76215 Cities as Drivers of Growth along the Silk Road Souleymane Coulibaly transformations from agriculture to industry to services.2 This is true even in regions where economic activities are a Key Messages1 result of political decisions engineered and imposed from the top. Consider the former Soviet Union, which, when the  Major events have reshaped the internal population Baltic countries are excluded, is often referred to as flows of Eurasia, including the breakup of the Soviet Eurasia.3 Before the collapse of the Soviet Union, cities in Union, the development of market economies, and Eurasia were expanding, reflecting the ongoing the rising influence of regional powers. transformation from agriculture-based economies to Soviet- engineered industrialization. From only two cities of more  Looking ahead, policy makers need to promote than one million inhabitants in 1939 (Moscow and St. reforms to make Eurasian cities the main drivers of Petersburg [then Leningrad]), Eurasia counted 23 such cities growth. This can be done by rethinking strategies to spreading to western Siberia by 1989.4 better plan, connect, and green the region’s important urban centers. This increase in the number of cities was accompanied by an increase in the total population of Eurasia in the years  Improved planning means promoting policies to leading up to the breakup of the Soviet Union. Estimated at develop land and housing markets and enhance 280 million in 1990, the population of Eurasia reached 283 public service delivery. million in 1993. It then began to fall steadily, stabilizing at below 277 million by 2007, attributable in part to  Connecting cities better means pursuing, in parallel, movements of people across and beyond the newly intra-urban, regional, and international connectivity established borders. With market forces strengthening, the according to a city’s prospects on domestic, regional, region’s population climbed back to 280 million in 2011. and global markets. These population dynamics reflect the tremendous changes  Greening Eurasian cities refers to ensuring their that have occurred in Eurasia, including the collapse of the sustainable development through strong markets Soviet Union, the return of the market as the driving force and institutions that encourage the efficient use of in society, and the emergence of regional powers such as resources, address pollution, and build livable cities. the European Union (EU), China, and India competing with the Russian Federation over its former satellites. For  To appropriately fund these needed changes, centuries, burgeoning cities along what is known as the Silk subnational finances will have to be reformed and Road5 traded goods between east and west, including new ways to finance cross-country connectivity explored. 2 World Bank, World Development Report 2009: Reshaping Economic Cities and Growth Geography (Washington, DC: World Bank, 2008). 3 Eurasia thus in this context refers to the countries of Armenia, The World Bank’s Development Report 2009 shows that Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russian Federation (Russia), Tajikistan, Turkmenistan, Ukraine, and agglomeration, migration, and specialization cause cities to Uzbekistan. become the main drivers of growth through the structural 4 Borys Lewytzkyj, The Soviet Union: Figures-Facts-Data. (Munich: K.G. Saur Publishing, 1979). 5 Although this term refers to historical trade routes across Eurasia and 1 This knowledge brief is based on S. Coulibaly and others, Eurasian parts of Africa that connected much of East, South, and Western Asia Cities: New Realities Along the Silk Road (Washington, DC: World with Europe and other regions of the Mediterranean, it is used here only Bank, 2012). in reference to Eurasia. ECA Knowledge Brief Figure 1. Population Trends in Eurasian Cities, 1992–2011 Source: ZOINET 2011. jewels, spices, glassware, medicines, musk and other consistently decreased from above 10 percent to below 8 perfumes, and silk, satin, and other fine fabrics. During both percent between 1990 and 2010. the Tsarist and Soviet eras, a north-south trade axis overlay Eurasia, with Moscow as the main hub. To adequately Due to agglomeration, some cities expanded while others confront and manage the post-breakup changes, and perhaps shrank (Figure 1). A diverse portfolio of places, including even to reinvigorate historical trade opportunities, Eurasia capital cities and secondary cities of different sizes and needs to rethink the form and function of its cities. functions, is emerging in Russia and Ukraine, while the rest of Eurasia is experiencing a simple consolidation of core- Eurasian Cities Experience Population Shifts periphery differences involving capital cities growing at the expense of other cities and towns. Some regional transport Based on the number of cities of more than 1 million hubs – Almaty and Astana (Kazakhstan), Kiev (Ukraine), people, Armenia, Azerbaijan, and Georgia are considered Minsk (Belarus), St. Petersburg (Russia), and Tashkent urbanized, and the nine remaining Eurasian countries are (Uzbekistan) – are also emerging, while Moscow remains urbanizing. After the breakup of the Soviet Union, the share the only Eurasian city with the potential to become a global of the people in the capital city stabilized at 35 percent in city like London, New York, Paris, or Tokyo.6 Armenia and 25 percent in Georgia, while it has consistently declined in Azerbaijan, though even there it is 6 Saskia Sassen identifies four new ways that global cities function: as still