A WORLD OF CITIES

With just under half of its population living in

cities, the world is already urbanized. When

measured in knowledge, attitude, aspiration,

commercial sense, technology, travel and access to information, even most rural societies are, to one extent or another,

woven into a global network of cities.

Globalization seriously escalated during the industrial

revolution of the late 18th century. Since then, the steam

engine, the telephone, the elevator, and now, the Internet

and cheap air transport, have conveyed people, goods and

information both horizontally and vertically at an unprecedented volume and velocity.The focal point of these activities has invariably been the city, a place of deals and decisions, take-offs and landings — a place less concerned with

the rhythms of nature, where everything can be bought or

sold, especially one’s ideas and labor.

In today’s globalized world, cities no longer stand apart as

islands. They are the nexus of commerce, gateways to the

world in one direction and focus of their own hinterlands in

the other.Tied together in a vast web of communication and

transport, cities are concentrations of energy in a global

force field.In a real sense,the world is completely urbanized,

as this force field has the power to connect all places and all

people into a productive, constantly adapting unity.

Three billion people — nearly every other person on

earth — live in cities.Today the planet hosts 19 cities with

10 million or more people; 22 cities with 5 to 10 million

people; 370 cities with 1 to 5 million people; and 433 cities

with 0.5 to 1 million people. By 2030, over 60 percent of

the world’s population (4.9 billion out of 8.1 billion people)

will be urban.

Cities in developed countries are rapidly losing their

place on the list of the world’s largest cities. Between 1980

and 2000, Lagos, Dhaka, Tianjin, Hyderabad and Lahore,

among others, joined the list of the 30 largest cities in the

GLOBAL OUTLOOK

INTERNATIONAL URBAN RESEARCH MONITOR AUGUST 2001

The State of the World’s Cities, 2001

JAY H. MOOR AND RASNA WARAH

United Nations Centre for Human Settlements (Habitat)

CONTINUED ON PAGE 5

US Department of Housing 

and Urban Development

WHAT’S INSIDE

Message from the Wilson Center Director . . . . . . . . .2

Message from the HUD Secretary . . . . . . . . . . . . . . .3

Establishing Property Rights for Economic Growth . . .9

HUD-Wilson Center Roundtable on Property Rights . .17

The Habitat Agenda and Global Urban Indicators . . .20

The Habitat Agenda and Best Practices . . . . . . . . . .25

USAID-Wilson Center International 

Making Cities Work Partnership Forum . . . . . . . . .29

Low-Income Housing in Mumbai, India . . . . . . . . . . .30

Community Economic Development in Ghana . . . . . .33

Summit of the Americas Update . . . . . . . . . . . . . . . . .35

Sustainable Development and Urban Livability. . . . . .36

Economic Strategies for Intermediate Regions . . . . .40 

Fannie Mae Foundation-Wilson Center International

Conference on Microfinance in the United States. .44

Bangkok, Thailand
GLOBAL OUTLOOK

2

GLOBAL OUTLOOK, the International Urban Research Monitor, is published quarterly by the Woodrow Wilson

International Center for Scholars, One Woodrow Wilson Plaza, 1300 Pennsylvania Avenue, NW, Washington, DC

20004 (www.wilsoncenter.org); and the U.S. Department of Housing and Urban Development, Office of International

Affairs, 451 Seventh Street, SW, Room 8118, Washington, DC 20410 (www.hud.gov).

EDITORS: Marc A. Weiss, Woodrow Wilson International Center for Scholars

(202) 691-4229 (ph); (202) 691-4001 (fx); WeissMA@wwic.si.edu 

Alven H. Lam, U.S. Department of Housing and Urban Development

(202) 708-0770 ext. 5827 (ph); (202) 708-5536 (fx); Alven_H._Lam@hud.gov

Opinions expressed in the articles are those of the authors and do not necessarily reflect the views and policies of

HUD, the Wilson Center, or the U.S. Government.

Layout for the August, 2001 issue of Global Outlook by David Farquharson, Prophyt Designs, Washington, DC.

The Woodrow Wilson International Center for

Scholars is pleased to co-publish, together with the

United States Department of Housing and Urban

Development (HUD), our third issue of Global Outlook.

A major theme of this issue is the challenge of global

urbanization. For the first time in human history, during the

early decades of this century, a majority of the world’s population will be living in urban areas. In June, 2001, the

United Nations Centre for Human Settlements (Habitat)

organized a Special Session of the U.N. General Assembly in

New York to begin facing the urban millennium. At the

previous U.N. World Habitat Summit in Istanbul, Turkey

during June, 1996, many countries committed to pursuing

an ambitious Habitat Agenda to increase the availability of

decent affordable housing for all, and upgrade the quality of

urban governance, economic and social life, health and safety, and the environment. Global Outlook features the

speech delivered by HUD Secretary Mel Martinez at the

United Nations in New York, along with three articles by

U.N. Habitat senior staff from Nairobi, Kenya — on the

state of the world’s cities, best practices, and urban indicators. In addition, we include related articles on low-income

housing in Mumbai (Bombay), India, community economic development in Ghana, a HUD update on the Summit of

the Americas, and a summary of the recent “Making Cities

Work Partnership Forum” that the U.S. Agency for

International Development (USAID) co-sponsored with

the Wilson Center’s Comparative Urban Studies Project.

We also highlight economic development issues through

an analysis by Hernando De Soto and Robert Litan on the

importance of creating formal property rights for the majority of people in developing

countries, in order to expand

market values and opportunities for capital investment,

financial credit, wealth creation, entrepreneurship, job

growth, and homeownership.

The Woodrow Wilson

International Center recently

co-hosted with HUD a roundtable discussion by a group of

experts about these issues.

HUD’s Deputy Assistant

Secretary for International

Affairs, Shannon Sorzano, provides a summary of this

roundtable, which we held to mark the publication of

Global Outlook’s second issue.

In this issue we explore international networking and

comparative research, including the Worldwatch Institute’s

study of sustainable development and urban livability in

Brazil, Denmark, and the U.S., the Organization for

Economic Cooperation and Development’s (OECD) economic strategies for intermediate regions, and a description

by Ayse Can Talen and Marc Weiss of the forthcoming international conference and book on microfinance and

microenterprise co-sponsored by the Fannie Mae

Foundation and the Woodrow Wilson Center.

The Woodrow Wilson International Center for Scholars

is delighted to forward to you this third issue of Global

Outlook.•

Message from Wilson Center Director Lee H. Hamilton
INTERNATIONAL URBAN RESEARCH MONITOR

3

Progress in the United States toward Implementing the

United Nations World Habitat Agenda

MEL MARTINEZ

U.S. Department of Housing and Urban Development

[Editors’ Note:The following is the text of the speech delivered by

Secretary Mel Martinez, United States Department of Housing and

Urban Development, at the Special Session of the United Nations

General Assembly for an Overall Review and Appraisal of the

Implementation of the Habitat Agenda, New York, June 7, 2001]

Mr. President, Madame Executive Director, Your

Excellencies, Ladies and Gentlemen, it is a great

honor for me to be here representing the United

States of America. I am the Secretary of Housing and Urban

Development, a member of the President’s Cabinet — and

I happen to be a refugee to the United States.

The fact that I am a refugee is not so remarkable. The

United States is a nation of immigrants and refugees who,

either searching for a better life for their families or fleeing

oppression, came to our shores and helped build our nation.

To be standing here today, however — as head of the U.S.

delegation — says a great deal about freedom and the

remarkable opportunities offered by participation in a free

society. We call it the American Dream — the freedom to

pursue success and prosperity, however the individual defines

it for him or herself. But access to housing, equal opportunities in choosing a place to live, and the right to own property and pass it on to our heirs are certainly at its core.

As nations united through Habitat, we share the dream

of individuals leading full and productive lives, through

access to adequate housing, land, credit, and basic services. In

the five years since Istanbul, we have made remarkable

progress toward meeting that goal. An innovative program

established in Santo Andre, Brazil, has transformed living

conditions, and brought hope to 16,000 residents who live

in the poorest areas of the city. Santo Andre has achieved its

success through an alliance that brings together local,

national, and international resources, while making citizens

a key partner and ensuring they have a voice. In Thailand,

the government established a unique revolving fund that provides low-interest loans for housing and other community

development projects.Today,Thailand’s urban poor are building networks and partnerships that are improving the quality

of life for residents in 53 of the country’s 75 provinces.

My government applauds these and other efforts that are

translating the Habitat goals into real solutions helping real

people.I am proud to say that we have also made strides here

in the United States since we met five years ago in Istanbul.

Today, we have more than six million new homeowners, and

the number of Americans who have achieved homeownership is at an all-time high.Americans who seek housing have

access to a vast network of support. Maybe I can best

describe this elaborate system from the perspective of the

individual who epitomizes its success: the homeowner.

The fundamental right to

own property, including a

home, is a foundation of our

society.Two out of every three

Americans own their own

homes. We believe so passionately in the cause of homeownership that every year, we

celebrate one week in June —

this week, coincidentally — as

National Homeownership

Week.

Expanding the number of

homeowners remains a national priority, because we understand that homeownership is at

the root of good citizenship. It plays a vital role in creating

strong neighborhoods by turning short-term tenants into

long-tern community stakeholders. In helping families build

real wealth, homeownership creates financial security and

peace of mind. Homeownership provides opportunities to

build the economic strength of a family, to also help elevate

families out of poverty. Once they have built up equity in a

home, homeowners can use it to fund a child’s higher education. Or they can access capital to help start a small business, with the dream of creating additional wealth — and

further security. Eventually, they can pass on their wealth

from one generation to the next.

Having lived in one country where such opportunities

are cherished, and another in which they are denied, I have

a special appreciation for the homeowner and consider the

growth in homeownership to be one of the most important

economic shifts of the past century. No matter where they

live, no matter their income, everyone should have the

opportunity to own their own home. “Everyone” includes

women. In the United States, we support without question

the equal rights of women to own property and receive —

or give — an inheritance.

Most new homeowners did not simply write a check

from a personal bank account. They had to finance their

purchase.Therefore, access to credit is critical, and the first

of four cornerstones of the United States housing system.

Over the past 35 years, we have enacted a powerful set of

laws to ensure that no American who can afford to own a

home is denied a mortgage. For this reason, the secondary

markets are key — perhaps the key — to the success of the

U.S. housing system. By stabilizing the mortgage markets,

the secondary markets provide low- and moderate-income

Americans with lower housing costs and better access to

home financing. They help break down the barriers to

homeownership and affordable rental housing.
GLOBAL OUTLOOK

4

The federal government serves as housing’s second cornerstone, although its role is specific and appropriately limited.The great majority of governmental decisions are made

closest to the homeowner, on the local level. The federal

government, operating openly and transparently, does offer a

supportive framework within which the housing market

operates. It fills in any gaps in the system by addressing issues

of unequal access to credit, discrimination, and the inability

of low-income families to afford housing. It provides programs and tax incentives aimed directly at bringing everyone into the mainstream housing market.

Every citizen has the opportunity to help make the rules

at the local level. This is the third cornerstone of the

American housing system. Through local elections, public

hearings, their involvement in non-profit groups, and public-private partnerships, individuals can help determine the

decisions that affect housing in their own communities.

As the fourth and final cornerstone, homeowners and

renters have a strong legal system to support them, one that

ensures their rights cannot be unjustly stripped away. The

civil rights protections extended by our Fair Lending and

Fair Housing laws prohibit discrimination in the sale and

rental of housing based on race, national origin, disability,

sex, and family status.

While its role is vital, we recognize that government does

not have all the answers or a monopoly on compassion.

President Bush is committed to working with communitybased and non-governmental organizations — especially faithbased groups -to lift up the neediest among our citizens.Two

days ago, I took hammer in hand and joined the President in

Tampa, Florida, to help kick off Habitat for Humanity

International’s World Leaders Build. We support Habitat for

Humanity and its faith-based cousins wholeheartedly — they

are helping to instill in our citizens something that government alone cannot: a sense of hope, and a sense of pride.

The United States is in many ways defined by the opportunities it affords its citizens.This says something very powerful about the benefits of freedom. And maybe it helps

explain why the American Dream compels us to share the

harvests of our opportunities.Within the next three decades,

more than 60 percent of the world’s citizens will live in

urban settings, most of them in developing countries illequipped to handle the housing needs of so many people.

Our urban centers in the United States have faced the problems of inadequate and unaffordable housing, and we have

decades of experience in creating solutions — not federal

government solutions, but solutions developed in partnership by local authorities, private enterprise, and community

organizations.We are eager to share what we have learned,

and we continue to reach beyond our borders to form

strong partnerships with our global neighbors:

The expertise we gained in establishing our secondary

markets and promoting and supporting community reinvestment is now helping other countries create their own

housing finance programs and ultimately expand homeownership opportunities. For 30 years, the U.S. worked with

the government of Chile and its private sector to develop a

successful housing finance system. Now, through U.S.-sponsored conferences, workshops, and technical assistance, other

Latin American nations are learning how to modernize their

finance systems based on the Chilean model.

The lessons we learned as we breathed new life into

struggling American neighborhoods are helping to create

jobs and revitalize urban communities elsewhere in the

world. The continued urbanization of South Asia has

brought with it management challenges that my government is actively helping to solve. We successfully worked

with key cities such as Katmandu to plan for and finance

improvements in urban environmental management.

The knowledge we gained improving construction techniques is helping our global partners build better homes at

a lower cost. In South Africa, USAID’s Regional Urban

Development Office is focused on energy efficient housing

and the need to bring electricity to those who have historically gone without it. Our work has been key in building

alliances between national and local governments and private entities.

These arrangements are hardly one-sided. Over and over

again, we have been the beneficiaries when other countries

developed improvements in urban management, new ways

to preserve historically significant property, more energy

efficient technologies, and other breakthroughs.This expertise is invaluable, because for all our progress, challenges

remain for this Nation. We are redoubling our efforts to

close the homeownership gap for minorities, keep the

inventory of federally assisted housing strong and viable, and

shelter the homeless and lead them toward self-sufficiency.

We are being wise stewards of our natural resources as our

cities grow beyond their original boundaries.We are building strong schools, so that “no child is left behind” in the

new, global, information-based economy.

“Like stones rolling down hills,fair ideas reach their objectives despite all obstacles and barriers. It may be possible to

speed or hinder them,but impossible to stop them.”These are

the words of one of my favorite thinkers, Jose Marti.

Despite the obstacles and barriers we sometimes find in

our path, my country shares with you a commitment to the

“fair idea” of secure, safe, and adequate housing for all.We

have made great strides, and our progress cannot be stopped,

but until democracy and freedom are truly allowed to bring

out the best in all the world’s citizens, we should not rest.As

we work together in search of answers, let us recognize that

solutions dictated by government will not work on their

own. Instead, we must strive to expand self-sufficiency for

individuals, strengthen families, and empower communities

to shape their own futures and their own destinies.This goal

is good for our countries, good for the international community, good for every individual who pursues a dream. Let

it be our constant guide as we recommit ourselves to fulfilling the Habitat agenda and carrying out the important work

ahead.•

Mel Martinez is Secretary of the U.S. Department of

Housing and Urban Development in Washington, DC.
INTERNATIONAL URBAN RESEARCH MONITOR

5

world. By 2010, Lagos is projected to become the third

largest city in the world, after Tokyo and Mumbai. By 2010,

Milan, Essen and London will no longer be listed among the

world’s 30 largest cities list, and New York, Osaka and Paris

will have slipped farther down that list.

The current worldwide rate of urbanization (that is, the

percentage, per year, that the urban share of the total population is expanding) is about 0.8 percent, varying between

1.6 percent for all African countries to about 0.3 percent for

all highly industrialized countries.At the same time, urbanization of poverty is a growing phenomenon; it is estimated

that between one-quarter and one-third of all urban households in the world live in absolute poverty.

Starting with the 2001 edition, the State of the World’s

Cities takes the reader through Africa, the Arab States, Asia

and the Pacific, the highly industrialized countries, Latin

America and the Caribbean and countries with economies

in transition to understand better how shelter, society, environment, economy, and, above all, systems of governance can

contribute to urban vibrancy and viability in a globalizing

world.

AFRICA

By 2020, sub-Saharan Africa’s urban population will

approach 440 million, or 46 percent of its projected total of

952 million.Today, Africa’s urban areas account for 34 percent of the total population of 611 million and are credited

with 60 percent of the Gross Domestic Product (GDP).

Municipalities, however, capture only a small percentage of

GDP — on average less than US $15 per capita per year —

in revenue, creating disparity between the requirements for

municipal governance and available resources.

Global economic processes have stalled in Sub-Saharan

Africa with severe consequences for its urban areas.Africa is

the only region in the world without a true newly industrializing economy. The failure to industrialize can partly be

explained by external factors, but a variety of domestic factors must also be taken into account, including economic

policies, the effects of personal rule, historical legacy, the role

of the state and low levels of literacy. Structural adjustment,

which has created shortages of imported materials, reduced

investment, retrenched the public sector and led to declining effective demand, has badly affected urban-based manufacturing. Large-scale manufacturing, which created an

impressive volume of jobs in the Asian and Latin American

regions, has generated only a small number of employment

opportunities in urban Africa and, consequently, the informal sector continues to remain the largest source of employment in the region.

Nonetheless, there is a forward movement. In recent

years, national governments across Africa are increasingly

adopting decentralization as one of their primary strategies

for development.Africa has also spawned an ‘associative’ sector built on local solidarity movements. Several countries in

Africa have revised their constitutions and passed legislation

that supports the participation of excluded and disadvantaged groups, especially women.

THE ARAB STATES

The Arab States’ urban population is projected to be 260

million, or 66 percent of its estimated total of 395 million,

by 2020. Today urban areas account for 56 percent of the

total population of 270 million, Municipalities capture just

over US $45 per capita in revenue per year.

Overall, the Arab States comprise a great diversity of

socio-economic and human settlement profiles and characteristics: from least developed through developing to oil rich

countries; conflict and post-conflict situations; from very

open economies to economic isolation; and from highly

urbanized to predominantly rural.The region’s considerable

internal diversity is reflected in the conditions in its cities

and has resulted in widely varying domestic needs and priorities: rehabilitation and reconstruction (Iraq, Lebanon,

Palestine and Somalia); poverty alleviation (Egypt, Jordan,

Syria, Morocco and Yemen); urban management and housing needs (Egypt, Jordan and Algeria); and capacity building

(Gulf countries).

ASIA AND THE PACIFIC

In 20 years, the urban population in the Asia and Pacific

region is expected to be 1,970 million or 46 percent of its

projected total of 4,298 million. Urban areas today account

for 35 percent of the total population of 3,515 million. On

average, municipalities secure about US $150 per capita in

revenue per year.

Urbanization in Asia and the Pacific raises red flags, particularly because an increasing number of the region’s poor

live in urban areas. The size and urgency of the problem

requires different ways of managing cities and their related

CONTINUED FROM PAGE 1

Kumasi, Ghana
GLOBAL OUTLOOK

6

infrastructure and service requirements. Recently, macroeconomic and financial crises have cast doubt on conventional approaches and concepts. The financial crises of the

1990s affected millions of lives and aggravated social vulnerabilities. In East and Southeast Asia, the social consequences

of the financial crisis have been felt more in cities, reflected

in increased poverty brought about by cutbacks in both

public and private employment as well as in public expenditures for health and education.

However, the increased pace of urbanization and its linkages to economic globalization have reinvigorated interest in

the process of governance and its links to economic growth.

