February 3, Honolulu, Hawaii

I am pleased to be here today to share with you my thoughts on what we can do to master the rapid urbanization Asia is experiencing.

1999 is the last year of a remarkable decade. It began with the Rio Conference in Brazil and the birth of the Local Agenda 21 movement. It included the Istanbul Habitat II Conference in 1996, where the importance of cities having a seat at the table was acknowledged, some would say, at long last.

We are now at the brink of the new millennium, which will usher in what many have already described as the new urban era. All of us are witnesses to and participants in an urban drama with very high stakes. To fail in our efforts to improve our cities is to accept increasing poverty, unemployment, disease, hopelessness, and disorder for many, with eventual grim consequences for all of us.

You, as the leaders of great and emerging cities, and we, as your partners, have the opportunity to work together to help shape these cities for a better future. This is a moment for all of us, responsible as we are for making this urban transition a success, to pause and consider.

Getting ahead of urbanization is essential. Business as usual will not produce the sustainable urban transformation that is a fundamental goal for all of us. If urbanization is harnessed, we can be assured of both economic growth and a better environment. If not, we will rue the results. By urban transformation, I mean well functioning cities that offer safe and healthy places to live, within a sustainable environment.

USAID has been intimately involved with issues of urbanization throughout the world, and particularly in Asia. I have been fortunate to have been a part of this process, beginning with our housing and finance efforts in Korea and India in the 1970s and 80s, and continuing with our work with urban areas in Indonesia, Thailand, the Philippines, and India over the last 15 years. There are very straightforward conclusions that I want to draw for you based on this experience.

Asian Urbanization

Rapid urban growth is a critical issue. Today, roughly 50 percent of the population of Asian countries now resides in cities. There are already eight megacities in the region with populations of more than 10 million, and these are about to be joined by the likes of Tianjin, Metro Manila, Karachi, and Dacca. Urban growth has also been extraordinarily rapid in secondary cities, such as Medan, Indonesia and Cebu in the Philippines, which have nearly doubled in size over the past 10 years.

The growth that Asia is experiencing has been fueled by an industrialization so strong that we must go back in history, perhaps to the industrial revolutions in the United States and Europe and to Japan after World War II, to find something similar.

This is very different from urbanization in other parts of the world. As a consequence, industrialization and urbanization in Asia need to be considered together as one dynamic process. Furthermore, the evidence shows that the impact of these dual processes on the environment can be devastating. Although the economic crisis has slowed industrialization, we fully expect that Asia will return to rates of growth that, even if more moderate, will still place enormous strain on urban and environmental management in the region. Addressing these issues is what my organization, the United States- Asia Environmental Partnership, is committed to doing.

The fact remains that urbanization and industrialization have brought many, many benefits. Worldwide, growth in GDP is strongly correlated with urbanization, and Asia is a leader in this category. Cities serve as marketing and distribution points, centers of service and industry, and gateways for trade. Urbanization also generally results in more educational opportunities, improvements in the status of women, an increase in family planning, increased life expectancy, and lower infant mortality. All of this is well accepted.

The trick for all of us in this business is to figure out how to maximize the benefits of industrialization and urbanization and minimize the very obvious costs. According to the World Bank, the cost of impaired health in Jakarta is $300 million per year, while the costs of congestion in Bangkok is $400 million per year. From Karachi to Surabaya, the costs of urban dysfunction are becoming unacceptable. We can do better than that.

Urban Transformation

I said earlier that urban transformation needs to be our fundamental goal. By urban transformation, I mean well functioning cities that offer safe and healthy places to live, within a sustainable environment. They are places that provide basic infrastructure and housing that serve all their inhabitants. They maximize employment opportunities and feature robust economies. They promote participatory democracy, with high levels of citizen satisfaction with local institutions. Given the rapid urbanization that Asia faces, Asian cities now have the opportunity to be world leaders in transforming the urbanization process and redefining the benchmark of what we think of as the best cities. Asian cities, like the best Asian businesses, need to adopt the fundamentals of sound policy, finance and management.

