87180 Turkey Urbanization Review - Policy Brief Rise of the An toli n Ti ers Turke Urb ni tion Review Polic Brief Soci l, Urb n, Rur l, Resilience Glob l Pr ctice Group The World B nk April 2015 1 Rise of the Anatolian Tigers © 2015 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. 2 Turkey Urbanization Review - Policy Brief RISE OF THE ANATOLIAN TIGERS T urkey’s demographic and economic transformation has been one of the world’s most dramatic, with urban growth and economic growth proceeding hand in hand. In the 1950s, despite concerted efforts low what would be expected for a country that went through such a rapid demographic trans- formation. to promote industrialization and the concentra- tion of population in cities necessary to support it, Turkey still featured a largely agrarian econ- omy with no more than 25 percent of its popu- lation in cities. But over the next five decades, starting in 1960, the share of industry in GDP rose from 18 percent to 27 percent and that of services from 26 percent to nearly 64 percent. These structural shifts and accompanying pro- ductivity gains paid dividends, as per capita GDP more than doubled from $6,000 in 1980 to $13,800 in 2013 1. Some 92 percent of Turkey’s Distinguishing Turkey from many other devel- gross value added is now produced in cities, oping countries has been the pace, scale, and and the last decade has witnessed dramatic and geographical diversity of its spatial and eco- consistent declines in poverty in parallel with nomic transformation. Perhaps more important a rise in most human development indicators. has been its ability to harness the benefits of Cities today accommodate nearly 75 percent of agglomeration economies that can accompany the country’s population and contribute much rural to urban migration. Policies in the 1980s to its industrially competitive economy. promoting economic liberalization attracted the Turkey’s first-generation urban agenda drove flow of new domestic and foreign private invest- its economic and social progress. Early and ment and new jobs that created a critical pull factor for rural migrants, enabling the conver- substantial investments in urban settlement gence of production and consumption markets planning and transport infrastructure helped that promoted agglomeration economies in cit- establish a sound settlement foothold and vi- ies. A metropolitan municipality regime adopt- tal transportation network connecting Turkey’s ed in 1984 provided the administrative frame- large land mass. This enabled a “system of cit- work to manage fast-growing cities across their ies” to take root over the second half of the economic footprint. A permissive tenure regime last century. Over the last decade new firms granted legal status to squatters on urban public increasingly moved toward dynamic secondary land and prompted both households and host cities, capturing economic spillovers from Tur- municipalities to invest in their dwellings and key’s large primary cities, while taking advan- neighborhood infrastructure respectively. And tage of lower land-rent values and labor costs. efforts to scale up housing supply through state Meanwhile, Turkey’s leading cities have been brokering services triggered a private response diversifying and innovating to remain competi- that helped accelerate the expansion of hous- tive. Indeed, Turkey features a system of cities ing stock. Added to all this, national programs today that matches the rank-size distribution to support the expansion of access to water, prediction of a country’s cities. Its cities largely sanitation, and other basic municipal services perform above average in achieving density, helped fiscally constrained localities meet na- suggesting efficient land use and higher pro- tional service coverage targets through the use ductivity. And informality in housing is well be- of matching grant subsidies. 1 Figures are cited in PPP-based GDP per capita in constant 2005 international dollars. At nominal GDP per capita in US Dollars the figures are $1,567 and $10,666 respectively. 3 Rise of the Anatolian Tigers While Turkey’s achievements in harnessing ur- urban development agenda. This policy brief banization as a driver of economic and social frames a second-generation urban develop- progress are impressive, it faces pressing chal- ment agenda to support Turkey’s transition lenges in building livable and sustainable cities from upper middle income to high income. for a high income future. Among these chal- lenges are improving coordination and planning Planning, connecting and financing cities to avoid inefficient urban sprawl, devising ur- Planning for the new metropolitan municipali- ban renewal policies that leverage commercial ties is now a top policy priority. Routinely col- interest for wider social gains, containing the lecting, analyzing, and monitoring urban data environmental footprint of growing cities, and can inform national and local policymaking. But creating an urban culture that facilitates social longer planning horizons have to anticipate fu- inclusion. ture urban growth—of both populations and Fast-growing secondary cities bring added land—in environmentally, economically, and so- challenges that define Turkey’s second-genera- cially sustainable ways. Policy and institutional tion urban agenda. With an amendment to the collaboration will have to be advanced across Metropolitan Municipality Law in December and within different tiers of government—and 2012, 14 municipalities—several of the Anato- with civil society and the private sector. And lian Tigers and other cities in the interior—were institutional and planning tools will have to elevated to metropolitan status, bringing the be more advanced and sophisticated to equip Turkish cities to value and manage urban land, total to 30 (See Figure1). Each faces the chal- deliver larger and more complex infrastructure lenges of managing a city with a larger foot- systems, and coordinate land use planning with print, with expanded planning responsibilities, infrastructure delivery across the entire metro- with greater delegated functions, and with new politan footprint. corporatized water utilities and urban transport systems to plan, upgrade, and expand across Connecting housing markets with job markets that larger footprint. New and differentiated and increasing the mobility of urban residents service standards will need to be established is another policy priority. While most cities in across both dense urban built-up areas and Turkey’s system of cities benefit from connec- small villages and rural settlements within the tive air, road, and rail networks, the challenge newly-expanded Metropolitan Municipality ad- now is to manage connections within cities. ministrative area. These developments make As expected in any country experiencing eco- planning, connecting, and financing important nomic growth, motorization rates are rising policy principles for Turkey’s second-generation dramatically. Private taxis and buses are oper- Figure 1: Turkey’s Metropolitan Municipalities Tekirdağ İstanbul Samsun Ordu Trabzon Kocaeli Sakarya Bursa Erzurum Balıkesir Eskişehir Ankara Manisa İzmir Van Kayseri Malatya Konya Diyarbakır Aydın Denizli Kahramanmaraş Mardin Muğla Şanlıurfa Antalya Adana Gaziantep Mersin Hatay Note: Purple indicates new metropolitan municipalities 4 Turkey