Monday, November 1, 2010

Trends that are shaping the World – part 3

The third trend of seven is the increasing population migration from rural to urban areas – Urbanisation. The economic development witnessed in emerging economies has led to huge urban migrations as cities continue to be main drivers of GDP growth. This migration is occurring at a tremendous pace; the urbanisation rate in China for example has reached around 45% last year from a level of around 35% in 2000. This means that in less than 10 years over 130 million people or about a half of the US current population, have migrated to major cities in China and this looks set to continue. By comparison, urbanisation in the US stands at about 80% (i.e. 4 out of 5 people in the US live in urban areas).

What are the triggers for this explosion in urbanisation in emerging countries? Economic growth in urban areas far outstrips that of rural ones. This in turn provides jobs which then drives migration. Beyond this, services and infrastructure investment further accelerate the economic development and the cycle continues. It is this reinforcing spiral of demand, corporate investment and job opportunities which will continue to drive urbanisation of the next 10-15 years.

As urbanisation continues, there will be significant pressure points that Governments and the private sector will have to address if economic development is to continue. A study conducted by McKinsey identifies these pressure points as land, funding, human and natural resources.

Firstly, the land issue relates to urban sprawl, loss of arable land and traffic congestion. Governments should anticipate the growing proportion of people living in urban areas by providing the availability of decent housing and larger and more effective mass public transport.

Next to this, funding will be needed not only for infrastructure, but also for the provision of services. The provision of health care and educational services for migrants will become an important factor.  As an increasing proportion of the urban population will be from rural areas, there will be a huge need to develop skills for urban jobs in industrial and services sectors. This leads to the third pressure point, namely the need for high-skilled labour forces.

Even though the number of university graduates will rise significantly in the coming years, these people will move to mega-cities where more job opportunities with better benefits are. If an evenly distribution of talent is to be achieved, governments should address this issue, as otherwise shortages in labour supply will occur in small to mid-sized cities in emerging countries.

Finally, the demand for energy and water resources will likely surge as urbanisation increases. If continued economic development is to be achieved, resource efficiency will become very important.

Planning must be conducted across these four areas in order for the current and forecasted rate of urbanisation to be sustainable and for emerging economies to drive economic growth.

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