Lessons That Need Not Be Learned the Hard Way

The hard lessons that we have learned over the last 30 years in the urban development business cannot be overemphasized. I am hoping that in the days to come, during your deliberations and in your recommendations, these lessons and others that you consider to be crucial, will be discussed and will become part of the important declarations and guidelines that will emanate from this Conference. If we can come to a consensus and can reinforce this consensus with our future actions, this Conference will have achieved something important and something that will endure.

The first lesson is that enlightened leadership is of paramount importance. Time and time again, we have witnessed that good leaders produce remarkable results. A mayor can make all the difference in the world if he or she fights for the right causes, is on the side of all the people, but especially those who have to live under terrible conditions, and is honest. Real, concrete progress happens in the cities because you make it happen. Good governance, including improved accountability, improved city management, and setting priorities well, is essential for the success of a city.

Second, ordinary people need to actively participate in the development process. Good leadership can really only succeed with the support of local residents. People and businesses have had, in the past, to look out for their own needs, sometimes with mixed results. Open and transparent processes are needed to enable all stakeholders to participate in public decision making that affect them. Shaping and managing our cities must not be the domain of public planners alone, or planners working only with business interests. We all know that most of the world's housing has been built by people themselves, once they were allowed to get on with the job. There is tremendous power, and assurance of future stability, in having the support and the involvement of your communities.

In the days ahead, you will be reviewing the experiences of cities throughout Asia that have used the Local Agenda 21 planning approach as a mechanism for creating partnerships between local populations and their mayors and municipalities. I look forward to learning the lessons of these partnerships as well as your recommendations in the "Mayors Action Plan" to be prepared later this week, on how this partnership approach can best be supported in the years ahead.

The third lesson is that there is a clear need for sound national and local policies that support responsible decentralization and that enable cities to conduct their business efficiently and fairly. Improved municipal creditworthiness, within an appropriate legal and regulatory framework, will enable municipalities to have greater access to both debt and equity financing to meet their growing needs.

Fourth, subsidies, where they exist, must be carefully targeted. Subsidies are a powerful tool, but the fact is that none of our cities has the kind of money to make a difference to all the people.... and more often than not, the subsidies go to the better off. We need realistic pricing for water, garbage collection, land, and housing that are affordable to the majority. This, and transparency, is key to having your finances in order. And this is also key to the access to greater finance that I referred to above.

Fifth, the links between the economy and the environment need to be understood and kept in mind. The same policies needed for improving the environment are those that will also help economic development. They will also ensure that you do not fall behind in meeting the needs of your people.

Clean water, clean air, and a clean environment demand extensive investment. And, at the same time, they create jobs and investment opportunities. There should not be a trade-off between them, whether in good economic times or bad.

Finally, sixth, it is important to get the roles of the public and private sector right. No government can possibly do all that is required by itself. The private sector can help you find solutions to environmental challenges if provided a stable framework and incentives. They can be your good allies in this fight.

Conclusion

The organization that I now head, the United States-Asia Environmental Partnership, is turning its full attention toward incorporating urban issues and activities into its agenda. With you, we hope to shape meaningful and relevant partnerships that will help put in place an urban transformation and an infusion of hope for a better future...not later, but now.

We at the United States-Asia Environmental Partnership support economic development that will lead to a cleaner environment - we call it the Clean Revolution - through partnership efforts between Asian and American industries and between Asian and American cities. Our vision for cleaner industrialization is based upon changing the fundamental way that industries do business. Our vision for urban transformation is based upon encouraging fundamental changes in the way that cities do business. We emphasize partnerships between Asians and Americans and we emphasize putting forward what the United States does best in both the industrial and urban areas and encouraging our Asian partners to look it over and adapt it to their own needs. We know we can benefit from learning more about how you have handled and are handling similar questions.

US-AEP believes in the partnership approach - partnering among the best of Asian enterprises and partnering with the best of American resources, including our EPA, our industrial and engineering associations, and our state and local governments. We believe that we can make this same process work when it comes to getting ahead of the urbanization curve. Better governance and better technology, combined with local participation can make the difference.

All across the world, there is a revolution afoot in the approaches being taken to improve the environment, to change the way that urbanization happens, and to fundamentally alter the industrialization process. We are moving from pure reliance on command and control to a participatory approach that involves all actors, including communities, to affect environmental change. Similarly, the approaches that are being tried to harness urbanization and to transform industrialization are revolutionary and fundamental.