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Regional Economic Cooperation and Integration in AsiaINPUTS AND MATERIALSConferenceEconomic Policy Dialogue among Asian Tr...
ImprintPublished by theDeutsche Gesellschaft fürInternationale Zusammenarbeit (GIZ) GmbHRegistered officesBonn and Eschbor...
Economic Policy Dialogue among Asian Transition Countries 2ContentsList of Abbreviations 31. Introduction 42. Welcoming Re...
3 Economic Policy Dialogue among Asian Transition CountriesList of AbbreviationsADB Asian Development BankCIEM Central Ins...
Economic Policy Dialogue among Asian Transition Countries 4IntroductionFrom 27thto 28thof April 2013, the China Institute ...
5 Economic Policy Dialogue among Asian Transition CountriesA wide consensus among participants of the conference was that ...
Economic Policy Dialogue among Asian Transition Countries 62. Welcoming remarks2.1. Welcoming Remarks by Mr. Wang Lu, Vice...
7 Economic Policy Dialogue among Asian Transition CountriesBut when we talk about urbanisation, we have to be careful not ...
Economic Policy Dialogue among Asian Transition Countries 83. Advancing Transformation of Scale-oriented Urbanisation into...
9 Economic Policy Dialogue among Asian Transition CountriesPopulation urbanisation will release the largest development po...
Economic Policy Dialogue among Asian Transition Countries 10 Farmers need to be enabled to use their land as mortgage to ...
11 Economic Policy Dialogue among Asian Transition Countries4. Fiscal Constraints and Political Challenges4.1 Citizenisati...
Economic Policy Dialogue among Asian Transition Countries 12The question whether China can afford urbanisation should not ...
13 Economic Policy Dialogue among Asian Transition Countries4.3 Urban Development and SEZ in Lao People’s Democratic Repub...
Economic Policy Dialogue among Asian Transition Countries 145. Rural Population and Administrative Reform5.1 Urbanisation ...
15 Economic Policy Dialogue among Asian Transition Countries5.2 New-type Urbanisation and Support of Public FinanceExpert ...
Economic Policy Dialogue among Asian Transition Countries 165.3 Rural-Urban Integration and Economic GrowthExpert Input by...
17 Economic Policy Dialogue among Asian Transition CountriesCambodia’s production of paddy rice has almost doubled during ...
Economic Policy Dialogue among Asian Transition Countries 18Economic growth helps to reduce poverty and lowers InflationIn...
19 Economic Policy Dialogue among Asian Transition Countries Child malnutrition rates are still too high as 41% of childr...
Economic Policy Dialogue among Asian Transition Countries 206. Sustainable Urban Population Development6.1 Urban Populatio...
21 Economic Policy Dialogue among Asian Transition Countries Target regional employment growth in strategic sectors of th...
Economic Policy Dialogue among Asian Transition Countries 22kek, where nearly half of all urban dwellers in Kyrgyzstan liv...
23 Economic Policy Dialogue among Asian Transition CountriesThe reasons for this primarily lie in the domination ofgovernm...
Economic Policy Dialogue among Asian Transition Countries 24growth in population in the last decade in which the total num...
25 Economic Policy Dialogue among Asian Transition Countries Further construction of urban housing so that new people can...
Economic Policy Dialogue among Asian Transition Countries 267. ConclusionUrbanisation bears great potential for Asian tran...
Registered officesBonn and Eschborn, GermanyT +49 228 44 60-0 (Bonn)T +49 61 96 79-0 (Eschborn)Dag-Hammarskjöld-Weg 1-5657...
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Inputs and Materials: Economic Policy Dialogue among Asian Transition Countries “Urbanisation and Inclusive Growth”

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From 27th to 28th of April 2013, the China Institute for Reform and Development (CIRD) and the Central Institute for Economic Management (CIEM) of Viet Nam in cooperation with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH convened an Economic Policy Dialogue among Asian Transition Countries on “Urbanisation Development and Inclusive Growth” in Haikou, People's Republic of China. This document summarise the themes and results of this event. Detailed information including the content of lectures and discussions can be retrieved from the respective summaries.

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Inputs and Materials: Economic Policy Dialogue among Asian Transition Countries “Urbanisation and Inclusive Growth”

  1. 1. Regional Economic Cooperation and Integration in AsiaINPUTS AND MATERIALSConferenceEconomic Policy Dialogue among Asian Transition Countries“Urbanisation and Inclusive Growth”
  2. 2. ImprintPublished by theDeutsche Gesellschaft fürInternationale Zusammenarbeit (GIZ) GmbHRegistered officesBonn and Eschborn, GermanyRegional Economic Cooperation and Integration in AsiaChina OfficeTaYuan Diplomatic Office14 Liangmahe South Street, Chaoyang District10600 Beijing, PR ChinaT +86-10-8532-5344F +86-10-8532-5744Office MongoliaNaiman Zovkhi BuildingSeoul Street 21Ulaanbaatar 14251, MongoliaOffice Thailand193/63 Lake Rajada Office ComplexNew Ratchadapisek Road, KlongtoeyBangkok 10110, Thailandrci-asia@giz.dewww.giz.deAs atJune 2013Photo creditsCopyrights for all pictures: GIZ RCITextEric Herbstreit and Torben NiemeierGIZ is responsible for the content of this publication. The findings and conclusions expressed in this documentation are entirelythose of the authors. They do not necessarily represent the view of the Deutsche Gesellschaft für Internationale Zusammenar-beit (GIZ). The information provided is without warranty of any kind.On behalf of theGerman Federal Ministry for Economic Cooperation and Development (BMZ)
  3. 3. Economic Policy Dialogue among Asian Transition Countries 2ContentsList of Abbreviations 31. Introduction 42. Welcoming Remarks 63. Advancing Transformation of Scale-oriented Urbanisation into PopulationUrbanisation84. Fiscal Constraints and Political Challenges 114.1 Citizenisation of migrant workers from the perspective of Inclusive Growth 114.2 New-type urbanisation and reform of public finance systems 124.3 Urban Development and SEZ in Lao PDR 13Comment by Gerhart Maier 135. Rural Population and Administrative Reform 145.1 Urbanisation should be advanced actively and steadily 145.2 New-type urbanisation and support of public finance 155.3 Rural-Urban Integration and Economic Growth 165.4 Urbanization development and inclusive growth. The case of Lao PDR 17Comment by Dr. Robert Haas 19Comment by Farhodhon Jurahonov 196. Sustainable Urban Population Development 206.1 Urban Population Development in Mongolia 206.2 The Specific Character of Urbanisation in Kyrgyzstan 216.3 Mongolia: Urban Population Development 226.4 Urbanisation in two core cities (Hanoi and Ho Chi Minh City):highlights, challenges and policy orientations for inclusive growth23Comment by Fuad Jafarly 257. Conclusion 26
  4. 4. 3 Economic Policy Dialogue among Asian Transition CountriesList of AbbreviationsADB Asian Development BankCIEM Central Institute for Economic ManagementCIRD China Institute for Reform and DevelopmentEU European UnionGDP Gross Domestic ProductGIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbHGNI Gross National IncomeGTI Greater Tumen InitiativeODA Official Development AssistanceRCI Regional Economic Cooperation and Integration in Asia ProgrammeRMB RenminbiSEZ Special Economic ZoneUN United NationsUNDP United Nations Development ProgrammeUN HABITAT United Nations Human Settlements Programme
