THE FUTURE OF ASEAN CITIES

INTRODUCTION

Cities are our future in every sense of the word. More and more of our population are going to be living in cities and more and more of our social, economic and cultural activities will focus on our cities. If previous generations and even the present generation have been shaped by the values of our kampungs, future generations will be shaped by the values of our cities. 

The role of mobility in future cities can hardly be overestimated. As urbanized population of the world passed the ‘symbolic threshold’ of 50 percent in 2007 going to exceed 60% by 2030 and the role of cities in the production of both economic and intellectual value is increasing (only 600 urban centers generate about 60 percent of global GDP; McKinsey Global Institute, 2011), the availability of transportation systems able to accommodate for future mobility needs of people and goods without consuming resources beyond acceptable level is quintessential. This is true both in the developed and developing worlds. The decisions we make today will influence how our cities will function in 20 years’ time and more. Hence the theme of this year’s LPT Symposium “The Future of Our Cities: Thinking Ahead, Building Together” is most apt. 

The future of urban mobility is certainly dependent on how urban transportation systems, and more generally cities, are today. And they are very different among each other in the first place. Cities around the world have different dimensions and structure, have reached solutions to their mobility needs that are very diverse. 

However there are a number of similarities among urban transportation of most cities. The building blocks of their transportation systems are very similar across cities and they differ in the way these components are used. 

When I say “our cities”, I do not just mean Malaysian cities but rather ASEAN cities. Why, you may ask? Well ever since I was Foreign Minister, I have always held the view that the ultimate success of ASEAN is measured not just by how many communiques are signed or how many Leaders’ Summits are held but also by how relevant ASEAN is to our citizens. Do we, ordinary citizens, feel that our lives are better off because we are in ASEAN? Do we feel that we have a personal stake in the success of ASEAN? Do we? If I were to answer honestly, and not diplomatically, I would have to say “Not that much”. So let me practice what I preach and talk today not just about the future of Malaysian cities but “The Future of ASEAN Cities”. 

At this point in time transportation is a problem in most cities exactly because it fails to achieve the standards of economic and environmental efficiency that would be desirable for their citizens and institutions. Thinking about future urban mobility is thus not only a challenging intellectual exercise, but could provide some insight on what “evolution trajectories” are to be preferred, or avoided, from the social and economic perspectives. 

“Changes in urban transportation can be induced by a number of factors either acting independently or jointly to shape future configurations.” In this regard the future of our cities must be seen in the context of whether it is able to sustain mobility of people and goods. This will require us to look at the supply chain, be it LRT, MRT or other modes to meet the needs and demands of public transport. Of course this must fit in with the Master Plan On Public Transport to shape perception to gain acceptance on the usage of public transport. The big challenge is when cities transformed to mega cities. The primary role of public transport must be to sustain mobility. In the context of ASEAN we need to manage the Asian Economic Community (AEC). 

CONTEXT – THE ASEAN ECONOMIC COMMUNITY 

ASEAN has always been the cornerstone of Malaysia’s foreign policy. It always had an economic dimension. Malaysia pioneered the policy of “Prosper Thy Neighbour” to try and ensure that we reduced the economic disparities among the different ASEAN countries. I am therefore very happy that ASEAN is going to implement the ASEAN Economic Community (AEC) in 2015, a year that coincidentally Malaysia holds the ASEAN chairmanship. The AEC is one of the three pillars of Bali Concord II of ASEAN encompassing the economic, political-security and socio-cultural. However the AEC is the most pragmatic and significant of the three pillars. 

The business case for the AEC is compelling. If ASEAN were a single country, it would already be the seventh-largest economy in the world. Its combined 2013 GDP is of US2.4 trillion is more than 25% larger than India’s economy in the same year. Its population of more than 600 million is larger than that of the European Union or North America. ASEAN has the third-largest labour force in the world behind only the other two Asian giants China and India. Equally importantly, it is a youthful population and thus can reap the demographic dividend. Not only is the ASEAN economic performance outstanding, it is also resilient. The current economic troubles in the US and EU did not have major adverse impact on ASEAN’s economic performance. 

CITIES AND ASEAN’S ECONOMIC GROWTH 

Now all this present and future potential from economic growth is all very nice, but what has it got to do with the future of ASEAN cities, you may ask. The answer is of course that cities are the engines of economic growth. For this purpose, I wish to make clear that when I refer to cities, I mean urban areas having a population of 200,000 or more. Based on the minimum population, Asian Development Bank (ADB) estimates show that in 2013 just over one-third of ASEAN’s population lives in cities and they generate two-thirds of the region’s GDP. Successful implementation of the AEC therefore depends in large part on the state of ASEAN cities. 

