The New Mega-Regions

6 February 2020

    Paris, France 7th November 2019

    A prominent aspect of global urbanisation today is the aggregation of neighbouring cities into ‘mega-regions’, resulting in dynamic clusters that surpass many entire countries in population and economic size. These mega-regions were the subject of a keynote panel discussion at HSBC's recent event, Cities of the Future 2019. The panel was chaired by Brian Pascoe, Global Head of Client Coverage, Global Commercial Banking, at HSBC Holdings plc.

    Urbanisation is accelerating to a previously unseen extent causing exponential growth in the urban population. One consequence of this is the merging of growing adjacent urban centres into clusters of cities that are becoming functionally integrated in how they operate. As they evolve, these mega-regions increasingly create their own connected infrastructures, economic markets, and social systems.

    The rapid evolution of mega-regions provides wider choices in terms of job opportunities, business locations and housing markets, and these attract a diverse group of talented workers who demand sophisticated transport systems and infrastructure to maximise their own potential. Simultaneously, such regions create opportunities to distribute population and jobs in new patterns so that economic, social and environmental imperatives can be harmonised, leading to improved sustainability.

    Collectively, these requirements present an exceptional challenge across governance, planning, investment, infrastructure development, connectivity and business dynamics – to accommodate growth with enhanced environmental and social sensitivities.

    Transportation

    An insight into how integral efficient transportation is to the success of mega-regions came from the four panellists describing the investment being made in their respective mega-regions: Ile De France/Grand Paris, the Greater Bay Area1 (GBA), the New York Region and Gauteng/Greater Johannesburg.

    In Paris, the EUR35 billion Grand Paris Express project will deliver 68 new stations distributed across the region to connect airports, scientific hubs and economic development hubs. Its 200 km of track will double the size of the existing Metro network in a decade.

    The GBA has the transportation objective that any city within the region is accessible within one hour (currently it is approximately three hours). Examples of steps taken to achieve this include the opening of the high-speed rail link from the mainland to Hong Kong, the Hong Kong–Zhuhai–Macau Bridge (HZMB), plus the addition of various other railways and highways.

    In New York Tri-State, only 13 per cent of the jobs growth from 1970 to 2005 actually occurred in the city of New York, thus reducing the motivation to invest in transport. However, the radical reversal of this situation post-2005 – whereby ~70 per cent of the jobs growth now happens in New York City – has placed enormous strain on the transport network. As a result, the governors haves recently announced a 60 per cent increase in the capital funding available to upgrade the subway system.

    In South Africa's Gauteng city region, the dispersed urban environment and fragmentation caused by apartheid has made delivering effective public transportation difficult. Historically, some 60 per cent of capacity comes from minibus taxis, which while flexible and available, are neither cost-effective nor environmentally sustainable. One current initiative is to establish a transport authority that will cover the entire metropolitan area and facilitate the roll out of a second phase of the existing Gautrain rail network, which will add east-west links across the city region.

    The role of the private sector

    The scale of the infrastructure growth required to support the efficient development of mega-regions raises the question of the private sector’s role in supporting this. Ayesha Lau, Managing Partner, Hong Kong, KPMG China, felt that the private sector definitely had an important financing role to play in the GBA's infrastructure development. "This is particularly true of green finance, which has been a major topic of interest for Chinese financial regulators recently," she remarked.

    Political difficulties over the past decade in South Africa have caused an investment deceleration by the private sector, but the new government and a greater sense of stability is gradually improving this situation, which is seen as a key priority by central government. In New York Tri-State, the private sector is seen as a key player in supporting and encouraging government investment. Therefore, having the business community on board backing major infrastructure investments is regarded as critical. Meanwhile in Paris, the role of the private sector was succinctly expressed by panellist Sébastien Chambe, Deputy Chief Executive Officer of L’Institut Paris Region: "We expect 1 million more people in the Paris region by 2035, so every year we have to build 70,000 housing units – that requires financing."

    The role of technology

    An audience question for the panel related to the role of technology in the evolution of mega-regions and how it might be used to address changes, such as new travel patterns. Rashid Seedat, Planning Commissioner, The Gauteng Greater Jo’Burg Region made the point that technology and the ability to leverage it is ultimately constrained by the available resources. "Smart cities are easier said than done," he remarked. "Vendors come to us all the time with lots of interesting technology, but the ability of cities/regions in developing countries to adapt so they can actually use this technology is the real challenge."

    In China, the GBA is seen as a potential technology and innovation hub for the entire country in line with the national objective of covering the whole innovation and technology process from basic research, to applied research, to development and finally commercialisation. The various skill sets of the cities within the GBA are a naturally good fit with this.