Decentralization and local autonomy are gaining more

momentum, and with this, the interest in building the

capacity of local governments is growing. While several

Asian countries have adopted decentralization policies,

excessive controls are still exercised in others on the functional, financial and administrative responsibilities of local

government. As a result, there is a mismatch between the

functional powers of local governments and the financial

resources available to them.

HIGHLY INDUSTRIALIZED COUNTRIES

The urban population in the highly industrialized countries

is projected to be 547 million, or 84 percent of their combined population of 649 million, by 2020.Today, urban areas

account for 80 percent of the total population of 597 million. On average, municipalities obtain about US $2,900 per

capita in revenue per year.

In 2020, there will be 5 urban agglomerations larger than

5 million inhabitants in Europe: Paris, Moscow, London,

Essen/Ruhrgebiet and St. Petersburg. Most urban populations in Europe live in small or medium-sized towns; half

the urban population lives in small towns of 10-50,000 people, and a quarter in medium-sized towns of 50-250,000.

Only 25 percent of the urban population lives in cities with

more than 250,000 people.

Cities in highly industrialized countries no longer deal

with the effects of urbanization, but rather with a combination of other demographic issues and the impacts of global

trends: increasing internationalization of metropolitan

regions; changes in the distribution of responsibilities

between the public and private sectors; a generally stronger

role for a few major cities within each country; aging populations and the related problems of access to health care and

pensions; international migration; and the highly detrimental impacts of social and economic polarization.

For the past two decades, the highly industrialized countries committed themselves to economic policies aimed at

encouraging macroeconomic stabilization, structural adjustment and the globalization of production and distribution.

Although these policies have in general been effective in

promoting short-term economic growth, low inflation and

lower current account imbalances, negative longer-term

societal implications are now emerging as major political

and socio-economic dilemmas. Growing political disenchantment arising from widening income gaps, declining

political participation and widespread social exclusion are

manifesting themselves in cities across North America and

Europe alike. In the United States, for instance, racial disparity is one of the most important issues facing cities.

LATIN AMERICA AND THE CARIBBEAN

The region comprising Latin America and the Caribbean is

the most urbanized in the developing world.With 75 percent, or 391 million, of its people living in cities, it has an

urban-rural ratio similar to that of the highly industrialized

countries. However, unlike highly industrialized countries,

urban areas are not geographically scattered in terms of

physical size or populations. Urbanization patterns, with the

exception of Brazil, typically involves one very large city

that accounts for much of the country’s urban population.

The urban population will approach 539 million, or 81 percent of its projected total population of 665 million, by

2020. On average municipalities capture less than US $90

per capita in revenue per year.

The biggest challenge facing Latin America and the

Caribbean is the growing urbanization of poverty. Despite

general economic growth, the number of low-income people in the region rose from 44 million to 220 million

between 1970 and 2000. More than one-third of the households living in poverty are headed by women. Much poverty is concentrated in urban areas; a massive 40 percent of the

population of Mexico City, for instance, and a third of São

Paulo’s population is at or below the poverty line.

ECONOMIES IN TRANSITION

The urban population in countries with economies in transition will approach 420 million, or 78 percent of its projected total population of 541 million, by 2020.Today, urban

areas account for 70 percent, or 382 million of the total

population of 543 million. On average, municipalities capture about US$ 275 per capita in revenue per year.

There are sharp differences among the various countries

with economies in transition, notably in criminality, corruption and levels of democracy. Some, particularly in central

Europe, have clearly started to adjust to the market economy promoted by the West. Although the laissez-faire model

was assumed by many to be the solution, experience during

the past decade indicates that this does not necessarily hold

true for all.

It is now recognized that sustainable urban development

in these countries will depend on the creation and maintenance of efficient land and property markets; the development of more and better housing finance options; a greater

emphasis on municipal finance and institution building;

strengthening of urban utility systems; a growing interest in

the preservation of cultural assets and heritage; and the

responsiveness to emergencies such as earthquakes and

flooding.
INTERNATIONAL URBAN RESEARCH MONITOR

7

Policy Issues

URBAN SHELTER

More than one billion of the world’s urban residents live in

inadequate housing, mostly in the sprawling slums and

squatter settlements of developing countries. A significant

trend during the past decade has been the growing awareness of the relationships between human rights and sustainable development. In the field of shelter, this has led to a

decline in human rights abuses, such as mass forced evictions. Negotiation and participation are increasingly being

employed to secure the urban poor their rights to shelter.

The right to adequate housing is recognized by more

than 70 percent of the world’s countries. Almost all countries in Asia and the Pacific promote housing rights in their

legislation, and the Arab States provide the greatest protection against eviction.

Extending urban citizenship to low-income people,

through the granting of secure tenure, for example, is one of

the most far-reaching decisions that can be taken in promoting a sustainable shelter strategy.

URBAN SOCIETY

Despite the potential of cities to improve living standards,

the benefits of urbanization are not shared equally. All too

often, cities are still divided into haves and have-nots - the

established and the marginalized — and offering different

life opportunities for women and men. In developing

countries, the statistics are particularly disturbing: over 50

percent of the population of Mumbai and New Delhi lives

in slums, while in Lagos and Nairobi over 60 percent of

households remain unconnected to water.

Exclusion, as a result of physical, social or economic barriers, prevents many groups from participating fully in urban

life and services. Failure of local authorities to integrate such

groups in their decision-making is often a function of inertia, along with bureaucratic and unresponsive forms of governance. Participatory governance is a prerequisite to social

cohesion and inclusion. It involves strengthening civil society and supporting local populations to engage in, and benefit from, urban opportunities.

URBAN ENVIRONMENT

Apart from its effect on health and well-being, environmental degradation and pollution continue to constrain development and growth of cities. Ill health and premature death

not only cause suffering, they also impose heavy costs on the

economy. Ultimately, the human population cannot escape

the detrimental effects of unsustainable consumption and

environmental degradation.

An increasing number of countries now recognize the

key principles of environmental management. One is that

the environment is not an end in itself — not something to

be ‘protected’ from development — but that it is a resource

to be carefully managed on a sustainable basis. Secondly,

urban development necessarily depends on the natural

resource base available to the city — which in turn has an

impact on the state of those resources. It is, therefore, crucial

to improve understanding of the two-way relationship

between the environment and development.

URBAN ECONOMY

Large cities typically produce a significant share of the Gross

Domestic Product (GDP) of their countries. For instance,

Bangkok, with only 12 percent of the national population,

contributes 38 percent towards Thailand’s GDP, more than

the GDP of any of the agriculture-based economies in

Africa.Yet, despite the significant economic role played by

Maria Auxiliadora, El Salvador
GLOBAL OUTLOOK

8

cities, they often receive less than they might warrant for

their contribution to the national economy, negatively influencing their productive potential. Key constraints to urban

productivity include infrastructure deficiencies, inappropriate regulatory frameworks for urban land and housing markets, weak municipal institutions, and inadequate financial

services for urban development. Strategies to combat these

constraints include:

1) strengthening the management of urban infrastructure

by improving the level and composition of investments,

reinforcing institutional capacity for operations and maintenance, and seeking opportunities for greater private sector

involvement;

2) improving city-wide regulatory frameworks to

increase land and housing market efficiency and to enhance

private sector provision of shelter and infrastructure;

3) improving the technical and financial capacity of

municipal institutions through more effective application of

resources and division of responsibility between central and

local governments; and 

4) strengthening financial services for urban development, ranging from microfinance to municipal bond markets.

Urban economies in the developing world are largely

driven by the informal sector. Informal sector employment

makes up 37 percent of the total employment in developing

countries as a whole, and is as high as 65 percent in Africa.

Cities can support the informal sector through the provision

and maintenance of infrastructure, including adequate supply of electric power, water, transport and telecommunications networks. By relaxing rules and regulations, the informal sector can be expected to contribute further to the creation of jobs and, perhaps, eventually be integrated into the

formal economy.

URBAN GOVERNANCE

Effective governance is increasingly dependent on people

assuming their responsibilities as citizens and participating in

decision-making and implementation. Citizens are learning

to forge new alliances that strengthen their voice and make

their concerns felt in legislation. Governments at all levels

increasingly recognize the value of communication, consultation, and negotiation for joint-decisions and joint-implementation of policies that meet the changing needs of society.

However, reform of governance institutions and

strengthening of local citizenship are necessary prerequisites

for effective governance. Some of the emerging issues and

priorities that need to be addressed include: redefining the

roles and responsibilities of central and local governments;

promoting city-wide development strategies; regulating

equitable financial transfer between all levels of government;

encouraging transparency through free flows of information; effective civic engagement and participation; and

strengthening leadership while promoting ethical conduct

in the governance of cities.

THE KEY FINDING

A country’s global success and its overall human development rest on the shoulders of its cities. For the good of all

citizens, city and state must become political partners rather

than competitors. If accommodation requires new political

arrangements, institutional structures or constitutional

amendments, it is never too early or too late to begin making changes.The nature of those changes can best be determined through empirical observation, analysis of information and political dialogue on both the condition of a

nation’s cities and a national strategy to improve that condition.

Each country should, indeed, prepare and publish, periodically, a report on the state of its cities, focusing especially on national and local policies and how they affect cities

and their citizens. Gathering of evidence by putting in place

proper information systems and diagnostic tools is a practical first step. Good information will provide the common

platform for dialogue among stakeholders — an essential

part of the process — as they approach a vision for the

future and set priorities for conservation and change.

The main goal is to make the structures of governance

more responsive to individuals, families, and communities so

that both national and local authorities can better serve civil

society, each through separate but complementary instruments.•

The State of the World’s Cities 2001, the first in a series

of flagship reports produced by the United Nations Centre for

Human Settlements (Habitat), was launched in June, 2001,

at United Nations headquarters in New York.This article is

adapted with permission from the report’s Summary. Dr. Jay

H. Moor is Coordinator and Principal Editor for the series.

Rasna Warah is Editor of Habitat Debate. The full report

may be viewed on the Habitat website, www.unchs.org, or a

copy may be ordered from the UNCHS (Habitat)

Publications Unit, P.O.Box 30030, Nairobi, Kenya. Email:

habitat.publications@unchs.org

Bhopal, India
The professional economics literature is replete with

articles and books devoted to the question of how to

enhance economic growth, especially in the developing world. Actual progress on the ground, however, is

mixed at best. While many areas enjoyed remarkable growth

in incomes and living standards during the past three or four

decades—Asia being a prime example—other regions

noticeably lagged. In the words of the recent, thorough

World Bank study, The Quality of Growth, by the end of the

1990s, poverty rates in sub-Saharan Africa, Latin America,

and the Caribbean remained “stubbornly high.”

If it were a matter of applying the standard neoclassical

model used by many economists, solving the growth problem would be relatively easy, somewhat like baking a cake:

add some capital (domestic or foreign), technology, and education to a fixed supply of labor, and assume the presence of

some basic market institutions, and growth of income per

capita should follow inexorably. For our purposes here, the

key assumption is that market institutions—specifically, the

presence of widely recognized and enforceable property

rights—are well functioning. Indeed, it is fair to say that

much of the professional literature on economic development, with some few exceptions, takes the presence of property rights as a given and then moves on to what apparently is the more important questions of how to promote

investment, savings, and the transfer of skills and technology

to the developing world. Indeed, the World Bank study of

economic growth mentioned above pays virtually no attention to the role of property rights, the presence or importance of which must implicitly be taken for granted

(although, to the World Bank’s credit, it has paid more attention to this subject elsewhere).

We take a much different view in this article. Building

on the argument laid out by Hernando De Soto in his

recent book, The Mystery of Capital, we identify how, in

principle, the most basic representation of property rights—

title to land—is fundamental, yet lacking, in many regions of

the world. There is a reason for this: massive migrations of

residents from rural to urban areas have simply overwhelmed the formal legal infrastructure of these countries,

leading to widespread “informality.” This phenomenon is

not peculiar to today’s less developed countries; the same

thing happened in developed societies, notably the United

States, earlier in their development. Confronted with largescale informality—”squatting” in the vernacular—developed countries eventually made their peace with it, essentially formalizing it, although not without much opposition

and delay.

We then turn to a theoretical and empirical discussion of

the costs of widespread informality. We concentrate on

informal residential housing because it is relatively neglected in the literature on informality and, when aggregated

throughout the world, represents an enormous investment

of resources.

Our argument can be summarized as follows. At the

most general level, legal systems are analogous to standards

and thus to features of what economists recently have come

to label as network externalities: the greater is the number

of people who use a network, the more valuable is it for all

to be “hooked” to the network. Land titles work the same

way. The larger is the number of people who recognize

them as representing legal claims to a piece of property, the

wider is the market in which the seller may want to transfer

it. Wider markets, in turn, promote investment, while

enabling the property to serve as collateral for financing.

We are careful in making our claim of the importance of

tackling the issue of informality. We are not saying that the

sudden formalization of all informally held property is the

silver bullet that will immediately launch less developed

countries on a much faster growth trajectory. Our claim is

more modest: finding a way to formalize property that is

now widely held informally is a necessary, but not sufficient,

condition for achieving faster growth and for thwarting a

looming backlash against capitalism in parts of the developing world. Certainly, other policy conditions—macroeconomic stability and policies that promote the development

of human and financial capital, among others—also are

essential.

In the final section of the paper, we take up the critical

issue of how to get from here to there —that is, what strategies should both developing countries and the international financial institutions create to assist them in speeding up

the process of turning existing informally held property

titles into titles that are recognized by formal legal institutions? This challenge is not as easy as it may sound. In

essence,we are calling for a vast acceleration of a process that

took developed countries such as the United States more

than a century to accomplish. If policymakers do not want

to see a widening gulf in the per capita incomes of the rich

and poor countries of the world, they should have a strong

interest in seeing that such acceleration takes place.

THE WIDESPREAD PRESENCE OF

INFORMALITY

Informality exists when people or businesses choose to

operate outside the formal law. We underscore the word

INTERNATIONAL URBAN RESEARCH MONITOR

9

Establishing Effective Property Rights for Economic

Development

HERNANDO DE SOTO

Institute for Liberty and Democracy

ROBERT E. LITAN

Brookings Institution
“choose”: the decision to forgo the protection and benefits

of the law—access to the judicial process, protection of the

police, and the ability to transact with many different parties

over a wide geographic region (in principle, the world)—is

not made lightly. Instead, it comes about because people

rationally conclude that the costs of acquiring these benefits

are simply too great to justify the time and expense of

becoming formal or because individuals have insufficient

information about the relative costs and benefits of being

formal.

One common supposition is that individuals choose to

live and operate outside the law because they want to avoid

paying taxes. Although taxes represent a real cost of doing

business or acquiring land through formal means, living and

working extralegally typically requires the constant payment

of uncertain bribes to officials, which can be more onerous

and oppressive than any formal tax. More important, however, are the delays—caused by layers of bureaucratic

machinery—that residents and businesses in less developed

countries typically encounter in their efforts to become formal. As years of painstaking study undertaken at the ground

level by researchers at Hernando De Soto’s Institute for

Liberty and Democracy (ILD) have documented, when it

takes nearly a year to form a legal business in Peru, or nearly two decades to obtain formal title to land in Egypt, or more

than two years to surmount the legal hurdles to lease land in

Haiti for a term of just five years, it is no wonder that so

much informality exists in these countries.

Table 1 tabulates the results of this research in the countries that the ILD has studied thoroughly. The evidence

speaks for itself. Most of the populations, in both rural and

urban areas, in these countries live in structures that have no

formal legal status. Actually, the phenomenon of informality is pervasive throughout the less developed world.

Extrapolating the results of table 1 to other regions, using

what we believe are reasonable assumptions, yields the projections shown in tables 2 and 3. If these numbers are anywhere close to accurate—and we believe that they are as

reasonable as any other projections—most of the world’s

population outside the West and Japan lives in structures that

are not legally sanctioned.

How did this happen? The rise of informality closely

tracks the explosive migration of populations from rural to

urban areas. People simply have moved faster than the law.

When arriving in their new urban surroundings, migrants

often come up against too many formal legal obstacles to

claim land formally. So they implicitly and understandably

make the benefit-cost calculation already suggested: under

the protection of informal, but often surprisingly wellorganized, groups and associations, the new arrivals usurp

land—often technically owned by the government—and

then use it to construct residences, but without waiting

interminably for legal permission to do so. In Peru, these

informal areas have come to be known as pueblos jóvenes, or

new towns; in Brazil, they are known as favelas; in other

countries, they have different names. The higher incidence

of informality in urban than in rural areas throughout the

world, shown in tables 2 and 3, is consistent with the notion

that rural-to-urban migration is driving much of the informality that now exists.

One other aspect of informality is essential to point out.

Not all informals are poor, nor do they always remain informal. Many individuals who might occupy the middle class

in otherwise low-income countries are informal because

they make the economic calculus described here.

Furthermore, that calculus may, at times, tilt in favor of formal registrations for some things, such as automobiles, but

not for others, most notably land. In addition, individuals

and their families may move back and forth between formality and informality, depending on the costs and benefits.

But, for the most part, informals, having chosen that path,

tend to stay there, unless given compelling reasons to

become formal.

ARE INFORMALS DIFFERENT FROM THE

REST OF US?

It is tempting to conclude that informal residents of less

developed countries somehow are inherently less lawful

than those living in richer countries. But such a belief

would be wrong. If the residents of rich countries would

look back at the histories of their own countries,they would

find that their ancestors or predecessors, too, behaved in a

very similar fashion.

GLOBAL OUTLOOK

10

Table 1.

Informality and Dead Capital around the World

Informal as a Informal as a Estimated value GDP in 1999

percentage of percentage of of dead capital (billions of 

Country rural population urban population (billions of U.S. dollars U.S. dollars)

Egypt 83 92 240 92.4

Haiti 97 68 5.2 3.9a

Peru 81 53 74 57.3

Philippines 67 57 133 75.3

Source: Hernando De Soto, The Mystery of Capital (2000) and World Development Indicators database.

a. 1998.
The history of Western Europe, for example, is marked

by official hostility to squatting and other illegal activity dating from as early as the seventeenth century by migrants

from rural areas to the cities. Existing guilds, which were

permitted by formal law, prevented many of the new arrivals

from gainful employment. Extralegal or informal activity—

-in homes and makeshift shops—was the inevitable result,

and migrants often were arrested, or avoided arrest only by

paying bribes to corrupt officials. Arguably, the French

Revolution was spawned in large part by the inability of

France’s bureaucratic legal system to accommodate the

needs of much of the population, who were effectively

forced to live outside the law. By the nineteenth and early

twentieth centuries, however, most Western European countries began adapting their legal institutions to accommodate

the property and labor rights of their populations.

The United States has a similar history and is worth a

closer examination. Its formal legal system, of course, was

inherited from Great Britain. Yet as new settlers from

throughout Europe continued to arrive in the colonies, they

resorted to squatting, putting down claims to property

wherever they stopped. Inevitably disputes broke out over

ownership to property claimed by multiple parties. Initially,

colonial leaders attempted to apply the common law they

brought with them from the mother country, but the common law had not envisioned a society that did not have an

established and well-accepted titling system from the outset

and where multiple claims to the same piece of property

were frequent. Accordingly, property disputes often were

resolved in open trials in which various parties testified, but

where the legal niceties were ignored. The definition of

property rights thus varied across the colonies, and squatting

became widespread.

As in Europe, the squatting was difficult to stop. The

number of extralegal settlers was too large relative to the

number of colonists who were willing to evict them.

Eventually, some squatting was grudgingly accepted where

settlers could prove they had improved the land they were

occupying by planting crops or building cabins or other

structures. Virginia was the first colony to recognize such

“cabin rights” or “corn rights” through the doctrine of “preemption.” Other colonies copied this legal innovation.