  5. 5. Economic Policy Dialogue among Asian Transition Countries 4IntroductionFrom 27thto 28thof April 2013, the China Institute for Reform and Development (CIRD) and the Cen-tral Institute for Economic Management (CIEM) of Viet Nam in cooperation with Deutsche Gesell-schaft für Internationale Zusammenarbeit (GIZ) GmbH convened an Economic Policy Dialogueamong Asian Transition Countries on “Urbanisation Development and Inclusive Growth” in Haikou,Peoples Republic of China. The following pages summarise the themes and results of this event.Detailed information including the content of lectures and discussions can be retrieved from the re-spective summaries. The conference handbook provided during the conference holds additional in-formationPurposeThe annual conference, which was initially started in 2004 as Sino-Vietnamese Economic ReformDialogue by CIRD and CIEM, over time has expanded to become an established forum with otherAsian transition countries. It is based on the recognition of similarities in economic reform needs andapproaches in Asian transitional economies and aims at hastening the pace of respective reformprocesses while at the same time enhancing their sustainability through mutual learning and the ex-change of lessons learnt. This years forum was attended by more than 200 delegates, including offi-cials, senior policy experts and researchers from Azerbaijan, Cambodia, China, Kyrgyzstan, Lao Peo-ples Democratic Republic, Mongolia, Viet Nam and Uzbekistan, as well as representatives from theGreater Tumen Initiative (GTI) and from the organising bodies CIRD, CIEM and GIZ.BackgroundUrbanisation rates in Asia in the last three decades are unprecedented in history. According to “KeyIndicators for Asia and the Pacific 2012” issued by the Asian Development Bank (ADB), more than abillion people have settled to cities in Asia between 1980 and 2010 which makes this a topic of utmostimportance. While urbanisation bears great potential for economic development for Asian transitioncountries, problems have emerged which require a change of strategy and therefore a profound dis-cussion on suitable policies.These are needed as it seems more evident than ever that scale-oriented urbanisation cannot beupheld by Asian countries in the near future because negative impacts have grown too large to copewith. These negative impacts can primarily be found in the social and environmental context: risinginequality, social tensions as well as steadily worsening air and water pollution to name just a few. Onthe other hand it is widely accepted that urbanisation itself constitutes an important component toachieve economic development.To be able to extract positive features of urbanisation, important policy changes were proposed at theconference, which include for instance a reform of the fiscal and the household registration (hukou)system in China to lay grounds for the country’s transformation towards a consumption-driven econ-omy. Additionally, country-specific best practices and perspectives were shared, such as the provisionof public accommodation in Viet Nam. Moreover, experiences with special economic zones from Laoswere discussed in order to evaluate their contribution to economic development.
  6. 6. 5 Economic Policy Dialogue among Asian Transition CountriesA wide consensus among participants of the conference was that urbanisation represents a potentialdriver of inclusive economic growth. However, the full potential can only be unleashed, if it is carriedout in a thoughtful, sustainable way.
  7. 7. Economic Policy Dialogue among Asian Transition Countries 62. Welcoming remarks2.1. Welcoming Remarks by Mr. Wang Lu, Vice Governor, Hainan Provincial People’s Govern-ment, PR ChinaIn his welcoming remark, Mr. Wang stressed the importance of a shift from mass urbanisation towardsa socially more sustainable type of urbanisation. In this context, he underlined the importance of en-hancing the quality of life of migrant workers who recently moved to urban areas. In his point of view,urbanisation processes nevertheless need to come hand in hand with an agglomeration of industrysectors in order to lift economic well-being and hereby create the prerequisite for a more prosperouslife. In Hainan, industries that seem the most prone to be able to deliver this task are the service sec-tor, particularly tourism, and primary industries.2.2. Welcoming Remarks by Mr. Jürgen Steiger, Deputy Country Director, GIZ ChinaDear Mr. Chairman, dear Governor Wang Lu, dear Prof. Chi Fulin, Excellencies, distinguished guests,dear friends, ladies and gentlemen:I would like to welcome you on behalf of GIZ to our economicpolicy dialogue and roundtable among Asian countries in transi-tion here in Haikou, Hainan. I am very happy and proud that wecan celebrate the 10thanniversary of the Economic Policy Dia-logue today that started in 2004 in Hanoi and was held in Haikouand Hanoi on rotation as well as one time ‒ in 2010 ‒ in Tash-kent, Uzbekistan. I am very happy to see you all again here inHaikou. I am happy to see old friends and new faces, fromSoutheast, Central and North East Asian transition countries andfrom Tumen Secretariat as well as of course our host countryChina.Let me express my heartfelt gratitude and recognition to the China Institute for Reform and Develop-ment, CIRD, for organising this conference. I am looking forward to our exchange of views and todraw on your collective knowledge and wisdom.Trends and challenges in the context of urbanisationThroughout the coming days the topic of our deliberations will be urbanisation and inclusive growth.Urbanisation is likely to shape economic, social, environmental and political interactions in the comingyears. In 1950s, 29.4% of the world population lived in urban areas. 50 years later, in 2010, this num-ber has increased to 51.6% and is projected to reach 67.2% by 2050 (UN Department of Economicand Social Affairs). More importantly, in the developing and emerging countries of Asia and Africa,almost 2.3 billion people live in urban areas. This number is twice as high, as the total number of in-habitants of industrialised nations.
  8. 8. 7 Economic Policy Dialogue among Asian Transition CountriesBut when we talk about urbanisation, we have to be careful not to equate urbanisation with urbanconstruction and expanding the size of cities. If urbanisation, like the title of our forum, is to contributeto inclusive growth, we have to consider the “human” side of urbanisation. We can call it “populationurbanisation”, or – a new term which has been coined here in China, Citizenisation of new urbandwellers. People who come to cities hope to find better jobs in the developing industries. The cities,on the other hand, have to cope with rapid population growth and increased demand for housing,access to water and energy, education and healthcare.More questions than answersMany questions remain unanswered and need further discussion. I will just name a few. Who canfinance, who can coordinate? How to integrate rural-urban migrants into the urban structure? How toenable them to make a legal transfer from informal employment into legality? How to enable theiraccess to basic public services?All transition economies in Asia are facing similar challenges, but of course, in different dimensionsand only if we can address them, will cities be drivers of sustainable economic development, hubs ofideas and thereby catalysts for economic wealth.We tend – in principle – to see cities or urban centres as the panacea for growth and development.More and more tasks are assigned: to be an innovative city, a social city, an economic centre, a smartcity, a low carbon, green, clean, energy city, a city of tomorrow, a future city, the new urban factoryand urban farming knowledge and wisdom.Concluding remarksLet us, ladies and gentleman, be pragmatic in the next 2 days, when we will have the chance to listento different practices and experiences from Asian transition economies, to exchange ideas, to learnwith and from each other.I want to wish all of us a successful and interesting forum and fruitful discussions.
