Southeast Asian Megacities: Big Challenges, Bigger Opportunities
Published in Knowledge@Wharton
Indonesia's rapid economic growth is dramatically changing its capital, Jakarta. While just over nine million people live in the central city, more than 23 million people live in its larger metropolitan area, making it the largest megacity in Asia and the third-largest in the world.
The world's urban areas are experiencing rapid growth. In 2007 -- for the first time in history -- more than half of the world's people (3.3 billion then) were living in urban areas. By 2030, nearly all the world's population growth will be in cities. Many will be living in megacities, which are defined as cities that have populations above 10 million.
New York was the world's first megacity, but today it is in eighth place for population size. Greater Tokyo, which has largely stopped growing, remains the world's most populous metro region, with more than 34 million people. By 2025, Asia will host seven of the world's 10 largest metro regions.
In addition to Jakarta, Asian megacities include Bangkok, Manila, Guangzhou, Seoul, Shanghai, Beijing, New Delhi, Karachi and Mumbai. Megacities are also home to sprawling slums and poverty. Many of them suffer from overburdened and aging infrastructure. The blackout that covered half the country and affected 600 million people in India in the summer of 2012 is an example of what happens when the system spins out of control. One major contributing factor was a spike in power demand brought on by a heat wave in New Delhi.
Megacities' Great Potential
Still, it's a mistake to conclude that megacity problems are intractable and life in them untenable, as some contend. Gavin W. Jones' report, "Megacities in the Asia-Pacific Region," concludes, "[C]onditions of life are in general much better than in the countryside, and improving over time." And because of their rapid growth, megacities will be a defining aspect of humanity for years to come.
A panel at the recent Wharton Global Alumni Forum in Jakarta, entitled "Growing Greener: Indonesia and the World," brought together many different environmental perspectives on megacity issues, with a special focus on Indonesia. The Forum's overall theme was "Indonesia, ASEAN and the World: Concentric Circles of Growth."
According to Eric Orts, the panel chair, director of Wharton's Initiative for Global Environmental Leadership (IGEL), and a professor of law and business management at Wharton, "Major environmental problems facing Indonesia include a booming population; large-scale deforestation and biodiversity losses; and issues facing particular business sectors, such as mining, palm oil production, and tourism. If Indonesia succeeds in handling these issues responsibly and efficiently, then it promises to become a leading example for other emerging economies in the second half of the 21st century. Jakarta is the face of the future with respect to the massive challenges of sustainability that everyone on the planet must deal with going forward."
Indonesia's dynamic economy -- it has a 6.4% annual growth rate in 2012, according to the Asian Development Bank -- belies some of the country's challenges, which are particularly acute in its largest urban regions. Jakarta, for instance, is a city on the move, but with mobility paralysis and attendant air pollution that cuts into its economic success. The Jakarta Transportation Agency reports that congestion costs the city $5.4 billion annually.
Challenges and Solutions for a Car-centric City
There are 11 million vehicles on the road in the city, up from 1.3 million in 1994, according to the Jakarta Police. Their frequent use is encouraged by federally subsidized gasoline through the state-owned Petramina oil company. "Traffic congestion in the capital has long been at an alarming level, particularly during the morning and evening peak hours," reports the Jakarta Post. It's a common problem for rapidly growing cities not designed to handle the traffic load.
The problem has led the beleaguered city government to try traffic-engineering schemes, such as switching inbound lanes to outbound during evening rush hours. The situation is exacerbated by erratic train service (with cars so packed that some people ride on the roof). An innovative TransJakarta bus service -- which has its own dedicated corridors and echoes successful transit systems in Curitiba, Brazil and Ottawa, Canada -- is helpful but needs expansion.
More cars and more congestion have led to increasingly poor air quality. In 2010, the city had 27 clean air days per year, with particulate matter far above the upper limits recommended by the World Health Organization (WHO). Jakarta's air would be far worse, however, if auto manufacturers had not dramatically reduced tailpipe emissions, and if the city's government had not banned open garbage burning, removed lead from gasoline and imposed curbs on industrial smokestacks.
In an energy consumption business-as-usual scenario, emissions of two major air pollutants (sulfur dioxide and nitrogen oxides) would increase by 2020 to two or three times 1990 levels, says the "Impact Assessment of Growing Asian Megacity Emissions" report. According to the study, "Urban air pollution in Asia has worsened in the developing countries, a situation driven by population growth, industrialization and increased vehicle use." The Stockholm Environment Institute identifies Asian air pollution as resulting from increased coal use, the steady growth in road traffic (especially diesel trucks and motorcycles), and residential heating and cooking.