Preemption proved to be quite limited in scope, however, after the United States was formed. Congress repeatedly expressed hostility to squatting, giving federal authorities

the power to remove unlawful settlers from federal lands. At

the same time, Congress awarded free land with formally

recognized titles to railroads, soldiers, and certain other

recipients. The resulting patchwork of property rights at

both the federal and state levels, formal and informal, was

just that: a system in disarray. Between the end of the eighteenth and nineteenth centuries, Congress passed more than

500 laws aimed at simplifying and reforming federal property laws, but it could not prevent squatting, which continued unabated. With the benefit of hindsight, this is hardly

surprising. As in the colonial period, the ever-expanding

numbers of people who were arriving in the country from

Europe, as well as the original settlers, were making claims

to property at a much faster pace than the formal legal system could accommodate.

The result also was predictable, although it took decades

to accomplish. Eventually,American politicians were forced

to recognize the realities of extralegal migration. The settlers proved too numerous and too politically powerful to

ignore. Building on the preemption doctrine developed in

the colonial era, Congress enacted the first federal preemption law in 1830, renewing it in subsequent years.

Furthermore, in 1862, when Congress enacted the

Homestead Act giving 160 free acres to any settler willing

to live on and develop the land for five years, it was only

sanctioning what the settlers had already done themselves.

While the population of the United States expanded by 32

million from 1862 to 1890, only about 2 million of these

individuals settled on farms claimed under the act.

Nonetheless, the Homestead Act is important symbolically

for illustrating how formal law came to embrace legal

arrangements developed extralegally in the first instance.

Extralegal property rights in the United States are noteworthy in two other ways as well. During the nineteenth

century in the Midwest, many settlers formed claims associations to protect their rights against speculators or claim

jumpers. Analogous to the organizations of informals in

Peru and elsewhere who “invaded” unoccupied areas of land

in the late twentieth century, these associations enforced

their own form of strict and primitive justice: in some cases,

juries of members would decide among competing property claims, while in others, settlers would resort to force,

knowing that the association would protect them against

reprisals. The associations had their own constitutions, their

own rules for adjudicating disputes, and their own procedures for registering and recognizing claims. In essence, the

associations developed their own version of the common

law—outside the existing formal system of common law

administered by the formally recognized courts.

Meanwhile, in California, settler self-help took the form

of miners’ districts - organizations of settlers who rushed to

the state after gold was discovered in the mid-nineteenth

century. Through their districts, miners created their own

law, fixing the dimensions of mining claims and establishing

guidelines for how miners would identify the boundaries of

those claims. In addition, the regulations of the districts

established their own recorders’s offices, which kept official

track of claims. In effect, then, the miners themselves filled

the vacuum in federal mining law, which explicitly excluded mineral lands from federal preemption, by creating a legal

structure of their own.

In short,American property evolved through occupancy,

preemption, homesteading, and miners’ districts. Although

formal legal systems had their defenders, they were overwhelmed by the continuing population growth and migration of existing and new residents who could not wait for

formal recognition of their property claims. So they took

matters into their own hands, much as informal residents

throughout the developing world have been doing for sevINTERNATIONAL URBAN RESEARCH MONITOR

11
eral decades. But the key fact about U.S. property law is

that it eventually embraced the bottom-up revolution engineered through extralegal means. Although not without a

struggle, policymakers and judges at least recognized realities

on the ground and thus, unknowingly at the time, set an

important precedent for what needs to be done in developing countries today.

THE COSTS OF INEFFECTIVE PROPERTY

RIGHTS

On the surface, it might appear that there is nothing wrong

with the apparently vast amount of informality around the

world. Squatting has replaced formal legal ownership, but it

does not appear to have stopped the informals from investing in the bricks and mortar that make up the residences in

which they live. According to rough surveys conducted by

ILD researchers, the value of real estate held by informals in

developing countries and the former communist countries

exceeds $9 trillion. So what is the problem?

The problem is that the capital created by informals—the

bricks and mortar that have gone into the structures they

have built—is literally dead: it cannot be transferred to anyone outside the very limited circle of friends and acquaintances of the sellers, and it certainly cannot be used as collateral for a mortgage or other type of credit provided by a

formal financial institution. For property to come alive, its

ownership must be widely recognized. In the informal

world, only personal relationships count; simple pieces of

paper representing ownership—titles—do not. To use more

modern analogies, informally held property is like having a

computer-generated file that cannot be read by another

computer or speaking into a wireless phone that cannot

interoperate with phones on another wireless system.

Informals are on the outside and not part of the legal network.

It is not surprising, therefore, that the World Bank concluded in its 1996World Development Report,“Property rights

are at the heart of the incentive structure of market

economies.” The stronger is the legal protection for one’s

claim to property, the stronger are the incentives to invest in

its creation and improvement in the first place. This elemental,but crucial,proposition has been confirmed in crosscountry statistical analyses (as imperfect as they may be): the

strength of property rights, as measured by various indexes,

has been found to have a statistically significant positive correlation with growth. In the business sector in particular,

researchers have found that investment was more constrained in eastern Europe and the former Soviet Union,

following the collapse of the Berlin Wall, by the absence of

effective property rights than by imperfections in credit

markets.

To our knowledge, there are no equivalent statistical

studies of the relationship between formal rights to residential property, in particular, and economic growth. But there

are likely to be several ways in which widespread legal protection for residential property should enhance economic

growth.

One link is through the financial system. In more

advanced economies such as the United States, individual

entrepreneurs often start their businesses with funds raised

by borrowing against their homes. The people who live in

informal structures cannot use their homes as collateral for

borrowing from formal lenders and thus do not have the

financial wherewithal to launch even modest businesses.

A second link is through the political system. Again, as

the World Bank in its 1996 World Development Report

observed,“A wide distribution of property rights can counteract any concentration of power in the political system and

contribute to political stability.” Or, as Richard Pipes has

pointed out for the Russian and French revolutions in his

1991 book, “Private property is arguably the single most

important institution of social and political integration.

Ownership of property creates a commitment to the political and legal order . . . Historical evidence indicates that

societies with a wide distribution of property, notably in

land and residential housing, are more conservative and stabler and, for that reason, more resilient to upheavals of all

sorts.”

It is not an accident that countries where informality is

widespread experience bouts of political instability.

Unstable governments, in turn, increase the risks of investment, whether by domestic or foreign residents. Higher

country risk premiums, in turn, discourage growth.

A third important benefit of broad, formally recognized

residential property rights is difficult, if not impossible, to

quantify, but may be the most significant of all. Although

there is great evidence that capitalism and Western values

made great strides throughout the world during the past

two decades, there is a growing backlash against that

GLOBAL OUTLOOK

12

Puerto Montt, Chile
progress. In developed societies, a backlash against globalization was manifested most visibly by the protests (and

some violence) attending the 1999 World Trade

Organization ministerial meeting in Seattle, the

International Monetary Fund and World Bank meetings in

Washington, DC in April 2000 and September 2000 in

Prague, and the G-8 meeting in Genoa during July 2001.

Meanwhile, it is less recognized, but nonetheless significant, that a backlash against not only globalization but also

market-based economies has been gathering steam in developing countries as well. In a world of modern communications, it becomes all too easy for the poor to blame capitalism in the West for their plight—they have no stake in the

capitalist world they now can see so easily on their televisions. Capitalism thus has become identified with a status

quo that, for the disenfranchised, is increasingly intolerable.

For informals—who are essentially on the outside looking

into a society and world from which they are excluded—

capitalism is an alien system, one to be detested more than

admired. If these views are to be reversed, then informals

must be brought inside the system, and that can only be

done by providing them with the formal rights of property

that participants in capitalist societies already have. Leaders

in both the developing and developed world have strong

self-interested reasons to make this happen; if they do not,

the backlash against the progress that capitalism has made

will grow, and Western values and markets increasingly will

be under threat.

As our condensed historical summary should make clear,

property rights did not fall from the sky in the United States

and Europe; they evolved only over several centuries in a

process somewhat akin to osmosis: the formal regime, confronted with widespread migration, gradually and often

reluctantly adopted and incorporated rights that were recognized initially only extralegally.

The challenge for developing countries today that find

themselves in situations akin to those faced by developed

societies a century or more ago is to find ways of accelerating

this process of melding the informal into the formal. In

short, do the systems of property rights have to take as long

to evolve in the developing world as they took in developed

countries? Or can policymakers in the developing world

learn from the experiences of developed societies and dramatically shorten the evolutionary process? These are the

questions to which we turn next.

CONSTRUCTIVE STEPS TOWARD FORMAL

RECOGNITION OF INFORMAL PROPERTY

RIGHTS

Just as physicians can accelerate the healing process once scientists have discovered the root cause of an illness, we

believe it is possible—indeed imperative—for countries

with high degrees of informality to accelerate what otherwise would be an evolutionary process that ultimately

would incorporate informally protected property into formal property rights regimes. Two steps are required for this

to happen: countries must first recognize the need to take

action, and then they must implement a strategy for making

the necessary changes.

The first step—recognition—would appear, at first

glance, to be highly problematic in developing countries

where political systems either are autocratic or have limited

experience with democratic institutions. This is because the

beneficiaries of any program to formally recognize informal

property rights inevitably are the poorest residents and

workers of the country. In societies where democracies have

barely taken root, why would political leaders take the preferences of this segment of the population into account,

INTERNATIONAL URBAN RESEARCH MONITOR

13

Table 2. 

Urban Dead Capital in Real Estate Worldwide, 1997

Number of Number of Value of informal

Total Urban Urban urban informal urban dwellings 

population population population dwellings urban dwellings (trillions of U.S.

Region (millions) (percent) (millions) (millions) (millions) dollars)

Asia 1,747 29 503 101 85 1.75

Africa 525 32 167 33 28 0.58

Middle East and North Africa 371 57 211 42 36 0.74

South America 328 78 256 51 44 0.89

Mexico, Central America, 

and the Caribbean 161 64 103 21 18 0.36

China, newly industrializing states, 

and Eastern Europe 1,611 38 619 124 105 2.16

Subtotal 4,743 1,859 372 316 6.48

Other developing countries 191 39 75 15 13 0.26

Total 4,934 1,934 387 329 6.74

Source: Hernando De Soto, The Mystery of Capital (2000).

a. 179 developing and former communist nations.

b. An estimated 85 percent of urban parcels are informal. They either (a) were built in violation of express laws, (b) did not 

comply with requirements for access to land, (c) were originally formal but became informal, or (d) were built by the government

without complying with legal requirements.
especially when doing so might erode the privileged status

of the limited amounts of property that are held formally by

the upper classes, which presumably dominate the government and its society?

Although political leaders in some countries will not

come to this conclusion, others already have, and there are

reasons why more are likely to do so in the future. Most

leaders, whether elected or appointed, crave legitimacy and

affection from their populations. Once they become aware

that most, or even the overwhelming portions, of their populations are residing outside the law—and are doing so because

formal legal systems are encouraging them to do so—many leaders recognize the political benefits of bringing masses of

informals into not only the formal legal system but also the

mainstream of political and social culture. In effect, by giving people formal recognition of where they live, the state is

giving them respect as well. Any leader interested in maintaining power—atop a stable society—can find it in his or

her own self-interest to be the political champion of a program that enfranchises the bulk of the population.

Leadership also can demonstrate why it is in the interest

of the elites of their countries to support formalization programs. When informals have secure property rights, they

invest more in their houses and in the furnishings and appliances that go into them, all the while creating business

opportunities for formal construction companies and retailers. Formalization also creates demand for mortgages, insurance, and electricity—all supplied by formal firms. In short,

formalization is a positive sum game for all involved, informals and formals alike.

The case for formalization can be made more compelling if political leaders are confronted with physical evidence of the extent of informality in their country and with

the role of the rigid formal legal system in bringing it about.

Over the past several years, researchers from the ILD have

worked with counterparts in Egypt, Haiti, Mexico, and the

Philippines to compile such evidence for top officials in

each of these countries. The widespread nature of informality is typically illustrated with pictures and maps, while

the complications of the legal systems are carefully documented, generally through simulations involving real-life

applications for title. The process, however, is time—consuming and tedious and, so far, has been completed one

country at a time-and then only at the initiative of a government showing interest in the project in the first place.

One key challenge for the future, therefore, is to find

ways of encouraging many other countries that surely have

widespread informality in their residential sectors to recognize that their societies look very much like those shown in

tables 1, 2, and 3. Ideally, it would not be necessary for separate teams of researchers to painstakingly document for

each developing country (including many societies in transition from communism to some form of market-based

democracy) that informality is common and that excessively rigid legal systems are the major reason why. Now that

the phenomenon is understood, and in fact has existed even

in developed societies like the United States and Western

Europe, the recognition phase can and should be shortened.

The World Bank and its developed-country members

can play a constructive role in this endeavor by educating

GLOBAL OUTLOOK

14

Table 3. 

Rural Dead Capital in Real Estate Worldwide, 1997a

Informal rural Informal rural Value of informal

Rural area Informality as a Informal rural area in croplands area in grasslands rural area

(thousands of percentage of area (thousands (thousands of (thousands (trillions of 

Region hectares) rural area of hectares) hectares) of hectares) U.S. dollars)b 

Asia 489,586 44 215,164 147,798 67,365 0.59

Africa 738,639 50 368,792 88,166 280,626 0.39

Middle East and 

North Africa 444,665 40 177,866 59,660 118,206 0.25

South America 607,407 49 297,895 51,006 246,889 0.24

Mexico, Central 

America, 

and the Caribbean 134,541 53 71,025 20,813 50,212 0.09

China, newly 

industrializing 

states, and Eastern 

Europe 1,151,280 47 540,142 188,721 351,421 0.8

Subtotal 3,566,118 1,670,884 556,164 1,114,719 2.36

Other developing 

countries 359,926 47 169,165 56,308 112,857 0.24

Total 3,926,044 1,840,049 612,472 1,227,576 2.6

Source: Hernando De Soto, The Mystery of Capital (2000).

a. 179 developing and former communist countries.

b. Total value of informal rural area is $9.34 trillion. Total row has $2.6 trillion. A value of $3,973 per hectare of croplands and $138

per hectare of grassland was used.
and encouraging, through their lending and aid programs,

developed-country recipients to recognize the importance

of incorporating informals into the mainstream of their

countries’ societies and legal systems. But what is the best

means of doing so? It is tempting to say that the answer lies

simply in using the existing formal legal structures in these

countries to register titles of property claimed by informals.

That would seem to require investment in computers and

personnel to construct and maintain the title registries, as

well as surveys and maps to mark the legal boundaries of the

land claimed. In other words, why is not the formalization

of informally held property simply a technical problem that

seems easy to solve with money—from the international

financial institutions or developed-country aid programs? 

To be sure, technical issues need to be resolved if the currently dead capital of the informal sector is to be resurrected and the appropriate resources are to be directed to building the requisite property rights infrastructure: the mapping,

registry, and information services that are necessary to determining who owns what and where. But if the problem of

informality were merely a technical problem, it could—and

probably would—have been resolved long ago. The main

barriers to formalization are not the absence of computers,

but the inability of current formal legal systems to readily

absorb masses of informals. When granting title can take

years, if not decades, and requires hundreds of forms and

bureaucrats to complete, why would informals bother, especially when they may be subject to further harassment and

demands for bribes while they wait for formal recognition?

The short answer is that they would not.

What, then, can and should be done? In particular, how

can masses of property claims be processed and recognized

promptly by legal and bureaucratic systems that are not

equipped to handle such a volume? We believe there is no

other choice than to make use of informal mechanisms of

recognizing and enforcing property rights—the informal

associations, religious organizations, and other institutions

that vary from country to country but that nonetheless constitute a “government on the ground” whose legitimacy is

respected by the masses of people currently without formal

property rights. In essence, governments must, for a time, be

willing to tolerate a titling system or systems that are parallel to the one that is currently in place. Currently, informal

registrars and the titles they register must be given full legal

status—that is, the same rights as property registered now

through the state. This includes full recognition by the

courts of all property transfers and security interests, including collateral, of property registered through informal

means.

To borrow an analogy from the world of computers, we

are suggesting—at least in the short run—that governments

recognize and give full status to the property equivalent of

multiple, but interoperable, computer programs. Just as computers can now recognize documents written in MS Word

and WordPerfect, governments and private actors throughout the economy, especially financial institutions, must be

willing to recognize and enforce the rights of property

recorded in multiple property registrars.

Although relatively simple in principle, the system we are

advocating has many practical hurdles. The first issue

requires determining which and how many informal registrars to recognize. The answer surely will vary from country to country. In some, informal property rights associations will be the right vehicles; in others, it will be churches. The process of choosing, and effectively licensing, the

registries will require a combination of diplomacy, determination, and fair-mindedness. In all cases, the informal registrars are most likely to require technical and financial assistance to establish and maintain their registries. This is an

area where, for modest cost, financial assistance from the

international financial institutions and developed countries

can make a big difference.

A second issue is to determine how much uniformity the

government should impose on the dispute settlement mechanisms of the various registries. As it is now, each informal

association has its own means of resolving competing claims

to certain properties. Should all registries entitle those who

make claims to a certain minimum amount of due process?

Should the decisions of the informal bodies be appealable to

the formal judicial systems in each of the countries? Our

inclination is that each informal body should be allowed to

operate relatively free of government-imposed standards, if

INTERNATIONAL URBAN RESEARCH MONITOR

15

Accra, Ghana
only because formal enforcement mechanisms in developing countries are weak, at best. Accordingly, even though it

might seem appropriate from the perspective of a developed

country for governments to impose minimum standards of

due process on the various informal registries, as a practical

matter these are not likely to be enforced, or, if they are, the

enforcement process could quickly paralyze the functioning

of the associations and thereby keep many otherwise informal claims to property in legal limbo for years—precisely

the problem that the recognition of the registries is designed

to address. In short, it is better for governments to be willing to sacrifice some fairness in exchange for speed, since

delays in giving full recognition to property rights are at the

heart of why so much informality exists throughout the

developing world.

The third, and perhaps and most important, challenge

will be for governments to convince private actors that the

titles registered in the informal registries are to be given the

same legal weight as titles now registered through more formal means. Some considerable educational effort will be

required to make this happen. But the law will have to back

this commitment up by prohibiting lenders and other private actors from discriminating against individuals or companies that have titles registered through officially recognized registries. We recognize, of course, that the same

weaknesses in judicial administration that now plague the

granting of formal titles are also likely to frustrate effective

enforcement of such anti-discrimination legislation. But the

very act of putting such legislation in place should have at

least some educational value, independent of the enforcement effort. Meanwhile, selective, but highly visible, prosecutions of violators of an anti-discrimination law could provide powerful incentives for all private actors to begin to

change their behavior.

Finally, it is important to take account of the dynamic

impacts of any kind of recommendation designed to register informal land. If the parallel path is open to individuals

in perpetuity, it will no doubt encourage even more migration and squatting, as individuals and their families hope to

take advantage much more expeditiously of the opportunity to expand their wealth at the expense of those whose land

they may be occupying, whether it be the government or

other private residents. For this reason, it is almost certainly necessary to make the parallel registry system a temporary

one and thus to keep open the window of opportunity for

such registration only for a relatively short period—such as

one or two years—and then to close it and keep it shut.

Thereafter, we would expect and would want the governments to mandate that a single, formal registry be the only

legally recognized way of certifying property ownership—

just as has occurred in developed economies.