Urbanization is a major driver of economic growth. In fact no country has ever climbed from low-income to middle-income status without a significant population shift into cities. In Malaysia, for example, real GDP per capita (in purchasing power parity terms) rose 3.4% annually as the urban share of the population increased from 50% to 72%. Cities have productivity advantages that result from the effects of agglomeration. Agglomeration represents the efficiency advantages from the clustering of firms and economies of scale within an urban area. There has therefore been a progressive concentration, specialization and integration of production and capital in cities that offer such competitive advantages. 

This is true not only at the national level but also at the global level. Decisions on location of economic activity now depend less on particular countries and more on the comparative advantages on different cities. Investment tends to concentrate in cities where integration into the global economy is easiest responding not only to national incentives but also to better access to communications technology, international capital markets, as well as globally integrated value chains of production and distribution. ASEAN cities have benefited from these global trends. Kuala Lumpur and Penang are leading global exporters of electronics goods, while Ayutthaya and Chonburi have joined the ranks of major vehicle and automotive parts exporters. Metro Manila and Cebu have established thriving business processing outsourcing industry serving clients in North America while the city-state of Singapore dominates regional finance and logistics industries. 

Millions of ASEAN citizens benefited from these trends. The urbanization rate in ASEAN for the period 1994-2012 was 0.6% per annum. This resulted in the urban population increasing by almost 10 percentage points. The international consultant McKinsey estimates that in 2012 some 81 million households in ASEAN cities are part of the “consuming class” with annual income exceeding US$7,500 in purchasing power parity terms. This is the level at which they can afford to make significant discretionary purchases such as motor vehicles, refrigerators and the like. Millions more have lifted themselves out of poverty by migrating from rural areas to cities to take advantage of economic opportunities and higher incomes afforded by these global trends. 

But they were not the only beneficiaries. The economist Paul Krugman got his Nobel Prize for his insights into the link between spatial urban economics and international trade theory, insights that rural migrants to cities seemed to instinctively possess. The academic and consultant Michael Porter got rich and famous advising the rich and famous on the benefits of urban clusters, again benefits that the nameless, faceless masses of ASEAN instinctively knew. 

ASEAN CITIES – TRENDS, CHALLENGES AND SOLUTIONS 

Let us now see what the wise men have to say about the future. McKinsey estimates that by 2030 ASEAN cities will house 45% of the total population and generate 76% of the region’s GDP. At one end of the scale the number of cities with a population of 5 million or more is expected to increase to from the current 4 to 11 while at the other end of the scale there will be 160 cities with a population of 200,000 to 750,000. The “consuming class” will expand to 163 million households. The population growth rate will be higher in the case of the smaller cities. Cities with a current population of 200,000 – 750,000 are expected to growth at a rate of 6.5%, those with between 750,000 – 2 million at 6.1%. Current second-tier cities having between 2 million – 5 million people will grow at 5.4% and megacities with more than 5 million at 5.1%. Thus ASEAN’s urbanization trend is much more than the continued growth of its largest cities or its capital cities. All in all an additional 90 million people are expected to move to ASEAN cities in the next 15 years. 

Cities are exceedingly complex systems and managing such rapid expansion is no small task. Although cities generate employment and nurture innovation, their expansion can often be accompanied by environmental degradation. If ASEAN cities grow faster than their infrastructure, the result will be uncontrolled urban sprawl that destroys established communities and imposes higher costs of service provision. The balance between the benefits of urbanization and the cost needs to be managed since in the future, it is clear that the quality of life for most ASEAN citizens will be determined by the nature of cities. Bright prospects are neither guaranteed nor universal. Even now, visitors to some ASEAN cities are often greeted by the sight of traffic congestion, uncollected garbage, beggars, and the squalid living conditions of squatter areas. 

Prof. Herbert Giradet, a recipient of the UN Global 500 Award for outstanding environmental achievements and co-founder of the World Future Council, in 1996 came up with a memorable statistic – that cities occupy only 2% of the planet’s land area but consume 75% of its resources. Personally I think that this is a good example of academics being too clever by half when bandying about statistics. Why did he use urban land area and not urban population as the basis of his comparison? After all resources are consumed by people and not by the land. Probably because saying cities contain 45% of the planet’s population and consume 75% of its resources does not sound as dramatic. Be that as it may, his underlying point is valid even if his use of statistics is not, namely that we need to use our resources more efficiently. 

Economic growth has traditionally been associated with increases in both energy consumption and mobility. Both have environmental implications. They increase the emission of air pollutants. Cities are the major source i.e. 80% of greenhouse gases that contribute to global warming and climate change. 

ASEAN is not immune from these potential threats. Many of ASEAN’s largest cities such as Bangkok, Jakarta, Manila, Ho Chi Minh City and Singapore are all located near the coast and thus vulnerable to increases in sea level brought about by climate change. ASEAN cities now have a window of opportunity to set its second-tier and smaller cities on a more sustainable development path and to address the growing pains of its largest cities before they become intractable problems. As explained earlier, AEC will generate additional resources for each ASEAN country. ASEAN cities have to ensure that we use these resources efficiently in the future. The single most effective manner to do this is to curb urban sprawl, the uncontrolled and excessive spatial expansion of cities leading to inefficient use of land, capital investment and other resources. I consider urban sprawl to be one of the most significant if least documented example of market failure. Make no mistake, sprawl imposes real financial costs to the public. It increases the cost of providing essential public services such as water and waste removal, it leads to increased capital investment such as roads. It is also inequitable since lower income people who are less likely to rely on cars are correspondingly less like to benefit from the additional investment in road infrastructure. Then there are the intangible costs of congestion and pollution arising from a sprawling city. 

