IGC Ethiopia: Urbanisation Workshop

Venue: United Nations Conference Centre in Addis Ababa, Ethiopia

Date: 2 July 2015

The IGC Ethiopia Country Programme partnered with the Ethiopian Development Research Institute (EDRI) to find solutions to Ethiopian growth challenges, based on independent research of the highest quality.

The Urbanisation Workshop was part of a broader research programme, “Urbanisation in Africa and Developing Economies”, led by researchers at the University of Oxford and the London School of Economics and Political Science. It was a unique event that brought together world-class researchers and senior policy makers to discuss key urbanisation issues relevant to Ethiopia and other African countries such as job creation and investment in city infrastructure.

 

 

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Sessions

Welcome Introductory Remarks

Introductory remarks were given by Dr. Alemayehu Seyoum Taffesse – Country Director for IGC Ethiopia.

He then invited Prof. Sir Paul Collier to officially open the Urbanisation workshop. Prof. Sir Paul Collier began the discussion by outlining of the general process of structural transformation that growing cities must undergo to become prosperous. For Ethiopia, the path from poverty to prosperity may come from a well-managed process of urbanisation. Cities, Prof. Sir Paul Collier argued, offer people hope, but whether that hope is realised depends on how the process of urban development is managed.

He then noted that to produce growth for ordinary people, a city must create an environment that is both liveable and productive. Ethiopia is well placed to lead the discussion on African urbanisation, as it continues to have a need for a robust urbanisation agenda. It is well suited to absorb evidence and research into effective policy design.

Summary written by Upaasna Kaul, Managing Editor & Hub Economist

Keynote by H.E. Ato Mekuria Haile (Minister, Ministry of Urban Development, Housing and Construction, Ethiopia)

Presenter: H.E. Ato Mekuria Haile (Minister, Ministry of Urban Development, Housing and Construction, Ethiopia)

Average urbanisation rates in Sub-Saharan Africa are around 30%, but urbanisation rates continue to be driven by both population growth and changes in economic structures that draw more people into cities. It represents an opportunity, because it is a chance to promote a dynamic, self-sustaining urbanisation process that is an integral part of structural transformation in Africa. At the same time, it is a challenge because it demands attention and investment across multiple prongs (infrastructure for public utilities, health services, adequate decent housing, and access to quality education, recreational facilities, environmental protections, as well as developing rural and urban inter-linkages.

Urban development policy must also aim to strengthen the complementary inter-linkages between rural and urban environments, whilst continuing to sustainably manage revenues from natural resources. An effective urbanisation policy must strive to ensure balanced growth. This can be achieved through quality roads and rail infrastructure as well as improved connectivity among the cities. Additionally, H.E. Ato Mekuria urged that strengthening secondary cities was also important, particularly along transport corridors to expand development outside urban areas.

Summary written by Upaasna Kaul, Managing Editor & Hub Economist

Ethiopian Cities Sustainable Prosperity Initiative (ECSPI)

Presenter: Ato Abuye Alemu (Advisor to the Minister, Ministry of Urban Development, Housing & Construction, Ethiopia)

Ato Abuye Alemu presented on the Ethiopian Cities Sustainable Prosperity Initiative (ECSPI). The ECSPI is the main guiding policy framework being used to pave the way for Ethiopia to achieve middle-income status through a process of planned industrialisation and economic growth. It is a transformational agenda that is being used to build upon on-going urban initiatives that were spawned from the urban development policy established in 2005. Ato Abuye outlined two big challenges in Urban Policy for Ethiopia going namely, affordable housing and adequate transport infrastructure.

In addition to needing better planning and development policy for urban development, Ato Abuye also discussed the challenges of establishing backwards and forward linkages between rural and urban communities. As one of the least urbanised cities in the world, Addis Ababa represents a unique testing ground to experiment with producing effective and balanced urbanisation in tandem with good governance that promotes housing, transport infrastructure and industrial development.

The industrial development strategy outlined addressed the importance of structure for economic growth. Major towns function well as the centre for industry whilst smaller-towns can support food security needs by serving as agro-processing centres and suppliers of urban foodstuffs. In closing, Ato Abuye emphasised the importance of developing strong monitoring and evaluation systems to assess effectiveness of the ECSPI and other development policy initiatives for producing sustainable growth.

Summary written by Upaasna Kaul, Managing Editor and Hub Economist

What does a good city look like, and how is it formed?

Presenters

  • Professor Tony Venables (Director, IGC & University of Oxford)

  • Professor Sir Paul Collier (Director, IGC, & University of Oxford)

Prof. Venables began the session with a discussion about the features that make cities more productive and liveable. The question motivating his talk was understanding not simply the features that define successful cities, but also how good cities can engineer sustainable, pro-poor growth?