It bears emphasis that the new single registry need not

necessarily be the existing system. If one informal system

proves to be more efficient and adaptable, then it ought to

replace and absorb the current system. After all, the registration function, which has elements of strong network

externalities, has certain features of a natural monopoly.

CONCLUSIONS

Capitalism may have won the hearts and minds of most peoples living in the developed world, but this is far from the

case in developing countries, where hundreds of millions, if

not billions, of people are living in the equivalent of a bell

jar, insulated from the rights and benefits of an economic

system whose foundations rest on the recognition of private

property. In an increasingly global economy, it is not only

unjust but also politically dangerous to keep such vast numbers of people in that bell jar. Something must be done to

lift the jar and open the way for those inside to become

beneficiaries of the market system they now view from afar.

This is one of the most difficult challenges of our times.

But it is not insurmountable. For clues to success, policymakers and citizens around the world need only look at the

path to development that most developed economies have

traveled. Each has been subject to massive migrations of

peoples, which have overwhelmed existing legal systems.

The response to this situation invariably has been for formal

legal systems to find some ways, often grudgingly and slowly, to recognize the rights of those deemed to be outlaws or

informals but who nonetheless have their own systems of

assigning and protecting claims to property.

The challenge now is for developing countries to find

ways of not just copying this process, but vastly accelerating.

We have offered a tentative way of doing just that: allowing

for—indeed encouraging—the development of multiple,

but officially recognized, property registry systems that can

quickly enfranchise the informals. At the same time, governments must encourage their existing formal financial

institutions and other private actors in the economy to give

full recognition to the rights registered in these multiple

registries. In so doing, governments can promote through

market forces the rapid diffusion of property rights that we

believe is necessary not only for enhanced economic growth

but also for political stability in most parts of the developing

world.•

Hernando De Soto is Founder and President of the Institute

for Liberty and Democracy in Lima, Peru, and author of The

Mystery of Capital. Dr. Robert E. Litan is Vice President

and Director of Economic Studies at the Brookings

Institution in Washington, DC. This article is adapted with

permission from the 2001 Brookings-Wharton Papers on

Financial Services.

GLOBAL OUTLOOK

16
The importance of property

rights and homeownership in

economic development and

the new global economy was the topic

of a roundtable discussion sponsored

by the US Department of Housing

and Urban Development (HUD) and

the Woodrow Wilson International

Center for Scholars, which took place

at the Wilson Center on May 30,

2001.The roundtable was followed by

a reception, celebrating the publication

of the second issue of Global Outlook.

Property rights are crucial elements

in economic development and indeed,

personal dignity. They mean much

more than owning a home, for they

enable a house or piece of land to be

used as collateral to raise a loan.

Ensuring property rights makes it easier to take advantage of

economic opportunities outside one’s immediate environment. Long-term transactions become feasible. Property

rights act as a liberating force from corruption, bureaucracy,

and informality. Their absence can condemn people to a life

of uncertainty and limited opportunity.

The Roundtable panelists included experts from the U.S.

government, international organizations and private entities.

Panelists discussed obstacles and shared strategies to improve

affordable housing and economic development opportunities and conditions in developing countries around the

world. Global Outlook Co-Editors Marc Weiss and Alven

Lam moderated the roundtable. The following excerpts

come from each panelist’s contribution to a very productive

discussion.

DR. JOLYNE SANJAK

Land Policy Advisor, U.S. Agency for International

Development (USAID)

Systems of property titling and registration are vital elements of real estate markets and essential ingredients for

broader economic growth. Inadequate governance of property affects financial market development, investment, and

environmental conservation. Throughout Latin America

and the Caribbean, recording transactions and verifying

rights are high-cost endeavors of time and money, and many

properties remain outside the formal title and registration

system. Property rights are neither secure nor fully marketable, limiting homeownership. Informal and often irregular access to property contributes to the unmanageable

development of cities and leaves the poor more vulnerable

to natural disasters.

In 1998, the U.S. and Salvadoran Governments jointly

assumed the task of implementing the Santiago Summit initiative on property registration. The Santiago initiative provides a template for modernizing and simplifying information systems that record and authenticate property rights.

Information relevant to the initiative is found at the

USAID-OAS summit website www.propertyregistration.org. Continuing this effort, the U.S.

Government, with other governments of the Hemisphere,

was successful in shaping an initiative for the 2001 Quebec

Plan of Action. The initiative aims both to secure rights and

to facilitate markets by focusing on the adequacy of legal

frameworks and the tailoring of reforms to enable wellfunctioning linkages from title to market.

WILLIAM COBBETT

Senior Urban Upgrading Adviser, United Nations

Centre for Human Settlements (Habitat) / The Cities

Alliance

Urbanization is moving in parts of the developing world at

an unprecedented rate, leaving many governments unprepared for the consequences. Most urban areas in Africa will

INTERNATIONAL URBAN RESEARCH MONITOR

17

Global Outlook’s International Roundtable on

Homeownership and Property Rights

SHANNON H. SORZANO

U.S. Department of Housing and Urban Development

HUD-Wilson Center International Property Rights and Homeownership Roundtable
double in size over the next fifteen years. This urbanization

is characterized by extreme poverty, as people exercise

rational choices in seeking access to social services and economic opportunity. For the low-income urban residents,

the dominant form of tenure is informal rental housing,

which is generally unregulated and relatively expensive. The

need for credit is a constant issue, particularly short-term

credit, small loans with very short maturities.

Neither the government nor the private sector has provided urban shelter that is adequate and affordable for people living in poverty. Too many city and national governments adopt an indifferent or hostile attitude towards the

impoverished, especially those in newly urbanized parts of

the world. The Global Campaign for Secure Tenure,

launched by United Nations Centre for Human Settlements

(Habitat) in 2000, is an advocacy initiative aimed at addressing the core of this problem. The lack of secure tenure and

the threat of eviction, or of arbitrary administrative action,

constitutes a major social and economic constraint for the

poor. As an advocacy agency, the Habitat Campaign for

Secure Tenure works to mobilize the active support of global, national, regional, and local partners.

ELENA PANARITIS

Initiator of The World Bank’s Urban Property Rights

Program in Peru 

Secure and formal property rights are fundamental to a market-based economy, as they stimulate both investment and

the creation of formal and efficient markets. Because of

inefficient and poorly defined institutions and often-corrupt

bureaucratic systems, a majority of the world’s low- and

moderate-income people are not able to acquire them. In

developing countries and nations making the transition to

market economies, most property claims, while acknowledged informally within local communities, too often go

unrecognized by government officials. As a result, informal

owners lack access to the social and economic benefits provided by secure property rights.

Institutions in general and more specifically those of

property work as the practical underpinnings to economic

development and democratization of a country. Property

rights are the defining factors of such institutional structures. Property rights enhance wealth distribution of the

economy’s resources promoting both economic and social

benefits. In the case of transition economies and less developed countries, more than 70 percent of real property lacks

effective and enforceable property rights. As a result these

economies do not operate with full productivity. Such

nations have large and unsustainable informal sectors that

undermine social cohesion, and they lag significantly in

global economic competitiveness.

The Peruvian program supported by the World Bank to

establish formal and secure property rights systems applied a

unique holistic approach to property formalization.

Reform of the property rights system successfully focused

on three fundamentals of formalization: establishing appropriate legislation, building effective organizations, and creating suitable enforcement mechanisms. It clearly demonstrated that a functional property rights system can be

organized in a developing country.Yet the holistic approach

in Peru should not be recognized as a mere exercise of simple titling. The method is a cross-sector strategic approach

to create a free real property market where transaction costs

are minimized, rights and obligations are enforced, and trust

between people and the government is established.

The issue of property rights is an interdisciplinary one

that urgently requires developing an international initiative

to promote existing best practices in formalization and real

estate reform, including replication of the approach taken in

Peru that encouraged both economic growth and good

governance.

MAUREEN BOLTON

Principal Financial Officer, International Finance

Corporation (IFC)

The importance of disseminating of information regarding

the performance of mortgage borrowers in developing

countries is crucial and must not be underestimated.

Mortgage borrowers in non-U.S. markets perform far better

both on a credit and a prepayment basis, which means securities backed by such mortgages would be of much more

stable duration and should attract more investors than is currently the case.

It would be beneficial for global investors and mortgageborrowers in developing countries to come together: the

investors need bonds of stable duration and the mortgage

borrowers desperately need a long-term funding source. To

this purpose, the International Finance Corporation (IFC) is

working on developing a number of products that will

accelerate the development of funding sources for emerging

market mortgage borrowers. A new database will capture

and make available the performance of mortgage borrowers

from financial institutions that originate mortgages with

GLOBAL OUTLOOK

18

Amarateca, Honduras
capital from IFC loans. The IFC also continues to encourage rating agencies to disseminate information on rated

Mortgage Backed Securities (MBS) transactions in developing countries.

RICHARD CORRIGAN

Manager of Credit Review and Internal Controls,

Overseas Private Investment Corporation (OPIC)

The Overseas Private Investment Corporation’s (OPIC)

mission is to assist in the development of emerging market

economies through the support of U.S. private capital and

the expertise this investment brings with it. With a fully

integrated housing sector as a key component in the maturation of developing economies, OPIC seeks ways to foster

involvement of businesses and the U.S. housing industry in

the evolution of local housing markets. American successes

can be duplicated and their shortcomings avoided in markets willing to provide the legal and regulatory environment

that supports homeownership and property rights.

Seemingly disjointed efforts to foster homeownership

and property rights have actually evolved into a working

pattern that shows great promise, and OPIC sees the role of

USAID and the World Bank in fostering this legislative and

administrative development as fundamental groundwork.

OPIC believes its own role, and that of its fellow international financial institutions, is to test the depth, commitment, and resiliency of international equity investment and

debt markets. It can serve as a laboratory, determining what

works, what needs improvement, and demonstrating to

domestic markets and governments that success in this sector can have a great multiplier effect on a vibrant financial

sector, their own economies, and the social order.

JENNIFER R. SERRATO

Senior Manager, International Housing Finance

Services, Fannie Mae

Property rights and title registration are fundamental

components of primary mortgage market development and

the creation of a viable secondary market. In many emerging markets, basic infrastructure and legal gaps exist where

property rights are non-existent or underdeveloped. Title

and property registration, and the establishment of lien and

foreclosure laws are required to build a supportive foundation to facilitate housing finance in these markets.

Irrespective of geographic area or scope of the market, the

core requirements of a legal and regulatory framework for

housing finance remain the same. Transparency, standard

processes, enforcement of laws and regulations, and public

and private sector support are critical components of this

sustainable framework.

Though Fannie Mae is not permitted to make investments in or guarantees of mortgage-based financial assets

outside of the United States, Fannie Mae does work in

international markets to help other countries develop their

own state-of-the-art housing finance systems. Fannie Mae’s

International Housing Finance Services was created in

response to requests from foreign governments, financial

institutions, and international organizations seeking assistance in the development of primary, secondary, and capital

markets.

CONCLUSION

In his address to the United Nations on June 7, 2001, U.S.

Housing and Urban Development Secretary Mel Martinez

articulated the importance of property rights. “Expanding

the number of homeowners remains a national priority,” he

said,“because we understand that homeownership is at the

root of good citizenship . . . In helping families build real

wealth, homeownership creates financial security and peace

of mind.”

Homeownership and property rights are important

foundations for equitable, sustainable, and socially responsible economic growth, in the U.S. and abroad. Poor people

without such rights cannot participate in the legal housing

market and subsequently, will have no chance to benefit

from any housing finance mechanisms or government subsidies.

This roundtable discussion was an effort by HUD and

the Woodrow Wilson International Center to foster an honest dialogue about these issues and other common challenges that nations face around the world.•

Shannon H. Sorzano is Deputy Assistant Secretary for

International Affairs at the U.S. Department of Housing and

Urban Development in Washington, DC.

INTERNATIONAL URBAN RESEARCH MONITOR

19

HUD-Wilson Center International Property Rights and Homeownership

Roundtable
THE GLOBAL URBAN INDICATORS

DATABASE

Indicators are not abstract numbers; they are variables that

simplify relevant information and make areas of interest comprehensible. Indicators are measures that summarise information about a particular subject and point to particular problems.Above all,the purpose of indicators is to assess conditions

and trends in relation to goals and targets and to indicate if

objectives have been reached or are likely to be reached.Good

indicators allow policymakers to anticipate future trends: provide early warning information, measure the impact of policies, identify priority issues and problems, allow for comparison of places and situations at one point in time and across

time.

In the particular context of the 1996 Habitat Agenda,

partners have reiterated their need for indicators. The

United Nations Centre for Human Settlements

(UNCHS/Habitat) has responded by engaging itself in a

review of the existing indicators system for the “Istanbul+5”

World Habitat Summit. Based on the Habitat Agenda and on

Resolutions 15/6 and 17/1 of the United Nations

Commission on Human Settlements, the UNCHS has

developed an indicators system that contains a set of 23 key

indicators and nine lists of qualitative data as the minimum

data for reporting on shelter and urban development.

Indicators measure performances and trends in 20 selected

key areas of the Habitat Agenda. They provide a comprehensive picture of cities and a quantitative, comparative base

GLOBAL OUTLOOK

20

The Habitat Agenda, Global Urban Indicators, and the

City Development Index

CHRISTINE AUCLAIR AND GUENTER KARL

United Nations Centre for Human Settlements (Habitat)

CHAPTER 1: Shelter

Habitat Agenda Commitment / indicator:

1. Provide security of tenure

indicator 1: tenure types

indicator 2: evictions

2. Promote the right to adequate housing

qualitative data 1: housing rights

indicator 3: housing price-to-income ratio

3. Provide equal access to land 

indicator 4: land price-to-income ratio

4. Promote equal access to credit

indicator 5: mortgage and non-mortgage

5. Promote access to basic services

indicator 6: access to water

indicator 7: household connections

CHAPTER 2: Society

6. Provide equal opportunities for a safe and healthy life

indicator 8: under-five mortality

indicator 9: crime rates

qualitative data 2: urban violence

7. Promote social integration and support disadvantaged groups

indicator 10: poor households

8. Promote gender equality in human settlements development

indicator 11: female-male gaps

CHAPTER 3: Environment

9. Promote geographically-balanced settlement structures

indicator 12: urban population growth

10. Manage supply and demand for water in an effective manner

indicator 13: water consumption

indicator 14: price of water

11. Reduce urban pollution

indicator 15: air pollution

indicator 16: wastewater treated

indicator 17: solid waste disposal

12. Prevent disasters and rebuild settlements 

qualitative data 3: disaster prevention and 

mitigation instruments

13. Promote effective and environmentally sound transportation

system 

Indicator 18: travel time

Indicator 19: transport modes

14. Support mechanisms to prepare and implement local environmental plans and local Agenda 21 initiatives

qualitative data 4: local environmental plans

CHAPTER 4: Economy

15. Strengthen small and micro-enterprises, particularly those

developed by women

indicator 20: informal employment

16. Encourage public-private sector partnership and stimulate

productive employment opportunities

qualitative data 5: public-private partnerships

Indicator 21: city product

indicator 22: unemployment

17. Promote decentralisation and strengthen local authorities

qualitative data 6: level of decentralization

18. Encourage and support participation and civic engagement

qualitative data 7: citizen involvement in major 

planning decisions

19. Ensure transparent, accountable and efficient governance of

towns, cities and metropolitan areas

qualitative data 8: transparency and 

accountability

indicator 23: local government revenue 

and expenditures

Key Indicators and Qualitative Data for The Istanbul +5 Review

Table 1
for assessing conditions and progress towards achieving

urban objectives (see box below).

The resultant Global Urban Indicators Database 2

(GUID2) includes data for 232 cities worldwide. It is

intended to assess urban conditions in 1998. It constitutes

the main source of information for analyzing urban conditions, trends and progress to date. Results have been incorporated into The State of the World’s Cities 2001 report. Most

of the results are presented in the report through data aggregated by region or by level of city development, using the

City Development Index. .Definitions of indicators are

detailed in the Guide to Urban Indicators available at:

www.urbanobservatory.org/indicators.

THE CITY DEVELOPMENT INDEX

What does the City Development Index measure?

There are a number of concepts relating to cities and urban

development that are, although complex and multifaceted,

meaningful and desirable to measure. These include: development level, livability, sustainability, relative disadvantage or

poverty, congestion and inclusiveness. Such multidimensional ideas cannot be encompassed by a single indicator but

require a combination of different indicators — corresponding to different aspects of development or city performance — to form an index. Two very useful urban measurements are City Product per person, which gives the economic output of the city (somewhat analogous to the

national Gross Domestic Product), and the City

Development Index (CDI).

The CDI is a measure of average well-being and access

to urban facilities by individuals and families. The high statistical significance and usefulness of this index suggests that

it is measuring real things. Overall, the CDI measures

depreciated total expenditure over time on human services

and physical infrastructure, and is a proxy for the city’s total

or human and physical capital assets. Expensive infrastructure or services, such as water treatment, are more heavily

weighted in the index.

The City Development Index was first developed as a

prototype for the United Nations 1996 World Habitat

Summit in Istanbul,in order to rank cities according to their

degree of development. The CDI is used in The State of the

World’s Cities 2001 report as a benchmark for comparative

display of several of the key indicators from the UNCHS

(Habitat) Global Urban Indicators Database. The CDI is,

to date, the best single comparative measurement of the

overall level of urban development.

How is the CDI Constructed?

The technique used to construct the City Development

Index is similar to that used by the United Nations

Development Programme for their Human Development

Index. Separate sub-indices are constructed and combined to

generate a composite index. Thus, the CDI is based on five

sub-indices — City Product,Infrastructure,Waste,Health,and

Education — the values of which range from 0 to 100:

CITY DEVELOPMENT INDEX VERSUS HUMAN

DEVELOPMENT INDEX

The CDI correlates well with the national Human

Development Index (HDI), but because there is considerable variation between cities in any particular country, it

provides a better measure of real city conditions than the

nationally based HDI data.

The City Development Index is used to show how the

values of indicators vary by city development quintile. Each

quintile contains 20 percent of all cities in the database,

INTERNATIONAL URBAN RESEARCH MONITOR

21

Table 2

Global Urban Indicators Database 2 - Sample size by region

REGION cities sample countries

AFRICA 55 23.70% 30

ASIA 28 12.10% 16

ARAB STATES 16 6.90% 13

LATIN AMERICA & CARIBBEAN 53 22.80% 20

HIGHLY INDUSTRIALIZED 38 16.40% 11

TRANSITIONAL ECONOMIES 42 18.10% 22

WORLD 232 100.00% 112

Source: www.urbanobservatory.org/indicators/database

0

20

40

60

80

100 96.2

78.6

66.3 65.4 64.6

42.9

Highly

Industrialized

Countries

Transitional

Economies

Latin America

and the

Caribbean

Asia-Pacific

Arab States

Africa

The City Development Index by region

CDI Values 1998

0.2

0.4

0.6

0.8

1

The City Development Index by region

Human Development Index, 1998

0

City Development Index, 1998

20 40 60 80 100

Icapui

Brazzaville

Niamey

Bujumbura

Bulawayo

Stockholm

Graph 1

Chart 1
arrayed from lowest to highest CDI values according to a

scale ranging from 0 to 100. The City Development Index

is a reliable predictor of its constituent variables. It is, moreover, usually a better measure than either City Product or the

national HDI as a predictor of a signficant range of other

physical and social variables affecting urban quality of life.

The CDI also is a useful index for analyzing urban

poverty and urban governance. The CDI’s Health,

Education, and Infrastructure components are particularly

appropriate variables for measuring poverty outcomes in

cities. Similarly, the Infrastructure,Waste, and City Product

components are critical variables for measuring the effectiveness of governance in cities.

