Urban Transport in the OIC Megacities

privatisation, in contrast, the ownership rights of the assets are transferred to the private sector, the

public sector retaining a regulatory role in some sectors. In a contracting out schemes, the private

sector is only contractually responsible for providing services, and not for capital assets.

The trend to privatise is strengthened by technological innovations in the collection of user fees. In

this context, Public Private Partnerships (PPPs) emerging as one institutional structure, in which the

public authorities deal with network or environmental externalities, demand uncertainty, and

administrative costs associated with the project. On the private side, if infrastructure privatisation is

combined with deregulation or liberalisation of market entry, competition in terms of the provision

of services may increase, as may the market risks associated with the project. Among the benefits of

such partnerships is that the private investor will search for a balance between cost, financial return,

and risk. The introduction of full lifetime costing of the asset is another advantage of having recourse

to the private sector. Indeed, a concession scheme favours optimisation of the trade-off between the

standards to which facilities are constructed and the cost of maintenance during their lifetime. The

lifetime costing approach ensures that the overall costs of an asset are minimised throughout its

lifetime as it is maintained at the required standards. It is associatedwith the shift of the public sector’s

focus to output specification in private concessions.

However, despite the elaborate funding mechanisms, cities and megacities do not always prioritise

projects and infrastructure that supports sustainable urban transport and development and long term

benefits. For example, it is estimated that the external costs of urban sprawl are in the area of $400

billion USD per year in the United States. Best practice towards sustainable urban development

involves many of the compact city investment projects within the reach of city governments, who can

leverage national or private funds to finance initial capital investments. In this case, private finance

can be mobilised through real estate developer charges and fees, property or value capture taxes,

loans, green bonds and carbon finance. This allows monetisation of the positive externalities of public

transport investment and can be particularly important in overcoming funding gaps for infrastructure

that supports higher levels of urban density. For example in Hong Kong, the government’s ‘Rail plus

Property’ model captures the uplift in property values along new transit routes, ensuring efficient

urban form whilst at the same time generating US$27 billion in direct financial benefits for the Hong

Kong government since its inception in the 1970s. Land value capture is also applied in several other

Asian cities including Delhi and Tokyo (Rode et al, 2014).

3.8.3.

Urban transport infrastructure financing in developing world megacities

Around the world, transport sector resource allocation has perpetuated a longstanding emphasis on

traditional private vehicle oriented transport projects and programs by domestic and international

funders. Currently, particular in the developing world, national and international funding streams do

not sufficiently recognise the importance of supporting sustainable transport projects and initiatives

that will mitigate the negative global trends car ownership and use, greenhouse gas emissions, and

fatalities resulting from road accidents (WRI, 2013).

Over the past few years, national governments, Multilateral Development Banks (MDBs) 4 and

Multilateral Financial Intuitions (MFIs) 5 that have begun to prioritise funding for sustainable

Multilateral Development Banks are institutions that provide financial support and professional advice for economic

and social development activities in developing countries. The term Multilateral Development Banks (MDBs) typically

refers to the World Bank Group and four Regional Development Banks

(African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank Group)

(The World

Bank, 2015).

Several other banks and funds that lend to developing countries are also identified as multilateral development

institutions, and are often grouped together as other Multilateral Financial Institutions (MFIs). They differ from the

MDBs in that they have a narrower ownership/membership structure and they focus on special sectors or activities.