Urbanization Review - Policy Brief ated in most of Turkey’s cities today, an impor- settlement areas. Turkey’s capital city of Ankara, tant market response to growing demand. But in the interior of the country without the typi- connecting people to jobs—and to public ar- cal endowments that would attract people and eas, institutions, and facilities—cannot be left firms, is a prime example of a planned city. A to private vehicles or private providers alone. metropolis of 4.5 million people today, Ankara An additional 14 metropolitan municipalities owes its modern-day existence to such plan- need systematic public transit routing systems ning. Across Anatolia, planners in the early days and more effective traffic management systems selected small Anatolian cities for the develop- to accommodate growing city populations and ment of industrial enterprise at a time when mitigate congestion. Effective urban transport the state was a majority owner of commercial systems also need to factor in how low-income activity. State manufacturing investments, pub- communities in remote parts of the city will get lic enterprises, and transport investments were to work—and how women, who are more reli- designed and executed to expand development ant on public transit, can have safe, clean, and eastward. The coastal Marmara region’s popu- affordable transit options. lation actually declined during this period in favor of the Anatolian hinterland. This spatial Financing and capital investment planning, transformation was spearheaded by state in- consistent with territorial plans, is a third tervention, with 23 settlements planned over a policy priority, essential for sustaining urban decade starting in 1923. growth. Central government transfers have been robust in view of local administration ex- Connective infrastructure was another hall- penditure assignments, particularly in recent mark of Turkey’s young system of cities, en- years. But Turkey’s second-generation urban abling the flow of goods and skills that fuel development agenda requires the financing of Turkey’s urban economies. Starting in the early larger scale investments in growing cities. For days of the Republic, connecting cities with an mass transit systems, wastewater treatment fa- efficient railway system met the political objec- cilities, and sanitary landfills meeting higher en- tive of linking settlements across the country vironmental standards, Turkey’s cities will need to promote national cohesion. But improving to improve the planning of capital investments accessibility and connectivity also provided a and devote more concerted efforts to preparing strong economic foundation for cities. Turkey’s bankable, larger-scale infrastructure projects rail network and later its highly developed road that promote sustainability. network provided the economic backbone to support vibrant local economies, even in the Economic and social progress interior. under the first-generation urban agenda For developing countries at incipient and inter- mediate stages of urbanization, Turkey offers important lessons. Advancing from incipient urbanization in the 1950s to advanced urbaniza- tion today, Turkey provides a glimpse for many developing countries of how this process took place, how agglomeration economies were har- nessed, and how pressing housing needs were met and infrastructure services delivered. At the core were policy and institutional adjust- A further key action was to ensure that cities ments to manage urbanization. were adequately financed. As many developing Turkey’s early investment in settlement plan- countries have experienced, it is one thing to ning set a foundation for the future of Turkey’s plan a city and devolve functions to local govern- cities. During the Republic Period (1923–1950) ments. It is quite another to ensure they have as nationwide industrialization and urbaniza- adequate financing to fulfill those functions and tion took firm root beyond Istanbul, policymak- build the needed infrastructure. Turkish poli- ers promoted the planning and development of cymakers were keenly aware of this need. And 5 Rise of the Anatolian Tigers with private banks unable or unwilling to pro- Critical planning framework for infrastructure vide long-term finance for infrastructure, Iller and service delivery Bank, the Bank of Provinces/Municipalities, was Turkey’s planning system evolved during the founded in 1933. Its mandate was to provide transition years of the 1960s and 1970s. It the long-term financing for newly prepared mu- was during these two decades that full-fledged nicipal development plans and infrastructure urban planning took hold. In 1966 an Istanbul services. To this day, Iller Bank remains critical Master Plan Office was established and the in the planning, financing, and development of city’s Masterplan completed, followed shortly Turkey’s cities. thereafter by Izmir and Ankara in 1968 and A system of cities for national growth 1969 respectively. Large public works projects Over the last 60 years, Turkey has witnessed on a monumental scale were undertaken across the world’s second fastest pace of urban numerous cities. But during the late 1970s, growth. Only the Republic of Korea grew faster, the state’s role as a technocratic agent of de- while India still lags far behind, and China, with velopment shifted from an active intervention- a major push by its policymakers in the 1990s, ist mode to more of an enabler of the private is now surging. In 2012, Turkish cities hosted sector. And the private sector had become the more than 57 million people, nearly 75 percent main investor in manufacturing. of the national population, up from 64 percent By the 1980s, as rural in-migration was peak- in 2000. Turkey’s urban population has in a de- ing, urban planning responsibilities were de- cade grown three times faster than its overall volved to local authorities, and planning regu- population, with an average rate of urbaniza- lations were relaxed to accommodate rapid tion since the 1980s well over 4 percent (See urbanization and changes in land use. With the Figure 2). emergence of the private sector in this period City growth has been dominated by Turkey’s of economic liberalization, development plans first 16 metropolitan municipalities. They ac- lost their dominant role and were no longer di- count for about 60 percent of urban dwellers rectly led by the central government. This was and have grown three times faster than other a period of enormous significance for urbaniza- municipalities. They are expected to double in tion, as the largest shift in population from rural population size over the next 15 years. Home to to urban settlements took place in the 1980s. 11 million people, Istanbul dominates the urban Development Law No. 3194, enacted in 1985, landscape, with 21 percent of the urban popu- delegated more planning functions to local gov- lation. Six other agglomerations, with between ernments as the state turned to regional plan- 1 and 5 million people, host another 24 percent. ning focused on economic zones and leveraging Figure 2: Growth in share of urban population in Turkey and comparator countries (1950-2015) 85% 75% 65% Share of Urban Population 55% 45% 35% 25% 15% 5% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Brazil Republic of Korea Turkey South Africa China India Source: World