Urbanization and spatial policies. June 2006 Kyung-Hwan Kim

Transcription

1 Urbanization and spatial policies June 2006 Kyung-Hwan Kim 1

2 Urbanization Urbanization as a process of development Stages of urbanization Trends of world urbanization Dominance of developing countries Urbanization in Korea 2

3 Urbanization: Drivers and trends Urbanization as a natural process of development Industrialization, urbanization and economic development: high correlation Urbanization follows an S-shaped curve. Difference between developed and developing countries Developed countries: 74.5%, developed countries: 42.1% Difference among regions Asia and Africa: 39%, Latin America and Caribbean: 77%, Europe: 73%, North America 80% 3

4 Source: Malpezzi

5 Stages of urbanization: An S-curve Initial Stage Transition Stage Terminal Stage 100 Demographic transition 80 Rural to urban migration Developed countries Urban Population Rural Society Least developed countries Developing countries Urbanization Urban Society 0 Time 5

6 World urbanization prospect In 2007, half of world s population will be urban for the first time in human history World urbanization will be driven by developing countries The vast majority of mega cities will be located in developing countries 1950: New York and Tokyo 1975: Tokyo, NY, Shanghai, Mexico City 2003: only 4 out of 20 in developed countries Source: UN

7 An urban age: A turning point Source: UN, World Urbanization Prospects: The 2005 Revision (UN 2006) 7

8 World s 15 Largest cities in 2000 & 2015 Karachi Rio de Janeiro Osaka-Kobe Dahaka Los Angeles Jakarta Shanghai Buenos Aires Calcutta Dolhi Bombay Sao Paulo New York Mexico City Tokyo (million) 8

9 Impact of urbanization on energy consumption in Korea Rapid pace of urbanization 39% ( 60), 50% ( 70), 69% ( 80), 82% ( 90) Currently 90% urban Rapid economic growth and industrialization 7% p.a. growth in real per capita income Rapid increase in motorization Modal split in Seoul Rapid increase in energy use 9

10 Urban and rural population in Korea Year Total Urban Rural 24,989 9,784 15,205 31,435 15,750 15, ,738 11,711 43,390 35,558 7,832 47,964 42,375 5,579 48,783 43,982 4,801 % urban

11 Urbanization and energy consumption in Korea : Per Capita Energy Urbanizatiom (TOE) (% urban) Source: Ministry of Commerce, Industry and Energy 11

12 Increase in automobiles in Korea (cars/ 000 persons) Automobiles Year Source: Ministry of Construction & Transport 12

13 Modal split in Seoul (%) Others Taxies Subways Buses Automobiles Source: Ministry of Construction & Transport 13

14 Spatial policies Trends of distribution of population and income Evolution and the current state of spatial policies Evaluation of effectiveness of policies Fundamental flaws with the presumptions of spatial policies Changing Environment and the need for policy reform What needs to be done? 14

15 The Korean Context The size of population in Seoul and the Capital Region(CR) by itself is a concern. Over-concentration in CR is blamed for negative externalities and under-development of the other regions. Stabilizing the population size of CR by dispersing jobs and people is the most effective way to solve the problems. Scientific policy evaluation is in short supply. But dispersal policies are popular enough to be politically feasible, the current government stance being more aggressive than ever before. 15

16 Population distribution and interregional income disparities Population distribution across regions Concentration worsened during the 1980~2005 period Interregional income disparities Narrowed prior to economic crisis Widened after the crisis Reasons for the widening income gap across regions Migration contributed to reducing interregional income disparities Increased role of human capital in regional economic development in recent years Widening gap in human capital accumulation across regions source: Wang (2006), Noh (2006) 16

17 An Economic Perspective on Spatial Policies toward the Capital Region (CR) What is wrong with concentration in CR? Popular indicators International comparison Questions about spatial policies Validity of policy objectives Effectiveness of policy instruments A Forward-looking perspective Globalization, competition among metropolitan regions, competitiveness, and the quality of life Decentralized regional development and support to lagging regions for social cohesion Relocation of government offices vs devolution 17

18 Trends in Population Concentration in the Capital Region Migration and population growth of Seoul in the 1960s Growth of population in the Seoul metropolitan region in the 1970s Recent slowdown of population growth in the Capital Region Capital Region s population share : 80(35.5%) 90(42.8), 00(46.3), 05(48.3%) 18

19 Perceived Problems of Capital Region Internal problems: congestion, pollution and high housing price Negative impact on the development of other regions Inefficient use of resources due to overinvestment in the Capital Region 19

20 Evolution of Spatial Policies toward CR Backbone of policies Dispersal of population-inducing facilities from CR CR Management Plan amendment to the 1984 plan No change in the basic tenet of policy From direct control to indirect control Consolidation of 5 zones to 3 Recent policy developments Relocation of government offices and public sector institutions Postponement of deregulation until visible gain is made on balanced national development 20