  9. 9. Economic Policy Dialogue among Asian Transition Countries 83. Advancing Transformation of Scale-oriented Urbanisation into PopulationUrbanisationKeynote Speech by Mr. Chi Fulin, President, CIRDIn his speech, Mr. Chi Fulin advocated a transformation from scale-oriented towards population ur-banisation and recommended a variety of policy and system innovations which he sees as necessaryto bring about this urgently needed shift. In the following lines, his main points will be summarised.Scale-oriented urbanisation has become difficult to sustainScale-oriented urbanisation has been one of the main drivers ofeconomic growth, specifically in China. Some major changeshowever will make this process unsustainable in the years tocome. Firstly, scale-oriented urbanisation has always been de-pendent on low cost factors and resources. The urbanisation ofrural land between 1990 and 2000 for instance was 1.71 timesthat of urbanisation of rural population. It seems obvious that thismethod cannot be upheld for much longer, as per-capita arableland has shrunken tremendously. Moreover, China’s inefficientuse of energy will soon hamper urbanisation efforts. As of now,energy consumption per unit of GDP is twice as high as theworld’s average. With rising dependence on foreign mineral re-sources and generally rising energy prices, this will pose a seri-ous threat to urbanisation in the way it is currently carried out.Additionally, implications of scale-oriented urbanisation for the environment are now more obviousthan ever. Despite the fact that this type of urbanisation has led to extraordinary high growth rates,environmental degradation can no longer be ignored. Water pollution as well as continually worseningair quality in major cities will make the social costs of scale-oriented urbanisation very, if not too high.Secondly, profound changes can be detected in society’s expectations towards urbanisation.This can be seen in people’s demand for quality jobs, housing as well as a growing rejection of aseparation of families. The fact that most migrant workers nowadays have no intention to move backto rural areas, but plan to establish a complete family life in urban areas, constitutes a major reasonfor the lack of sustainability of scale-oriented urbanisation.Thirdly, the role and function of cities will change as China moves to middle and late stages of indus-trialisation. In the early years of industrialisation, the expansion of production is seen as crucial.Scale-oriented urbanisation has contributed to the achievement of this expansion and hereby to higheconomic growth. As production is expected to stall in later stages of industrialisation and as the soci-ety is set to gradually change to be consumption-dominated, a new type of urbanisation needs to beimplemented that takes these major changes into account.
  10. 10. 9 Economic Policy Dialogue among Asian Transition CountriesPopulation urbanisation will release the largest development potentialUrbanisation itself has large potentials for economic growth in China and everywhere else. Yet, thispotential can only be realised if urbanisation is carried out in a smart way. Generally, the populationurbanisation rate can be doubled in the next 20 years. It would then peak at 65-70% and hereby con-tribute to two important factors that trigger economic growth in a more sustainable way. Firstly, mi-grant workers which move to urban areas increase their per capita consumption by 171%. If they areproperly citizenised, their consumption will grow by 214%. Through this, domestic demand and in-vestment would be boosted immensely. Secondly, population urbanisation would drive transformationprocesses and an upgrading of the industrial structure. More precisely, the industrial structure wouldmove towards being more service sector oriented and hereby more sustainable.The current priority of population urbanisation is to citizenise migrant workersAs mentioned before, a trend can be observed that migrant workers tend to settle down and do notplan on returning to rural areas as in previous centuries. Yet, in most cities they do not receive theusual benefits citizens are entitled to as a hukou is often not granted to them. As most of them staynevertheless, China is observing a ticking time bomb with social conflicts and tensions not too faraway. It therefore needs to be of high political priority to reform the household registration system andto further equalize urban and rural residents with regards to public services. In this context, it is es-sential to enable migrant workers to fully integrate themselves into urban public services. This way, itcan be ensured that the family will be able to find housing and that their children will have access topublic schooling. If citizenisation of migrant workers is done properly, social conflicts can be avoidedand economic growth can be triggered through the described transformation towards a service sectordriven economy.Advancing institutional innovations with reforming the household registration system as thefocusThe urban-rural dualistic household registration system has been in place for more than 50 years nowand has turned out as a major source of inequality between urban and rural residents. It thereforeneeds to be replaced by a residents’ registration system. This new system needs to ensure that benefits are allocated to migrant workers. In small and medium sized cities it would be possible to introduce such a system within 3-5years. Nationwide, including all major cities, this system should be in place in no more than 5-8years.Furthermore, land property rights needs to be reformed in order to ease urbanisation processes. In case of expropriation, land needs to be compensated properly and farmers ought to be ac-cepted as negotiator with certain rights. Hereby, land will become an asset and not a liability. Rural markets need to be developed.
  11. 11. Economic Policy Dialogue among Asian Transition Countries 10 Farmers need to be enabled to use their land as mortgage to have access to credit in thesame way that enterprises can use theirs. Ways for farmers to sell their property and hereby raise money in order to move to urban ar-eas need to be enhanced.Lastly, China’s welfare system needs to be reformed so that more citizens of the middle and lowerclass have access to public services. As of now, China not only spends a relatively low amount of itsbudget on welfare but faces the problem, that the upper class receives most of it and those in needare not granted access. If this can be reversed, equality could be minimised and the way to a moreprosperous system was laid out.Urbanisation has tremendous potential, economically and socially, for China and other Asian coun-tries. This is mainly due to a shift towards a more service-driven economy with rising domestic de-mand. Nevertheless, population urbanisation requires a set of institutional changes that need to beimplemented in order for this potential to be fully released.