Erik Assadourian, a senior fellow at the Worldwatch Institute who has studied sustainable communities, said that megacities "can take the lead in shifting urban transportation norms away from the car and back to trains, bus and bus rapid transit." Jakarta is ahead of most megacities in already having a bus rapid transit system -- its challenge is to expand the service to serve a wider swath of the community. Congestion pricing (which charges a fee for cars entering downtown cores) has been effective in reducing traffic in Europe (especially London), but has yet to see widespread adoption in the world's megacities.
Clean Water: A Critical Goal
Clean water is another challenge for Jakarta and Indonesia as a whole. The United Nations' Millennium Development Goals call for reducing by half the world's population without access to clean drinking water by 2015, but that goal is not yet in sight for Indonesia. According to the Jakarta Globe, only 40% of the city's population has access to piped water, and only 20% have access to a private toilet.
"Water flowing from an open tap is a luxury for only a few people in Penjaringan, one of Jakarta's densest neighborhoods," reports the IRC International Water and Sanitation Centre. "The French-run PT Palyja, one of two private companies that control Jakarta's water supply, provides only a communal tank for the local residents to use. Even the smallest daily activity, like brushing one's teeth, requires a trip to the tank, where people pay a large portion of their meager salaries for containers of cloudy, brackish water."
A related issue is the lack of sanitation access in megacities. Across Indonesia, 94 million people live without sanitation and up to 24 million must pay to use communal latrines, mostly in urban areas. Without sanitation, disease spreads rapidly through the water supply and other means, and quality of life is significantly impacted, especially for women. wH2O: The Journal of Gender and Water at the University of Pennsylvania makes these issues a main focus.
But even in Penjaringan, life is getting better for many residents, thanks to the international aid organization Mercy Corps, which in 2008 launched a program called Master Meter and installed its own clean water supply and ran lines to households that could afford the initial $20 fee. Despite its unsustainable population increases, Jakarta is beginning to confront its megacity problems, as are the region's other sprawling urban enclaves.
Indonesia's Importance
Paul Wolfowitz, a former ambassador to Indonesia, U.S. deputy secretary of defense and head of the World Bank, also spoke at the conference. "Sustainable development is absolutely critical to Indonesia's economic development and economic future," he said.
According to Wolfowitz, Indonesia's environment is "considerably endangered," and sprawling megacity growth, which annexes habitat and agricultural land, is one important reason for that. The country's environmental challenges have dramatic implications for the rest of the world, Wolfowitz said, because Indonesia is home to a disproportionate share of the world's biodiversity, including 25% of its fish, 17% of its bird species, and 12% of the its mammals -- including a critically endangered and charismatic primate, the orangutan. It also is host to the third-largest tropical rainforest in the world, covering 100 million acres. "The bad news is that Indonesia has lost 1% of its forest area annually every year for 20 years. Indonesia is responsible for 5% of all global warming emissions (making it the world's third-largest emitter, behind the U.S. and China).
Indonesia has many obstacles to overcome. Corruption, once concentrated in the all-powerful federal government, has become localized with political decentralization, Wolfowitz said. To evolve toward sustainability, he said, land-use management in Indonesia has to address questions of chronic poverty and securing a productive livelihood for the people who live in regions under threat, including the country's large cities. He pointed to Singapore as a model of what can be accomplished.
Worldwatch's Assadourian points out that "it's hard to imagine a utopian megacity," because the inherent challenges make sustainability much harder to achieve than in village-based ecosystems. "A sprawled-out city built around cars and parking lots, that's the worst possible design," he said.
Singapore's Solutions
Megacities can look to their smaller urban cousins, like Singapore, for solutions. Unsustainable population growth makes the problems worse. According to the CIA Factbook, the tiny city-state of Singapore, although somewhat authoritarian, "has a highly developed and successful free-market economy" and "enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries." One reason for its success is a family planning program that achieved one of the world's lowest fertility rates and made a virtue of necessity -- Singapore's five million people live in an island environment that is 30 miles long and only 16 miles wide.
Singapore, which has avoided megacity status by design, is the only metropolis rated "well above average" on the Asian Green City Index, part of a global project assessing and comparing major urban areas on six continents. (Six Asian cities rated "above average" are Hong Kong, Osaka, Seoul, Taipei, Tokyo and Yokohama.)
