H3 Quito Policy Brief: Fostering ‘Inclusivity’ in Urban Economic Development

By Aidan Kidder

Summary

The Habitat III conference saw UN member states agree to implement ‘The New Urban Agenda’, which is set to be the guiding framework for urban development over the next twenty years. The New Urban Agenda makes a commitment to promote inclusive urban economies, through “fostering an enabling environment for business and innovation and jobs and livelihoods”. There was much discussion At Habitat III on how this could be achieved. From such discussions, I have identified three key issue areas which need to be addressed for creating such an “enabling environment”. First there needs to be greater accessibility to decent income-earning opportunities.  Better representation of informal workers, scaling-up workers through skill development, and regulating a positive investment environment for growth in tradable sectors were all suggested as key approaches for doing this. Second is the challenge of overcoming infrastructural deficits which deter investment and perpetuate inequalities. This should be done through improving and extending public service provision, as well as providing increased connectivity through better urban planning.  Thirdly, governance processes need to be made more open and transparent, both to give confidence to potential investors and to improve public procurement practices. To ensure a balanced approach to urban development which can work towards truly inclusive cities, there should be a commitment to open dialogue and participation from a range of different stakeholders, underlying all of these three key issue areas.

Introduction

The emphasis on ‘inclusive’ urban economic development was ever prevalent at Habitat III, and equitable access to decent jobs and livelihoods was widely acknowledged as central for this. Whilst trends have shown huge increases in urbanisation across all countries, indicating a strong pattern of convergence, there has been no such convergence in income per capita. The world’s urban population is projected to increase by 2.5 billion by 2050. The key question on urban economic development at Habitat III has, therefore, been, ‘how can cities provide for such a huge influx of people?’. Three critical issue areas can be identified in regards to this question: accessing ‘decent work’, infrastructural deficits, and institutional challenges.

The reality facing many urban dwellers is that there simply aren’t enough (formal) income-earning opportunities, which represent ‘decent work’ (as defined by the ILO’s municipal indicators), to meet the rising demand. In Africa, the majority of urban jobs are informal, with less than 25% of new labour force entrants in South Africa finding wage labour. Inadequate or poorly planned infrastructure in cities exacerbates these unbalanced development trajectories, as many migrants and young people are becoming marginalised in settlements disconnected from areas of opportunity within their city.

In response to this, there has been much talk of the need for local authorities to step up to play a more developmental role. For this to happen, local authorities first need to be made more accountable and transparent, to incentivise more rule-bound processes of governance. Transparency International estimate that one in four people across the world will have paid a bribe in the last twelve months, when they came into contact with one of nine institutions or services.

For overcoming these challenges, there has been much emphasis throughout the conference on forging partnerships. The public sector, private businesses, workers, NGOs, and not-for-profit organisations have each been identified as important actors to be incorporated into an urban dialogue, which continues beyond the four days of the conference, and is maintained throughout efforts to implement the New Urban Agenda.

Accessing ‘Decent Work’

A reliance on informal employment in many urban areas not only lowers prospects for adequate livelihoods, but may also be relatively unproductive, compared to formal counterparts. This doesn’t mean that all informal economic activity should cease, but that the barriers preventing informal workers from playing a more productive role in their local economies should be removed. Poor working premises, harassment, discrimination, and the inaccessibility to finance are the barriers faced by many informal micro-enterprises, which with the right regulatory framework and social protections could become far more productive enterprises.

WEIGO (Women in Informal Employment Globalising and Organising) encapsulate neatly what informal workers require in what they call the three v’s: visibility, voice, and validity. Informal workers need to be recognised for the productive contributions they make to local economies; they need a platform to have their interests heard and incorporated into planning processes; they need legitimacy as economic actors to free them from discriminatory treatment by officials. WEIGO believes that better organisation of informal workers will drive these changes in policy and common narratives.

The emphasis should not only be on the informal sector. The disproportionate growth in the informal economy is largely due to the inability to access employment opportunities in the formal economy. Improving accessibility to formal employment means overcoming mismatches of skills in labour markets, through investments in human capital. Through investments in young people, local economies will be able to seize the demographic dividend by empowering a large and growing group which is often marginalised;increasing the productive capacity of local economies. This is an important way to scale people up, either for work in the formal economy, or to enable them to grow their own micro-enterprise. Effective investments in human capital should arise out of dialogues with the private sector on what skills labour markets are demanding, in order to ensure smooth transitions from education to employment.