  12. 12. 11 Economic Policy Dialogue among Asian Transition Countries4. Fiscal Constraints and Political Challenges4.1 Citizenisation of Migrant Workers from the Perspective of Inclusive GrowthExpert Input by Ms. Feng Qiaobin, Professor for Economics, Chinese Academy of Governance(CAG)In her presentation Prof. Feng Qiaobin presented some of the latest research of the Chinese Acad-emy of Governance on the topic of financing the urbanisation process in China. In what follows, hermain points will be laid out.BackgroundThe academy has conducted a considerable amount of research on how to turn migrant workers intofull citizens. It is beyond doubt that this should be seen and carried out as a “people-oriented” process.Yet, one also has to acknowledge, that this process is expensive for the government and hence re-quires sound analysis. CAG has therefore built a model which calculates the cost of citizenisation ofmigrant workers in China and enables one to develop needed reforms of the funding process. TheAcademy has compared different schemes and recognises that its model is subject to controversialdiscussions.Four building blocks of citizenisationGenerally, the model assumes that citizenisation of migrant workers is composed of 4 building blocks.Firstly, the government needs to provide education for migrant workers. Mainly this means that newschools ought to be build and maintained. Secondly, migrant workers need to have access to socialsecurity provision. More precisely, this means that a minimum living standard can be guaranteed withhealth care and a suitable pension. Thirdly, the government needs to ensure that reasonable accom-modation opportunities are available for workers moving to urban areas. In this context the modelcalculates with the required minimum standard of 13m², as set by Chinese law. Lastly, it is the gov-ernment’s task to provide employment opportunities in cities by public spending on job creation andtraining.In the calculation of CAG, it is assumed that there are 160 Million migrant workers in Chinese cities.Additionally, it is acted on the assumption that 10 Million will be added each year. The model deliversa projected outcome of 1.8 Trillion RMB annually to cover the cost of citizenisation, which is equal toabout 15% of gross fiscal revenue. It neglects regional disparities and uses average costs across thecountry. However it does not yet take into account the growing number of migrant workers as well asa potential rise in government subsidies. Hence, the actual amount that needs to be spent might beunderestimated by the model.Policy implicationsKnowing the costs, it is then inevitable to think carefully about the division of this financial burden.Some areas see more migration than others and the costs need to be divided between local and fed-eral governments. Moreover, middle-sized cities will most likely be home to the largest proportion ofnew working migrants and need to be financially supported.
  13. 13. Economic Policy Dialogue among Asian Transition Countries 12The question whether China can afford urbanisation should not be up for debate however. Instead,urban-rural readjustment, interregional as well as fiscal transfers from central to local governmentagencies should be discussed. The federal government needs to incentivise local governments tofulfil their duty in this context and financial support is the most promising to persuade local govern-ments and thereby achieve this goal. If the costs are shared between regions, cities and the local aswell as the federal government, a people-oriented urbanisation is possible. The model developed byCAG can hereby function as a useful tool.4.2 New-type Urbanisation and Reform of Public Finance SystemsExpert Input by Mr. Cao Yuanzheng, Chief Economist Bank of ChinaIn his presentation Cao Yuanzheng laid out why China needs to change from encouraging productionand investment towards encouraging consumption as well as how urbanisation fits into this picture. Inwhat follows, his main points will be summarised.BackgroundIt has to be acknowledged that the Chinese fiscal system in its current condition is deeply flawed.Despite the fact that government revenue has grown tremendously over the last years, local govern-ments see themselves in dangerous financial situations. This is mainly due to the fact that the federalgovernment receives a larger share of revenues and yet local governments have to pay most of thesocial benefits to their citizens. Consequently, alternative sources of funding had to be found for localgovernments. We need to ask ourselves whether we should continue with the traditional system andexpand land based revenue or whether we should try to find alternative funding sources. The costs ofthe former are high. Local governments will not be able to sell unlimited areas of land to regain fiscalbalance, without seriously hampering the region’s welfare. The system of land based revenue istherefore doomed to lead to failure and therefore alternative financing models need to be constructed.How urbanisation contributes to the needed shiftUrbanisation plays an increasingly growing role in the needed shift of China’s economy from one thatwas primarily investment- to a consumption-based society, from one that used to rely heavily on ex-ports but is now starting to be built on domestic demand. As urbanisation describes the process ofequalisation of public services to migrant workers, vast potentials are being created when the latterare being enabled to consume. For this to happen effectively however, policies which tackle the de-scribed problems, need to be implemented simultaneously, otherwise, the public finance system willnot be sustainable for much longer. Most importantly, a fiscal transfer from the federal to the localgovernment needs to be established.Lastly, it is essential not only to grant migrant workers access to basic social services but to create jobpossibilities for them. Doing so, a gradual shift towards the service sector should be conducted.These supporting policies, in combination with better access to social benefits for migrant workerswould stimulate domestic demand and hereby contribute to China’s needed shift towards a consump-tion-driven economy.
  14. 14. 13 Economic Policy Dialogue among Asian Transition Countries4.3 Urban Development and SEZ in Lao People’s Democratic RepublicExpert Input by Mr. Thanouxay Khoutphaythoune, Deputy Director, Planning Division, Secre-tariat to the Lao National Committee for Special Economic ZonesMr. Khoutphaythoune’s presentation focused on the Lao Country Strategy 2020 and Urban Develop-ment in selected SEZs which are of significant importance for the development of Lao PDR’s econ-omy.SEZs as an opportunity for urban developmentThe concept of SEZ development was introduced in 2000 when the first friendship bridge betweenLao PDR and Thailand was constructed in the Savannakhet province. According to the Country Strat-egy, by 2020, many SEZs will be established and become one of the most important driving forces,contributing decisively to the success of regional integration and poverty reduction in the countrythrough job creation, generation of revenue, and technology as well as transfer of knowledge. TheNational Strategy for SEZ development proposes investments in the fields of tourism and related ser-vices, fostering trade, agriculture, light and other manufacturing industries.That Luang is exemplary for the development of SEZs in Laos PDR. In this case, empty rural landarea is transformed into a new urban city centre. Taking the balance between environmental issuesand rapid economic growth into consideration, future urban planning must combine water reservoirs,water treatment systems, tree plantations and needs to include green energy systems in order to builtsustainable infrastructure and housing facilities.Comment by Mr. Gerhart Maier, Senior Advisor, GIZIn his comment, Mr. Maier stressed the importanceof an integrated approach to absorb negative con-sequences of structural adjustments due to migra-tion. He proposed the abolishment of high barriersfor migrants and cited good experiences with thispolicy from Germany. At the same time he pointed tomeasures by the German government and theEuropean Union (EU) that incentivise migration butat the same time financially help to overcome struc-tural adjustment processes in some sectors.