Development Indicators (WDI), World Bank (WB) staff calculations 6 Turkey Urbanization Review - Policy Brief Box 1: The Rise of the Anatolian Tigers Turkey’s system of cities is evolving, particularly over the last decade, giving rise to the “Anatolian Tigers.” The Tigers have increased their share of urban population in the last 10 years, and they continue to expe- rience modest population growth. Meanwhile, the shares of Turkey’s largest agglomerations—Istanbul, Ankara, and Izmir—have declined. This demographic growth among the Anatolian Tigers has contributed to an equally impressive economic expansion. Turkey’s secondary cities are not only growing faster demographically—they are also growing faster economically. Istanbul, Ankara, Izmir, and Antalya are well ahead of other Turkish cities in gross value added per capita, but many of the Tigers have been catching up. Led by provincial cities like Ga- ziantep, Samsun, Malatya, and Trabzon, which recorded some of the fastest growth in gross value added per capita during 2004–11. This is largely explained by market forces, as Turkey’s secondary cities benefit from economic spillovers. Rising land-rent values and labor costs in its primary cities force firms to find lower cost alternatives. And connections to external markets have helped cities like Gaziantep position themselves as gateways to regional markets. Factoring in the change in firm location and population movements, Turkey looks today much more spatially distributed than it did only a decade ago. Istanbul is no longer a mountain among molehills, but a city among many that are attracting firms (Figure 3). Figure 3: Spatial distribution of firms established between 2007 and 2012 Source: The Union of Chambers and Commodity Exchanges of Turkey (TOBB) Survey Data, 2012; WB staff calculations. transjurisdictional economic endowments. It 14 more, for a total of 30. Many of the law’s was at this time, particularly in the early 1980s key provisions enable metropolitan municipali- that metropolitan cities turned to an “incre- ties to formulate policies and support linkages mental planning” approach. across a city’s administrative boundaries and in line with its economic footprint. For instance, Metropolitan municipality law of 1984 the Law enabled metropolitan municipalities Turkey’s metropolitan municipality law was a to undertake their own higher scale territorial game-changer for managing cities. It was pre- planning (1:50,000 scale) that provides a stra- cisely during the period of economic liberal- tegic framework to plan city development. Un- ization and urbanization surge in the first half til such time, these plans were prepared by the of the 1980s that the Government adopted central government. Urban transport planning a new municipal administration regime. Not and investment functions were also consoli- only in Istanbul, Turkey’s megacity, but also in dated, enabling planners to ensure access and newly emerging urban conurbations, more ef- mobility across a metropolitan municipality’s fective metropolitan management was needed entire footprint. across a broader footprint. Turkey’s landmark legislation—the Metropolitan Municipality Law Competitive cities, thanks to the passed in 1984—provided the legal and admin- metropolitan effect istrative basis for managing cities at a metro- Turkey’s metropolitan municipality regime politan scale. Sixteen cities were elevated as clearly promotes economic growth. Every metropolitan municipalities between 1984 and city’s desire is to remain vibrant as its economy 2012, and in December 2012, an amendment evolves with the ability to attract and retain to the Metropolitan Municipality Law created firms and human capital and to gravitate to 7 Rise of the Anatolian Tigers Box 2: Permissive policy toward informal settlements Turkey experienced a major surge of rural migrants to cities in the 1980s, rapidly expanding informal ur- ban settlements. Many cities could not accommodate this growth, and the influx of migrants took place so quickly that these informal settlements became known as gecekondu, “houses erected overnight.” Estimates of informal housing in major cities during that period range between 30 percent–60 percent of the urban housing stock. Most in-migration was concentrated in large cities along the coast (Istanbul and Izmir) and in Ankara. During the period from 1949-1990, the government issued eight amnesties legalizing irregular residences. The prevailing attitude of the government, and tacitly accepted by the public, was the notion that all Turks have a right to some form of basic housing. The amnesties gave residents either outright legal title to the land or the temporary right to use it, removing the fear of eviction. With their tenure secure, residents of informal areas began to invest in their housing, in some cases adding rooms later rented to new migrants, and municipalities connected them to vital infrastructure services. Turkey was also fortunate that the vast majority of land where the informal settlements took shape was public. That may have foreclosed criti- cisms about property rights from private land owners. higher value-added activity. The Metropolitan secondary cities. New, higher value-added ac- Municipality Law provided a critical planning tivities—relying more on knowhow and human framework that has a direct impact on infra- capital than manufacturing space—locate close structure provision and coordination in the de- to a city core or central business district where livery of services. Used effectively, its provisions proximity to universities, other businesses, and can help a city administration promote mobility knowledge-generators are essential to their op- across a metropolitan area and ensure connec- erations. tivity for residents and prospective businesses. It can thus influence economic performance Figure 4: Firm location across city area: and city competitiveness, through a “metro- Manufacturing and ICT firm comparison politan effect.” The metropolitan regime can Manufacturing disproportionately attract firms and generate 0.0012 Firms per Squared km 0.0010 agglomeration economies, illustrated by the 0.0008 heavy concentration of firms in Turkey’s metro- 0.0006 politan municipalities. 0.0004 0.0002 0.0000 Ankara>100km 20 - 50km Ankara<50km Core <10km 10 - 20km Ankara 50 - 100km ICT 0.00006 Firms per Squared Km 0.00005 0.00004 0.00003 0.00002 0.00001 0.00000 The metropolitan effect not only attracts and Core <10km 10 - 20km 20 - 50km Ankara<50km Ankara>100km Ankara 50-100km retains firms, but also promotes the sorting of economic activity across a system of cities. A snapshot of firm locations within concentric ar- Source: TOBB and ABPRS, TurkStat, WB staff calculations. eas of Turkish cities demonstrates the consisten- cy of Turkish city performance with economic Urban form has a determining effect on a city’s principles (See Figure 4). As land rent values and economic viability and sustainability. Urban labor costs rise, manufacturing activities begin density can, in principle, yield multiple econom- to hollow out from a city’s core and compete by ic benefits. It can lower the cost of infrastruc- operating at the city’s periphery or relocating to ture provision—or, put another way, increase 8 Turkey Urbanization Review - Policy Brief the number of beneficiaries per unit cost of