above the world average of 20 percent (2010 data). The highly concentrated command points in the organization of the world growth of urban primacy (the population share of the largest economy; as key locations for finance and specialized service firms, city) in Belarus, the Kyrgyz Republic, Moldova, and Russia which have replaced manufacturing as the leading economic sectors; as sites of production, including the production of innovation, in these has been close to the world trend, while that in Kazakhstan, leading sectors; and as markets for the products and innovations Tajikistan, Turkmenistan, and Ukraine remains 5-10 percent produced. See S. Sassen, The Global City: New York, London, Tokyo below it. The exception is Uzbekistan, where urban primacy (Princeton, NJ: Princeton University Press, 1991). ECA Knowledge Brief This spatial reorganization is driven by renewed mobility in Better City Planning Eurasia. The early years of economic transition, with high Planning cities better means promoting policies to develop cross-border migration after the removal of Soviet land and housing markets and improve public service restrictions on mobility, were followed by the eruption of delivery. Policy makers need to modernize and enforce land civil and transborder conflicts within and between some of use regulations and building codes, lower the costs of land the region’s newly emergent countries, which produced a transactions, use public infrastructure development to guide kind of forced migration in the form of large numbers of land development strategically and sustainably, and build refugees. As conflict abated and economic reform took root, the institutional capacity to redevelop brownfields. In economic motivations became the key driver of migratory housing, governments need to unlock rental markets, flows in these former communist countries. People in revitalize homeowner associations, create and enforce rules Russia and Ukraine largely migrated to Europe, while those for using public spaces, and lower the costs of property in the rest of Eurasia migrated to their capital cities and to transactions, such as buying an apartment block. For public Russia and Ukraine. service infrastructure, the relevant officials need to continually upgrade and maintain utility networks, adjust Labor mobility and agglomeration in leading Eurasian cities tariffs to ensure system sustainability, encourage and enable have been reinforced by changes in the direction and inter-jurisdictional cooperation to provide such services as composition of trade. For instance, the rapid diversification regional sewage and water management systems, and of the export products and trading partners of both Russia maintain and extend public transit networks. and Ukraine favored the emergence of secondary cities to complement Moscow – St. Petersburg in Russia and Kiev in Better Connectivity Ukraine – while exports from the remaining Eurasian Connecting cities with transport and telecommunications to countries remained concentrated on traditional products and facilitate the movement of goods, people, and information trading partners, reinforcing the role of those countries’ across cities and countries requires new policies, largest cities as production and transportation hubs. institutions, and infrastructure. To foster inter-urban connectivity, policy makers need to upgrade the transit Better Planning, Connectivity, and Greening Needed system in large cities, improve the energy efficiency of private vehicles by introducing market prices for gasoline, In the post-Soviet era, the proximity to the EU market and introduce or adjust gasoline taxes where needed, and the subsequent deeper integration with the EU shaped the encourage walking and biking through the redesign of city internal geography of Central and Eastern European centers. The hub function for air and rail connectivity of countries, favoring the emergence of urban centers closer to Moscow, Eurasia’s largest city, should be leveraged to Western Europe and reinforcing economic diversification in substantially reduce the cost of transporting goods and their capital cities. Agglomeration dynamics in Eurasia, on people across and beyond Eurasia. Policy makers should the other hand, were attenuated due to the long distances to also reinforce the connectivity of emerging regional hubs by leading world markets, which favored the consolidation of developing the institutional framework to support road capital cities and a few other leading cities such as Almaty transport and ensure smooth cross-country connections. In (in Kazakhstan), and Kazan and Yekaterinburg (in Russia). addition, Eurasian cities need to be anchored in the digital This is not necessarily a handicap, however. era by participating in regional and global information and communications technology (ICT) initiatives. Around the world, leading cities play a key role in production and export by delivering a range of services, Better Greening sustaining economic activities, and driving the urbanization Greening Eurasian cities means ensuring their sustainable dynamics in the rest of the country. Leading cities tend to be development through strong markets and institutions that well connected domestically and externally, and to offer the encourage the efficient use of resources and deliver growth. most diversified production. Leading Eurasian cities in the To use resources effectively, policy makers need to put in former Soviet countries are no exception, and they could place adaptation and mitigation measures and scale