An interesting issue is the extent to which cities perform

better or worse on the City Development Index than their

income alone would indicate, suggesting that public policy

and governance make an essential difference. The message

is clear: cities that invest more heavily and strategically in

physical infrastructure and human capital generate substantial economic and social benefits from such investment.

The overall City Development Index correlates strongly

with the City Product measurement, which is one of its

components. Generally, a high-income city will have a

higher CDI. But, some cities have a significantly higher or

lower CDI than would be expected from their incomes, due

not only to urban policies but to the impacts of broader

regional and national geographic policies, trends, and traditions.

Graph 2 shows the comparative size of the various components of the City Development Index for four geographic areas. Although they regions are generally ordered from

least developed to most developed, there are also particular

elements in which each of the four regions are relatively

weaker or stronger than their overall level of development.

For example, the transitional economy cities perform relatively well in most social and physical infrastructure categories but are further behind in City Product. African

cities, on the other hand, face particular difficulties in providing physical infrastructure. Waste disposal is a problem

throughout nearly all of the developing world.

The five sub-indices of the CDI increase at different rates

as the CDI increases. As this graph shows, the two best performing areas are the components that correlate with the

Human Development Index: Health, and Education.

Satisfactory levels of performance are reached on the Health

sub-index for all but the bottom 20 percent of cities, and for

the Education sub-index, for the top 60 percent. This

demonstrates the important emphasis placed on these key

services, and their relative ease of developmental improvement. Conversely, urban waste management is the weakest

area, starting from low levels and not gaining an adequate

score until it reaches the top 20 percent of cities. Many othGLOBAL OUTLOOK

22

CDI Components by Region and City

Region CDI City Product Infrastructure Waste Health Education

Africa 42.9 49.7 36.2 26.0 50.4 52.0

Arab States 64.6 66.5 69.8 45.9 77.2 63.4

Asia-Pacific 65.4 62.9 67.8 44.4 78.3 73.4

Highly Industrialized 96.2 90.6 99.2 100.0 94.3 97.1

Latin America-Caribbean 66.3 62.9 70.4 39.5 82.7 75.7

Transitional Economies 78.6 71.6 90.6 55.9 85.8 88.9

City

Stockholm 97.4 93.5 99.5 100.0 94.0 99.8

Melbourne 95.5 90.0 99.8 100.0 93.7 94.1

Singapore 94.5 91.6 99.5 100.0 92.7 88.6

Hong Kong 92.0 89.4 99.3 99.0 90.9 81.3

Moscow 89.9 81.0 98.7 86.8 83.8 99.3

Seoul 86.0 65.3 98.4 100.0 88.7 77.7

Rio de Janeiro 79.4 82.3 86.2 62.6 81.9 84.3

Sofia 79.1 70.9 93.7 58.5 86.2 86.3

Hanoi 74.2 59.6 72.0 90.0 80.6 69.0

Havana 71.0 65.0 74.8 50.0 80.7 84.7

Jakarta 69.2 66.2 57.3 46.7 80.2 95.7

Ulaanbaatar 68.4 53.7 59.0 90.0 72.5 66.7

Lahore 61.1 71.1 78.5 50.0 64.9 40.8

Colombo 58.4 46.9 68.6 45.0 86.2 45.3

Bangalore 58.0 51.1 82.7 31.3 76.5 48.5

Dhaka 48.4 55.6 45.3 27.5 64.6 48.7

Vientiane 47.1 44.0 58.0 0.0 62.3 71.3

Accra 46.6 49.4 50.0 0.0 71.4 62.0

Phnom Penh 43.5 40.2 33.0 27.0 47.2 69.9

Port Moresby 39.3 69.0 18.1 10.0 59.1 40.2

Lagos 29.3 42.1 29.5 2.0 44.0 29.1

Niamey 21.7 40.0 22.0 0.0 78.3 14.9

Table 3
erwise developed cities score poorly on the Waste subindex. City Product, representing the private sector or economic component of urban investment and development,

has also been somewhat slower to improve for the majority

of cities worldwide.

CALCULATING THE CITY DEVELOPMENT

INDEX

The City Development Index is calculated according to

mulitple formulas. It has separate sub-indices for

Infrastructure, Waste Management, Health, Education, and

City Product, which are averaged to form the CDI. Each

sub-index is a combination of several indicators that have

been normalized to give a value between 0 and 1.

Because the variables used to make up the CDI are

strongly related to each other, there are several different ways

to calculate the CDI that give almost identical results. For

The State of the World’s Cities 2001 report, the weightings given

to each indicator were initially calculated by a statistical process

called Principal Components Analysis, and then simplified.

This formulation of the CDI basically utilizes the same forINTERNATIONAL URBAN RESEARCH MONITOR

23

Highly Industrialized

Transitional

City Product

Infrastructure

Waste

Health

Education

CDI

Asia-Pacific

Africa

100

50

0

Examples of cities with higher or lower CDI than expected from City Product

High performers Low performers

Cuenca Ecuador Lagos Nigeria

Santo Andre Brazil Tangail Bangladesh

Bourgas Bulgaria Conakry Guinea

Chisinau Moldova Kigali Rwanda

Seoul Korea Bangui Central African 

Republic

Medan Indonesia Lome Togo

Tena Ecuador Abidjan Cote d’Ivoire

Novomoscowsk Russian Federation Baghdad Iraq

Ulaanbaatar Mongolia Niamey Niger

Hanoi Vietnam Monrovia Liberia

Kumasi Ghana Nouakchott Mauritania

Cajamarca Peru Asuncion Paraguay

Tbilisi Georgia Kinshasa Congo, Dem. Rep.

Amal Sweden Port Moresby New Guinea

Note: as expressed by large differences in rank when ranking is undertaken using each variable.

Graph 2

Table 4
mulas as in the UNDP Human Development Report (1999), for

the Health, Education and City Product sub-indices.

For meaningful ranking of cities, the index requires data

that are essentially complete, robust and precise — thus not

very many variables are suitable. For The State of the World’s

Cities 2001 report,All the underlying data were thoroughly

checked for accuracy and completeness. Where there were

missing data or very inaccurate estimates, they were either

replaced by data from another national city of similar size,

by country-wide figures (or national urban data, if available)

or by figures for a nearby city or place at a similar level of

development (but only if absolutely necessary).Also, Formal

waste disposal or Wastewater treated is taken as zero if not

provided. Where City Product was not provided, it was calculated so that City Product x Household size = 0.45 x

Mean Household Income (which is similar to the main estimation formula). For most transitional countries 0.35 x

Household Income was used because, in transitional

economies, a higher proportion of the Gross Domestic

Product (GDP) is devoted to indirect services and subsidies.

The resultant City Product must be somewhere in the

vicinity of the nation’s GDP per person,

otherwise household incomes were presumed to be incorrect and were adjusted

accordingly.•

Christine Auclair is Indicators Advisor for the

Global Urban Observatory and Statistics

Section of the Urban Secretariat, and Guenter

Karl is Coordinator of the Global Urban

Observatory and Statistics Section of the

Urban Secretariat, at the United Nations

Centre for Human Settlements (Habitat) in

Nairobi, Kenya. Their website is 

www.urbanobservatory.org.

GLOBAL OUTLOOK

24

High (Q5)

Medium-high (Q4)

City Product

Infrastructure

Waste

Health

Education

CDI

Medium (Q3)

Medium-low (Q1)

Low (Q1)

100

50

0

0

20

40

60

80

100 95.8

35.3

55.8

91.7 88.3

41.8

Transitional

Economies

Latin America

and the

Caribbean

Asia-Pacific

Arab States

Africa

Minimum and Maximum CDI by region

87.8

35.9

74.6

21.7

max CDI

min CDI

Graph 3

Chart 2
The Habitat Agenda adopted by governments, local

authorities and civil society organizations in Istanbul,

Turkey during 1996 identified a set of strategic

objectives and key instruments in support of the implementation and monitoring of action plans to meet the twin goals

of “Shelter for All” and “Sustainable Urban Development”.

The strategic objectives are partnerships and participation,

decentralization and empowerment, networking and the use

of information in decision-making, and equity by gender,

race, and ethnicity. The monitoring instruments are “indicators” and “documented best practices”. From 1996 to

2001, UNCHS (Habitat) in collaboration with a global network of capacity building institutions and policy advocacy

organizations, identified and documented over 1,100 best

practices from 125 countries. Of these 441 originate from

North America and Europe, referred to in this article as the

ECE region.The purpose of the present article is to highlight some of the trends, emerging issues and lessons learned

from the analysis of practices from this region.

RESPONSES TO THE IMPACTS OF

GLOBALIZATION

The impact of globalization on urban policies has led to several positive responses and initiatives in the ECE region.

Cities, and particularly urban regions, have realised that

those strategies that will allow them to compete effectively

are best met through social, economic and environmental

policies that also benefit their citizens. In the post-industrialised countries where levels of infrastructure and services

are already high, cities and regions are increasingly turning

their attention to making more strategic use of their key

assets, such as ports, transportation and communication

hubs, and their cultural amenities, social capital and civic

vitality. Numerous examples illustrate this trend. Investments

in museums, cultural festivals and special events, including

those that are rooted in ethnic diversity, highlight this new

asset-based approach. Other practices focus on preserving

and rehabilitating the cultural and physical environment

including architectural heritage, watersheds, wildlife and

other natural endowments. For transition economies, sectoral policies for improving the living environment are

largely led by compliance with European Union norms and

standards leading to better quality of life as well as improved

investment climates. In North America, a competitive edge

is sought by cities and regions through a combination of

economic development strategies for incubating local business opportunities, human resources development, environmental policies for improving quality of life and safety.

RESPONSES TO UNEMPLOYMENT

One area which remains a major issue is structural unemployment. Despite very different macro-economic and

social policies that underlie European and North American

approaches, a persistent percentage of the urban population

remains unemployed and socially excluded.

Several best practices provide for promising policy alternatives. In North America examples include the community-based approach to “Welfare to Work” implemented in the

Waterloo Region of Canada — a region with a very substantial immigrant population. Numerous inner-city initiatives in the United States target at-risk youth, women, and

minorities for job training and small business opportunities

associated with neighborhood revival.

One of the impacts of globalization and an increasingly

competitive marketplace is the demand for skills in information and communications technologies. Many women,

particularly single heads of households, older people, and

high school dropouts lack these skills and are unable to find

jobs. In Europe, some of the more successful practices in

dealing with unemployment focus on finding new job

opportunities for youth, women, and early retirees through

skills training.A good example can be found in a public-private partnership called the Open Data Centres in Denmark

involving the Municipality of Naestved and the IBM corporation in assisting early retired people, youth and women

to re-enter the job market through intensive training in

information and communications technologies. In the

Basque Country in Spain, a public-private-community initiative under the umbrella of the Bidasoa Area Development

Agency was able to combine efforts in waste recycling and

re-use with creating new job opportunities for socially

excluded youth, women and minorities. In Tomaszow

Mazowiecki, Poland, unemployment was much higher than

the national average.The Employment Forum has a 65 per

cent success rate in finding jobs for the unemployed through

the careful matching of supply for training with industrial

demand. In Bosnia and Herzegovina the Humanitarian

Association uses a combination of trauma therapy, leadership

and empowerment training to facilitate the re-integration of

women, many of whom are widows with children, into economically productive roles in society.

CRIME PREVENTION AND PUBLIC SAFETY 

Since 1996 there has been an observable trend, both in the

ECE region and in other regions, in the types of policy

responses to crime and social safety. Prior to 1996, community policing and community-based safety were the exception rather than the rule. No doubt owing to the political

INTERNATIONAL URBAN RESEARCH MONITOR

25

Implementing the Habitat Agenda: Learning from Best

Practices

NICHOLAS YOU

United Nations Centre for Human Settlements (Habitat)
attention that is accorded to crime and social safety,there has

been a growing awareness of what works, namely the necessity to involve the police, social services, the communities

concerned and the architectural and urban design professions. Both in the United Kingdom and the Netherlands,

police have been working together with architects and

urban design professionals and Departments of Justice to

issue “Secured by Design” guidelines and seals of approval.

These guidelines, premised on partnerships and participation by homeowners, residents and the police, provide a

checklist of items that help reduce risk and vulnerability to

violence and robberies, resulting in up to 40 percent reductions in robberies and break-ins.

The gender dimension of safety is also being mainstreamed in several cities in the ECE region.The “Comite

d’action femmes et securite urbaine” in Montreal, Canada

mobilizes women to pressure the local authority to make

the city safer for women. A key demand was the establishment of a public transit policy allowing women to get off

the bus between stops at night, closer to their destinations.

This practice, started in 1996 is now being adopted elsewhere in the Province of Quebec. Starting in 1998 in

Pamplona, Spain, consultations between the municipality

and women’s groups have introduced new planning options

including a Transport Plan.This plan involves differentiated

times and levels of service and payment systems to improve

the quality of life and safety for women and children.

ENERGY PRODUCTION AND CONSUMPTION

The Hamilton-Wentworth Region in the Province of

Ontario, Canada has been actively implementing many

projects as part of its Air Quality control initiative.Activities

include reducing industrial and residential energy consumption, a community-based air quality monitoring system, and

the development of a bicycle commuter network.

In Europe a major area of focus is on alternative means

of individual and collective transport, including the recent

call and mobilisation of European cities to participate in “car

free” days. Muelheim an der Ruhr, in Germany, is testing

the “Public Car” concept as part of its mobility management

plan.A variation of the popular Car Sharing programme in

Europe, the Public Car project is a public-private partnership which rents small, fuel-efficient cars to Muelheim residents for short trips within city limits, such as shopping

errands and doctor’s visits.Vehicles are located at two stations

in the city, in close proximity to bus and tram stops. The

objective is to reduce the number of car-owners in the city

(Muelheim’s car density — 498 automobiles for every 1,000

inhabitants) by providing an alternative, flexible means of

transportation in addition to public transit.

In 1996, the executive committee of the Vaxjo

Municipality in Sweden decided to stop using fossil fuels in

the activities of the municipality. The reduction is to be

achieved through changing behaviour and consumption

patters, increasing energy efficiency and substituting oil with

bio-fuels. Industry, non-governmental organizations

(NGOs) and private citizens are participating in these activities with the result that emissions of carbon dioxide from

fossil fuels in the heating systems are less than half the current national average.

INFRASTRUCTURE AND SERVICES

Cities in the ECE region are among the best-equipped cities

in the world in terms of infrastructure and services. As

mature cities, their problems with infrastructure and basic

services have more to do with maintaining old infrastructure

and integrating new and improved infrastructure with environmental planning and management concerns. In Finland,

Helsinki Energy’s district heating system is a case in point,

having resulted in remarkable energy efficiency and, thereGLOBAL OUTLOOK

26

Prague, Czech Republic
by, energy saving.The achievements are due to the technology based on co-generation of electricity and heat.The heat

obtained in generating electricity is used for heating the city

instead of the sea. Also the specific heat consumption in

buildings has decreased thanks to information campaigns.As

a result, air quality has improved substantially.The system has

worked on market terms from the beginning. At present,

more than 91 per cent of all buildings heated in Helsinki are

served with district heating.

Many of the documented initiatives in infrastructure and

services in North America and Western Europe seek to

address the issue of social exclusion, particularly vis-à-vis

immigrants and ethnic minorities living either on the

periphery of cities or in inner-city slums.The main purpose

of the Integrated Plan for the Old City in Zaragoza, Spain is to

provide improved infrastructure, housing and social services

to a neighborhood largely inhabited by the urban poor and

an immigrant population. The Plan involves renovation of

abandoned buildings in the old city for affordable housing,

along with providing education, job training, and health

services.There are similar initiatives in Boadilla del Monte,

Santa Coloma de Gramenet, Madrid,Valladodid,Vitoria and

other Spanish cities with neighborhoods of significant

poverty and substantial numbers of immigrants. Their success is based on a concerted approach to social development,

boosting the local economy, renewing infrastructure,

improving the educational system, increasing access to

health services, and enhancing environmental conditions.

The State of Pennsylvania’s pioneering approach to

property tax reform recognizes the important distinction

between land and building values through what is now

known as the split-rate or two-tier property tax.The tax is

decreased on buildings, thereby giving property owners the

incentive to build and to maintain and improve their properties, and the levy on land values is increased, thus discouraging land speculation and encouraging infill development.

This shifting of the tax burden promotes a more efficient

use of urban infrastructure such as roads and sewers, decreases the pressure towards urban sprawl, and assures a broader

spread of the benefits of development to the community as

a whole.

SHELTER AND SECURE TENURE

Over a quarter of the documented practices from ECE

countries address the category of housing, shelter and security of tenure. Housing provision is closely linked with the

issue of social inclusion especially regarding the integration

of minorities and immigrants in cities in Western Europe

and North America, as well as problems associated with an

aging population. Care for the homeless and children is an

important concern in Eastern Europe as is the issue of the

privatization of housing ownership. Security of tenure

remains a problem, especially with the gentrification of

neighbourhoods and in some cases, the propensity of local

authorities to give up on crime and high-poverty public

housing estates.The FAWOS initiative for preventing homelessness in Vienna,Austria has identified debts, low incomes,

and other financial problems as the most common causes of

evictions. In response, FAWOS offers a standardized procedure and rapid, efficient help to families facing eviction.

Measures to help clients retain their dwellings include counseling on legal aspects, information on available financial

support and client entitlement to such benefits. During the

first year 250 out of 374 eviction cases were able to retain

their apartments.

In Boston, Massachusetts, the South End neighborhood

is a socially, racially, and economically diverse neighbourhood, where real estate speculation and gentrification in the

1980s had driven the cost of housing beyond the means of

many life-long residents. In 1987, the South End

Neighbourhood Housing Initiative (SENHI) was conceived

through an extensive 15-month community planning

process facilitated by the Boston Redevelopment Authority

(BRA) to create affordable rental and homeownership

opportunities for families and to protect current residents

from displacement. SENHI managed to provide affordable,

moderate, and market rate housing; eliminate urban blight;

improve the quality of life for all residents; and promote

development opportunities for non-profit and for-profit

community-based organizations and minority-owned businesses. Hence over $50 million in private and public money

was invested in six development projects to build 307 units

of mixed-income housing, of which 219 (71.3%) were

reserved for low and moderate income households.

BUILDING CAPACITY

The Habitat Agenda recommends that partnerships be

strengthened and participation made more effective through

capacity building and improved management.

Internationally, the Federation of Canadian Municipalities is

pairing up cities such as Guelph, Canada and Jinga, Uganda,

to improve local governance in both cities. Often, capacity

building plays a crucial role in integrating otherwise marginalized groups. The Winds of Change is a movement

developed by Asistencia para Latinos to address the issues of

cultural isolation and language barriers presented by the

new population of immigrants coming to the rural resort

areas in the State of Colorado.This initiative trains individuals, advocates for fair treatment for Latinos (including the

hiring of Spanish-speaking staff in public agencies, and

builds bridges and coalitions between the Anglo and Latino

cultures. It provides services in four areas: health and human

services, education, business, and public safety/immigration.

The initiative seeks to identify and build on the assets and

capabilities of the Latino community, fostering a regional

cross-sectoral, collaborative problem-solving approach that

encourages the Latino and Anglo community to see each

other as resources.