Policy makers in ASEAN cities currently have one major existing policy tool to guide the pattern of urban development namely transport infrastructure investment policy. If we want to foster a compact urban form, then our transport investment has to necessarily give priority to public transport investment. If we instead give priority to building roads in the name of connectivity and relieving congestion and leave public transport until later, then we can be sure that the city urban form will be shaped by private vehicle use and the task of installing public transport and changing travel behaviour will be more difficult. 

I also agree with the urban strategy put forward in the New Climate Economy Report 2014 prepared by the Global Commission on Climate and the Economy. This Commission is chaired by the former President of Mexico, Felipe Calderon. It is a very good and informative report and I strongly urge all of you to read it. When it comes to future urban development, it recommends compact, connected and coordinated cities or what I like to call the 4C approach. 

Different cities can apply the 4C approach in different ways. Small and medium-sized cities in ASEAN growing at 6% or more per year could design in compact urban growth features from the start. These include integrating residential, commercial and industrial areas and designing efficient public transport routes. They could provide connected infrastructure by introducing road-based public transit system such as the conventional bus and Bus Rapid Transit systems. Where appropriate urban rail systems including trams could also be provided. They can introduce coordinated governance by building up capacity, systems and procedures to carry out integrated land use – transport planning. 

Medium and large ASEAN cities expecting growth rates of 5-6% per annum could introduce several compact urban growth strategies. These include re-densification through regeneration of existing city cores and supporting hubs, developing multiple hubs, encouraging brownfield re-development, encouraging transit-oriented developments and urban retrofitting as well as managed growth of the urban periphery. For connected infrastructure, they could consider expanding public transport systems and introducing new forms of public transport such as mass rapid transit systems. For coordinated governance, they need to practice integrated land use – transport planning and develop financing structures to support public transport including considering road pricing and land value capture mechanisms. 

All this may sound academic and theoretical for some of you. Let me assure you that it is not. Two cities of similar population and socio-economic function and status can have very different impact on resource utilization and carbon emission depending on the policy choice they make whether to opt for a compact city or a sprawling city. Let us look at some real cities to illustrate this point. Houston has a population of 2.5 million. Barcelona has a population of 2.8 million. Both have important economic functions, Houston being the largest city in Texas, one of the best performing states economically in the US and Barcelona the capital of Catalonia, the most economically vibrant region of Spain. Yet Houston occupies 4,280 sq. km while Barcelona occupies just 162 sq. km. You can imagine the waste in resources. Houston spends about 14% of its city GDP on transport compared with 4% in Barcelona. Transport carbon dioxide emissions are 7.5 tonnes per person per year in Houston compared 0.7 tonnes per person in Barcelona. 

It is up to us now to decide which model we in ASEAN would like to follow – Houston or Barcelona? Do we want urban sprawl or a compact city? Do we want a car-oriented city or a public transport-oriented city? In case you are still not sure, just google for the 2014 Quality of Life survey published by Monocle magazine. You will find Barcelona rated No 21 in the world. Houston is not even mentioned. By the way, I want to assure you that I am not picking on Houston because it is George Bush’s hometown! That’s pure coincidence. 

CONCLUSION 

I know that I have spoken at some length this morning. But I could not help it. The topic, the Future of ASEAN Cities, somehow combined my twin professional passions. I am passionate about ASEAN and I am passionate about the need for better public transport in our cities. I firmly believe that in this globalized world, in a world of large trading blocs, size matters. We therefore need to make the AEC a success for our own success. 

The success of AEC in large part will be determined in our cities because our cities are the driving force of our economies. For that, we need to ensure that our cities function as efficiently as possible. While I recognize that good public transport by itself is not enough to make a city efficient, in the future with the rates of urbanization that we are seeing, no city can be considered efficient if it does not have good public transport. The success of AEC and the success of ASEAN cities will be mutually reinforcing. AEC will provide the additional resources to increase our cities’ quality of life while better quality of life in our cities will attract more investment to the AEC. So if you were to ask me what I wish for the future of ASEAN cities, my answer is simple– I want ASEAN cities to dominate the world’s quality of life indices in the future. Then every ASEAN citizen will know that he or she has a personal stake in the success of ASEAN. 

Thank you

By 

YB TAN SRI DR SYED HAMID ALBAR 

CHAIRMAN OF SPAD 

TUESDAY 18th NOVEMBER 2014 

HILTON KL SENTRAL