  15. 15. Economic Policy Dialogue among Asian Transition Countries 145. Rural Population and Administrative Reform5.1 Urbanisation should be advanced actively and steadilyExpert Input by Mr. Chen Huai, Director-General, China Institute of Urban-rural ConstructionEconomicsIn his presentation Chen Huai outlined the history of urbanisation in China and proposed policieswhich could make urbanisation more sustainable. The following lines will summarise his main points.BackgroundGenerally, one needs to bear in mind that urbanisation is not a process in which the government triesto push people to move to cities. On the contrary, it should be seen as an inevitable, natural processwhich has great potential for a society. Nevertheless, it should also be acknowledged, that severemismanagement has taken place over the last decades which has led to unsustainable consequences.Slums, shantytowns, and rising pollution are just a few among many. Most of these problems whichbecome obvious today are related to or a direct consequence of policy priorities in the 1980s and1990s. During these times, urbanisation was seen as the main driver of economic growth and citieswere created that in today’s view do not deserve to be called cities but can merely be seen as placesof industrial accumulation. Policies have retained people in the countryside and township enterpriseswere not encouraged to develop.Additionally social imbalances were starting to build up as migrant worker, having moved to urbanareas, were not treated equally and were deprived from urban benefits. As development then onlyproceeded in the Chinese mega cities, they saw vast price increases for housing combined with stag-nating prices in the rest of China. This at least partly was also due to misguided policies which did notpay attention to development in all parts of China but were restricted to creating and supporting indus-trial hubs located in mega cities.How to overcome problems associated with urbanisationIn order to achieve more prosperous lives for the entire Chinese population, it is inevitable to create amore balanced path towards development and to dissolve social inequality. Urbanisation can help toachieve both, but only if it is carried out correctly. Therefore, the following aspects need to be kept inmind: social tensions need to be prevented by creating equal access to public services such aseducation and health care equal payment for equal work: migrant workers should not be discriminated housing infrastructure needs to be improved so that migrant workers can afford accommoda-tion land property rights are unfavourable for the rural population and need to be reformedLastly, urbanisation and resource consumption cannot go hand in hand as they did in the 1980s and90s. If these steps are being followed and policies are implemented accordingly, urbanisation will bemore sustainable and will lead to a more balanced development of China.
  16. 16. 15 Economic Policy Dialogue among Asian Transition Countries5.2 New-type Urbanisation and Support of Public FinanceExpert Input by Mr. Jia Kang, Director-General, Institute of Fiscal Science, Ministry of Fi-nance, PR ChinaIn his presentation Mr. Jia Kang laid out problematic developments in the context of urbanisation andproposed policy reforms to alter them. In the following, his main points will be summarised.BackgroundThe ability of major cities, such as Beijing and Shanghai, to provide basic public services to migrantworkers is lagging behind demand. This has led to socially unsustainable circumstances which arecharacterised by only 20% of migrant workers able to bring their spouse along with them to the city.Even more alarming is the fact that only 10% of children are being taken along, triggering an increas-ing number of “left-behind-children” in rural areas. These children hardly have a bright future and thegovernment lacks capacity to effectively help them. In smaller cities the situation used to be superioras it was a lot easier to acquire citizenship. Thereby, access to public services for migrant workerswas ensured. However, these cities could not afford the service in the long run and for political reason,citizenship has again been more difficult to attain since then and to this day.Policy implications for the “Chinese Dream”It is beyond doubt that urbanisation bears great potential as it triggers domestic demand and herebyboosts economic growth. And yet the conditions under which it is implemented are very important. Inorder to achieve greater sustainability and to create the prerequisites for more people to live the “Chi-nese Dream”, the following aspects need to be kept in mind: The need for a unified public resource allocation plan: all of the government’s revenue shouldbe collected and injected into one single budget. This budget can then be reallocated toplaces where it is needed the most. The allocation of public services needs to be non-discriminatory. As household registration(hukou) holders are treated favourable to non-holders, the process of receiving a hukouneeds to be simplified. Children need to have equal access to public services, such as educa-tion and families need to be able to afford housing. Government needs to address a variety of concerns with regional development, including landproperty rights, fiscal transfers to local governments beyond others.The integration of migrant workers into urban areas as well as the creation of favourable conditions isat the heart of the debate. Reforms are urgently needed on various levels to make urbanisation moresustainable and thereby foster inclusive growth.
  17. 17. Economic Policy Dialogue among Asian Transition Countries 165.3 Rural-Urban Integration and Economic GrowthExpert Input by Mr. Sok Sopheak, Director-General for International Trade, Ministry of Com-merce, Kingdom of CambodiaIn his comment, Sok Sopheak gave a short briefing on rural-urban integration and economic growth inthe case of Cambodia. As in all Asian countries, issues of urban-rural development and inequality inCambodia need to be seen in the context of Cambodia’s stage of development and developmentstrategy.BackgroundCambodia is not yet highly urbanised. Almost 80 per cent of thepopulation lives in rural areas and the share of urban dwellers intotal population is much below the Asian average. But on the otherhand, some numbers indicate that urbanisation is steadily increasing.Cambodia is experiencing rapid population growth, with urban popu-lation growing at about 2.5% per annum in the last five years, andrural population growing at about half that rate. Mr. Sok also pointedout that Cambodia is internationally competitive or at least potentiallycompetitive referring to a wide range of agricultural products. Fur-thermore, the rural sector has considerable potential to prosper.The sector grew by 5 per cent in the last five years, contributing 1.5% to overall economic growth. Ingeneral Cambodia is at the very early stages of industrialization. Recently manufacturing output con-sisted almost entirely of production of garments and footwear for export. Another important role inCambodian economy play the nearly 200 special economic zones located in the rural area neighbour-ing Viet Nam and Thailand.Cambodian experiencesThe particular features of recent Cambodian development process affect the way that the urban andrural economies interact. There are several hundred garment & footwear factories (about 400 facto-ries) located in the outskirt of Phnom Penh City and along the Growth Corridor from Phnom PenhCapital City to the main seaport of Cambodia. Garment & footwear workers (around 400,000) aremainly female migrating from the surrounding countryside. They remit a high proportion of their earn-ings back to their families in rural areas. Most of them, after working for several years, will return totheir rural homes. This creates considerable income linkages between urban and rural areas.Manufactures other than garments are usually located in SEZs, which are spread around the country,especially near Cambodia’s borders. With the exception of one zone near Phnom Penh, these SEZsare not in or near urban areas. Thus, the rise of manufacturing in Cambodia has so far contributedonly modestly to urbanisation. It follows that the pace of urbanisation has also been slowed by therapid expansion of agricultural incomes.
  18. 18. 17 Economic Policy Dialogue among Asian Transition CountriesCambodia’s production of paddy rice has almost doubled during the past decade (2011-2012: 8.5million tons of paddies produced), and other crops such as cassava, rubber, and palm oil have alsoexpanded rapidly. In consequence The Royal Government developed a detailed strategy for increas-ing further paddy production and expanding sharply the export of milled rice (one million tons by2015). It has also targeted a large increase in rubber plantings.At the political level, the Royal Government has pursued a policy of de-centralization designed to giveprovinces and their respective communities greater control over their development.ConclusionWhile urbanisation is clearly a feature of the current landscape, Cambodia has not yet experienced ahead-long rush of population from rural to urban areas. Moreover is just at the very beginning of theprocess of assessing the issues of equity and inclusiveness associated with urbanisation.5.4 Urbanization Development and Inclusive Growth:. The Case of Lao PDRExpert Input by Mr. Pheuiphanh Ngaosrivathana, Senior Macroeconomic Specialist, GIZ LaosDr. Pheuiphanh Ngaosrivathana gave an introduction to urbanisation and inclusive growth in the caseof Lao PDR. He explained that Laos has undergone some major transformations over the past dec-ade, especially when it comes to structural changes of the economy. For example, urbanisation rateas estimated by UN Habitat amounts to the range of 4.9% per year.BackgroundFrom a more general perspective, the economy of Lao PDRlooks to become the fastest growing in Southeast Asia. Thisyears’ economic growth is on track to reach 8.3%. Main drivingforces come from resource sectors such as hydropower andmining. These two combined accounted for about one third ofthe country’s economic growth between 2005 and 2010. Al-though external shocks like the recent global economic andfinancial crisis had some impact on less developed countries,GDP increased by 7.9% over the past 10 years and is expectedto grow by 7.6% per year until 2015.Nevertheless, Lao PDR isstill a very small economy with a population of 6 million and anannual average growth of 1.5%, Lao GDP was valued at justUS$ 8 billion in 2011. Neighbouring Thailand, in comparison,had a GDP of US$ 345 billion.