ter utility and to operate them at arm’s length infrastructure. It can reduce carbon emissions on the principles and practices of cost recov- by making mass-transit more feasible as an al- ery. Turkey now compares very favorably with ternative to private vehicles. And it can maxi- peer countries in its market pricing of water and mize the efficiency of land use, reducing land sanitation services, as well as its cost recovery, costs per built area. That translates into lower discouraging waste and promoting water con- housing costs as well as higher productivity and servation. Market pricing has also helped Tur- tax value of land assets. Cities reliant on prop- key to attract the private sector to the provision erty tax as their main source of revenue have a of water and sanitation services (See Figure 6). built-in incentive to make efficient use of their land, and they typically promote density in their Figure 6: Water supply service pricing development planning. Turkey’s high degree of and domestic consumption per capita in density suggests an economically efficient pat- Turkey and comparator countries, 2011 tern of urbanization (See Figure 5). 3.0 600 Combined Water Tari ff (US$ /m3) Domestic Use: Liter/Person/Day Figure 5: Turkey’s cities have high density 2 2.5 500 2.0 400 40000 Diyarbakir Population Density (pop/sq mile) Gaziantep 1.5 300 Adana 30000 Izmir 1.0 200 Istanbul Mersin Konya 0.5 100 20000 Kayseri Ankara Antalya 0.0 0 Eskisehir India China Mexico Korea, Russian Italy Turkey Spain 10000 Republic Federati on of Combined Water Tariff (U SD/m3) Domestic Use: L iter/Person/Day (right axis) 0 10 12 14 lnpop 16 18 Source: Global Water Intelligence (GWI) Market Report, vol. 12, Issue 9, September 2011 lowess: Density_per_sqmile Density_per_sqmile Source: Data from Demographia (2008) and Urbanization Review team calculations Supporting the system of cities Turkey’s Metropolitan Municipality Law also Connective infrastructure was a hallmark of promoted more efficient management of wa- Turkey’s young system of cities, enabling the ter and sanitation services. Faced with grow- flow of goods and skills that fuel Turkey’s ur- ing cities, Turkey needed to find an institu- ban economies. Starting in the early days of tional model that would achieve greater scale the Republic, connecting cities with an efficient efficiency, and it looked for a solution at the railway system had not only the political objec- metropolitan scale. In 1981, Istanbul initiated tive of linking settlements across the country in the first successful corporatization of water and an effort to promote national cohesion but also sanitation services. That helped it more effec- the motive of improving accessibility and con- tively manage and monitor those services, par- nectivity that provided a strong economic foun- ticularly by removing such expenditure outlays dation for Turkey’s cities. Turkey’s rail network from its municipal books and shifting them to and later its highly developed road network ISKI, Istanbul’s corporatized water utility. This provided the economic backbone to support vi- arrangement helped ensure cost recovery in brant local economies, even in the interior. pricing water, sanitation, and wastewater treat- ment services and avoid cross-subsidies from Social housing and the TOKI model other municipal revenue sources. Istanbul’s The mid to late 1980s were an important pe- successful corporatization was formally adopt- riod for establishing other key institutions to ed within the Metropolitan Municipality Law manage rapid urbanization, which had reached in 1984, requiring all of Turkey’s metropolitan its peak. The first measure was the passage of municipalities to establish a corporatized wa- the Housing Development and Public Partici- 2 LOWESS (Locally Weighted Scatterplot Smoothing) plotting was used to find the non-linear relationship between population and density. LOWESS enables robust locally-weighted time series and scatter plot smoothing for both equi-spaced and non-equi-spaced data. Population and density data are drawn from 1500 cities globally. For any given population level, the trend line indicates the average or expected density of the city. Cities above the trend line have densities above the international average for their population size, while cities below the line have densities below the interna- tional average. 9 Rise of the Anatolian Tigers pation Law (#2985) in 1984. This law provided Expansion in housing finance also improved one of the first formal state interventions in affordability of housing. The problem of ac- the housing policy arena to that point. The law cessing long-term mortgage finance had been recognized the urgency of responding to rapid a persistent problem over the first half of the urbanization, which was peaking, provisioning 2000s. In the absence of long-term financing, for financing of low income housing at nominal many new housing developments were beyond rates with long-term payback periods. The Law the reach of even middle income households. also called for the establishment of a Housing This has meant that accessing long term financ- Agency, which came to pass in 1990 when the ing for housing has been a real constraint on de- Housing Development Administration, other- mand, and possibly a factor in holding back the wise known as TOKI, was established. housing supply market overall. Still in its early stages, Turkey’s mortgage market has played an important role in making housing more af- fordable. On the demand side, mortgage-based finance was expanded, particularly over the last decade, with extended maturities that allowed it to go down-market. Shorter maturities (less than 3 years and 3-5 years) have been replaced overtime by longer ones (5-10 years and 15-20 years). Interventions to support less fiscally equipped municipalities The entry of TOKI to the housing market Interventions at the national government level was significant. Founded in 1990, it created a in cases of market failure have been a hall- “wholesaling” mechanism for the large-scale mark of Turkey’s approach to support its sys- supply of housing for low and middle income tem of cities. Beyond the government’s foray market segments during Turkey’s most pressing into housing policy in the 1990s, basic urban period of urbanization. It was never to replace services were also shored up. Municipalities, Turkey’s predominantly private housing model with their own resources and those from the with public provision. Instead, it was to create central government, began over time to regu- an enabling environment for the private sec- larize informal settlements, including the provi- tor to scale up housing supply. This was largely sion of road infrastructure, as well as network accomplished through TOKI’s brokering role, water, sanitation, and wastewater treatment which cut red-tape, streamlined administrative to become permanent features of the urban procedures into an effective one-stop-shop, fa- landscape in many cities. Iller Bank provided cilitated the assembly of public land at a scale financing to larger cities for infrastructure net- sufficient for large scale housing development, work expansion as they grew, enabling many and mobilized housing finance. This, in turn, to keep pace with rapid urbanization. But there created investment opportunities for large con- were