Opening Session

Prof. Paul Collier opened the conference by talking about what it takes for cities to be successful, and what Rwanda can do. The session was closed by the minister of finance and economic planning, Hon. Claver Gatete, who highlighted urbanisation as a key priority and expressed enthusiasm for our partnership as they begin the process.

Prof. Collier spoke across three areas: the Rwandan context, the process of building successful cities, and housing in Rwanda.

Urbanisation in the Rwandan Context:

Rwanda’s demographic trends and geography means it needs to urbanise rapidly and successfully. To keep rural living standards rising, there has to be a decrease in absolute terms of rural populations to raise rural productivity. Cities need to pull people in from the countryside with opportunities, rather than wait until rural desperation pushes them and slums emerge. It is not, though, an automatic process.

How do you achieve those opportunities? We have to act today, but don’t know what we’ll be doing in the future. But we know what it will take to be good at making something in the future. Rwanda should focus on building cities as platforms for manufacturing something, rather than what that something will be. To be successful platforms, cities need to be a) highly efficient and have b) highly skilled people. Both are needed to be successful.

Building Efficient Cities

Building efficient cities requires three investments. These investments are separate and undertaken by different actors but all three must be undertaken together to produce productivity. The investments – housing, infrastructure and commercial – need to be coordinated and should be the priority for public policy.

Sequencing of the investments is essential. Commercial investment will always come last, so the choice is whether households move first with housing investment or governments do with infrastructure. Government must move first. When governments move second, retrofitting infrastructure investment becomes expensive and without the timely provision of public goods first to which households can positively respond; there can be disastrous outcomes.

For governments to move first well, they need to do two things together: investing and coordinating. Investing requires planning and implementing. When we plan, we should aim for high-density cities. High density cities generate greater spill-overs and create jobs endogenously – notably, because high density is a public good and markets will undersupply it. For good implementation, we need mandates with budgets and clear mandates to deliver investment in a timely manner. Coordinating household and commercial investments needs a regulatory function with two distinct processes for both categories.

Building low-income housing

Professor Collier argued that low income housing is most essential. Without housing that can be afforded by majority of citizens – rather than grandiose dreams – slums emerge and many things go wrong. Building low-cost housing can also produce a lot of jobs and benefit quickly.

Achieving low-income housing means overcoming four obstacles. 1) housing has to be affordable, not necessarily grand. 2) Have the right building standards appropriate to the country that make it easy for people to build. Cumbersome (or inappropriate colonial era) codes push people to informality. 3) Industrial organisation: it needs to be small, local firms doing the construction, not large, foreign ones. 4) We need secure legal rights: land, collateral and tenancy rights.

Finally we need to consider financing. Banks are inappropriate because of their cost structure. We need building societies, e-savings and targeted taxation to capture a good share of the large returns that accrue to the private sector via urbanisation.