  19. 19. Economic Policy Dialogue among Asian Transition Countries 18Economic growth helps to reduce poverty and lowers InflationIn 2011, Lao PDR reached a GNI per capita of US$ 1,010, and as such, moved up from its lower in-come status to become classified as a lower-middle income economy. At this pace, Lao PDR is ontrack to achieve its long term vision: to graduate from the Least Developed Country status by 2020.Additionally, a Government report implies that the number of poor families in Laos has dropped to 17%and the government expects to lower the percentage of poor families even further to 15% by the endof this year and 10% by 2015. Nevertheless, more efforts are needed in remote regions where pov-erty highly concentrates and is probably going to persist.Urbanisation in the most rural country in Southeast AsiaThree out of four Lao people currently live in rural areas. Out of these, approximately 38% live belowthe poverty line and aside of that population growth continues to be concentrated in the rural areas. Inconclusion, the government is acutely aware of the need to promote rural and agricultural develop-ment. Policy reforms and public investments have contributed to robust agricultural sector growth of4.7% per year over the last decade.On the other hand, urban population increased from 17% in 1995 to 27% in 2005. Most of the people(about 41%) who migrated across provinces went to Vientiane Capital to seek better employmentchances, education and healthcare whereby other districts observed net emigration. Laos has in-vested substantially to transform from a land-locked disadvantaged into a land-linked nation. This ledto a major improvement in transportation linkage between both, within the country and with neighbour-ing countries. This was mostly promoted and aided by the construction of three major internationalbridges, with three more under consideration or in construction, and the establishment of SEZs.At the same time, this rapid growth in the population of Vientiane presents a challenge in terms ofprovision of adequate and sufficient public services and infrastructure including improvements in basicsanitation, access to safe drinking water, all-weather roads and electricity.Rural poverty remains highTo ventilate another grievance, income per capita in the agrarian economy is less than half of thenational average and referring to an UNDP report from 2009, labour productivity in agriculture is 4-10times lower than in non-agricultural areas. Furthermore, other findings meet poverty assumptions inthe case of Lao PDR: Large inequalities between the interior in the north and centre-south (less developed andpoorer), and areas that border the Mekong-river and plains in the centre-west (developed andless poor). Poverty proportion in the north is 12 % higher than in the centre or south. The interior, which remains relatively isolated, is characterised by a very heterogenic society,consisting of many different ethnic groups, implying that these populations are less integratedinto the overall development process. (UNDP Report 2009). Female workers experience higher unemployment.
  20. 20. 19 Economic Policy Dialogue among Asian Transition Countries Child malnutrition rates are still too high as 41% of children under the age of 5 suffer fromchronic malnutrition.ConclusionThe challenge ahead for the country will be to further shift the focus from absolute growth levels toimproving the quality of growth. In this context it will be essential to ensure the country will follow aninclusive and sustainable growth path which will be based on the development of non-resource indus-tries as well as on better urban planning. SEZs in remote areas of the country will prove to be of highsignificance for this process.Comment by Mr. Robert Haas, Senior Advisor, GIZIn his comment Dr. Haas stressed the importance of education as the key to social mobility andsuccessful citizenisation of migrant workers. He cited experiences with migrants from the formerSoviet Union as well as other migrants in Germany. Access to education enabled the second gen-eration of these migrants to improve their situation relatively to the generation of their parents andto have a more prosperous life. As China will eventually also head towards an economy with lesslow-skilled and low-paid jobs, it is urgent to grant migrant workers access to education so that theycan upgrade their skills and qualify themselves for skilful and higher paid work. If this step is leftout, social tensions as well as economic problems will soon arise.Comment by Mr. Farhodhon Jurahonov, Acting Deputy Director, Institute of Forecastingand Macroeconomic Research (IFMR) under the Cabinet of Ministers of the Republic ofUzbekistanIn his comment, Mr. Jurahonov laid out how the government of the Republic of Uzbekistan plans tosolve the problem of a lack of suitable accommodation for the rural population. In the following lineshis major points will be summarised.Uzbekistan, neighbouring the states of Turkmenistan, Kyrgyzstan, Kazakhstan and Tajikistan ishome to 30 Million inhabitants, 54% of them live in urban areas. A territory of 470.000 km²makesUzbekistan about 1.5 times as big as Germany.2009 was declared as the year of “Rural Development and Welfare” by the government. More pre-cisely, a state program was adopted which built on the idea that “the more the village advances, thehigher the quality of our lives and prosperous the country”. This program was then preceded by twopresidential resolutions (in 2009 and 2010) which expanded construction of houses in standarddesign in rural areas. Through this funding close to 25.000 houses had been constructed between2009 and 2012 and additional 10.000 were set to be built in 2013. The latter number reflects anincrease in the program’s budget by 54% relative to 2012. By 2015 around 40.000 houses will beconstructed with the financial assistance of this program and will thereby contribute to further equal-ization of urban and rural population.
  21. 21. Economic Policy Dialogue among Asian Transition Countries 206. Sustainable Urban Population Development6.1 Urban Population Development in MongoliaExpert Input by Mr. Yadam Sumkhuu, Officer, Department of Urban Development and LandAffairs Policy Coordination, Ministry of Construction and Urban Development, MongoliaIn his presentation Mr Sumkhuu from the Ministry of Construction and Urban Development talkedabout the current situation, trends and challenges as to give a comprehensive overview about urbani-sation and inclusive growth in Mongolia. The following lines summarise the main points of his presen-tation.BackgroundMongolia, with its 1,564,116 km², is the world‘s 19th-largest country in the world. Its wide space ofunused land is blessed with vast amounts of natural resources such as copper, zinc, gold, silver andcoal etc. Neighbouring only with the People’s Republic of China and the Russian Federation, leavesopportunity to trade via maritime transportation only through mentioned countries.Mongolian population has increased from 647,500 in 1918 to 2,647,500 in 2010. From 1990 until nowpopulation growth first slowed down caused by low fertility and high mortality, but as estimated by theNational Statistics Office will increase to at least 3,750,000 in 2040. According to the new Mongolianconstitution of 1992, people are guaranteed the right of free choice of residency. On this legal basisfounds the ongoing internal migration process. Over the last 50 years rural migrants primarily movedto Ulaanbaatar. As a consequence, about 60% of urban population and 44.4% of all Mongolians livein the dominating capital nowadays. At the same time 88.2% of government bodies, banks, universi-ties, hospitals, retail wholesales and theatres accumulate in the core city centre. A recent sustainableurban development plan for Ulaanbaatar provides policies such as migration control, reconstruction ofexisting buildings, decentralisation which includes the development of satellite cities, better economicand social infrastructure and stresses the need to elaborate and reform legislation.The focus lies on harnessing urbanisation to deliver equitable and inclusive growth as well as povertyalleviation. Policy discussions should start with the possible contributions by institutions, and specificinstruments need to be identified which can promote economic density and manage social and envi-ronmental externalities. In order to foster inclusive growth, Mr. Sumkhuu suggested a wide range ofkey policies:Targeting migration and rural development Disproportionate rise in urban population is not economically or environmentally favourable. Construction of regional vocational centres for the unemployed to acquire practical knowledge,skills and foster employment in local aimags. New soum centre universities and training centres will provide educational and employmentopportunities for the young.
