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Moscow Urbanization Knowledge Platform

June 9th, 2011

Paths to Resilience

Stephen Karam
Lead Urban Economist ECA Urban Sector Leader


The Soviet Union urbanized at a very fast pace

Urban Population in Soviet Union Oblasts

The Transition Years were followed by widespread urban decline

some of the hardest hit places were the monotowns

Compounded Annual Population Decline Rates in Russian Cities, from 1989 to 2010

UK Experience: Similar Shifts in Demographics

People follow jobs: 200 years of population change in the UK

Source: Centre for Cities - London


Monotowns, derived from the Russian monogoroda, can be understood as:
Urban settlements with an economic base dominated by a single industry. Monotowns are not necessarily one-company towns often they have more than one core enterprise, but these enterprises belong to a single industry. Monotowns also differ from Western one-company towns in that Soviet industrial enterprises were, and many still are, municipal service providers that offer services such as: social services, including subsidized housing, canteens, shops, hospitals and recreation facilities participating in building infrastructure (roads, transportation systems sewage networks, etc.) deliver heat and electricity

A 2000 study of the Russian Ministry of Economics shows that:
467 cities and 332 smaller towns in Russia could be classified as monotowns over 40% of all Russian urban areas These monotowns amassed 24.5 million people over 17% of Russia s population, and generated over 30% of the country s industrial output Over 80% of their workforce belonged to the following industries: mechanical engineering, fuel industry, metallurgy, food processing, timber and pulp In size, monotowns vary from small towns like Pikalevo (22,000) to large cities like Togliatti (700,000)

The transition of the 1990s found many monotowns with:
An industrial base that was often obsolete and/or underperforming Budget deficits and lack of funds for municipal projects Deteriorating urban infrastructure

The recent crisis exacerbated some of the challenges:

The industrial enterprises found in monotowns were some of the most affected by the crisis (e.g. metallurgy, machine building, wood and paper production) Unemployment rates grew in most monotowns, and the sluggish national economy could not absorb the extra labor force Core enterprises have often stopped providing social services (to reduce costs) and municipal authorities were faced with fiscal crises (due to a decrease of the local tax base personal income tax, small business tax, corporate profit tax)

ADDRESSING the challenges

The Russian Government has made monotowns a priority:
In 2010, 27 monotowns were selected for special support (see below)

The World Bank has also offered direct and indirect support
A number of WB reports show that:
National economic growth cannot occur equally in all geographic areas of a country nonetheless, the benefits of growth should be shared among all residents. Economic density is key to economic growth, especially for modern activities that involve sharing of knowledge, technology, and innovation. Removing barriers to internal mobility would lead to greater economic concentration (e.g. in growth centers like Moscow), which can improve the productivity and dynamism of the economy.

Every monotown requires a targeted approach

There are national level policy changes that can positively affect all:
Business-friendly regulations Flexible land, labor, and housing markets Decreasing barriers to migration

There are also some common themes to urban regeneration:

Even if urban regeneration efforts succeed, they are only one option Urban transformations can take decades and requires a multi-faceted approach and continued effort Good local leadership, and support from stakeholders, is key The approach has to be socially inclusive i.e. concerted efforts should be made to reach the vulnerable population, such as the unemployed and young people Refurbishment of the physical space should be secondary to measures to keep local government and the social fabric strong. Shared Community Values are what made our city what it is today not infrastructure. (Mayor of Bilbao, Spain)

International Experience: Saginaw, US

Shared Community Values Made a Difference
Background: 2008: 57,500 residents. Lost 20,000 automotive jobs and almost 40% of its population since 1970 Change Agents: Local authorities, Saginaw Future Inc., two medical centers, and private investors, the EPA Main Elements & Actions: Community commitment came first Fiscal incentives and good infrastructure access Accessed EPA grants for brownfields redevelopment Results: Infrastructure and land improvements leveraged $18 million in private investment

KEY ELEMENTS of Urban Regeneration Experiences (1)

Local leaders have to proposes a new vision for the city Multiple stakeholders have to be rallied around the new vision Focus should be on easy wins and expectations should be carefully managed (e.g. a full recovery might not be possible)

National and Regional Government Support:

Financing and guidance to municipalities, when needed Clear framework of rules and regulations for healthy city development:  Local financing (e.g. how revenues are shared and transferred, and taxes and charges that can be applied locally)  Framework for inter-jurisdictional cooperation  The use of urban land (e.g. the rights of municipalities to own and dispose land)

