Asia's cities don't have to break the bank to plan for a green recovery post-pandemic

ASIA'S mayors face a dilemma: how do they curb the effects of climate change on their cities while dealing with a drop in municipal revenues due to the economic impacts of Covid-19? The answer lies in the private sector.

Asia's cities already consume 80 per cent of the region's energy, create 75 per cent of its carbon emissions, and are set to contribute over half the rise in global emissions over the next 20 years.

In addition, Asia is home to 99 of the world's 100 riskiest cities for climate-related and environmental threats, including pollution, dwindling water supplies, extreme heat stress and natural hazards.

These factors, combined with rapidly growing urban populations, underscore the need for urgent action, including more investments in green, resilient, and inclusive infrastructure.

However, municipal leaders are now confronted with a financial toll from Covid-19 that is affecting federal, regional, and local authorities. Around the world, cities are facing declines of as much as 25 per cent in municipal revenues due to the pandemic, forcing municipal leaders to tighten their belts and make tough choices.

Most cities in emerging markets rely heavily on central governments for funding, and many of them have bans or restrictions on subnational commercial borrowing. Covid-19 has deteriorated the financing standing of subnational governments and put pressure on their creditworthiness. All of this makes financing investments in public infrastructure and services even more difficult.

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Yet municipal leaders don't have to embark on their green reboot alone. With the right groundwork, cities can, and must, work with the private sector to fuel their resilient recovery - in a way that puts them on better financial footing for future crises, too.

As mayors and ministers from around the world gather at the biennial World Cities Summit in Singapore this week, the answers to two big questions hang in the balance: how can we build the green, resilient, and inclusive cities of tomorrow that can help pull us out of the concurrent crises of Covid-19 and climate change, and how can we finance it?

SENSE OF URGENCY

The sense of urgency is palpable. Sixty-eight per cent of the world's population is expected to live in urban areas by 2050. What's more, 95 per cent of Covid-19 cases have been reported in urban areas, with the pandemic highlighting the importance of clean water, proper waste management and high-quality health services for people.

To make matters worse, 43 per cent of global cities in a recent survey don't have adaptation plans to keep people and critical infrastructure safe from climate threats. Twenty-five per cent cited budget constraints as a barrier to further action.

City governments must move quickly to plan for growth and provide basic services, climate-resilient infrastructure, and affordable housing needed for their expanding population needs. The convergence of rapid urbanisation, climate change, and disruptive technologies is forcing mayors to think not only about how much investment their cities need, but also about how to diversify the types of investments they should be making.

It's impossible for cities to address these challenges alone. Private sector solutions, innovation, and finance are critical to addressing their complex needs, and attracting them will be fundamental to creating the cities of tomorrow.

An example of a city strategy that combines sustainability principles and private sector financing is Singapore, where the government's approach to addressing urban challenges such as transport, wastewater management and urban density is to leverage private sector financing and solutions, including through long-term planning, clear procurement rules and the planned issuance of Singa infrastructure bonds.

Building green and resiliently is a huge investment opportunity that will have significant, positive impacts and externalities on growth, development, and job creation. By prioritising green projects in their recovery plans, including retrofitting buildings for energy efficiency, investing in low-carbon municipal waste and water, and expanding green urban transport, a recent International Finance Corporation (IFC) study found that across cities in 21 emerging markets, 144 million new jobs and US$7 trillion in investment opportunities could be created by 2030.

Private-sector innovations, many of them low-cost, can improve services dramatically. For example, health and education services can be expanded using digital platforms. Traffic can be managed better by using Big Data analytics, and climate impact can be minimised through the use of drones and early-warning systems.

Today's investments can save significant sums. Take India. As a result of a public- private partnership supported by IFC, the city of Jaipur improved its street lighting, saving US$1 million annually and reduced an estimated 36,750 tonnes of greenhouse gas emissions per year.

To fully leverage the power of the private sector, central governments must create an enabling environment for prudent fiscal decentralisation and enhanced financial autonomy for cities to diversify their sources of financing.

REFORMS NECESSARY

Reforms are needed to address these challenges. For example, 84 per cent of countries give local governments limited or no tax autonomy, and less than half allow local government borrowing of any kind. Many cities are also prohibited from signing long-term contracts with the private sector beyond their political terms, meaning most can't access private capital and are ultimately dependent on national transfers.

It is also critical to ensure good project preparation and design at the subnational level. This includes having sound frameworks for public-private partnerships, which are lacking in some countries. Post-Covid-19, cities in emerging markets will need also to improve their creditworthiness in order to tap commercial lending and capital markets. Less than 20 per cent of the largest 500 cities in developing countries are deemed creditworthy.

The pandemic has presented us with a unique opportunity to do things differently. By finding the right types of partnerships with the private sector, municipal leaders in Asia and beyond can create the green, resilient, and inclusive cities of the future - without breaking the bank, too.

• The writer is vice-president for Asia and Pacific, International Finance Corporation