  22. 22. 21 Economic Policy Dialogue among Asian Transition Countries Target regional employment growth in strategic sectors of the economy, particularly in com-modities, mining and oil industries. Financial investment & support for remote and poorly developed regions. This will includeloans and grants for local residents.Boosting job growth and education Boosting structural employment- Vocational training centres to bolster employment among the young population, whichhas dropped.- Universities and college campuses must be built in regional districts as well as in Ulaan-baatar. Sector-specific training- Specialised training for engineers and for sector specific vocations, such as service-sector employment, which is edging higher.- Supporting and incentivizing small to medium-sized (SME) enterprises in both aimagsand soums.6.2 The Specific Character of Urbanisation in KyrgyzstanExpert Input by Mr. Sultanbek Usenov, Construction and Architect Consultant, Kyrgyz Invest-ment and Credit Bank (KICB)In his presentation Sultanbek Usenov emphasised the close connection between urbanisation andeconomic growth referring to the World Development Report of 2009. He explained that low level ofurbanisation is explained by structure changes in economies often characterised by a reduction ofindustry sector in the state’s economy. He concludes that no country ever reached a high incomelevel without large and economically successful cities.Historical backgroundThe former Soviet republic of Kyrgyzstan is neighbouring the People’s Republic of China and has todeal with environmental limits. Kyrgyzstan is an extremely mountainous country with only 15% flatland. Its urbanisation rate was 33.9% as of 2012. The number reflects downward tendencies in ur-banisation after the collapse of the Soviet Union and is in fact the lowest since the early 1960s. His-torically, in the period between 1920 and 1990 urbanisation process in Kyrgyzstan had been a resultof industrialisation. Urban policy in the Soviet period was centralised and directly linked to interests ofa militarised economy, which led to industrial agglomerations to support export hydro-related re-sources and other raw materials.The next two decades were characterised by an even stronger continuous outflow of population fromrural areas which fostered decent urbanisation rates mainly in the two biggest cities: capital city Bish-
  23. 23. Economic Policy Dialogue among Asian Transition Countries 22kek, where nearly half of all urban dwellers in Kyrgyzstan live and so called “southern capital” Osh.During this time administrative reorganization of villages was not supported by a clear city-orientateddevelopment. Later Kyrgyzstan chose a model of decentralization in order to reform city government.Unfortunately it occurred that individual power between central, regional and local authorities misseda clear distribution of responsibilities and budgeting. In fact, some critics observed that executive au-thority bodies dominated local self-governments.Policy implications for KyrgyzstanNational programs of urbanisation development in Kyrgyzstan have not clearly formulated urban pol-icy, which lead to misbalance of spatial development. The government tried to focus on policies tocreate equal opportunities for people but irrespective of their place of living. This is just one examplefor activities that must be revised. According to Mr Usenov, authorities need to undertake severalreforms and other activities such as: Regional and Spatial Program Development. Reform of local government system with emphasis on cities and municipalities Reform of city budget system and inter-budget relations Industrial development programs by sectors Migration process management Tax policy for stimulating industrial development in cities Housing policies Urban planning development6.3 Mongolia: Urban Population DevelopmentExpert Input by Ms. Bolormaa Tsogtsaihan, Professor at School of Economic Study, NationalUniversity of MongoliaIn her presentation Dr. Bolormaa focused on trends and impacts of population growth and explainedwhich challenges urbanisation process has brought to the country. She focused on causes and pres-sure of urbanisation and urban growth.Problems of urbanisationUrbanisation can create environmental hazards which affect the health and safety of the populationand especially of the poorest dwellers. It could be observed that urban growth has led to a deteriora-tion of air and water quality and land degradation. At the same time, it has also aggravated a solidwaste management problem. On the other hand, the rising number of urban dwellers has led to insuf-ficient land and housing supply and furthermore, a rapid demand for services such as water supply,sanitation, solid waste collection and transportation occurred due to the inability to provide basic envi-ronmental infrastructure.