also acknowledged gaps in service cover- tractors and real estate developers, and scaled age, particularly among small towns and vil- up a traditional cooperative housing model that lages that generally had a very low economic could not keep pace with increasing housing de- base and insufficient revenue to service debt. mand. In response, the government initiated special Increasing housing supply enabled developers programs to ensure that water, sanitation, and to go down market. To do so, TOKI leveraged solid waste services were adequate in these fis- public land which factored in as a subsidy to cally dependent areas. make housing affordable to low income groups. For small towns and villages, Ministry of De- Provisioning for low income housing was based velopment programs, such as KÖYDES and SU- on limited space (often around 50-80 m² units) KAP, filled a critical gap. KÖYDES, or the small housing, which would have been less attractive villages water and sanitation project, spanned for developers to build without the state’s inter- in its first phase over 2005-12. The aim of was to vention. ensure broad-based access to water and sanita- 10 Turkey Urbanization Review - Policy Brief tion services across all of Turkey’s settlements, ing for amendment plans – a feature that is very particularly small villages in remote rural areas. rare in planning legislation of developed coun- A companion program, SUKAP, was established tries. Many of the concerted planning efforts in 2011. Through Iller Bank, it has reached mil- before the 1980s have diminished in substance lions in only three years. It involves a 50 percent and application. The impetus to be flexible is un- subsidy to municipalities to encourage them to derstandable during a period of rapid urbaniza- borrow from Iller Bank and invest in critical in- tion. However, a 2008 Council of Europe report frastructure services. These programs, together indicates that in a single city as many as 250 with a national system that provides financing amendment plans may be approved in a single for municipalities through Iller Bank and com- year. What this means is that there is maximum mercial banks, have contributed to raising Tur- uncertainty about the planned expansion of a key’s access to water supply to nearly universal city, how to link transport and other strategi- coverage by 2011, with access to sanitation ser- cally important infrastructure to new residen- vices elevated to 91 percent. tial and commercial needs and locations, which contributes in some instances to a mismatch of Pursuing Turkey’s infrastructure services with development pat- second-generation urban agenda terns – a very costly and inefficient, not to men- Turkish cities today offer a range of attractive tion unsustainable, future for cities. features that make many of them both livable Turkey’s development planning and implemen- and a pleasure to visit. They have extensive tation programs do not sufficiently emphasize cultural heritage endowments, and many have public consultation. Turkey’s rapid urbaniza- modern award-winning museums. They gener- tion was, metaphorically, the tide that lifted all ally feature clean and well-maintained streets. boats in economic terms, improving the lives of Solid waste collection is carried out daily in urban residents as well as new rural migrants many of the larger cities. Taxi and public buses are frequently available and affordable. And to cities across the board. But urbanization in there is virtually no evidence of slums of the Turkey, as in most other countries, also brought type found in Latin America and South Asia. But social dislocation and the often “un-neat” jux- they still face a host of long-term sustainability taposition of urban and rural cultures in a city challenges, such as improving transport plan- setting that have yet to fully meld into a civic ning and systems, broadening the benefits of culture and discourse. This phenomenon is in- urbanization to all city residents, and safeguard- evitable and, managed well, can benefit all city ing against sprawl and inefficient, uncontrolled residents through the diversity and co-mingling development. Together, these key challenges of different cultures and mindsets that spark make up Turkey’s second-generation agenda for creative energies, innovative ideas, and effec- sustainable urban development. tive solutions. But this takes hard work and a dedicated commitment to public consultations Planning to avoid the increasing criticisms of top-down With a few exceptions, Turkish cities have ef- interventions. Engaging community groups and fectively developed without plans over the last developing a new social contract are important two decades. Turkish planning legislation allows elements of the second urban development for maximum planning flexibility by provision- agenda for Turkey’s cities. 11 Rise of the Anatolian Tigers This next development frontier for Turkey’s cit- scale city. So, they are only now beginning to ies is captured in the recently issued Tenth Na- address their growing urban transport needs of tional Development Plan. Many of the critical planning and investing in public transit systems. development challenges for Turkey’s cities noted Going forward, several fast growing cities will here are addressed in the Plan, including creating need to avoid congestion costs and other nega- “Livable Spaces and a Sustainable Environment.” tive externalities. This reality is underscored by The Plan places appropriate emphasis on: the fairly low capacity of Turkey’s mass transit • Making structural and functional improve- systems. ments to the development planning sys- Turkey’s cities will need to link transport plan- tem, including spatial planning and urban ning, especially for bus lines and other public design. transport, with land use planning. Despite the • Increasing value capture from the conversion legal requirements, urban transport planning is of rural to urban land in development plan- not fulfilling the intended objectives. In most ning (and using associated revenue streams cities, meaningful integration between land-use to develop social infrastructure, including planning and transport planning is not taking the expansion of public and green areas). place. While both are required by law, they are usually prepared at different times with neither • Using urban transformation to enhance legal requirements nor institutional arrange- city competitiveness and improving the ef- ments to ensure their mutual consistency. For ficiency of urban land management. example, both the third bridge and the third • Promoting social harmony, urban integrity, airport projects in Istanbul are being developed aesthetics, and culture in Turkish cities. as transport projects, but they are not includ- All these policy measures will need effective ed in the land-use development plan. At the planning and monitoring of city performance municipality level the functions of the UKOME and establishing monitoring systems to pro- (City level Transport Coordination Center) do mote livable and sustainable cities. not extend to the coordination between trans- port policy and land use, which is under the re- Connecting people to work and services sponsibility of the city architecture department City public transport systems are under- or equivalent. This suggests the need for new