    The Paris region has recently seen a change of perception concerning innovation and technology, with Startup Genome's Global Startup Ecosystem Report 2019 showing that the region had entered the top 10 innovation regions worldwide2. This is partially attributable to greater business orientation at a national level, but also to the steering committee at a local level bringing together all businesses from the very smallest to the largest to work together and innovate.

    In the case of New York Tri-State, an important initiative in linking the public sector with big tech companies that have established operations in New York recently is the Partnership for New York City (PFNYC), which includes a sub-initiative, called the Transit Innovation Partnership (TIP).

    “The TIP aims to reconcile the goals of the subway and bus company with those of the technology companies,” remarked Juliette Michaelson, Regional Plan Association, New York Tri-State. “So a lot of small technology companies are looking for ways to plug in to the smart city and become more engaged in the economic growth opportunities presented by the public sector. This collaboration is already bearing fruit in terms of new apps and partnerships between the two groups.”

    Sustainability

    The importance of sustainability has risen sharply up the priority list of mega-regions in recent years and this was reflected in the panellists' views. In the case of Paris, there are two key sustainability goals. The first concerns land use, with an emphasis on not using agricultural land for city expansion, while the second deals with decarbonisation, particularly in relation to transportation and housing energy consumption.

    For the Gauteng city region, reducing urban sprawl is also a major priority in supporting sustainability. The region has a low population density, but improving this is not easy and requires a major change in the planning regime of municipalities. The other major sustainability challenge for Gauteng is water. The Lesotho Highlands Water Project will alleviate the situation when it comes online in six or seven years, but both in the meantime and thereafter there will need to be a drive towards far more sparing use of water.

    In New York Tri-State the priorities are rather different. A lot of progress has been made on carbon mitigation by requiring higher building efficiency measures and further progress has been made in facilitating offshore wind and other green power generation. However, the most urgent issue is coastal resilience, particularly flooding. The focus is therefore on measures that will address the issue of 600,000 people living in areas that will be permanently underwater within the next hundred years and the 2.2 million people in areas that will be in the hundred year floodplain by 2050. A further consideration is that a lot of important infrastructure assets are also in areas that will ultimately be permanently submerged.

    When it comes to sustainability, the GBA follows China's current (13th) five year plan in which it is a major element. This includes mandatory targets for environmental protection and poverty alleviation. The next five year plan (due out in 2021) is expected to continue this emphasis. The GBA's sustainability planning includes the development of policy measures for matters such as air and water pollution, the promotion of low carbon development and the encouragement of more cooperation between cities on environmental protection.

    Conclusion

    It was apparent from the panellists that the diverse mega-regions with which they are associated are making intensive efforts to foster sustainable development for the benefit of residents, business, and planet. Technology clearly has a role to play, but there was pragmatism among the panellists about matching this with the local ability and resources to deploy it effectively. As well as technology solutions, these regions also require fundamental investments in infrastructures and reform of land uses. To some extent, this last consideration could be influenced by the participation of the private sector, which all panellists saw as integral to successful evolution of their mega-region.


    The panellists and their associated mega-regions

    Sébastien Chambe, Deputy Chief Executive Officer of L’Institut Paris Region

    The Île-de-France Paris Region has around 12 million inhabitants and 6 million jobs, with employment approximately equally split among Paris, the suburbs and the outer suburbs. At around EUR700bn, the region accounts for approximately a third of total French GDP.

    Ayesha Lau, Managing Partner, Hong Kong, KPMG China

    The Greater Bay Area (GBA) is a national initiative to create a world-class cluster of 11 cities in the southern part of the country, consisting of the two special administrative regions of Hong Kong and Macau along with nine cities in Guangdong province. It has a population of over 69 million people and a GDP of around USD1.5trn, with its GDP expected to double over the next decade.

    Juliette Michaelson, Regional Plan Association New York Tri-State

    The New York Tri-State region is divided across three US states but has no regional government running planning for the area as a whole. This role is instead fulfilled by the Regional Plan Association, which is a civic organisation. The region has some 23 million residents, spread across the three states, 31 counties, and 783 municipalities. The region occupies just 1 per cent of the total US landmass but represents ~10 per cent of the country's GBP.

    Rashid Seedat, Planning Commissioner, The Gauteng Greater Jo’Burg Region

    The Gauteng city region is in the North East of South Africa and has some 15 million residents spread across approximately 18,000 km². There are three contiguous metros within the region: Johannesburg, Pretoria and Ekurhuleni. The region accounts for ~35 per cent of South Africa's GDP and dominates in finance, manufacturing, innovation and universities.


    1China’s GBA Initiative is promoting greater economic integration between nine cities in Guangdong, Hong Kong and Macau through policies to enhance the movement of capital, goods, people and services, despite the complexities of separate local governments, regulatory regimes, legal systems, tax codes and currencies in the three regions.

    2https://startupgenome.com/reports/global-startup-ecosystem-report-2019

     

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