Investment in job creation is also key. Rapid urbanisation needs to be accompanied by growth in tradable sectors. For most of Africa this has not occurred, unlike in many emerging South East Asian economies. Of particular importance is the growth of a manufacturing sector, and generating a shift away from extractive resource industries, which, in Africa, have shown to increase inequality. Smart industrial policies are needed to ensure cities are able to cultivate well-guided investments with real linkages to the local economy, which develop comparative advantages and the increased production of tradable goods for export.

Infrastructural Deficits

In a special session on local economic development, Yondela Silimela highlighted how in Johannesburg the disparity between where many people live and where employment opportunities are available has created a deeply unequal city. Johannesburg suffers from a poorly planned urban form which lacks a central core, giving rise to spatial inequality. The US Department of Housing and Urban Development also conveyed the message that where one lives can be a key determinant of socio-economic status even in the US, demonstrating the importance of inclusionary housing and effective transport linkages for connecting people to opportunities in both developed and developing cities.

Spatial inequality also gives rise to neighbourhoods dominated by informal work, which are disconnected from the formal sector but also from other basic services. For many informal workers, particularly women, the home is their workplace. Connecting these homes to basic public services is a cornerstone for opening up access to opportunities and increasing productivity.

Poor quality infrastructure has also been identified as a disincentive to investors. The 2017 State of African Cities Report is set to present evidence of a common narrative amongst investors, which portrays African cities as disorganised and poorly planned. This creates expectations of high production costs and low productivity, making such cities appear unreliable places to invest. Quality infrastructure can play an important role in changing these narratives and the expectations of potential investors.

Poor Governance

Corrupt forms of governance also negatively affect the ‘common narratives’ held by private investors, which influence decisions to invest in a particular region. Greater transparency by local and national governments can help lend confidence to investors. Exerting pressure for transparency in government can also be useful for identifying and forcing change in corrupt practices in public investment. Slovakia serves as a story of what increased transparency in local government can achieve. Before legislation forcing municipalities to disclose all public receipts and procurement contracts only 4% of municipalities auctioned off public procurement contracts, after the legislation this rose to 100% of municipalities in Slovakia, with rising numbers of competitors for the contracts.

Conclusion

Successful implementation of the New Urban Agenda will require a balanced multi-faceted approach by a range of different actors: national and local governments, the private sector, NGOs, and not-for-profit initiatives. Whilst local governments will be required to take the lead on this, it is essential they maintain a positive dialogue with other actors to ensure that public projects are conducive to both business and workers interests, to ensure they are able to strike a balance between the search for profit and livelihoods; the two need not be mutually exclusive. Encouraging workforce development in private firms is an ideal way to do this, for which many suggest the incorporation of labour clauses into public procurement contracts. Consultations with the private sector, trade unions, and NGOs in planning processes will also be imperative for creating vibrant and inclusive urban economies that work for all.

Policy Recommendations

  • Allocating clear rights for informal economy workers, including the assignment of licenses for informal economic activities where appropriate.
  • Policies and training programs to engage and empower young people.
  • Inclusion of labour clauses in public procurement contracts to facilitate workforce development.
  • Public investments into basic infrastructure and service delivery.
  • More transparent processes of governance.
  • Greater platforms for dialogue and participation from a wide range of different stakeholders.

 

References

International Labour Organisations (ILO) 10 municipal indicators for ‘decent work’:

http://www.ilo.org/wcmsp5/groups/public/—dgreports/—integration/documents/publication/wcms_229374.pdf

United Nations, Department of Economic and Social Affairs, Population Division (2014). World Urbanization Prospects: The 2014 Revision, Highlights (ST/ESA/SER.A/352): https://esa.un.org/unpd/wup/Publications/Files/WUP2014-Highlights.pdf

Employment and inequality outcomes in South Africa, Southern Africa Labour and Development Research Unit (SALDRU) and School of Economics, University of Cape Town: http://www.oecd.org/employment/emp/45282868.pdf

Transparency International Statistics: https://www.transparency.org.uk/corruption/corruption-statistics/

 

Aidan Kidder is currently studying for an undergraduate degree in Economics and Politics at the University of Sheffield. He attended Habitat III conference as a policy analyst for Global Policy. His interests are in local economic development, inequality and poverty, and the informal economy. He can be contacted via email by akidder1@sheffield.ac.uk.

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