KEY ELEMENTS of Urban Regeneration Experiences (2)

Human Capital brings ideas, identity, entrepreneurship, resources
Private sector and NGOs often have a stake in the well-being of the local community (e.g. if people leave, they lose customer base) Citizens are vested in the identity, culture and financial prospects of the places they live and can help by sponsoring local sports teams, investing in the maintenance and upgrade of the built stock

Special-purpose Institutions:
City-region organizations that coordinate regeneration efforts at the metropolitan level (Newcastle Gateshead in the UK) Ground Truthing: Community development organizations, neighborhood associations, foundations, corporations often play a critical role in coordinating regeneration efforts at the neighborhood level:

Gateshead, UK
Background: Population fell from 240,000 in 1931 to 72,800 in 2010. Manufacturing employment dropped from 40,000 in 1971 to 13,000 in 2001 Change Agents: 1NG (regional agency), Newcastle Gateshead Main Actions: Brownfields redevelopment Targeted investments in the city center Development of iconic structures Results: Unemployment dropped from 14% in 1981 to 6% in 2007. Increase in the number of skilled people

STRATEGIES and ACTIONS for Urban Regeneration (1)

Articulating a Vision and Strategy:
Vision should be long-term, including alternatives for action, engaging multiple stakeholders, and challenging assumptions about what is possible Strategic efforts should draw on a periodic review of both the stable and weaknesses of the area, as well as the dynamic opportunities and threats

Identifying and Building on Local Assets:

Population size, location, and accessibility (e.g. close to a growth center) Historical and cultural assets Natural resources (e.g. landscape, climate, and urban agriculture) Human resources Urban land and real estate Hard infrastructure services (e.g. good-quality public transport) Soft infrastructure or institutional endowment (e.g. education) Local government roles and capacities (e.g. inter-jurisdictional cooperation agreements)

International Experience: Roubaix, France

Strategy & Tax Instruments served this region well
Background: Population fell from 125,000 in 1900 to 97,000 in 1990. Employment in the textile industry fell from 54,000 in 1973 to 8,000 in 2000 Change Agents: Lille Metropole Communaute Urbaine and local leaders Main Actions: Creation of a tax-free zone Investments in urban beautification, public infrastructure, and cultural projects Small business grants and innovation incentives Results: 15% of new employment is culture driven

STRATEGIES and ACTIONS for Urban Regeneration (2)

Integrating Social Development with Economic Development:
Target the vulnerable population (the unemployed, the under-employed, and the young) Provide assistance (e.g. subsidized, public transport, affordable housing, child care services) Nurture existing social networks and engage community brokers

Promote Green Growth :

Redesign and optimize service infrastructure (water and wastewater, solid waste management, roads) Encourage economic activities that are more efficient in the use of energy and water Encourage energy efficiency in public and private sphere (to save costs and benefit the environment) Enhance people s access to natural amenities such as parks, forests, and watersheds (to increase the quality of life)

International Experience: Bitterfeld-Wolfen, Germany

Privatization and Central Government Support were critical
Background: 1989: Pop. of 79,000, and 70% of labor force employed by the chemical industry 2009: Pop. 46,000, and significant structural transformation Change Agents: Treuhand (charged with privatization of East German assets) and local authorities Main Actions: Administrative restructuring of municipalities Privatization based on old and new assets Leveraged transport connectivity Results: 360 new companies with 11,000 employees

Policy Angles & Instruments for Urban Regeneration

Recycling Land:
Have a clear strategy for the management of derelict and under-used land and properties that is in the public domain Create a system of incentives and regulations for bringing private derelict land into productive use (e.g. a flat tax on idled property, tax-foreclosures on delinquent properties) Identify an anchor investment such as iconic landmark projects, as a way of re-branding the city Transmillenio (Bogota), Guggenheim Museum (Bilbao) Focus resources on a small strategic area (e.g. golden triangle or city center) to encourage a positive spillover effect to neighboring areas Focus public investments on projects that will attract private investments Attempt to create congenial places for people (i.e. spaces where people want to meet and gather), rather than trying to maximize land value exclusively

Strategic LAND MANAGEMENT for Urban Regeneration

Land & Property Auctions Can Raise Needed Financing for Public Investments
CAIRO: Auction of Desert Land Raised: $3.12 billion for 117 times total urban internal infrastructure, property tax collections connective highway, and country-wide general budget Raised: $1.2 billion to 10X Regional Authority s finance projects in capital spending in 2005 metro regional transport plan Raised: $1.5 billion devoted to capital investment budget Raised: $1.0 billion to recapitalize transport agency Exceeded city s total capital spending in FY2005 Sale proceeds exceeded transport agency total capital spending in FY06.

