Megacities – the next game changer?

Are you a city dweller? Do you have more in common with others living in the world’s big cities than with your nation’s country cousins? You are not alone. 

The Organization for Economic Co-operation and Development (OECD) argues in Trends Shaping Education 2016 that inhabitants of megacities like Tokyo and Shanghai have more in common with each other than with rural regions of their own countries and share many similar challenges in transport, housing, security, jobs, migration and education. 

Acknowledging that big contemporary questions can be most acute in the great global cities, Andreas Schleicher, the OECD's education director, said, “The world is much more of a global village when you talk about cities.” 

Urbanization around the world is accelerating at an unprecedented pace. By 2050, at current rates of urbanization, the world will be two-thirds urban and one-third rural, a reversal of the global distribution pattern of 1950. Today, there are 23 megacities – defined as populations over 10 million – and that total is expected to surpass 40 by 2030. 

Just a few weeks ago, I was in Shanghai, a true megacity in its own right, attending EY’s 2016 China Strategic Growth Forum. The city is attracting many different people - from Chinese entrepreneurs and high end professionals to the expat community of big corporates who would rather live here than in Beijing. All are there to take advantage of the city’s renaissance matched by China’s rising economic fortune. 

But it’s not just megacities that are changing. In EY’s latest Megatrends report released this week , The upside of disruption: Megatrends shaping 2016 and beyond, we talk about how new cities are being planned and constructed from the ground-up for example in China, Malaysia, India and the Philippines. That’s because Asia as well as Africa are expected to add one million urban inhabitants every week – roughly the population of Boston and Zurich combined—for the next 40 years. 

Three years ago, 60 Minutes’ correspondent Leslie Stahl brought American television viewers halfway around the world to visit China’s Zhengdong New District. It was a ghost city. 

“We discovered that the most populated country on earth is building houses, districts, and cities with no one in them,” said Stahl, whose report stirred international debate over the future of cities. “We found what they call a ‘ghost city’ of new towers with no residents, desolate condos, and vacant subdivisions uninhabited for miles, and miles, and miles.” 

But that was then. Founded just over a decade ago south of Beijing and west of Shanghai, Zhengdong New District is now home to more than 1.4 million people. And many more are on the way. By 2020, 5 million people are expected to live there. 

Western cities face their own challenges, especially the need to upgrade or replace their current infrastructure. In New York City, a recent estimate put the cost of simply repairing or replacing existing infrastructure across the city at $47.3 billion. Four-fifths of the £1.3 trillion cost of the London Infrastructure 2050 plan is earmarked for upgrading existing infrastructure. 

Of course, splashy new projects always attract politicians and media interest, but it is true that good infrastructure remains essential for economic development. Funding sources are hard to come by at the scale required. 

Even though urbanization is at different stages around the world, there are several common approaches to pursue. 

Critical to overcoming the challenge of urbanization is public and private collaboration. That means tapping into both the creativity and investment capacity of the private sector as well as the long-term agenda and funding from the public sector. 

A key ingredient to success is innovation – especially when it comes to cutting infrastructure costs, launching driverless transport, leveraging smart technologies and apps to deliver citizen services, designing smart buildings that generate their own energy and pursuing sustainable urban greenfield development, among other opportunities. 

In the private sector, for example, more residential and commercial customers are starting to generate more of their own energy and getting more of their power from distributed renewable sources. Net zero energy – where the renewable energy generated by a building in a given year equals the total energy the building uses – has become a key goal for many new buildings and their inhabitants around the world. On the public sector side, governments are creating incentives for new approaches to urban environments. This includes for example, the Chinese government’s combination of trade incentives and tax subsidies to launch new cities like Zhengdong New District as part of its “Go West” program. Tianjin Eco-city is another example with an emphasis on green buildings, transportation and affordable housing. 

So with global urbanization continuing to accelerate, how can people in cities across the globe work effectively together to learn from each other and pursue the best outcomes for the future? 

The C40 network may provide a model for this.  The effects of climate change – especially rising sea levels – leave many cities vulnerable.  C40, a network of cities, is acting both locally and collaboratively to share knowledge and support meaningful, measurable and sustainable action on greenhouse gas emissions and other climate change components. 

Maybe cities could extend their cooperation to other critical challenges – such as developing financing mechanisms for mature cities and investing in new cities in fast growth economies to help drive their success. 

Other opportunities for cities to collaborate and share knowledge globally include new ways of funding infrastructure, smart technologies, transportation, planning, smart buildings, energy grids, trade and much, much more.  

If managed well cities can be the new hubs of innovation and represent a world of social and economic possibilities. Just think ahead to the emergence of megacities as the world’s most powerful economic entities – joined together in crisscrossing networks that will change global politics, governance and corporate strategies forever. 

If not managed well, they could well bring misery and disappointment to many. Some predictions foreshadow up to 40% of city dwellers in 2050 living in slums. Let’s make sure we have the political will, collaboration and innovation mechanisms, shared insight and commitment to inclusivity to prevent this from happening. 

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.