Also pointing to Singapore as an example is Susan Wachter, a professor of real estate and finance at Wharton and co-director of the School's Institute for Urban Research. She cites Singapore's development of a clean water system for its population, in part through desalination technology developed with corporate partners such as GE Power & Water. What is called Singapore NEWater is reclaimed wastewater that has been purified using membrane technology and ultra-violet disinfection.
Singapore's Innovations
"Singapore is far more innovative than we are in the U.S. with environmental regulations and incentives," Wachter said. "By 2030, 80% of Singapore's building stock will meet Green Mark certification on energy efficiency. Singapore has also adopted congestion pricing on highways, which has done wonders in reducing traffic problems. They don't have as much bicycle use and walking as they could have, so there is room to move there."
Wachter also points out that megacities are only one facet of urban growth in Asia. "In the region as a whole," she said, "there is faster growth out of the megacities than into them. Though urban growth is continuing, much of it is in secondary cities." China, for instance, leads the world in the creation of new urban enclaves that quickly become large population centers. The Chinese city Shenzhen is one such "overnight" city, a skyline of skyscrapers and 14 million people, belying the fact it was little more than a fishing village 30 years ago. Today, it's the newer second-tier cities that are attracting major manufacturing and attendant job growth.
Wachter differentiates China's planned new city growth from the "informal" shantytown growth that swells the population of megacities like Mumbai and New Delhi. "India and Africa have many examples of urban growth through informal settlement," she said. "And it's growth without access to public services." According to the "Rapid Urbanization and Megacities" report from the International Federation of Surveyors, more than 30% of the world is living in such informal settlements, and 70% of the growth in these urban enclaves "currently takes place outside the formal planning process."
And that's why the work of relief agencies such as Mercy Corps, which works in 41 countries including Indonesia, is so important. Among many other issues, the group works with local governments and private sector partners to build better access to clean water, both private and communal sanitation facilities, and hand-washing stations. The services are not free, but experience shows that people, even very poor people, are willing to pay for clean water, sewers and other services vital to their health. Wachter sees these kinds of public-private partnerships as critical to improving lives in informal settlements. "It's a way for residents to have access to public services, with ownership rights," she said. "We don't have widespread adoption of these solutions yet."
Climate Change and the Environment
Daily life in the megacities is exacerbated by climate change (sea level rise being one vivid example), and by natural events, such as the recent devastating flooding in metropolitan Manila, that may be intensified by climate change. Rafael Senga, manager for Asia-Pacific energy policy at World Wildlife Fund International, rates Jakarta as eight out of 10 among megacities in climate vulnerability. Jakarta, he wrote in a recent report, faces particular challenges because of its size, its exposure (particularly to flooding) and its "relatively low adaptive capacity." Jakarta was flooded as recently as April 2012, but that event was dwarfed by flooding in 2007 that killed more than 50 people and displaced 200,000.
In 2011, Bangkok, Thailand (with a population of 12 million) became the first megacity to contemplate relocating because of epic flooding. Sataporn Maneerat, a member of the Thai parliament, said that the country should consider either relocating Bangkok or building a second capital. "The capital will face more and more problems from natural disasters and the environment," he told Agence France-Presse.
Sarene Marshall, managing director for The Nature Conservancy's global climate change team, said that TNC has traditionally worked mostly on the intersection of nature and people in rural environments. "But most of the world's population is living in cities, and as an organization we've begun paying more attention to urban dwellers and their relationship with nature and natural systems," Marshall said.
TNC's investigation of Jakarta's 2007 flooding shows that its primary impacts were felt by the urban poor living in low-lying areas and along riverbanks. "And one of the main issues is that the watershed is badly deforested; water flows freely into rivers instead of being absorbed by trees along the route. Further, so much trash is being dumped into rivers that they become clogged with debris, which gives the water nowhere to go but over the river banks."
Fred Scatena, chairman of the earth and environmental science department at Penn, points out that the lack of strong community organizations in informal settlements (especially when compared to established village structures) is a problem when trying to make megacity infrastructure improvements. Churches are sometimes the strongest local institutions and can be conduits, he said. Monasteries and mosques also act in this role.