In Germany, the National Association of Mother Centres

provides the basic means and support to women’s groups to

participate effectively in local decision-making and to

engage local authorities and city planning departments to

address unmet needs and to eliminate physical barriers as

well as gaps in human services that alienate women and

INTERNATIONAL URBAN RESEARCH MONITOR

27
children. Mother Centres represent an innovative model of

how to strengthen civil society by strengthening neighborhoods. Key issues addressed include removing barriers

resulting from poor urban design to allow ease of access for

women with children, policy impediments to gaining

greater access to quality services and public safety. From an

initial three centres,the network has grown to over 400 centres in Germany and many neighboring countries of central

and eastern Europe, as well as in Africa.

LINKING BEST PRACTICES WITH NATIONAL

POLICY 

The Habitat Agenda recommends that all partners should

regularly monitor and evaluate their own performances in

implementing the Habitat Agenda through comparable indicators and best practices. The guidelines developed by

UNCHS (Habitat) further recommend that national committees organize broad-based and participatory competitions, exhibitions, seminars and conferences to help mainstream lessons learned from best practices. Several governments and organizations in the ECE region have engaged in

such undertakings. The Governments of France, Italy and

Spain organize nationwide competitions on best practices,

followed by publications, exhibitions and seminars to initiate policy dialogue based on lessons learned. The EC supports the European Sustainable Cities Campaign and Awards

system.The International Council for Local Environmental

Initiatives (ICLEI) organizes a global awards system, and the

cities of Bremen and Vienna organize the identification and

dissemination of best practices focusing on European and

transition countries. Best Practices initiatives and awards are

organized at both the federal, state and local government

levels in the US, including the Ford Foundation’s and

Harvard University’s Innovations in American Government

annual awards program. In addition, Environment Canada

has taken an active interest in the collection and dissemination of best practices.There is need, however, to harmonize

these initiatives and to make their differences and similarities more transparent to users and submitters alike so as to

make the information and its interpretation more userfriendly, comparable and relevant to policy and decisionmaking.

CONCLUDING OBSERVATIONS

In the shift towards the enabling approach and the implementation of the strategies recommended by the Habitat

Agenda, cities and their civic partners are assuming new roles

and responsibilities.This is particularly apparent where partnerships are actively involved in areas that were previously

assumed to be the sole responsibility of higher-level authorities in most countries. Examples include the design and

delivery of human services; the creation of jobs and of

income-generating business activities; the provision of housing, infrastructure, and basic public services; and the promotion of information and communications technologies.

The types of policy responses emerging as a result of this

enabling approach appear to be much more holistic, as called

for by the Habitat Agenda.This can be attributed to the participation of non-governmental organizations, including the

private sector, that demand effective solutions to what they

perceive as convergent rather than sectoral issues. In forging

solutions, they play an active role in promoting dialogue, in

formulating socially-oriented projects, in mobilizing and

leveraging public, private and community resources, and in

implementation. As a result, they not only influence policy

but also create sustainable and replicable processes.

In most cases, however, major gaps still exist between the

lessons learned on the ground and policy making at the

national level. Much more needs to be done to incorporate

and integrate successful experience into macro-level policy,

regional and international co-operation. The potential for

such forms of capacity building remains largely untapped.

The above conclusions suggest that Best Practices are

indeed a highly effective means of monitoring trends and

assessing progress in the implementation of the Habitat

Agenda. Countries, cities, and civic groups are eager to

report on their most innovative work.This information can

be used to assess the continued validity of approaches recommended in the Habitat Agenda as well as the effectiveness

of regional and national policies.The Best Practices system

should therefore be strengthened. A principle means of

doing this should be a renewed commitment by governments, national committees and Habitat Agenda partners to

engage in the systematic identification, documentation and

exchange of Best Practices and to mainstream the sharing of

the knowledge, expertise and experience as an effective tool

for international cooperation, capacity-building and policy

development.•

Nicholas You is Coordinator of the Best Practices and Local

Leadership Programme at the United Nations Centre for

Human Settlements (Habitat) in Nairobi, Kenya.The website is www.bestpractices.org.

GLOBAL OUTLOOK

28
During the week of July 9-13, 2001, the U.S.Agency

for International Development (USAID) and the

Woodrow Wilson International Center for Scholar’s

Comparative Urban Studies Project sponsored the Making

Cities Work Partnership Forum, themed “Linking Effective

Management to the Development Challenges of the Urban

Millenium.” In his opening remarks, Wilson Center

Director Lee H. Hamilton stressed that by 2050 more than

80 percent of the world’s population will live in cities. Such

growth, he said, is potentially dangerous to both the national security of the United States and to the lives of millions

of urban residents worldwide. Making cities work is therefore a critical global challenge of the twenty-first century.

Confronting urban issues in what USAID has dubbed

“the urban millennium” requires an extensive network of

collaborative partnerships. The Making Cities Work

Strategy engages partners, both traditional and non-traditional, from the private, public, and non-profit sectors and

the donor community, so that sector-specific work may be

more responsive to changing global trends. Three days of

the conference were therefore devoted to working group

sessions during which representatives of a diverse group of

organizations discussed conditions for effective partnerships.

Most importantly, they stressed the need to identify shared

visions, pool resources and organize themselves more effectively.

Forum participants also emphasized the role partnerships

between cities can play in improving the lives of urban residents, especially low-income families. David Rusk, former

Mayor of Albuquerque, New Mexico and author of Inside

Game/Outside Game, argued that current trends in American

cities, including suburban sprawl and segregation by income

and race, generate continuing obstacles to effective and

equitable urban policy and management. Congressman Earl

Blumenauer called attention to the need for the U.S.

Congress to become more involved in encouraging and

supporting environmentally sustainable urban development

and livable communities. He advocated increasing opportunities for direct partnerships between municipal officials

from cities and metropolitan regions around the world,

which can lead to the creation of more effective global solutions to urban challenges.

What became exceedingly clear over the four-day forum

was the importance the U.S. private sector and civil society

place on improving the lives of the rapidly growing urban

low-income population in the developing world. The

potential environmental degradation, health risks, and economic losses due to poorly managed urban growth threaten

the security of nations and the livelihood of millions of people. Coordinating the efforts of the numerous organizations

that participated in the Making Cities Work Partnership

Forum will help to address both current challenges and

potential future problems. The fifth day of the conference

was dedicated to an intensive dialogue among the members

of USAID’s international Making Cities Work Strategy

Team to determine and plan for the next steps in finding

and implementing new policy solutions for making the

Urban Millenium a century of improvement for families

and communities.

Diana Varat is a Project Associate in the Comparative Urban

Studies Project at the Woodrow Wilson International Center

for Scholars in Washington, DC. For information, consult

www.makingcitiesworking.org, or www.wilsoncenter.org.

INTERNATIONAL URBAN RESEARCH MONITOR

29

The U.S. Agency for International Development and

the Woodrow Wilson Center host an International

Making Cities Work Partnership Forum

DIANA VARAT

Woodrow Wilson International Center for Scholars

Damnoen Saduak, Thailand
Mumbai (also known as Bombay), more than any

other metropolis in India, merits its label as an

engine of the national economy. Half of the

nation’s imports and exports and a little over 40 percent of

the National Government’s revenues come from Mumbai.

Within the State of Maharashtra itself, Mumbai accounts for

40 percent of the State’s domestic product. Though located

in a promontory off the mainland, Mumbai has the busiest

railroad terminal, seaport, and airport in India. The golden

quadrangle project of upgrading and improving national

highways will further increase Mumbai’s connections to the

rest of the country. Total metropolitan employment is 4.6

million, of which 1.4 million is in manufacturing and 1.9

million is in services. However, much of the employment

may be described as informal. Estimates of the informal sector vary from 51 to 65 percent of the total employment in

the services sector. By the year 2011, employment in the

metropolitan region is expected to be 5.4 million, an

increase of more than 800,000 jobs. The bulk of future

employment will be in the older Mumbai Corporation area,

amounting to nearly 3.4 million jobs. The new Mumbai

area is expected to have about 500,000 jobs, and the areas to

the northeast and north of the old city will have about 1.1

million and 340,000 jobs respectively.

POVERTY AND INADEQUATE HOUSING

Annual per capita state income in Maharashtra is about

Rs.17000 at 1996-97 prices (approximately US $370). It is estimated to be

about 40 percent more in the Mumbai

metropolitan region. Income distribution, however, is considerably skewed,

though incomes across the board have

been rising steadily. Projections and

analysis indicate that the percentage of

households below the poverty line, calculated at Rs.1300 in 1991 prices, will

fall from 25 percent in 1991 to nearly

zero in Mumbai City and less than five

percent in the metropolitan region. As

elsewhere in the country, poverty

thresholds are calculated mainly on the

basis of minimum caloric food intake.

However, if other variables like housing

or environment are considered, the picture looks very different. Mumbai has

often been described as “the most

expensive slum in the world.” Squatter

settlements are a prominent feature of the Mumbai scene.

The problem is mainly due to the sizeable gap between the

rapid rate of household formation and the inadequate supply of affordable housing mainly due to the acute scarcity of

buildable land.The average annual addition of households in

the metropolitan area during the past five years is estimated

to be about 87,000, yet the annual supply of new housing

during this same period has been only about 47,000. The

number of low-income households has grown from about

800,000 in 1952 to about 1.1 million in 1991. Taking the

average household size to be about five people, this means a

population of nearly six million in slum households.

While housing affordability is a significant factor in the

growth of slums, a wide array of policy and market distortions seriously limit the availability of land. The Bombay

Rent Control Act of 1947, which consolidated provisions of

earlier rent controls and froze private residential rents at

1940 levels, has had a highly negative impact on housing

supply. Because of low rents, many of the rent-controlled

buildings fell into disrepair.A 1957 survey by the Municipal

Corporation revealed that out of 36,000 buildings in the

inner city area, nearly half had been built before 1905 and

were generally in a dilapidated condition. Collapses of

buildings resulting in hundreds of casualties and rendering

families homeless became frequent during the 1960s. In

1969 the Building Repair and Reconstruction Board was

GLOBAL OUTLOOK

30

Managing a Metropolis: The Challenge of Low-Income

Housing and Neighborhood Redevelopment in Mumbai

(Bombay), India

K. C. SIVARAMAKRISHNAN

Centre for Policy Research

Mumbai, India
set up, enabling the government to intervene and undertake

rehabilitation of these deteriorated buildings.

COMMUNITY IMPROVEMENT ACTIONS 

As in other cities, Mumbai’s initial response to slum

growth was one of clearance and redevelopment.The subsidized housing plans for factory workers and low-income

families introduced by the national government provided 50

percent loan and 50 percent subsidy to state governments

for constructing apartment blocks with low cost specifications. The State of Maharashtra made considerable use of

this scheme to rehouse slum dwellers. However slum housing growth and the increase of low-income households

continued to outpace the availability of funds.The approach

then shifted to improvement of slum dwellings and communities. Started in Calcutta in 1972, the slum improvement

program was extended to other cities. Mumbai was one of

the first cities in the country to undertake an official Census

of Slums and issue photo passes to slum dwellers in 1976.

This Census identified about 1,700 slum pockets in the

Municipal Corporation area with a population of about 3.2

million, about 40 percent of the city’s total population.

About half the number of slums were on municipal lands,

mainly in the island part of the city, and the other half were

on private lands in the outlying areas of the Municipal

Corporation’s jurisdiction. By 1996, slum improvement

efforts served nearly two million people.

The slum improvement programs, or for that matter

even the Census of Slums, did not address the problem of

pavement dwellers.The Indian Census specifically enumerates such people as homeless.According to the 1981

Census of Population, there were about 22,000 households

in Mumbai living on pavements, alongside the commuter

railway lines, under bridges, and in other outdoor locations.The benefits of slum improvement schemes were not

available to these pavement dwellers, and from time to

time municipal authorities tried to evict them and demolish their shacks.They would scatter and reappear again

within a few weeks or months. In July 1981 a civil rights

group obtained an injunction from the Supreme Court

against such evictions pleading that the fundamental

“Right to Life” included the right to shelter in some location allowing a person to earn a livelihood.The case was

argued in court for more than four years.The final judgement upheld the right of the Municipal Corporation to

evict the pavement dwellers after giving prior notice. Since

then municipal authorities have focused entirely on clearing lands that are required for other urgent public purposes.According to one estimate based on the 1991 Census of

Population, the number of homeless families who live on

pavements was 33,000, an increase of 11,000 families from

a decade earlier.

The continuing growth of slums in the Mumbai metropolitan region reflects its economic attractions as well as the

difficulties in evolving a policy to deal with slum growth

and adhering to it over a period of time. Though the

Municipal Corporation and other local authorities are

involved, it is the State government which has taken the

main responsibility for dealing with the problem. Reference

was made earlier to the Census of Slums in 1976, which was

probably the first of its kind in the nation. Since then the

State government has been periodically updating the

Census of Slums.As of November 2000, one such Census in

progress estimated that slum dwellers in the Municipal

Corporation area alone may exceed six million as compared

to four million when the Census of Slums was last updated

in 1995. The main purpose of the Census of Slums, apart

from a head count, is to identify the slum locations in public and private lands and determine the eligibility of slum

dwellers for assistance according to cut off dates determined

by the State government from time to time. An ongoing

Census has been organized through 32 centers across

Mumbai with over 17,000 volunteers. Officials undertaking

the Census predict that when it is completed, the total figure of slum dwellers may be more than eight million. Given

the total population of the city of over 12 million, twothirds are slum dwellers, thus reinforcing Mumbai’s reputation “as the most expensive slum in the world.”

Like other large cities in India, the mechanics of slum

growth in Mumbai is a highly organized process.Apart from

the operation of the so-called slum landlords, the consolidation of slum growth in Mumbai is based on a combination

of socio-economic factors. Unlike pavement dwellers, many

of the slum neighborhoods do not entirely consist of an

intense concentration of low-income residents. For example, Dharavi, an area of Mumbai with a population of nearly one million people, is considered to be one of the largest

urban slum communities in Asia. Expanding on a settlement

of fishermen which had existed in the area for many years,

Dharavi is now a bustling center of small-scale manufacturing and service activities. Dharavi also is strategically located between the two principal commuter railway lines.

Many of the occupants are above the poverty level and may

be classified as belonging to lower middle income groups.

Dharavi is highly heterogeneous, with residents, workers,

and entrepreneurs drawn from almost all parts of India, and

sharing a spirit of enterprise and adaptability. Like Dharavi,

many of the slums have well organized community groups.

The provision of basic services taken up initially under the

slum areas improvement program of the 1970s has moved

forward. In 1985, then Prime Minister Rajiv Gandhi visited Dharavi and announced a special grant for community

improvement and redevelopment. The grant was used for

upgrading services, widening of roads, and construction of

new apartments to rehouse slum dwellers.

While Dharavi has been a somewhat special case, public

policy and programs for improving slum conditions have

moved forward in a difficult and tenuous manner.After the

phase of removal, clearance, and rehousing of slum dwellers

between 1958 and 1971, the Slum Areas Improvement,

Clearance and Redevelopment Act of 1971 enabled

improvement of slums in public and private lands, acquisition of land, and protection of residents from eviction. In

1975 the Maharashtra Vacant Land Act (Prevention of

INTERNATIONAL URBAN RESEARCH MONITOR

31
Unauthorized Occupation and Summary Eviction),

intended to protect land from encroachment and squatter

settlements, was passed but the law was not upheld by the

courts. In 1976 the first Census of Slums was taken. In the

same year the Maharashtra Housing and Area Development

Act integrated all slum housing activities related to new

housing, demolition, and renovation of older buildings

under one authority. The Urban Land Ceiling and

Regulation Act of 1970 enacted by the National

Government of India during the same year stipulated ceilings of land holdings, enabled acquisition of excess land and

offered exemptions for promoting low-income housing.

The implementation of the Act has been regarded as a signal failure. The Development Control Rules, which had

prohibited redevelopment of land previously occupied by

closed textile mills, began in 1991 to permit such redevelopment on up to one-third of the land area considered surplus under the Ceiling Act, with the remaining two-thirds

to be handed over to the Municipal Corporation. There

were no takers for the scheme.This is one of many instances

of public policy failure. In the case of Mumbai, the Ceiling

Act had the effect of further aggravating the scarcity of

developable land. It was repealed in 1999.

PROPERTY RIGHTS AND PARTNERSHIPS 

In 1985 an Urban Development project was launched in

Mumbai with financial support from the World Bank. For

the first time an effort was made to incorporate principles

of affordability through differential pricing and full cost

recovery. The project emphasized wider distribution of land

through the provision of serviced sites in different parts of

the metropolitan region, and upgrading of slums with secure

land tenure and formal property rights. Labeled as

Affordable Low Income Shelter (ALIS), the program envisioned 85,000 serviced sites and upgrading of 100,000 slum

households. About 40,000 of the serviced sites were in the

old city of Mumbai and the rest in the new-Mumbai and

Thane-Kalyan areas. Agencies like the City and Industrial

Development Corporation (CIDCO), and the State

Housing and Urban Development Authority, were responsible for implementation. The Development Control

Regulations administered by the Municipal Corporation

and other local governments were reformed to permit construction of affordable housing.The Affordable Low Income

Shelter project was able to accomplish most of its quantitative targets. Unfortunately, this market-oriented public-private partnership approach has not been replicated. Instead,

populist schemes of providing heavily subsidized government-owned housing continue to predominate. From time

to time the public authorities also regress into demolition

and slum removal, such as in January 2000 when slums

adjoining railway tracks were bulldozed and the residents

were forcibly displaced. Nevertheless, the plan for the metropolitan Mumbai region continues to emphasize a facilitating role for public authorities in private market activity

through provision of critical land and infrastructure, reorienting the role of municipal authorities and planning agencies, minimizing cash subsidies from government by choosing less costly land supply and servicing options, creating

incentives for direct private investments through guided

land development, and assigning a stronger monitoring role

to metropolitan area governments.•

K. C. Sivaramakrishnan is a Professor at the Centre for

Policy Research in New Delhi, India. This article is adapted from a paper delivered at the Woodrow Wilson

International Center for Scholars, Urban Governance

Workshop, December 6-7, 2000,Washington, DC.

GLOBAL OUTLOOK

32

Mumbai, India
I

n early June, 2001, the National Congress for

Community Economic Development and Global

Linkages conducted a ten-day study tour to Ghana.

The purpose of the tour was to bring community development practitioners from the United States to visit similar

groups in Ghana. This offered the opportunity for U.S.

practitioners to learn from Ghanaian non-profits and for the

groups in Ghana to learn from their American counterparts.

Our members are community development corporations

(CDCs), non-profit organizations that build and manage

affordable housing and create jobs and businesses in lowand moderate-income communities across the U.S. Some

of our members also operate human services programs.

Some people may ask, why a study tour and why Ghana?

This was our first study tour in ten years, since a two-week

trip to the United Kingdom and the Republic of Ireland in

1991. Our experience is that the best way to learn about

community development is to see the projects first-hand

and to talk to the people living in the community about

how they have benefitted.

There are more obvious differences than similarities

between Ghana and the United States. So, why was Ghana

selected? It is a politically stable country in West Africa,

with an active non-profit sector. It is English speaking,

which made direct communication between our tour participants and our local hosts easy. Our partner, Global

Linkages, already had the necessary contacts with the nonprofit sector in Ghana to make the arrangements. The

notion that countries have to be at a similar level of development in order to be able to learn from each other’s experiences is not an accurate one. For example, many of our

member CDCs operate microenterprise loan programs, an

idea that came from the world’s developing countries, not

from western, industrialized nations.

We visited a wide range of community development

projects during our tour, including microenterprises, housing developments, child care centers, and health clinics. We

also met with officials from the national government.