  24. 24. 23 Economic Policy Dialogue among Asian Transition CountriesThe reasons for this primarily lie in the domination ofgovernment’s monopoly and heavily regulated pricesand subsidies as well as in a poorly functioning urbanland and housing market.Additionally, air pollution is another important issue thatneeds to be tackled. The increased motorisation and asa consequence overcrowded roads have a strong nega-tive impact on environmental well-being of the inhabi-tants of major cities in Mongolia. In addition, house-holds often use fuels of low quality and release evenmore carbon dioxide or other climatically detrimentalsubstances.Due to unsustainable extraction linked to uncontrolled industrial effluent, unclear property rights andconfusing treatment as a free resource, ground water depletes and is in fact contaminated by waste.Policy implicationsBased on these observations Dr. Bolormaa defined four essential recommendations for future sus-tainable development: Development strategy for cities Environmental public awareness Public awareness and citizen pressure on governments and polluters are some of the mostimportant factors in motivating environmental reform Private sector involvement is key to sustainable urban environmental improvements6.4 Urbanisation in two Core Cities (Hanoi and Ho Chi Minh City): Highlights, Chal-lenges and Policy Orientations for Inclusive GrowthExpert Input by Mr. Tran Kim Chung, Vice President, CIEMIn his presentation Tran Kim Chung introduced urbanisation processes in Viet Nam, specifically inHanoi and Ho Chi Minh City, and elaborated on positive and negative aspects of these processes aswell as possible policy recommendations. The following lines will summarise his main points.Background information on urbanisation in Viet NamAs of today, only 34% of the total population are urban residents which points to a great potential be-cause this level of urbanisation was already reached by most Asian states about 10 years ago. If ur-banisation continues at the current pace, the percentage of Vietnamese, living in urban areas is esti-mated to reach 45% by 2020 and 50% by 2025. Most of these urbanisation processes are concen-trated on the nation’s two major cities Hanoi and Ho Chi Minh City. Hanoi has seen tremendous
  25. 25. Economic Policy Dialogue among Asian Transition Countries 24growth in population in the last decade in which the total number of inhabitants grew by almost 4 Mil-lion from 2.67 to 6.5 Million in 2000 and 2009, respectively. Population will continue to grow and willpass 8.5 Million by 2020. While Hanoi accounts for nearly 14% of national GDP, Ho Chi Minh City hasestablished itself as the largest economic centre in Viet Nam and contributes 47% of the state’s eco-nomic output.Positive and negative aspects of urbanisation in these two citiesUrbanisation in Viet Nam has contributed immensely to eco-nomic development. Average income in the two cities has in-creased by a factor of 2 to 3 relative to the average income ofViet Nam. Even more important, poverty rates in both cities arelow. For 2009 only 1.27% of the population in Hanoi and 0.31%in Ho Chi Minh City lived below the national poverty line.Slumps, as can be witnessed in basically every major cityaround the globe, are nonexistent in neither Hanoi, nor Ho ChiMinh City. This is mainly due to provision of public accommoda-tion. Even more so, the state not only prohibits the demolition ofold buildings but on the contrary, encourages upgrading andrenovation. Large investments in infrastructure, mainly withODA money, have been made. Consequently, water supply,drainage, lighting and traffic are largely under control.Taken together, one can say that most people, even in the low-income segment can potentially live acomfortable life in these two cities.There are however also a few challenges. The construction of urban areas leaves many inhabitants ofrural areas landless. Even though compensation is paid, a large proportion, about 37%, mishandlesthe amount of money that has been given to them and eventually faces poverty.Additionally, mass migration has led to imbalances in the labour force. Moreover, problems arise be-cause city planning has been done insufficiently in some areas. This has led to many unsuitable loca-tions of commercial areas and service centres. Environmental problems can unfortunately also bewitnessed in Viet Nam. The number of green spaces, ponds and lakes has eroded over the last dec-ade. Moreover, signs of massive pollution are starting to show in many areas. Air quality has wors-ened specifically in the two major cities. In some parts serious traffic congestions occur as the numberof car owners has increased drastically.Some policy recommendations in the Vietnamese contextMany policy recommendations have been proposed for Hanoi and Ho Chi Minh City. More generally,the Vietnamese government will focus on the following: Further development of transport infrastructure: construction of ring roads, link-belt satelliteroads, connection of urban and rural areas, as well as crossroads and bridges. Increase the use of public transportation systems in cities.
  26. 26. 25 Economic Policy Dialogue among Asian Transition Countries Further construction of urban housing so that new people can move to urban areas. Reduction and gradual termination of the development of high-rise buildings, paired with re-quirements for construction standards for old apartments. Development of environmentally friendly city and eco-cities. Protection of “green belts” andraise awareness among the population.Taken together, one can conclude, that Viet Nam is on a solid path towards sustainable urbanisation.Good efforts have been made with positive results in many areas. Yet, challenges remain and policiesneed to be pursued that take these into account. If this is done properly however, Viet Nam couldwitness more prosperous years as the potential of urbanisation has not yet been released, as meas-ured by the relative low urbanisation rate.Comment by Mr. Fuad Jafarly, Urban Initiative-Azerbaijan, Urban Planning and PublicTransportation ConsultantIn his presentation Fuad Jafarly gave an overview of urbanisation processes in Azerbaijan with aspecific focus on the greater Baku area. Azerbaijan had been the fastest growing economy be-tween 2002 and 2010 and reached per capita income of 7000$ in 2011. The total population as of2009 was 9 Million and is estimated to grow moderately in the future. 3.3 Million of these live in theBaku area which has a significantly higher population growth rate than the rest of the country.The Baku area itself makes up for roughly 90% of Azerbaijan’s GDP and nearly 85% of the state’sbudget revenue is created within this region. The fact that Baku is the single most important eco-nomic centre of Azerbaijan can be demonstrated when one closer examines the nation’s employ-ment structure. In every important sector of economic activity, Baku accounts for more than 90% ofthe national output. The city is characterized by a distinct cluster system which scatters firms ofsimilar industries in the same place.Despite the economic success of Baku, problems are existent that need to be addressed by politi-cians. Most prominently is a problem Mr. Jafarly calls the existence of two cities within one, a termwhich refers to rising social imbalances. The government of Azerbaijan has therefore launched aprogram is supposed to target these undesirable circumstances. The main locus hereby lies onequalisation of rural and urban population as well as boosting job quality within Baku.
  27. 27. Economic Policy Dialogue among Asian Transition Countries 267. ConclusionUrbanisation bears great potential for Asian transition economies. This can mainly be attributed torising income of migrant workers leaving rural areas and taking up employment in cities. The highersalary then leads to a more prosperous life of the individual worker and directly effects the nationaleconomy as domestic demand grows. Through this mechanism, urbanisation can lead to massiveeconomic growth as can be seen in China and other Asian states.In recent years however, problems related to urbanisation processes have become apparent thatdemand the attention of policy makers in the region. Most prominent in the public debate are negativeimpacts in the environmental and social context. Cities are confronted with quickly increasing pollutionof air and water and social tensions have started to arise in many areas. Inequality between migrantworkers and residents as well as between the rural and urban population is rising. Slums, shanty-towns and other undesirable living conditions have left a growing part of the cities’ migrant workerpopulation in poverty instead of enabling them to become market participants. Additionally environ-mental degradation has continued as can for instance be measured by the rapidly decreasing numberof lakes and forests.The main purpose of this conference was to bring together senior policy makers, researchers andpractitioners from Asian transition countries to find and discuss answers to these pressing problems.The conference hereby provided a platform for mutual learning and transfer of professional experi-ence. GIZ’ RCI Programme contributed to the productivity of the conference through its internationalnetwork and its ability to mobilize renowned experts from across Asia.Many policy proposals were introduced by participants and discussed in formal and informal settings.Among them, a reform of the hukou system in China, a serious attempt to create equal opportunitiesfor migrant workers, combined with an urgently needed change of the country’s fiscal system, seemedto be of general consensus. For Viet Nam and Lao PDR, the need for further housing opportunitieswas underlined and Mongolia stressed its need for more environmental friendly solutions. All of theparticipating countries still see vast potential for economic development through urbanisation proc-esses. This potential is specifically high in countries that as of today do not have a very high urbanisa-tion rate, as Lao PDR for instance.Scale-oriented urbanisation as carried out in the past will not be sustainable in the future. People-oriented urbanisation has to take its place to guarantee that more people are enabled to live a pros-perous life in cities. To achieve this, reform needs to be undertaken in areas of public administration,public finance and environmental policy, to name just a few. Urbanisation will unleash its full potentialonly if this is done accurately.
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