Working from the notion that cities can be high-productivity places, Prof. Venables went on to describe the dynamism and scale that defines particularly successful cities, but noted that the downside often associated with such cities was that they also tend to be much costlier places to live. Costs are driven in large part by the scarcity of land availability in densely packed urban areas.

He then went on to outline the three main types of built structures that characterise cities:

  • Commercial & Industrial structures which produce jobs and income
  • Residential structure which promote the wellbeing of households
  • Public infrastructure which ensure that public goods and services necessary for cities to function are widely and easily available.

The main constraining factor to these forces continues to be land-scarcity. This constraint can be relaxed only through effectively designed transport infrastructure. Without adequate compensation in the form of higher wages, or low-cost transport, urban environments can often produce vicious, not virtuous, circles of high costs and low wages which is considerably less efficient as an urban equilibria. The risks from higher costs can further exacerbate lower productivity and deter entry of newer firms into the market as a whole.

For most examples of successful & dense cities, the traditional urban form is most concentrated in the centre, but there are several notable examples of variation that emerge among large global cities. This is particularly true in cities developed without regard to normal efficient market principles such as Johannesburg, where the long-term impact of apartheid produced much more dispersed residential housing clusters. Brasilia & Moscow are both examples of largely government-constructed cities where residential areas were built too far out from the urban centre.

Prof. Venables went on to discuss the overall benefits that accrue in well-designed urban centres with particular emphasis on economic activities and productivity for workers. Cities are able to benefit from agglomeration effects, including knowledge spillovers and thicker labour markets that allow firms to readily access high-skilled workers. This also captures the advantages of specialising as a means of accessing higher-wage jobs. The other aspects of urbanisation that make such efficiency gains from cities possible are the features that make cities more liveable and low cost, primarily access to high-quality services such as public health and education provision, as well as well-designed, low cost transport infrastructure.

In concluding Prof. Venables urged researchers and policymakers to view cities as more holistic concepts. Moving out of vicious and into virtuous circles requires promotion of effective urbanisation processes that in turn invite greater influxes of high-productivity firms and provide financing for more effective urban infrastructure.


 

Following on from Prof. Venables session, Prof. Sir Paul Collier began by posing the question of how cities can move into more virtuous circles?

He went on to say that good cities act as engines of growth by creating productive jobs for ordinary people. The push to create more jobs, according to Prof. Sir Paul Collier, should form the basis of national urban policies and growth strategies. As migration brings more people into urban centres, a good development policy works to improve opportunities in both urban and rural areas.

Those who are capable, will move into newly emerging jobs in cities, leaving higher wages and more productive rural jobs for those who remain behind. This pattern, in turn, produces large urban markets into which agricultural workers can sell their produce. To this end, Prof. Sir Paul Collier argued that good urbanisation must not come at the expense of rural development.

In continuing, Prof. Sir Paul Collier identified the large young populations as a significant advantage of Sub-Saharan African economies. A large youthful workforce can better compete along dimensions that require workers to adopt and adapt to newer technologies and processes. In line with this thinking, cities are natural incubators of young, innovative technology-driven sectors, and simultaneously, they are magnets for flows of young labour market entrants. Efficient market structures will then, according to Prof. Sir Paul Collier, produce firm clusters, characterised by different kinds of labour specialisation.

In addition to the firm clusters, Prof. Sir Collier also observed that successful cities produce clusters of consumers that can serve as ready-made demand for local firms that do not produce internationally tradable goods. This again emphasises the need for efficient urban densities to trigger demands of scale and specialisation to facilitate efficient markets.

In exploring the factors that produce effective cities and ultimately drive virtuous circles, Prof. Sir Paul Collier went on to describe the central components of urban connectivity as (1) affordable transport infrastructure and (2) liveable density. These factors support and drive substantial industrial development by creating conditions for middle manufacturing firms to special their production and participate actively in global value chains.

Specialised production in particular is essential for reaping the rewards of clustering and agglomeration generated by dense urban environments. Liveability requires urban centres to produce sufficient levels of services such as health care and affordable housing. In his recommendation for African cities, Prof. Sir Paul Collier argued that the most efficient design of housing for developing cities should be apartment blocks typically built at a maximum height of five stories, 5 being the most efficient number of floors for residential housing that does not require the costs of elevator technology.