21 Criteria for Evaluating Spatial Policies toward CR Three causal relations Have regulations on location led to relocation of population-inducing facilities? Has population been dispersed as a result of dispersal of facilities? Has population dispersal led to alleviate the perceived problems of the concentration in CR? Side effects of policies What have been the side effects on national competitiveness? 21

22 Flawed Premise 1: Is the Capital Region Too Large? Is there an optimal size of the city region? Problem with the concept: static vs dynamic Social costs and benefits of agglomeration Exaggerated costs, underestimated agglomeration economies Slowdown of population growth in CR Population growth in the next two decades will be ¼ of that during the period, and 1/10 of that during the period Problems of congestion, pollution and housing price may continue even if population growth slows down. Local government units in CR are the key stakeholders, not the central government or other regions 22

23 Flawed Premise 2: Does prosperity in CR impair prosperity of other regions? Is there a zero-sum relationship between the prosperity in CR and that in other regions? Not really: Son (2001), See table Is concentration of manufacturing premises in CR still a problem? Not really. Most large premises already decentralized into other regions Further regulations may only impair the vitality of the national economy 23

24 Side-effect of Spatial Policies towards CR Discouraging investments and output loss Reduced and delayed investments by domestic corporations Failure to solicit foreign direct investment Estimated cost of regulations: 2.7% of GDP Impairing competitiveness Competition among metropolitan regions in Asia Arrival of knowledge-based economy and the need to secure quality labor force Land-use regulation and high costs of land and housing 24

25 Competitiveness of the capital region and limitations Competitiveness of the capital regin 19 th among 30 metropolitan areas (Samsung economic research institute, 1997) 8 th among 11 world cities (Seoul Development Institute, 1995) Not competitive against Hong Kong, Singapore, and Shanghai as destination of foreign direct investment (KDI 2004) Seoul shares some characteristics of a world city Networking among cities, specialization in business services industries and headquarters of multinational firms Constrains for Seoul in becoming a world city Language and cultural barriers, regulations, urban infrastructure, limited openness Dissatisfaction with transportation and environment, 25

26 Competitiveness of Seoul vs 6 major metropolitan regions Economic growth environment Source: Arthur D. Little

27 Three types of cities Source: OECD (2006) 27

28 Recent developments in spatial policies More drastic view on the compatibility between CR and other regions Deregulation for CR is impossible without the consent of other regions More concrete measures to promote balanced regional development Failed attempt to move the capital Dispersal of government offices to new administrative city Relocation of public sector institutions Formation of innovation cities 28

29 Issues about spatial policies toward CR Government plan for the capital region Basic premise: Stabilize population growth in CR Development of other regions first, deregulation for CR next Some questions A win-win strategy? Will our competitors wait for us? Why relocate financial institutions while pursuing a financial hub of Northeast Asia? Why allow foreign investments but not domestic investments in CR? 29

30 Some issues about balanced regional development Regional development policies with the initiative of the Central government? Selection of 4 strategic industries for each province Selection of public sector institutions to relocate to each province Expected effects and side effects of key policies New administrative city: costs, inefficiency Dispersal of public sector institutions: cost effectiveness, job creation Consistency with other policies Seoul as financial hub of Northeast Asia Incheon Free Economic Zone Conflict with decentralization policies Why relocating government institutions instead of devolving powers and privatizing? 30

31 Issues about policies to promote balanced regional development Compatibility of reform of regulations on the capital region and promotion of regional development Capital region regulation is ineffective in promoting development of other regions Capital region as a self-sufficient economy: analysis of interregional input-output tables (Bank of Korea 2003) Reform of capital region regulation after regional development: Time frame? When will it be judged to be the right time? Indicators of balanced regional development Stable population share of the capital region Interregional income disparities 31

32 What Needs to be Done? Lessons learned Externality problems cannot be solved by controlling population growth Suppressing development in CR will not automatically help other regions What needs to be done: Separate two issues Address externalities directly Allow the Capital Region to compete with other metropolitan regions in Asia Devolve powers and resources to local government and support their attempts to develop their own regions 32

33 Changing the course of policies for balanced regional development Are current government policies reversible? New administrative city: land purchases completed, construction to begin later this year Relocation of public sector institutions: sites and time frame already determined Innovation cities: land purchases in progress What to do if policies could be reversed? New administrative city Reduce the size of the project, make it a science R&D cluster Preserve remaining land for possible future development Relocation of public sector institutions/ innovation cities Enterprise cities might be a more viable option for job creation 33

34 An alternative approach Basic premises Separate regional development polices from policies to contain the growth of the capital region Decentralization of functions rather than physical dispersal Regional development policies Promote locally-based regional development through decentralization of powers, responsibilities and resources Incentives to lagging regions Reform of spatial policies towards the capital region Enhance competitiveness through upgrading the quality of life of residents and strengthening urban functions Address externalities with price mechanism and development management Establish regional body coordinating policies of local government 34