Cities should be made attractive for investment

Policymakers should see cities as a whole economic system, focus on efficient use of land, infrastructure and utilities and maintain coordination among the stakeholders, to tap the growth potential, a renowned economist said yesterday.

Cities will achieve their potential only if they are perceived as attractive places for investment, said Anthony Venables, professor of the Department of Economics at the University of Oxford.

He delivered a lecture on “Urbanisation in the developing world: challenges and opportunities”. South Asian Network on Economic Modelling (Sanem) in collaboration with the World Bank organised the event at Muzaffar Ahmed Chowdhury auditorium of the social science faculty of Dhaka University.

Almost 350 students, young researchers and teachers attended the lecture.

Venables, also a member of the steering group of the International Growth Centre, said Bangladesh needs to have other thriving cities like Dhaka.

Cities are the drivers of economic growth and development, Venables said.

Cities are potentially good places to do business and to work because they support high productivity, he said.

“The data tells us that large cities have much higher labour productivity than other places,” he said, adding that metropolises attract highly skilled, well educated and energetic individuals.

Venables said connectivity to markets, suppliers and workers and firms' and workers' scope to specialise are the main factors behind the high productivity of cities. Much of the productivity advantage of cities ends up in land values, he said.

“This value is not created by any single investor. It is because of the overall effect of the city, and this creates strong case for a land tax that transfers this value to the city.”

“I do think city authority should have fiscal base, a revenue stream to act effectively,” he said.

It is also important for the central government to think about cities as a fact or part of development, he added.

He said cities are a balance of high productivity and high costs. But balance can go wrong if cities become dysfunctional.

Policymakers should think about urbanisation instead of focusing on cities only, said Hossain Zillur Rahman, chairman of the Power and Participation Research Institute.

He said growth in Bangladesh also takes place through transport corridors such as the Dhaka-Chittagong, Dhaka-Narsindi-Sylhet and Dhaka-Tangail highways where industrial and business activities are taking place.

Policymakers, including the high-ups of the government, are still unwilling to accept people coming to the cities although it is a reality, he said. “Urban vision is important.”

He was also critical of the type of investments that are being made. “Urban investments are dominated by elite thinking.”

Construction of flyover gets priority than ensuring good commuter facilities, he said.

He said flyovers have allowed people living outside of Dhaka to come and leave the city quickly. But people who commute below the flyover have to suffer from congestion, he said.

“When you think about infrastructure you must think of governance,” he said.

Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, said Bangladesh should focus on developing cities not only from the viewpoint of productivity.

“We also need sustainable and inclusive cities.”

Rahman suggested issuance of bonds or other innovative financing instruments to raise funds to build infrastructure.

Bazlul Haque Khondker, chairman of Sanem, said Dhaka suffers from land scarcity and severe infrastructure constraints.

There is also problem in coordination among the 18 ministries and 42 government agencies that are responsible for ensuring various services, he said.

The government's various targets, including the goal of becoming a developed nation, are impossible to achieve through the dysfunctional cities, he said.

Nazma Begum, chairperson of the Department of Economics at Dhaka University, said urbanisation creates many opportunities for trade and investment as well as employment.

It also creates many challenges like the pressure of the spiralling population and the increasing demand for basic amenities and the risks of environmental degradation and governance failure, she said.

Begum suggested for increased coordination, public awareness and cooperation to ensure better management of cities.

AJM Shafiul Alam Bhuiyan, dean of the social sciences faculty at Dhaka University, and Selim Raihan, executive director of Sanem, were also present.