Journal of Urban Economics and Management

Almost one billion people live in slums/ the quality of private sector’s participation in urban development

Journal news:  in a lecture entitled “participation of private sector and financing urban development” Dr. Hossein Mohammadpour Zarandi, the head of IESA in IRIB International Conference Center said: urban population passed 50% in 2008 and it is predicted that it would reach to two-third by 2050. It seems that it continues with rapid pace in the third millennium. In this regard, UNHABITAT called the 21st century as cities’ century.
Stating that troubling reality about cities particularly developing ones is poverty development, suburbanization and informal settlements, he said: one-third of developing cities i.e. nearly 1 billion people live in slums. One of the development goals is reducing poverty and improving 100 million people of slum dwellers by 2030.
Expressing that financing urban development is a global issue, he said: cities need nearly 40 trillion dollars at the world scale and 25 trillion dollars in developing countries by 2030.
Emphasizing that one of the most efficient financing method is private sector, he said: for example, private sector in developing countries invested more than 755 billion dollars in more than 2500 urban project during 1990 to 2001.
Adding that there are several relevant mechanisms in many developing countries that decrease private sector participation, he said; one of them is inefficient legal mechanism and nontransparent planning.
Stating that troubling reality about cities particularly developing ones is poverty development, suburbanization and informal settlements, he said: one-third of developing cities i.e. nearly 1 billion people live in slums.
Highlighting that there are several methods for absorbing private capital in order to finance urban projects, he further said: some of them are based on debt and some others are capital-based. Capital-based requires transferring a part of project profit in exchange for capital. Shareholders provide required capital in this method. Their shares are distributed in promoting projects. 
Saying that it is possible debt-based methods would be more efficient in some country and vice-versa in another because of special requirements, he added: funding via securities is popular in England cities and the Municipality of Sao Paulo, Brazil had successful experience in the field of infrastructure funding via stocks.
Referring that high risk of investment is one of these problems for private sector, he said: technology risk is noteworthy; since modern technologies are used in urban infrastructures in line with smartization. Along with their attractiveness, they have high risk. Operational risk, infrastructure, market, regulation and policy change are other types limiting private investment. Identifying them and presenting functional solutions would be encouraging in investment for decreasing risks.