up play a much greater role in driving the integration of the interventions to address immediate pollution problems. region into world markets. But for this to happen, policy They also need to promote the planning of greener cities in makers in all the Eurasian countries need to undertake more new developments and brownfield redevelopments, which effective city planning to contain congestion and maximize will help Eurasian cities in the global competition for agglomeration economies; improve city connectivity both investments and skilled labor. Indeed, cities offering a high internally and with key external hubs; green their cities to quality of life – through better air and water quality, less make them more attractive to young and talented workers; congestion, more green space, and other amenities – will be and change how cities are financed to allow other Eurasian better positioned to attract skilled workers and innovative cities to complement Moscow, St. Petersburg, and Kiev as firms. the anchors of this region in world markets. ECA Knowledge Brief Table 1. Issues Confronting Cities in the Former Soviet Union and Ways Forward Period Planning Connecting Greening Financing Soviet past Master plans instead of Hierarchical structure Cost of externalities not System based on plan targets zoning, and central oriented toward Moscow, considered in public and intra-party negotiations; planners instead of urban with limited horizontal policies; broad access to tariffs highly subsidized planners; cities built links among lower order public transport; high around industrial areas; centers rates of access to water widespread land and sanitation; recycling misallocation programs Transitional High ownership rates and Institutions established to Reduced pollution as Move to modern subnational present weak rental markets, with manage connectivity firms went bankrupt; finance with transparent misallocated housing infrastructure and develop collapse of recycling systems of revenue sharing stock and missing or sector plans, but progress systems; deterioration of and equalization transfers, poorly enforced city moving at different paces public transit with some countries moving planning regulations across the region faster than others Market future Collaborating between Promoting a few cities Preserving positive Increasing personal income local and central well connected to world features of the former tax rates; enforcing payment government to solve markets by road, rail, air, Soviet Union; enforcing of housing maintenance fees; property issues, and telecommunications existing regulations; increasing water tariffs; modernize land use links; developing regional improving livability by expanding metering and regulations, and use institutions for corridor building cities for people raising public transport public infrastructure management and and taking care of the tariffs; for big cities, development strategically interstate cooperation on environment exploring public-private connectivity issues partnerships for large connectivity projects Source: Coulibaly et al., Eurasian Cities. New Funding Mechanisms are Essential telecom infrastructure is commercially viable); public- private partnerships using, say, tolls to partly recover costs; The systems for financing cities – and the infrastructure subsidies from richer/leading countries for infrastructure in connections between them – have changed substantially poorer ones if this reinforces network externalities in their since the breakup of the Soviet Union. On subnational own countries; or contributions from a reputable regional finance, policy makers first need to improve the technical development bank, leveraged with funds raised on and economic efficiency of public utilities, as only then will international markets. it make sense to explore ways of making people who benefit from public service infrastructure pay more through Conclusion increased taxes. Finance initiatives could include increasing personal income tax rates in big cities; taxing agglomeration As the World Bank’s Development Report 2009 illustrates, rents; improving the administration of property tax; and securing accessibility to leading regional markets such as increasing tariffs and fees through enforcing the payment of China, India, and Russia is critical for Eurasia. Planning, housing maintenance fees, raising water tariffs, expanding connecting, and greening Eurasian cities are essential steps metering, and raising public transport tariffs to at least cost- on this development path. These policy actions will require recovery levels. scaling up subnational finance as well as adopting instruments to facilitate cross-country finance and help Several Eurasian countries have been encouraging more these cities prepare for a sustainable future. private sector investment in transport and other infrastructure investments, reflecting the global trend that started in the 1990s. But private sector investments have About the Author been limited because the financing of cross-country Souleymane Coulibaly is a Senior Economist with the infrastructure is affected by externalities and coordination Operations Policy and Quality Unit at the World Bank. failures. Depending on the public good, policy makers could consider different means of financing: purely private (some “ECA Knowledge Brief� is a regular series of notes highlighting recent analyses, good practices, and lessons learned from the development work program of the World Bank’s Europe and Central Asia Region http://www.worldbank.org/eca .