Three groups hosted our trip and arranged local site visits. The first group was the Ghana Association of Private

Voluntary Organizations in Development (GAPVOD) is a

close equivalent to NCCED in Ghana. GAPVOD is the

national umbrella organization for non-profits in Ghana,

although its membership is involved in a broader range of

activities than are ours. GAPVOD is located in the capital

city of Accra.

The second host group was the Centre for the

Development of People (CEDEP) provides technical assistance to many local nonprofit groups and operates projects

as well. CEDEP works throughout Ghana, but its main

office is in Kumasi, the second largest city in the country.

Our third host group was the 31st December Women’s

Movement, which was started by the former first lady of

Ghana, Mrs. Rawlins. This organization runs child care centers in both urban and rural locations and operates several

income-generating activities in order to pay for the cost of

operating the centers. These income-generating activities

include palm oil production, forestry, and candle making.

With the recent change in government, the 31st Movement

is no longer as well positioned as it was before.What impact

this change will have on its funding base and its ability to

operate the day care centers is yet to be seen.

One major difference between the U.S. and Ghana is that

the majority of Ghanaians earn their living through the

informal sector of the economy. Street vendors are ubiquitous everywhere one goes. This is true in both urban and

rural areas. While this allows people to survive day-to-day,

they don’t earn enough income to actually set up a small

store and to hire other people. The income generated by

this sector of the economy is not taxed, so it does not generate any revenue for government, which is badly needed in

order to pay for basic infrastructure, such as roads, electricity, garbage disposal, fresh water, and sewage treatment.

Access to capital is a much different issue in Ghana than

in the U.S. A much smaller portion of the population has

access to institutional financing sources, such as commercial

banks. Many microenterprises are too small to obtain bank

loans. In addition, a high inflation rate makes repayment

terms difficult for most businesses to meet. To deal with this

dilemma, some innovative approaches have been developed.

One of the innovative projects that we visited was a Susu

collective in Kumasi. Susu is a term that originated in the

INTERNATIONAL URBAN RESEARCH MONITOR

33

Community Economic Development in Ghana

KEVIN KELLY

National Congress for Community Economic Development

Kumasi, Ghana
Carribean, but has been adopted in other parts of the world.

Susus are formed by street vendors. The vendors make so

little income, that they don’t participate in the normal banking system in Ghana. They don’t have enough money to

open accounts and their financial needs are too small for

banks to be interested in providing them with loans.

Employees from the Susu collective visit with each member

each week and collect part of their earnings. They keep

deposit records on each vendor and then deposit the pool of

funds that they collect in a bank account. This keeps the

funds safe until the vendors need the money, and then it can

be withdrawn. The pool of funds also enables the Susu to

make micro-loans to its members. This allows the vendors

access to capital that they would otherwise never have. The

Susu also pays taxes out of the bank account, so that the

government gets some badly needed tax revenue.

The housing development process in Ghana also differs

from the United States. If a family wants to build a house,

they save enough money to buy some land. As they save

more money, they buy building materials and start building

their home. The house is built little by little, until it is complete. The development of affordable housing by nonprofit

organizations in Ghana is more of a rural than an urban

phenomenon. We visited a rural housing project developed

by Habitat for Humanity International. Their approach in

Ghana is different from the approach I’ve seen used in the

U.S., where Habitat for Humanity generally builds a few

homes in scattered sites, rather than concentrating large

numbers of homes at a single location.

In rural Ghana, we visited a small town where Habitat

for Humanity was in the process of completing its 100th

house. The community was slowly being relocated from

substandard housing in the older portion of the town to

newer homes built through Habitat for Humanity. This way

a sense of community is retained. The new homes are

owned by the residents and are made from bricks that are

produced on-site from the local soil. One other difference

is that even the newly built homes in this rural village do

not have electricity or running water. There is no existing

infrastructure of water pipes and electric lines to run out to

the newly constructed homes.

As in the U.S., parents in Ghana have a need for convenient, affordable child care. The 31st December Women’s

Movement has focused on this need. We visited their child

care centers in Accra, as well as in rural areas east of the capital. The 31st Movement has over 700 of these centers across

the country. Our group brought donations of school supplies for the centers, which had been collected by Global

Linkages in New Jersey.

One site visit with lessons for the U.S. was a new reproductive health center that trained youth to discuss AIDS and

other sexually transmitted diseases, and the use of condoms

with their peers. In a country where discussions by young

people about sex is not considered socially acceptable, this

model holds out hope for educating youth about a sensitive

but important topic. Currently the AIDS epidemic has not

hit Ghana as hard as it has many other African nations.

Programs like this one will be necessary to keep down the

disease rate.

We met with the new minister for economic development and the new mayor of Kumasi.The new national government plans to focus on macroeconomic issues that prevent people from raising their standard of living above the

poverty level. This includes reducing inflation, which has

been running at over 40%, and thereby reducing interest

rates. High inflation and high interest rates constrict access

to capital and make it hard to develop housing or create

more stable, private sector jobs. Improved access to electricity, safe drinking water, and regular, sanitary garbage disposal are goals of the new mayor of Kumasi.

Another difference between Americans and Ghanaians is

the perception of poverty. According to our hosts,

Ghanaians, if asked if they are poor, will almost always

answer no. They perceive the question to be whether they

consider themselves to be permanently poor. Even if someone is obviously poor at the moment, they don’t consider

themselves to be in that condition permanently. An example was given of a health clinic set up for low income people. Very few people would go to the clinic, because they

didn’t want to define themselves as poor or to be viewed by

others in that way. Instead of asking if someone is poor or

has an income below a certain level, it is more acceptable to

inquire as to whether the family was able to pay their school

fees for the past two semesters.

In addition to visiting non-profits and their projects, we

learned about the history and culture of Ghana. The traditional decision-makers in Ghana have always been the chiefs

and queen mothers that operate in each village and town.

In rural Ghana they are still the basic units of local government. The King of the Ashanti people is viewed as equal to

the President of Ghana. This traditional structure must be

taken in to account when considering ways to improve living conditions in Ghana.

One particular fact of history links Ghana closely with

the United States and other parts of the new world, the history of slavery. Ghana has more of the forts used to hold

and transport slaves to the Americas than any other African

nation. Another connection with the U.S. is the presence of

the final home and grave of the famous African American

leader,W.E.B. Dubois. Ghana is now a major tourist destination for African Americans and approximately 2,000

American citizens live there. Tourism has become a major

part of Ghana’s economy, trailing only gold and cacao in the

amount of revenue that it generates.

We at NCCED plan to continue the relationship that we

started this year with our counterparts in Ghana and to

expand our work to include other nations as well.•

Kevin Kelly is Assistant Vice President for Programs at the

National Congress for Community Economic Development

in Washington, DC. The website is www.ncced.org.

GLOBAL OUTLOOK

34
During the Third Summit of the Americas, held in

Quebec City, Canada, April 20-22, 2001, President

Bush met with the Heads of State of 35 countries

in the Americas and they agreed to work together on several key issues. The final declaration by all delegations identified actions to be taken in the near term to further the

Summit’s goal of promoting greater hemispheric cooperation in addressing common challenges. One of these actions

was the conference on “Decentralization, Local

Government and Citizen Participation,” held in La Paz,

Bolivia, July 29-31, 2001 sponsored by the Organization of

American States (OAS).

In an effort to advance or consolidate democracy, most

countries in the Americas have begun to decentralize government in order to increase the capacity of people to act

on their own initiative in serving the social, political, and

economic needs of their communities. The United States is

eager to share the lessons learned from its experiences with

encouraging local participation and facilitating collaboration between governments and nonprofit community-based

organizations. Many other countries in the Americas also

are promoting citizen participation in local decision-making

for the improvement of community services. For example,

in the State of Jalisco, Mexico, training courses are delivered

to citizens’ organizations that focus on local government

functioning and the development of strategies for increased

citizen participation.

Contributing to successful governance and decentralization is active citizen participation, the inclusion of grassroots

organizations, and the formation of local networks of nongovernmental organizations (NGOs). Citizens, working in

concert with local governments and NGOs, are the foundations for a strong democracy, and play a crucial role in guiding the administration of public services.

Anja Graves is an Expert in the Office of International

Affairs at the U.S. Department of Housing and Urban

Development in Washington, DC.

INTERNATIONAL URBAN RESEARCH MONITOR

35

Summit of the Americas Update

ANJA GRAVES

U.S. Department of Housing and Urban Development

Cuzco, Bolivia
Over the past several decades,

political leaders and community

activists in different parts of the

world have put the brakes on car-centered urban development. Three such

places are Copenhagen, Portland, and

Curitiba, where political leaders have

made difficult, even controversial, choices

to give precedence to pedestrians and

cyclists, steer new development to locations easily reached by public transportation, and maintain population densities

that make public transportation and

cycling possible. These decisions have

helped to revitalize central city locations,

improve environmental health, and make

streets safer for children.

COPENHAGEN, DENMARK

In the 1960s, just as cars were taking over

the city, and public squares were being commandeered as

parking lots, Copenhagen made some crucial choices.

Rather than widening the roads to ease congestion, officials

proposed closing streets to cars to improve conditions for

pedestrians. Many people protested that Scandinavia was too

cold for people to linger outside,arguing “We are Danes,not

Italians!” After a lengthy debate, the city closed the main

shopping street, the Stroget, to cars in 1962. Storeowners

found that the greater number of pedestrians on the street

stimulated business. Over the next 11 years, adjacent streets

were turned over to pedestrians. Then the focus turned to

reclaiming public squares and harborsides from parked cars,

and the number of parking spaces in the heart of the city

was reduced by roughly 2-3 percent per year, cutting some

600 spaces between 1986 and 1996.

The city also enhanced public transportation, aided by an

enduring vision called the “Finger Plan.”The plan, initiated

in 1947, was for the urban region to develop along rail corridors extending toward smaller population centers.

Copenhagen’s central city was the “palm,” while urban

development along the five rail corridors constituted the

“fingers.” Green space between the fingers kept the image of

a hand from turning into a paw.

In addition to maintaining these rail “fingers,” officials

made walking and bicycling safer and easier, replacing curbside parking with bicycle lanes and expanding the network

of bicycle lanes from 180 kilometers in 1950 to 293 kilometers in 1995. By 1996, the city center had six times as

much space devoted to pedestrians. Bicycling to and from

the city center increased by 65 percent between 1970 and

1996.

In recent years, Copenhagen has built on these successes. For instance, along with other Danish cities, it has adopted a “safe routes to school” program that ensures that students have a network of safe walking and cycling paths.And

to further promote transit- and cycle-friendly development,

a recent government directive states that new development

should occur within one kilometer of a transit station.

Copenhagen’s changes in the past few decades have

made it far less dependent on motor vehicles. Even though

the road network is bigger now than it was in 1970, the total

number of kilometers driven by motor vehicles is 10 percent below what it was three decades ago.A survey of major

industrial countries between 1973 and 1992 found that

Denmark was the only one in which a shift from cars toward

buses and rail led to a clear reduction in automobile travel,

energy use, and pollution from vehicle emissions.

In the words of one city official, the heart of

Copenhagen changed “from a car-oriented to a people-oriented” place.”

As a result, Copenhagen is a safe, healthy, and enjoyable

place for people to live, work, and relax. Cities in the United

Kingdom are now trying to emulate the Danish safe routes

to school initiative.After a student exchange trip, a 14-yearold British boy remarked:“It was amazing how independent

GLOBAL OUTLOOK

36

Metropolitan Regions Promoting Sustainable

Development and Urban Livability: Copenhagen,

Curitiba, and Portland

MOLLY O’MEARA SHEEHAN

Worldwatch Institute

Venice, Italy
the children were in Denmark, compared to Britain. They

could cycle to their basketball training, and to parties, rather

than having to get taken by their parents.

PORTLAND, OREGON

While people in Copenhagen were mobilizing to preserve

the character of their city in the 1960s, residents of the U.S.

State of Oregon were becoming concerned about the effects

of suburbanization. New houses and businesses were popping up farther from downtown Portland, which was losing

vitality as people moved to new opportunities in the suburbs. Nature lovers, attracted to Western Oregon by its lush

greenery and woodlands, and farmers whose livelihood

depended on the region’s rich soils, formed a coalition to

protect Oregon’s forests and farms from urban sprawl. In

1973, the Oregon Legislature passed a law requiring all metropolitan areas to create growth boundaries beyond which

new urban development would not occur.The boundary for

the greater Portland area, eventually decided on in 1980,

encompassed the city of Portland and 23 neighboring towns

in three counties.

While the boundary was intended to protect the rural

landscape, it ended up making Portlanders more aware of

the urban streetscape. Under the leadership of Mayor Neil

Goldschmidt, Portland began to take space from cars and

give it to people. The city tore down a six-lane riverfront

expressway and replaced it with a park for cyclists and walkers, and transformed a large downtown parking lot into a

pedestrian plaza, Pioneer Courthouse Square, in the heart of

the shopping district. Even as Portland became more consciously urban, city officials maintained a link to nature by

enforcing municipal regulations to protect “view corridors”

of Mount Hood, 50 miles to the east.

Over the years, the city government has taken steps to

promote alternatives to driving. Both building and transportation policies aim to make streets welcoming to pedestrians and cyclists. To avoid expanses of alienating blank

walls, the city required ground-floor windows in new buildings, and public art to account for one percent of the budget of new public buildings.The city’s transportation department and police department have teamed up in a “trafficcalming” program to deter speeding on city streets, especially those near schools. The city now has 240 kilometers of

bikeways, and requires bicycle parking to accompany new

construction. When a highway was proposed in 1975 as a

link to the eastern suburbs, Portland opted instead for a light

rail system called MAX (Metropolitan Area Express).

Active citizens have influenced these decisions. When a

highway bypass was proposed to cut through farmland to

the west of Portland, two citizens’ groups, 1000 Friends of

Oregon and Sensible Transportation Options for People,

pointed out that computer models of traffic growth did not

take into account the benefits of walkable and bikeable

neighborhoods in projecting future trends. Updating the

software, these advocates showed that over 20 years, development geared toward transit, pedestrians, and cyclists

would result in 18 percent less highway congestion than

building a new bypass.

Metropolitan Portland is now trying to apply the lessons

learned in revitalizing its downtown to revamping its suburbs, which were built with office parks separated from

housing developments by wide motorways. The Portland

region’s latest plan is to channel the bulk of future growth

toward nine regional centers that are to be interconnected

by the light rail transit system. Up to 85 percent of new

development is to take place no farther than a five-minute

walk from a transit station.The first segment of the light rail

network, opened in 1990, runs east from downtown

Portland; the second line, opened in 1998, traces the city’s

western corridor. Without the west-side rail link, planners

estimate that they would have needed eight new parking

garages and two extra lanes on major highways.

Portland’s regional government, Metro, consulted extensively with residents in formulating its latest plans. For

example, Metro commissioned a survey in the early 1990s

that asked citizens for their reactions to pictures of different

types of streets. Most suburbanites surveyed actually did not

favor the pictures of typical suburbia: wide expressways with

large shopping malls on either side, marooned in an asphalt

sea of parking spaces, and curving residential streets fronted

by two-car garages.The highest-rated residential scene was

in fact a picture of a tree-lined urban street in Toronto, with

30 to 40 dwelling units per acre. Based on these surveys,

Metro developed four scenarios for growth to show how

the region might accommodate the anticipated population

increase, held 182 public meetings with citizens, made a

video available through video rental stores, and sent every

resident a questionnaire with maps of the different scenarios.

Initial surveys uncovered double standards. For instance:

“I don’t like sprawl, but I don’t want my neighborhood to

change,” or “I like transit, but I mostly drive my car.”

Subsequent questionnaires explicitly offered a set of tradeoffs. Faced with the choice:“Should investments be made in

highways or transit,” only 14 percent preferred investing in

roads. Only 13 percent thought that growth should occur in

new areas instead of existing neighborhoods. The resulting

plan employed a host of transportation and land use policies,

but the vision, according to Metro’s chairman Mike Burton,

could still be summed up in just two sentences: “Everyone

can always see Mount Hood. Every child can walk to a

library.””

Although the suburbs within Portland’s growth boundary still rely heavily on automobiles, the region’s investment

in transportation choices is already paying dividends.

Compared to a number of more sprawling cities in the

southern and western United States, Portland’s streets are

safer for children and pedestrians of all ages.

The growing variety of transportation choices has made

“car sharing” possible. Membership-based hourly car rental

services took root in Europe in the 1980s. Portland’s program boasts a fleet of rental cars, including a hybrid-electric

sports car and a pickup truck, parked throughout the city.

Members pay a $100 annual fee, reserve the car they want,

INTERNATIONAL URBAN RESEARCH MONITOR

37
walk or bike to pick it up, and receive a monthly bill for the

hours used and miles driven. Steve Gutman, a participant,

reports that he and his wife “share 18 vehicles with 282 people-that’s 6.4 percent of one car for each of us.” The

Gutmans end up driving about 160 kilometers (100 miles)

by car each month, much less than the typical American, and

pay only $60 for transportation, a fraction of the $480 a

month it costs to own and operate a relatively new car.And,

says Gutman,“on any given day we have, within 10 blocks

of our home, our choice of four different cars!”

As in other desirable places, increased demand for housing in Portland has pushed prices up. But, contrary to critics’ assertions, Portland’s regional planning has likely eased

the pressure. Elsewhere, suburbs put an upper limit on the

number of houses per acre, effectively mandating expensive

homes on large lots. Portland’s Metro sets a lower limit on

the number of houses and requires a mix of housing types

to make housing affordable and keep a 20-year supply of

buildable land within the region’s Urban Growth Boundary.

Still, the target density of Portland’s latest plan is less than 15

people per hectare, slightly less dense than smaller Ashland,

Oregon, and far from Manhattan’s 193 people per hectare.

Between 1985 and 1995, the prices of buildable lots

increased on average 2.85 percent per year in Portland, but

rose even faster in some booming places, such as Phoenix

and San Diego, that lacked regional growth boundaries.

Between the 1980s and 1990s, according to researcher

Arthur Nelson, metropolitan Portland and Atlanta have 

seen comparable growth in population, but Portland has

benefited from slower growth in vehicle traffic, reduced

commuting time, declining air pollution and fuel consumption, and an increase in neighborhood quality. Moreover,

both job growth and income growth were higher in

Portland. (See Table 1)

CURITIBA, BRAZIL

Another city that opted to invest in quality public space and

public transportation in the 1970s is Curitiba, Brazil. Like

Portland, Curitiba started as a New World frontier town. By

1972, it was reeling from a population surge in the 1950s

and ‘60s that, combined with escalating automobile ownership, had brought daunting traffic problems. Under Brazil’s

military dictatorship, foreign capital was flowing to large

infrastructure projects such as highways and the hasty assembly of Brasilia, a dazzlingly modern new capital of skyscrapers and wide motorways that was widely touted as the city

of the future. In line with then-prevalent thinking, a new

overpass was expected to ease the Curitibans’ traffic woes.

But the city’s new mayor, Jaime Lerner, an architect,

believed that greater use of public transportation could ease

traffic while maintaining the character of Curitiba’s streets.

Mayor Lerner pointed out that the overpass would obliterate the city’s historic main street. And on the eve before

demolition was to begin, he took a highly controversial step

to halt the project, organizing engineers to block off the

street to cars and create a pedestrian mall. Bulldozer operators showed up the next morning to find the street they

were supposed to tear up lined with flowerpots and 

occupied by children painting murals.

The city proceeded to manage traffic by improving public transportation, designating several main roadways radiating from the city center as “busways.” (See Figure 1) Zoning

laws encouraged high-density buildings along these thoroughfares. Transfer stations allowed commuters on the

fringes of town to switch from smaller, local buses to the

express buses on the main routes.