planned, underfinanced, and undermanaged. mechanisms for planning as well as organiza- Because Turkey features motorization rates tional arrangements at the municipality level, (cars owned per 1,000 persons) that are grow- including changes to the legal and regulatory ing twice as fast as economic growth, the cost framework. of doing nothing is substantial. Although this growth is in line with international trends, it is likely without concerted policy efforts to exac- erbate already existing congestion costs in city transport systems. Traffic accidents already generate costs estimated at well over 3 percent of GDP. Personal vehicle transportation is also the least energy-efficient mode of transport and generates substantial demand for energy (projected to reach 2.5 to 5 times the current level by 2022). That has serious implications for Turkey as an energy import-dependent country. Developing mass transit systems and other Turkey’s cities should also forge links between larger scale infrastructure for larger cities re- job and housing markets, especially for low- quires significant planning, a robust tax base, income households, whose transport costs can and larger investments linked to well integrat- be a big part of their income. Urban transport ed land use planning. In past decades, many is integral and essential in any urban develop- Turkish cities relied on an entrepreneurial pri- ment strategy. Indeed, it should be the back- vate sector, including taxis and dolmus minibus- bone of the city’s planning framework. It is es, which are no longer adequate for a larger vital in connecting housing markets with labor 12 Turkey Urbanization Review - Policy Brief markets and ensuring that low income house- others have under designed systems. Appropri- holds can affordably reach job opportunities, ately scaled and cost-effective urban transport while contributing to the competitiveness of systems should follow guidelines for capital a city’s firms. Successful cities start their plan- investment planning. A shift in focus to provid- ning process from setting a long-term vision ing mobility for people rather than automobiles and goals for city development, recognizing the would help Turkish cities to keep pace with lat- interactions among multiple and often compet- est urban transport policy trends, emphasizing ing policy objectives. They then address each options that promote pedestrianization and problem—such as road network development, other public transit options over attempts to ac- traffic management, and public transport per- commodate more personal vehicles. formance—in a coordinated manner. Urban transport strategy in the best managed cities: The national government essentially “holds the ring,” setting general conditions for local • is well integrated with other aspects of the autonomy and initiative. These conditions are city development strategy, such as land-use universally acknowledged, though not always plans, environment policies, and economic well performed. More controversial are nation- development strategy; al measures that go further and mold the poli- • has the planning process coincide with the cies pursued locally. budgetary process, constraining fiscal and • Research and technical assistance for urban administrative resources to the available transport can be managed at the national investment plans. level because of the economies of scale and Turkey should overhaul the urban transport scope in the collection and dissemination of planning system with new standards, tools, information on best technological and com- and performance indicators. Turkey needs des- mercial practice. perately to overhaul its urban transport plan- • Formula-based counterpart funding for ning system with new standards, tools, and in- capital investments can help where local dicators for monitoring performance. Currently, borrowing capability is weak. The danger is many Turkish cities operate without a functional that it can distort the choices local authori- transport masterplan. Planning often is not in- ties make by changing the relative costs of tegrated with land use planning, with the aims different policy interventions. of connecting housing and job markets and al- lowing a city’s transport system to serve as the backbone for land use planning. A major reason for this deficiency is the generally inadequate institutional setup in most Turkish cities. The city level UKOME enjoys no executive functions, financial management controls, or mechanisms and tools to effectively plan, deliver and oper- ate effective urban transport systems. Compare that with the water sector, where water utilities were spun off from municipalities and corpora- tized some 30 years ago, accountable for cost recovery in their operations. Turkey should create a national framework for sustainable urban mobility systems for people (not cars). Weak links between national policies and local practices underscore the deficiencies in the planning, financing and sustainable pro- vision of urban transport services. Many cities have opted for higher cost “showcase” transport systems that do not have the ridership to jus- tify such an outlay of financial resources, while 13 Rise of the Anatolian Tigers • Special financial assistance from the cen- The local administration sector is heavily reli- tral government can encourage the take-up ant on transfers, including shared tax revenues of technical innovations. Other assistance and government aid and donations. Central can simply be an injection of “emergency” government fiscal transfers and donations support for vehicle replacement as fleets stood at 45.5 percent and 16.5 percent respec- deteriorate. But this can encourage the mu- tively in 2011. The bulk of government aid and nicipality to rely on such occasional support donations are for SPAs, not municipalities. En- in place of proper vehicle replacement pro- terprise and property gains (land sales) domi- grams and should be avoided unless critical nate the municipalities’ own-source revenues to operations. (21.9 percent in 2011). In contrast, tax and fee revenues are very small, at about 11 percent Financing of total revenues, low by international com- Traditional approaches to taxation and reve- parison. The share of transfer revenue is also increasing, driven by the growing economy and nue-raising strategies advocate marginal taxa- growing national tax revenues sources of the di- tion. That means taxing at the margin to raise visible pool. revenues for the delivery of desired services in a particular locality. But planning and investment Horizontal imbalances dominate the revenue decisions in the context of rapid urbanization picture. Behind the aggregate and comparable often need to be made in anticipation of new- total revenue figures are horizontal imbalances comers to the city. In most cases, this means in municipal revenues across regions and by size that an increasing share of the tax base has yet of local administration. As expected, local reve- nues are concentrated in the large metropolitan to materialize. A municipality’s ability to access municipalities and in the western regions of Tur- long-term finance and use other debt and land key, where the tax base is robust. Four regions equity instruments can bridge this gap, while collect more than two-thirds of municipal rev- pursuing