Can you Succeed in the Bottom Right Corner?

By Anonymous

Emerging Economy, Greenfield Situation, Chaotic Governance, Entrepreneur

Emerging Economy, Greenfield Situation, Chaotic Governance, Entrepreneur

The matrix proposed by Prof. Macomber titled “How to Invest in Sustainable, Competitive Cities” points to the bottom right cell as one with the greatest potential opportunity. At a first glance this “opportunity” does not make sense: Who would want to be an entrepreneur investing in greenfield developments in regions with chaotic governance?  However, while thinking about this framework in the context of bringing order to chaotic situations with a lot of activity, one extremely successful business comes to mind. It does not erect the kind of barriers to entry that most HBS MBA students think about. Continue reading

MRT vs. BRT. Which System makes sense for developing cities?

By Saad Islam

Given that up to 60% of the world’s output comes from just 600 cities, and this concentration of wealth will increasingly shift to emerging cities[1], the question of implementing effective urban mass transit systems is extremely important. Karachi is one of those emerging megacities and I would therefore, like to tackle this question in Karachi’s context. To give people some perspective, Karachi’s population is estimated to be around 21 million[2], making it the seventh largest urban area in the world and the third densest[3]. The current public transportation closely resembles the one in Bogota pre-BRT  – mainly private transporters with rickety, although beautifully adorned buses.

I believe that four major issues in particular need to be addressed in implementing a mass-transit system and I will try to address each one below:

  1. Capital costs and financing issues: As we saw in the Bogota case, MRT solutions are significantly more expensive than BRT. It is estimated that for Karachi an MRT system would cost around $2billion for 2 lines of 41km total length, while the BRT system’s cost is about $292 million for 6 lines totalling around 90km[4]. Hence, purely on capital cost basis a BRT system makes more sense. It should also be noted that the opportunity cost for cities like Karachi of spending $1.7 billon extra on mass-transit are not insignificant. Finally, the ability to raise such a large amount of capital should also be taken into account. An MRT system costing billions would require significant external financing from multiple sources, not necessarily achievable for most emerging cities.
  2. Operating costs and affordability: A mass transit system would be useless if fares are not priced correctly. GDP per capita in Karachi is around $3,500, hence ticket prices cannot be high. Rail-based systems generally need to be subsidized and this is not sustainable for cities that have budgetary strains. Hence, in such a scenario a less costly system such as BRT makes greater sense.
  3. Integration with the existing transportation infrastructure: Any new mass-transit system needs to complement the existing infrastructure. Large cities like Karachi already have a widespread network of roads. A BRT system can be built around the existing system as long as roads are large enough to accommodate extra lanes. On the other hand, an MRT system could be significantly disruptive while tunnels are being dug and tracks laid etc.
  4. Bringing various stakeholders on board: The bus operators in Karachi have a very strong trade union and do not hesitate to go on strike, grinding the city to a stop. As we have seen in the Bogota case, a BRT system can be structured so as to provide existing operators with a stake in the system. This can substantially mitigate any risk associated with existing operators trying to sabotage the new mass-transit system.

In summary, I believe that while an MRT system might be more scalable and work for wealthier cities, other cities need to be more realistic about the systems that can be put in place. For a city like Karachi, a BRT system provides a cost-effective mass transit solution that is also quicker and easier to implement.


[4] Karachi Transportation Improvement Study Project 2010 – 2012, Japan International Cooperation Agency (JICA) and Karachi Mass Transit Cell, Karachi Metropolitan Corporation