By Neil P
Before 1999, siestas were commonplace in the Mexican workplace. During the hottest hours of the afternoon, workers went home to eat, nap, and returned to work when the weather was cooler. But as Latin American countries integrated with the global economy, they adopted the work schedules of their international business partners, working through the heat¾and using air conditioning to feel more comfortable while they did so. From 1985 to 2011, consumption of air conditioning went from 10% of Mexican households to 80%. (In India and China, that number is increasing by 20% a year).
In Afghanistan, traditional dwellings capitalized on native materials and knowledge of local weather to build adobe houses of “thick walls, small windows and natural ventilation…that were cool in summer and warm in winter.” Many of these structures have been replaced with American-built concrete and cinder block constructions that offer the reverse protection (sweltering summers and freezing winters) and require energy-intensive air conditioning and heating that’s not always available due to insecurity and regional disconnectedness. Continue reading
By Nour El Hoda Farrag
The stated objective of establishing King Abdullah Economic City (KAEC) in Saudi Arabia is to diversify the economy and reduce unemployment. Two of Saudi Arabia’s main challenges are the economy’s high dependency on oil and relatively large local population. However, the same challenges can be perceived as its two main levers, and the reasons why such an initiative can be successful. As the second largest country in the Arab World, Saudi Arabia can rely on local consumption to drive GDP growth and use this platform to scale and export to neighboring countries. With the second largest proven oil reserves in the World, Saudi Arabia has the unique, invaluable advantage of deep pockets to sponsor mega infrastructure / economic projects that can enhance value across the economy, and is incentivized to do so. Moreover, acknowledging its natural resource wealth as a key strength, the government/City’s leadership has rightfully, in my view, focused on especially expanding industries that are either energy-intensive, or oil-based, to leverage its resource, alongside other non-oil related industries. To this end, as the case indicates, early adopters of the project were companies spanning the food, packaging, pharmaceutical, and oil industries.
The project’s main shortcomings, in my view, lie in its financial planning and execution. The case quotes the president of KAEC’s Industrial Valley and City Services, Ahmed Linjawy, as saying: “The original assumption was that… anything we do, we assume we will do it ourselves.” The “Labor Camp” is an example of a responsibility, which in my opinion should be left to the project’s industrial / corporate clients. Other examples in fact include the education, hospitality and residential arms of the project; all of which seem to be dictated through a master plan, as opposed to taken care of by market demand/supply forces. Continue reading
By Oscar Quintanilla
Although the “Overall Framework for Sustainable Urbanization” seems comprehensive, class discussions have been mostly around how to influence structures. It is not a new shortfall; it reflects a broader problem in cities around the world. Of the three components in the center of the framework (people, structures and land), structures are the less contentious and where private sector involvement can generate more profits. It makes sense for a class in infrastructure finance to center around this component, but it doesn’t really make sense when what we are dealing with is sustainability.
Cities are complex organisms, without clear boundaries or static definitions, continuously changing and adapting. As such, talking about the structures without even mentioning people or land is an unexciting conversation. As we saw in one of the presentations, people behavior has the most impact in sustainable development. I might argue that land use patterns are even more important. Structures help support human activity, but land use patterns and human behavior are more critical components for understanding these activities. Continue reading
By John Macomber
A student wrote to me offline with the observation I’ve paraphrased below. My email reply follows below that. I’d be interested in thoughts on how to expand an infrastructure finance course from “develop property” into “develop human beings” while continuing to exercise a finance, investment, entrepreneurship, and big business toolkit.
This passionate pain point (sorry about the PPP again ) is a good angle for final essays on the blog (should you be looking for a topic later today).
To me this conversation also underscores the potential learning value of this experimental blog in drawing out points of view or lines of reasoning that didn’t get expressed in class (for any number of reasons). Other recent posts expanding on what was not said in class include but are not limited to:
By Tina Adams
I came across a quote from the company in charge of building Tianjin Eco-City that summarizes why I feel the Eco-City is more significant and interesting than Masdar City in Abu Dhabi or PlanIT Valley in Portugal
“We want to avoid the idea that [Tianjin Eco-City] is a haven for rich people or second-homers from Beijing…Being green isn’t a luxury, it’s an affordable necessity. This city should be a practical, replicable, scalable model for elsewhere in China and the world.”
I wholeheartedly agree that the overarching mission of a sustainable city should be to be socially inclusive, practical, replicable, and scalable. Without these characteristics I find it hard to classify a city as truly sustainable. I want to dive deeper into what we can learn from Tianjin Eco-city’s plan to meet these four criteria. Continue reading
By Michael Landerer
The case about Phu My Hung and their decision to build Crescent Mall got me thinking about the effects of such a complex on the greater Ho Chi Min City metropolitan area. Indeed, the building of a confined luxury area 4 kms south of the city reminded me in particular of one city that I have been to recently where such centers have negatively impacted overall development. The city of Johannesburg has various sub-cities built around luxury retail, safety, and the promise of removal from the dirtiness and in the case of Johannesburg, danger of living and working in the historic city center.
In Johannesburg, over the last several decades there has been a diaspora from the central business district outwards towards Northern suburbs that are gated, self-contained, and often in large complexes dominated by malls. The most notably of these areas is Sandton. Sandton, a suburb, 20 minutes north of the city center has 125,000 residents including most of the wealthier residents of Johannesburg. About 2/3s of its residents are white or Indian, far different demographics than the rest of the country. The neighborhood itself is largely interconnected indoors with the center lying in the Sandton City Mall. An enormous complex housing high end and more moderate retail stores, dozens of restaurants, both luxury hotels and apartments, and progressively more and more offices. Sandton is widely known as “Africa’s Richest Square Mile”. Continue reading
In every class conversation we’ve had about greenfield developments, from PlanIT to Masdar to KAEC, someone has made the comment that these cities are interesting as a laboratory or experiment. Implicit in those comments is the assumption that the project is likely to be a financial flop, but maybe something useful for society can come out of it. The prospect of a more urbanized, resource-constrained future may argue for more laboratories… but given the reality of a resource-constrained present, project sponsors probably care about making money. Or at least not losing too much money in the name of science.
Through an independent project with Professor Macomber, I am developing a template for a financial model that approaches new city projects from the perspective of an omniscient developer [omniscient heremeaning a) all-knowing, b) interested in optimizing the system and c) the sole source of capital, for simplicity-John].
The template simplifies unique projects into four value drivers comprised of development, operations, demand (i.e. rent and tariffs) and taxes. Additionally there is the option to run a “sustainability case” which compares traditional development with an alternative plan based on different zoning, building quality choices, more efficient transit or water, construction costs, resource inputs, etc. that may cost more upfront but are presumed to have long-term benefits. The objective for this template is threefold: to assist investors in their financial-decision making with respect to greenfield cities, to assist students in comparing different projects, and to assist governments and other interested parties in assessing the value—if any—of sustainability measures at the city scale in new cities. Continue reading