MUMBAI: Auction of land in city s new financial center ISTANBUL: Sale of old municipal bus station and surrounding land CAPE TOWN: Sale of Waterfront Property

Strategic LAND MANAGEMENT for Urban Regeneration

Consolidate Neighborhoods:
A changing city economy may require different, sometimes scaled back land uses. In such cases, cities are encouraged to shrink and densify city foot print, if needed, to encourage strong communities and more efficient service delivery Turn abandoned tracts of land into neighborhood amenities (e.g. parks, playgrounds, urban gardens)

Land Management Institutions:

Land Management or Development Agencies are often created with special powers to: Prevent contagious blight that often occurs when properties are vacated Manage land and sell to private developers for uses consistent with the city s strategic social, cultural, and environmental interests

Unique Features of Russian Monotowns

Western industrial cities can offer a number of lessons for Russian monotowns, but monotowns have several unique features:
Lack of Think Labor, Production and Consumption Markets: They are usually not part of a densely populated region or urban agglomeration Weak Sub-national Investment Climate: Many cities do not have a market-friendly environment (e.g. clear legislative framework and relative ease of doing business) Limited Prior Autonomy/Capacity: Municipal governments have little experience in managing local affairs autonomously Effective Urban Planning Underpins All Other Efforts: Urban planning remains archaic or is sometimes completely absent Change Agents: The private sector, non-profits, and civic groups, are still not accustomed to taking active roles in city/community revitalization efforts Mayor of Bilbau (Fear was a critical motivating factor in its shift from ship building to entirely different economic activity)

How Do We Apply These Lessons Learned to Russias Monotowns?

KEY ISSUES in 4 Russian Monotowns

Tutaev, Yaroslav Oblast Gavrilov Yam, Yaroslav Oblast Asbest, Sverdlovsk Oblast Leninsk-Kuznetskii, Kemerovo Oblast

Tutaev, Yaroslav
Background: 2009: Pop. of 41,290 and location of first oil refinery in Russia Key Issues: Local authorities want to invest in a new industrial park, but no clear market demand analysis Tourism development is a priority, but there are only 2 hotels in town Land taxes are a significant contributor to local budget comprehensive land management is key Potential: Proximity to larger markets is a potential advantage 30% of labor force works outside the city Potential for cultural heritage development

Gavrilov Yam, Yaroslav

Background: 2009: Pop. of 18,200, center of flax processing industry Key Issues: 40% of labor force is employed by core enterprises, 40% work in the public sector Land management is key, as land taxes are a significant source of local revenue Potential: Incipient private initiative outside the core industry seems present Tourism potential, but no hotels Construction of Central District Hospital can generate new employment, but it is unclear where staff will come from Potential to productively channel community s pride in the city s history

Asbest, Sverdlovsk
Background: 2009: Pop. of 70,800, specialized in production of asbestos Key Issues: PLAN: Somewhat unrealistic targets to have 40% of total output be innovative , and generate 4,600 new jobs by 2015 Demand for local labor is in decline Because of health issues and alternatives, asbestos is not an industry of the future Planned incubator for new businesses, but not clear what new industries are desired Potential: Potential to become a satellite town to Yekaterinburg, through highway investment project (Connectivity & Changing Function)

Leninsk-Kuznetsii, Kemerovo
Background: 2009: Pop. of 104,800, focused on coal-mining Key Issues: Extreme dependence on the core sector 78% of industrial production with plans to reduce to 49% by 2020 Ambitious investment program (RUR 184.1 bln), but not clear where funding is coming from or for what purpose Isolated from any major urban agglomeration Demographic decline and deteriorating housing stock Potential: Plans to make it part of a bi-polar agglomeration Relatively strong growth in the small businesses sector

Going Forward: How Can the World Bank Help?

Urbanization Knowledge Platform: We can mobilize global expertise through our partners, specific countries or cities, and practitioners, as well as peer cities. This assistance could include: Market Analysis: Help in preparing or guiding preparation of market analysis for a specific monocity Workshops with specific monotown cases to explore potential and constraints and provide inputs on strategy Support organization of international networks and specially tailored knowledge forums for exchange of information or building links with peer countries/cities Other?

Thank You! !