In conclusion, Prof. Sir Paul Collier proposed two questions to guide thinking on the process of urban planning and policy design. First, identifying primary decision makers that will determine the essential questions of the urban policy space? This will distribute clear responsibility for policy elements and decision-making to a specified set of decision makers. Second, even more primary is the need to determine who will appoint these decision makers in the first instance.

Summary written by Upaasna Kaul, Managing Editor & Hub Economist

Empirical presentations: What do we know about Addis Ababa & other African cities?

Presenters

  • Simon Franklin, LSE

  • Patricia Jones, University of Oxford

  • Julia Bird, University of Oxford

Dr. Franklin started the session by presenting two of his most recent working papers on location, housing and labour markets in Addis Ababa. His first project, an RCT conducted in the job search market that subsidized a subset of the population’s travel expenses to and from the widely used job boards, aimed at researching how distance from the centre affected employment opportunities. In analysing the results, Dr. Franklin concluded that there was significant friction in the labour market such that subsidized individuals where more likely to both search for jobs and find better permanent employment. According to Dr. Franklin, there is therefore a role for policy to remove these frictions, for example by reducing transport costs, and implementing urban safety nets or welfare systems to improve access to labour markets. Lastly, Dr. Franklin presented his ongoing research project conducted around the government’s initiative to build low-income housing, allocated to the citizens of Addis Ababa through a lottery. In this project, Dr. Franklin aims to look at how being allocated such an apartment affects employment outcomes, health, savings and community risk-sharing.

Dr. Jones then presented her recent work in Tanzania on entrepreneurship and firm productivity. The goal of her work had been to identify which types of firms created the most productive jobs, as job creation in many African countries is not necessarily correlated with small, entrepreneurial firms, such as the case in most OECD countries. Dr. Jones was able to identify a number of characteristics that were correlated with increased productivity and concluded that creating more productive firms it was important for having functioning transport networks.

Lastly, Julia Bird presented an ongoing study on path dependence and infrastructure in African cities. The study researched the location of firms and the elasticity of such locations, in order to explore reasons for why productivity in many African cities tends to be very low. Julia explained how the motivation of the study was to better understand the effects of urban transport infrastructure on the location of people and business as well as how policies can help make cities work. The study exploited a large urban transport infrastructure investment in Kampala, where the predicted effect of building such a large highway was to increase clustering of businesses as well as a shifting of tradable industries closer to the highway. Julia Bird concluded her presentation by explaining the extensive firm data set that the project would be analysing and asking the audience to stay tuned for upcoming results.

Summary written by Amanda Jinhage, Policy Economist

Panel session: What policies would help to make Addis Ababa a great 21st century city?

Presenters:

  • H.E. Ato Newai Gebreab (Executive Director, Ethiopian Development Research Institute & Chief Economic Advisor to the Prime Minister of Ethiopia)

  • Alemayehu Seyoum Taffesse (Country Director, IGC)

  • Professor Sir Paul Collier (Director, IGC & University of Oxford)

  • Professor Tony Venables (Director, IGC & University of Oxford)

Dr Jones chaired the final session of the day, addressing key urbanisation challenges for Addis Ababa in the upcoming years such as affordable housing, mortgage markets, firm productivity, and transportation costs. The discussion kicked off by Dr Taffesse identifying important policy goals for the city government regarding the housing situation, primarily highlighting the need for clearer taxation principles and specific rules regarding production standards.  H.E Newai stressed the importance of functioning rental markets and Professor Collier further pointed out the need to increase the supply of landlords. The panellists also specifically addressed the question of how the mortgage market should be developed to make it readily available to people. The need to innovate and establish efficient solutions were reoccurring themes.

The session then touched upon firm productivity, asking what lessons have been learned so far and how the “productivity miracle” needed could be accomplished. Dr Taffesse pointed to infrastructure being one of the main tools to achieving such productivity, which lead the panellists to debate how the transportation costs in Addis Ababa could be reduced. Dr Venebles stressed the need to increase official land use and make land prices more efficient. The need for technical innovation in construction was also pointed out.

In the closing statements of the panel, Dr Collier stressed the immense need, as well as possibilities, to get urbanisation right by concluding that “if easy isn’t available, you’ve got to be serious”.  Dr Venebles raised the question of secondary cities and stressed the need for Ethiopia at large to address this issue going forward. Dr Taffesse pointed towards the looming risk of mismanagement and extensive polarisation, which is something Addis so far has avoided successfully. Lastly, H.E. Newai concluded the session by stressing the need to incentivise private sector real estate developers to build houses for the ordinary middle class, asserting that the prospects for industrialisation and urbanisation going forward look promising.

Summary written by Amanda Jinhage, Policy Economist