mingliang QinggangTown, BishanCounty, ChongqingCity, Sichuan SecretaryGeneral LanZhifang QinggangTown, BishanCounty, Chongqing City, Sichuan TownAdministrator JiangTiezhu CRES of Shanghai Vice Chairman Jiang Aolong CRES of Shanghai DivisionChief Shi Liangui HongmiaoTown, Fengxian,Shanghai Secretary General Sun Chunjun Xiaokunshan Town, Songjiang,Shanghai Director Li Wenliang HengshanqiaoTown, Wujin, Jiangsu Province Vice Administrator Chen Yimu CRES of Wujin, Jiangsu EditingChief Zhu Hongcai CRES of Kunshan, Jiangsu Director Wang Hande Commissionof Constructionof Kunshan, Jiangsu Director Zheng Zhangna~ I Lujia Town, Kunshan, Jiangsu Administrator Xiang Jianguo LujiaTown, Kunshan. Jiangsu General Manager Lu Xinyi Jinsanjiao GroupCo., Jiangsu Vice President Ma Quanzhen CRES of Weifang, Shangdong Province Vice SecretaryGen Wang Xueying ShifuTown. ChangyiCounty,Shangdong Secretary General Guan Jianhua JingzhiTown. Welfang, Shangdong SecretaryGeneral Yang Zhiyuan CRES of HuaihuaPrefecture,Hunan Province Deputy Director Mi Qingdian QianyangCounty Municipality, Hunan Magistrate Shi Mingxin MengzhuangTown. HuiCounty, Henan Province Vice Administrator