intergenerational equity in infrastruc- enues, while the other eight share less than a ture finance. third. There is a 27-fold difference between the Today’s very robust fiscal transfers are likely largest and the smallest regional share of mu- to decline in relative terms as national eco- nicipal revenue. The population, the local eco- nomic growth tapers off, making city financ- nomic situation, and particularly the presence ing a critical challenge in the years ahead. of large companies strongly influence municipal Municipal revenues and expenditures are both revenues. Disparities in municipal revenues and expenditures are substantial and growing. growing steadily, if just keeping pace with infla- tion. A steady current balance at about 22–30 The very low current balance of the nonmet- percent of total revenues indicates a healthy ropolitan municipalities and towns is a matter control over current expenditures and appears of concern. It leaves very limited fiscal space to be a good cushion for financing investments for financing development directly or for debt and securing debt. This contributed in 2011 to repayment. The low current balances suggest a gradual accumulation of cash reserves (about low fiscal capacity and likely constrain the capi- TRL11bn), concentrated in the special provin- tal investment capacity of the secondary cit- cial administrations) (TRL6.6bn) and the towns ies. These shortcomings could be addressed in three ways: by expanding local revenue bases and borough municipalities (TRL2.1bn). But and improving collection at these municipalities over the past five years, the current balances with incentives; by providing specific targeted have moved very differently: metropolitan mu- development grants to these entities; and pos- nicipalities have steady and robust current bal- sibly by slightly modifying the intergovernmen- ances, while the nonmetropolitan municipali- tal transfer formula (changing the allocation ties and the towns have small positive current shares, improving equalization, or introducing balances. These cash balances and current bal- a local revenue mobilization incentive). Before ances would drop if the local entities were to designing and introducing any such changes, pay their overdue liabilities for taxes and loan it would be advisable to conduct an in-depth arrears owed to the Treasury and for social se- analysis of the accounting, bookkeeping and curity payments. budgeting practices of local governments. 14 Turkey Urbanization Review - Policy Brief Turkey should aim to capture the land divi- cent), with only double rates for empty lots be- dend when providing public goods. Property ing higher than the tax rates in other developing taxes are not keeping pace with land prices, and countries. So, further increases in property tax revenue collection is weak. Local own-source revenues are among the more promising op- revenue overall, not necessarily weak, relies tions for local governments. heavily on enterprise and property revenues Revenues from the sale and lease of assets rather than direct taxes to cover service provi- and development contributions by citizens sion. The property tax, the best proxy of local or enterprises can be considered own-source wealth, should be assessed at levels commen- capital revenues. Revenues from the sales of surate with the degree and quality of service building sites make up 3.3 percent of the total provision that local residents desire and expect. revenues of the municipal sector. Metropoli- The Turkish subnational finance system has big tan (42 percent of total) and metropolitan dis- gaps in incentives and in coordination: trict municipalities (39 percent) raise the lion’s share of these revenues from building site sales. • Metropolitan municipalities, as the largest Building site sales make up 5.7 percent of the local entities, do not have buoyant own- total revenues of metropolitan district munici- source tax revenues (such as property tax- pality revenues. But this is a one-time opportu- es) and thus have no effective power over nity since municipal land is scarce. Municipali- what is typically the most important source ties can also benefit from land development by of local revenues. So, they must rely on increasing property tax revenues from the more collecting own revenues from enterprises, valuable developed land and newly constructed economic activities, and land and building buildings—if the tax base is changed timely and leases and sales that should complement properly. but not be a main source of revenue; Increasing municipal revenue collection of • There may thus be a gap in incentives for fees and charges, fairly and effectively, is an local revenue mobilization. Municipalities important objective. Fees and charges repre- within metropolitan districts (towns and sent about 4 percent of municipal revenues, boroughs) have property tax collection as- led by building construction fees (27 percent), signed to them within the metropolitan ju- occupation fees (15 percent), wholesale market risdictions, but they may lack motivation to fees (10 percent), and building user permit fees boost these revenues, because of the nar- (10 percent). Within the upper and lower lim- row scope in their service responsibilities. its set by the central authority, municipalities Solid waste collection and some interior determine the specific fees for different neigh- road resurfacing are their exclusive service borhoods based on their economic and social responsibilities, though they have the op- position. But local revenue collection will need tion, but not the mandated responsibility, to be a concerted focus of municipalities in the for other services. coming years. Turkey’s property tax revenues are lower than One option available for local administrations in OECD and some EU comparators. Property to boost own source revenues is land-based taxes amount to 0.2 percent of GDP, less than financing instruments to convert land or land- one-fifth the OECD average (1.1 percent). This related regulatory powers into funds for infra- is in part due to national legislation that sets structure or service delivery. The three main the property tax rates at 0.1 percent for land strategies: and residential buildings, 0.2 percent for other buildings, and 0.3 percent for empty lots. Met- • Land sales or long-term leasing of land, ropolitan districts (towns) can levy twice those buildings, or other infrastructure assets; rates, but even those are much lower than the • Development impact levies or taxes, taxing OECD and EU averages of around 1 percent direct beneficiaries of infrastructure devel- of the assessed property value. Turkey’s base opment in specific locations by extracting property tax rates are at the lower end even some gains in land values as a result of pub- of the developing countries’ average (0.3 per- lic infrastructure development; 15 Rise of the Anatolian Tigers • Regulating and using regulatory power to land may be in the hands of small private land- generate revenues for infrastructure devel- owners and private developers from whom it opment. must be purchased in parcels and transformed to land suitable for development projects. The Selling in-city land can generate exception- ally high one time revenue. This may appear challenge and responsibility for the city is to simple, but it faces many