Scatena also said that informal settlements are often located on poor or risky land, including floodplains or steep slopes rejected by other population groups. The danger, he said, "is making the problem worse by attempting to make it better. For instance, if you put in water infrastructure and electricity, you encourage a larger influx of people and the building of more houses, so you end up with an even larger settlement on unstable terrain. It's hard to remove people once they're settled, and that's why you need planning."
Financing Progress
Financing for projects that benefit the poor in megacities -- and could possibly address the conditions that led to Jakarta's human toll in 2007 -- is vital, but scarce. "There's no question that both the challenges and opportunities of environmental sustainability are more pronounced in Southeast Asia than they are anywhere else in the world," Mira Arifin, president and managing director of Bank of America Merrill Lynch (BAML) in Indonesia, said at the Forum. She added that BAML has made a 10-year, $50 billion environmental commitment to address climate change, reduce natural resource demands and create momentum for low-carbon economic options.
According to Abyd Karmali, managing director and global head of carbon markets at BAML, "Our goal is to help clean technology companies gain access to equity and debt markets, which enables them to implement green infrastructure projects in megacities like Jakarta."
Karmali said that the embryonic climate bond market, estimated at just $3.5 billion to $5 billion in development bank-issuance, and $174 billion when corporate and asset-backed project bonds are included, "is something that will likely grow, and that will help a lot" in getting megacity-targeted projects funded. Climate bonds are issued to raise capital for specific projects aimed at reducing climate change impacts.
The structure of climate bonds is key, Karmali said, "to have the appropriate risk and reward opportunities for different types of institutional investors. Some would forego income opportunities for perceived greater impact on how the funds are deployed, but others wouldn't want to accept any reduction in returns. They'd have to be convinced that the reward would be commensurate with what they were used to seeing."
Identifying new funding has to work closely with improvements in governance, says the "Megacity Challenges" report sponsored by Siemens. In its stakeholder survey, Siemens said, "Over half of respondents with knowledge of urban management see improved planning as the priority to solving city problems, with only 12% that prioritize increased funding." In addition to a more effective planning process, those polled identified poor infrastructure management (one likely cause of the Indian blackout) as a hindrance to progress.
Energy Cooperation: An Efficiency Solution
Roger Raufer, a consulting environmental engineer who has taught at the University of Pennsylvania and who wrote two books on the role of emissions trading in environmental management, offers a sustainability solution for megacities: energy integration. He notes that Asian cities rely primarily on coal as their main source of commercial energy, and that China and India combined account for 79% of the projected increase in world coal consumption between 2005 and 2030.
One result: Asian cities have the highest air pollution levels in the world, and more than 500,000 premature deaths annually as a result of it, says the World Health Organization. Coal is also the fossil fuel with the biggest impact on climate change, which is one reason greenhouse gas emissions from coal-rich China are projected to double between 2002 and 2030, says Geophysical Research Letters. By 2015, says the Beijing-based Climate Policy Initiative, China could be emitting 50% more carbon dioxide than the United States.
Asia's Huge Energy Demand
Energy demand is expected to grow significantly in Asia. The International Energy Agency projects that China alone will see a 75% demand increase by 2035, compared to 2010 levels. To help meet that demand, Raufer says a city's overall energy needs can be evaluated together and addressed with sustainable, and in many cases more affordable, systems. "For example," he said, "integrating combined heat and power (CHP) with district heating/cooling systems (DHC) offers a long-term approach to addressing energy demand requirements in fast-growing urban areas." Nuclear power, in small-scale pebble bed reactors, can also be combined with coal gasification in urban settings -- unless public reaction made such a solution politically untenable.
Raufer added, "Some of these approaches are almost like science fiction, but integration is key. Asia is where the big megacities are, and there are a lot of opportunities for making them work better."
Centralized DHC systems that can tap into the abundant renewable geothermal or biomass resources that countries such as Indonesia have in abundance, offer huge energy-efficiency and emissions gains, Raufer said. Waste management also offers abundant untapped energy generation, he said, citing Tokyo as a city whose 18 incineration plants have processed and generated energy from 87% of post-recycled and 100% of Bureau of Waste Management-collected waste since 1998.
Raufer said that buildings, which account for 52% of urban energy consumption in South and Southwest Asia, also present opportunities for reducing energy demand through the use of efficient insulation and more efficient appliances, and through new building designs that include grid-connected energy generation.
Asian megacities need not be seen as perennial obstacles to building regional sustainability. The good news is that innovative ideas, and the funding necessary to make them reality, are coming into focus.