Mayor Jaime Lerner aimed not only to improve traffic

but also to secure housing locations for poor families. Before

the buildings along the transportation corridors were fully

developed, the city bought up strategically located land

parcels and set them aside for affordable housing. “These

small-scale developments blend into the surrounding residential areas,” writes urban analyst Jonas Rabinovitch.“They

integrate rather than isolate low-income households into

the economy and culture of the larger city.”

With the streets reconfigured, the city revamped the bus

system with a series of innovations that are now world

famous. Dedicated busways, extra-large buses for high-density routes, and tube-shaped shelters where passengers pay

their fares in advance, are all adaptations from rail systems

that add speed and comfort for relatively little expense. In

fact, the bus system cost less than one third of one percent

of what a subway would have cost. And much of the

expense has been covered by contributions from private bus

companies.The city has paid only for the roads, lighting, bus

stops, and staff to monitor the bus operators. By the mid1990s, although Curitiba had one car for every three people, two thirds of all trips in the city were made by bus.

Looking ahead, Curitiba not only steered growth toward

the streets and neighborhoods around transit lines, but also

guided it away from environmentally sensitive areas.

Stretches of land along rivers were put off limits to developers and made into parks, a practical option that also eliminated potential economic loss from flood damage to buildings.These re-zonings, together with other efforts to protect

GLOBAL OUTLOOK

38

Changes in Portland and Atlanta Regions from mid-1980s

to mid-1990s

Indicator Portland, Oregon Atlanta, Georgia 

(percent change)

Population growth +26 +32

Job growth +43 +37

Income +72 +60

Property tax -29 +22

Vehicle miles traveled +2 +17

Single occupant vehicles -13 +15

Commute time -9 +1

Air pollution (ozone) -86 +5

Energy consumption -8 +11

Neighborhood quality +19 -11

Source: Lincoln Institute of Land Policy, (Cambridge, MA,

2000).

Table 1
natural areas and build parks, increased the area of green

space per person 100-fold over 20 years.

The city took a host of other steps to make streets safer

and easier for pedestrians and cyclists to use. What began

with the pedestrianization of the historic main street led to

some 650 downtown blocks being set aside as pedestrian

thoroughfares. These streets connect to bus stations and

parks, which in turn connect to a 150-kilometer network of

bicycle paths.

As in Copenhagen and Portland, Curitiba’s transportation reforms were part of broader efforts to revitalize the

central city, preserve the environment, and respond to the

needs of citizens, particularly children. In Curitiba, the city

made the needs of children central, funding municipal daycare centers and engaging street children in city projects

such as urban gardening.

When New Yorker writer Bill McKibben wrote in the

early 1990s, “Curitiba is among the world’s greatest cities,”

he found that many shared his view: “99 percent of

Curitibans told pollsters that they were happy with their

town; and 70 percent of Paulistas, residents of the mobbed

megalopolis to the north,said they thought life would be

better in Curitiba.

The road taken by Brasilia shows what might have happened to Curitiba. The national government planned for

Brasilia to have lower-density development that makes public transportation inefficient, and required residential, commercial, and industrial facilities to be separated from each

other. As a result, notes an analyst for the Inter-American

Development Bank,“car travel is required for even the simplest of needs” in Brasilia. Curitiba, on the other hand, by

promoting development-including low-income housingalong public transportation routes and allowing residences

to be located near stores, created a city in which people do

not need to drive.”

CONCLUSION

The three cities described are by no means utopias.

Outlying areas within greater Copenhagen are not as

accommodating to the pedestrian or bicyclist as the center

city.Within its Urban Growth Boundary, Portland has cardependent suburbs and is feeling the housing demand that

comes with success. Curitiba must wrestle with the problem

of squatter settlements on the outskirts of town.

Nonetheless, as a result of decisions to give precedence to

public transportation and public space, these cities have fared

better than others in many respects. Public transportation

ridership has increased faster than population growth, children have better access to places they need to go, and the air

is cleaner.What is more, their economies are thriving.•

Molly O’Meara Sheehan is a Research Associate at the

Worldwatch Institute in Washington, DC. She is author of

Reinventing Cities for People and the Planet. This

article is adapted with permission from City Limits:

Putting the Brakes on Sprawl, published in June 2001 by

the Worldwatch Institute (www.worldwatch.org).

INTERNATIONAL URBAN RESEARCH MONITOR

39

KEY

bus line

transfer station

bus terminal

direct bus line

The Bus System in Curitiba, Brazil

Development is kept close to bus

lines, to make walking and cycling

practical

Figure 1
I

n the field of regional policy, metropolitan regions

centered around large

cities, and rural areas with

small towns, have generally

been the main focus of policymakers. But what about

those regions that are in

between these two extremes?

What about regions which

consist primarily of an

intense network of small and

medium-sized towns? The

Territorial Development

Service of the Organization

for Economic Cooperation

and Development (OECD)

calls them “intermediate

regions”. According to the

OECD, regions are classified

as being intermediate when

between 15 and 50% of their

population live in rural communities (see box). Despite

their great diversity, the different profiles of intermediate

regions show some common

characteristics. This is significant for policymakers as they

attempt to learn from successful initiatives applied in

other similar regions of the

OECD.

Trend analysis for intermediate regions shows a

mixed record. On the whole,

intermediate regions have

performed dynamically over the last 15 years. However, if

structural adjustment has had positive effects in some intermediate regions, others have stagnated or declined.

Generally, intermediate regions account for a significant

proportion of the total population of the OECD countries,

about 34 percent in 1995. In fact, intermediate regions were

the only ones that have registered an increase in their population during the period 1980-1995, and this at the

expense of rural regions (See Figure 1). However, the relative importance of intermediate regions varies among

OECD countries. In European countries like France, Italy,

and Spain, population is concentrated in intermediate

regions. In Germany, Switzerland, and the United Kingdom,

the greatest number are to be found in urban regions while

in Finland, Norway, and Turkey, the bulk of the population

lives in rural regions (see map). Overall, Europe’s intermediate regions are to be found in all parts of national territories. Another point is that most intermediate regions in the

OECD are specialized in manufacturing industries.

Although this sector has recorded a net decline in the number of jobs in most intermediate regions of OECD member

countries, manufacturing industries continues to provide

employment for a significant portion of the working population.

GLOBAL OUTLOOK

40

Economic Development Strategies for Smaller Cities

and Intermediate Regions

LAMIA KAMAL-CHAOUI

Organization for Economic Cooperation and Development

Types of Regions in Europe 

Figure 1

Source: OECD Territorial Database, 1999.
This mixed record for intermediate regions is due to the

fact that within the category of intermediate regions, there

are different subtypes of regions.A more detailed assessment

will require differentiating among regions according to their

economic structures. Broadly speaking, there are three main

types of intermediates regions: regions with a strong agricultural heritage, regions with industrial specialization, and

regions with a developed tourist industry. Of course, some

intermediate regions may combine several of these features.

Consequently, it is quite a challenge to identify the factors

of growth and reasons for decline. However, it is possible to

highlight some similarities in terms of strengths and weaknesses that reflect global trends affecting most intermediate

regions. Here are some interesting findings that will allow

formulating fairly general strategies.

In terms of strengths, most intermediate regions have a

highly-specialized industrial sector. Their strong industrial

tradition has produced a local workforce with the skills and

technical know-how that gives a competitive edge for incremental innovation. Moreover, in many OECD intermediate

regions, the proportion of small and medium-sized enterprises (SMEs) is higher than at the national level.This is an

asset, because SMEs have the advantage of being more flexible to a changing environment than big firms. They can

respond more easily by shifting their production. Also,

growth in intermediate regions is often linked to the

dynamism of their small and medium-sized towns.With the

concentration of facilities, infrastructure, and services, these

towns offer both the advantages and the disadvantages of

urban life combined with the quality of life in rural areas.

In terms of weaknesses, one of the main problems of

intermediate regions is the relative weakness of the services

sector, especially business and financial services. This is an

important challenge since outsourcing of services is a key

element of business strategies for becoming more modern,

flexible and innovative.Another problem is that the limited

resources of most businesses makes them less able to invest

in technological improvement. Technology transfers and

innovation are also held back by the lack of cooperation

among the owners and managers of competing SMEs.

Besides, there is a shortage of people with high levels of

education and job skills. Holders of university and postgraduate degrees are proportionately less numerous in intermediate regions than in major metropolitan centers. Links

between universities and the labor market in intermediate

regions are frequently less well structured. Finally, lack of

cooperation is a major problem of governance in intermediate regions, both in the private sector and between governmental jurisdictions.

In fact, globalization and the speed of technological

progress have put intermediate regions in the difficult position of constantly catching up. Industrial restructuring has

been particularly challenging for intermediate regions that

grew up around one single industry. Generally, regions that

have managed to adapt to the changing environment are

those that are very well organized in terms of their local

production systems.These regions have taken advantage of

their existing assets and output potential to move into new

market niches. In this context, it is essential to strengthen

productive relationships in industrial districts.The objective

here is to focus on targeted industry clusters or networks,

related groups of small regional businesses belonging to the

same industry but specializing in different phases of the

process of design, engineering, production, marketing, and

distribution. It is also important to promote entrepreneurship through greater regional cooperation, including the

creation of industrial zones, business incubators, and other

policy measures to promote public-private collaboration.

With rising competition from developing countries

where labor costs are cheaper, the economic competitiveness of intermediate regions now depends on the quality of

manufactured goods, on advanced design, and on technological innovation. In this context, local entrepreneurs need

a well-trained workforce, a sophisticated research and development system, and adequate transportation and communications infrastructure. Every small or medium-sized city acting alone cannot provide all of the necessary human and

material resources required for the development of the business sector. In this respect, it is essential to improve inter-city

industrial networking policies and regional cooperation.

Small and medium-sized towns will then be able to offer

facilities and services that they could never afford on their

own. This cooperative approach makes possible supporting

the critical mass necessary for intermediate regions to gain

a higher economic profile domestically and internationally.

Networking of cities is optimized when it goes together

with a process of specialization of cities, whether in niche

market products, through local industrial districts, or in

industries based on tourism and natural and cultural 

amenities.

In many OECD countries, networking among small and

medium-sized towns is non-existent or in its infancy.There

are, however, a number of initiatives in various stages of

progress. One excellent example is the region of Emilia

Romagna in northeastern Italy. Widely recognized for its

industrial districts, Emilia Romagna is economically a highperforming intermediate region. It has registered an

employment growth rate of 4.2 percent between 1995 and

1999 and a Gross Domestic Product (GDP) growth rate of

about 4.5 percent.The region is characterized by an important cultural industry of festivals, attractions, and arts.

Policymakers have encouraged the networking of the small

and medium sized-towns coupled with a specialization of

each city in specific aspects of culture and the arts. Hence,

Bologna has become the regional center for orchestras,

Modena for theaters, Parma for operas, Ferrara for art

exhibits, Regio Emilia for dance performances, and Ravena

for archeology. The cities are located near each other, and

the transportation connections by road and rail very well

developed. Consequently, it is possible for someone to spend

his evening in another town attending an exhibition and

come back home after the show.This process of networking

and specialization was first borne from independent initiatives by local private entrepreneurs.Aware that these actions

INTERNATIONAL URBAN RESEARCH MONITOR

41
could help enhance cultural amenities, promote employment, and boost tourism, regional public authorities also

supported the process.

Another important economic cooperation initiative is

taking place in the Central Comarcas Valencianas (CCV), an

intermediate region located in the central eastern part of

Spain, comprising 155 separate municipalities in two different provinces. Under the 1978 Spanish Constitution,

municipalities gained some political autonomy, but more

sub-national powers were granted to the newly created

regional authorities called Autonomous Communities.The

CCV is not considered an official region by the Spanish

government officials, because it is located within the central

part of the Valencian Autonomous Community, between the

provinces of Alicante and Valencia. The CCV intermediate

region has an important manufacturing sector specializing

in textiles, clothing, and toys, organized in classical industrial cluster structure and highly oriented toward production

for export. The region’s development is somewhat held

back by the lack of advanced services which prevent businesses from developing economies of scale, by external and

internal problems with transportation accessibility, and by

environmental concerns. In this context, the public and private sectors have decided to work together in promoting

new regional economic and industrial policies. To pursue

this agenda, they formed in 1999 the Consortium of Cities

of the Valencian Central Districts. Its main purpose is to

generate cooperation in overcoming the relative political

marginalization of the smaller industrial communities from

the major metropolitan areas of the region, the cities of

Valencia and Alicante, and to create a critical mass enabling

the region to address strategically the new economic

dynamics brought about by the ongoing process of economic globalization. During June 27-29, 2001, the OECD

and the Polytechnic University of Valencia held an international conference in the CCV area of Spain on “Territorial

Development Strategies for Intermediate Regions” and

released a book-length report on the OECD territorial

review of The Valencian Central Districts, Spain. Three days of

meetings were held in four different communities: Xativa,

Ontinyent,Alcoy, and Ibi.

In France, a traditionally centralized country economically and administratively, the reseaux de villes (network of

cities), is a contractual public/private partnership with associated representatives from the business sector, different local

administrative entities, and the central government. These

French city networks are neither political bodies nor institutions. Generally speaking, medium-sized cities join

together in order to share costs and risks with a view to

achieving complementarity and improving administrative

procedures.The organizations that take part in the city networks collaborate on strategic planning, public-private partnerships, and joint development projects. Cooperation covers a wide range of issues including promoting tourism and

culture, improving transportation, business marketing, environmental enhancement, and investing in new information

and communications technologies.

Overall, regional networks of small and medium-sized

towns and cities are a still modest but growing phenomenon

in OECD areas. The specific challenges that intermediate

regions face are yet to be fully perceived by local leadership.

Many OECD countries now view their growth potential as

based not only in major metropolitan regions, but also in

small and medium-sized towns and cities that encompass

GLOBAL OUTLOOK

42

Alcoy, Spain
valuable core assets for sustainable development. In this perspective, small and medium-sized towns and cities in intermediate regions should seize the opportunity to enhance

the value of their unique comparative advantages through

selective specialization strategies, relying in particular on

active niche marketing. For this purpose, inter-city networks

are crucial for reaching the critical mass to better provide

the services and infrastructure their enterprises need.

However, there is no magic formula on how to establish

successful industrial specialization networks.. What is

important is to find solutions that will be appropriate to the

local institutional context and to promote partnerships that

involve central and local governments, the private sector,

and civil society.•

Lamia Kamal-Chaoui is an Administrator at the Territorial

Reviews and Governance Division of the Organization for

Economic Cooperation and Development (OECD) in Paris,

France. The website is www.oecd.org.

INTERNATIONAL URBAN RESEARCH MONITOR

43

Considering the fact that there are different types of

regions with different development trajectories, the

OECD Territorial Development Service (TDS) has

established a regional typology. A region is defined

as “predominantly rural” when more than 50 percent

of the regional population lives in rural communities

(and rural communities are defined as communities

with a population density below 150 inhabitants per

kilometer). When less than 15 percent of the regional

population lives in rural communities, the region is

considered as being “predominantly urban”. In

between, there is the category of intermediate

regions. 

This regional typology is a simple indicator but

quite relevant in dealing with the diversity of territorial spaces. Based on this typology, the OECD has

developed a comprehensive database and produced

various regional studies. In 2000, TDS conducted an

initial series of territorial reviews at the national level

(Korea, Italy and Hungary) and regional level (Teruel,

Spain; Tzoumerka, Greece; Comarcas Centrales

Valencianas, Spain; Bergamo, Italy; MoravskaTrebova-Jevicko, Czech Republic; and ChampagneArdennes, France). The programme of work for 2001

includes Canada, Switzerland, and Mexico, for

national reviews, Siena, Italy; Vienna, Austria;

Helsinki, Finland; and Oresund (the Copenhagen,

Denmark and Malmoe, Sweden cross-border international region) for regional reviews. Broadly speaking,

a territorial review is an audit of structural and territorial policies. It includes the review of policy efforts

to combat economic and social disparities between

regions and/or within regions and of initiatives to

enhance their comparative advantages and economic

potential. The review analyzes the distribution of

competencies and resources between the different

levels of government and the most appropriate

modes of governance, focusing in particular on the

different mechanisms of decentralisation and/or

devolution. This audit is carried out by missions of

the Secretariat accompanied by representatives of

the examining countries and international experts

who use their knowledge about other national experiences to deepen the assessment and provide meaningful policy recommendations.

For more information about the territorial reviews,

please contact: Lamia.Kamal-Chaoui@oecd.org

The OECD Regional Typology

and Territorial Reviews

Valencia, Spain
GLOBAL OUTLOOK

44

US Department of Housing and Urban Development

HUD USER

P.O. Box 6091

Rockville, MD 20849

Official Business

Penalty for Private Use $300

FIRST-CLASS MAIL

POSTAGE & FEES PAID

HUD

Permit No. G-795

August 2001

Equal Housing 

Opportunity

The Fannie Mae Foundation and the Woodrow Wilson

International Center for Scholars are co-sponsoring an

international conference on “The Future of Microfinance in

the United States: Research, Practice, and Policy

Perspectives.” This invitation-only all-day event will take

place on October 11, 2001 at the Fannie Mae headquarters

in Washington, DC. The theme of the conference is based

on a collection of original research papers commissioned

by the Fannie Mae Foundation that will be published as a

book in the summer of 2002 by the Wilson Center Press.

The conference, coordinated by Dr. Marc Weiss of the

Woodrow Wilson Internation Center, will be a day-long

conversation among 50 of the top leaders in the fields of

microfinance (also called microcredit, microlending, and

microinvesting) and microenterprise in the United States

and throughout the world. Its purpose will be to explore

the cutting edge issues, and the recent experience and lessons to be learned both domestically and globally. A special focus will be addressing the major challenges and

opportunities for increasing the scale, outreach, effectiveness, and sustainability of microfinance institutions and

activities in the United States, including strengthening

market-oriented approaches, and expanding into new

fields such as affordable housing. In particular, the purpose of the conversation will be to identify the major challenges that need to be overcome and opportunities that

can be pursued through public policy reform, institutional

changes in private markets, and civic and community

entrepreneurship.

Microfinance and microenterprise initiatives and institutions have become important tools for reducing poverty, promoting self-employment and entrepreneurship,

creating jobs and wealth for low-income people and welfare recipients, creating affordable housing and homeownership, and strengthening families and communities

in many countries around the world, from Bangladesh to

Bolivia, and from India to Indonesia. In particular, the success of the Grameen Bank has been widely discussed and

emulated over the past two decades, not only in developing countries, but in the United States. 

There are currently hundreds of public and private sector microfinance programs operating in this country, with

substantial diversity in terms of how they are funded and

operated, and what target population they serve. In addition, there is a growing body of research and program

evaluation regarding the accomplishments of these programs. Many of them now belong to their own national

trade group, the Association for Enterprise Opportunity,

and are supported by a wide range of private foundations,

government agencies, financial institutions, corporations,

research centers, and non-profit organizations.•

Dr. Ayse Can Talen is Senior Director for Community

Development Research at the Fannie Mae Foundation in

Washington, DC. Dr. Marc A. Weiss is a Public Policy

Scholar and Co-Editor of Global Outlook at the

Woodrow Wilson International Center for Scholars in

Washington, DC.

International Conference and Book on “The Future of Microfinance

in the United States” Co-Sponsored by the Fannie Mae Foundation

and the Woodrow Wilson International Center for Scholars

AYSE CAN TALEN

Fannie Mae Foundation

MARC A. WEISS

Woodrow Wilson International Center for Scholars