challenges. Cities of- ensure that development is consistent with the ten fail to have updated and reliable public land city’s master plan and development plan, that inventories and thus knowledge whether the it avoids urban sprawl, including new privately given parcel is surplus land or possibly a strate- developed housing areas that soon demand gic reserve for future development. Experience connection to the city’s road, water and sanita- is lacking in valuing and pricing land or property tion systems, and that it manages well the pres- (what price should be used: market value? so- sures for social services, health, and education cial value? price before or after development?). facilities to be located nearby. Important plan- Expertise is lacking in managing the sale or ning and tax regulatory instruments should be lease transactions. Transparency is lacking in used in such cases to avoid creation of or re- managing transactions. And there are limits on duce negative consequences of sprawl. the available surplus of in-city land. Land-pooling can support harmonious city de- Urban transformation or redevelopment is an- velopment in areas largely under private own- other way to improve efficiency in land use, ership. A well-developed city needs substantial- particularly as a city economy evolves. This ly different land parcels and subdivisions than strategy usually involves transforming industrial the land-ownership structure on original rural or commercial land or informally settled areas or agricultural land. More important, well-man- into housing and commercial development as- aged cities often need to provide green areas, sociated with a shift in the city economy from set-backs, public infrastructure, and rights of manufacturing to higher value-added services. way. With land pooling, the city provides plan- The hollowing out of a city’s manufacturing ning inputs, zoning, and infrastructure develop- base that often occurs over 20–30 years can ment in exchange for a share of land that the be transformed to much more valuable urban private owners give up. The entire area is then development. Again, there are challenges: com- consolidated into one single area for develop- plicated legal issues because of mixed owner- ment based on planning regulations, an urban ship; the need for environmental cleaning and design concept, local cultural characteristics, rehabilitation of the area with excessive costs and other considerations. The initial land own- in brownfield redevelopment; transactions and ers could receive in exchange one or two plots rehabilitation can take a long time; temporary in the designed town for own use. The surplus or permanent displacement of existing tenants parcels are sold, and the revenues distributed in or residents and the need for interim financing; accord with the initial land contribution. and difficulties in generating accurate valuation Taxing the gains in land-based financing is vital of the land before and after rehabilitation. But for three main reasons. First is to ensure con- such practices are widespread in Turkey’s larger sistency of private developments with the city’s metropolitan cities. Selling an old bus station master plan, zoning, and strategic plans. Sec- for redevelopment generated about USD1.5 bil- ond is to generate public revenues for needed lion in revenue for Istanbul in 2007. infrastructure development. And third is to en- Careful planning of urban land expansion sure fair sharing of the development gains be- through conversion of rural land is another tween the public and the private stakeholders. option. This should be done through prior plan- The taxing instruments include betterment tax ning and reflected in a city’s long-term strategic or impact fees charged for capturing gains at- plan. Coordination with national and regional tributed to developing external infrastructure. plans, such as Turkey’s Strategic Spatial Plans, These are one-time payments to be combined would be essential. If the expansion is on gener- with increasing the property taxes through the al public land without encumbrances or restric- long-term increase of property value as a result tions, the costs can be free or at nominal “row- of the nearby public infrastructure develop- land” value. But this seldom is the case, as the ment. Developers know, calculate, and account 16 Turkey Urbanization Review - Policy Brief for gains from major water, road development, or methods to better rationalize capital invest- transport (metro-rail) well ahead of proceeding. ment planning. At the metropolitan munici- In sum, Turkey faces several policy options: pality level, in particular, multiyear capital investment planning could be improved by • Reduce municipal dependence on fiscal linking it to land-use planning within city transfers by maintaining the current share master plans, helping to better mobilize do- between central and local administration mestic and international finance for bank- sectors, while providing incentives and tak- able investment projects. ing policy measures to encourage improve- ments in own-source revenue collection. Coordinating policy and implementation One of the most practical measures would across sectors and administrative tiers be to revisit the property tax base and The Turkish intergovernmental system has sev- rates, currently one-tenth of what most eral tiers with complementary but also inter- OECD countries assess, and provide flexibil- linking responsibilities. These tiers comprise ity to local administrations in setting their metropolitan, non-metropolitan provincial, and own. Also consider a new property valua- town & borough municipalities, special provin- tion system—moving from quantitative to cial administrations, and municipal affiliated in- qualitative (market values) would be high- stitutions (utility companies). Districts or towns ly recommended. Review the ineffective or boroughs in metropolitan areas are part of equalization transfer and consider a block the metropolitan jurisdiction as independent grant or performance grant for localities affiliated entities. Their functions are only partly with a small economic base. subordinated to the metropolitan government, • Review the equalization transfer mecha- as for master planning and transport planning. nism and improve equalization effects. One Here, local administration denotes the entire option would be a block grant or perfor- sector and municipalities the sum of the three mance grant system (conditional or uncon- basic clusters as Figure 7 depicts this relation- ditional) to localities with a low economic ship. base. Many of them, such as Van, have fully exploited their property tax, recording the Turkey’s metropolitan municipality law is a highest yields among Turkish administra- global best practice in organizing service pro- tions, but they still appear to have inade- vision and management at a broad metro- quate resources to deliver their mandated politan scale. Most countries, including many services. developed ones, have not put in place such an administrative regime. In international practice, • Resolve mounting arrears and enhance such a system, where a second level of govern- finances, particularly for smaller munici- ment is added to improve service provision at palities. Further review and study in more the local level, is known as a two-tier system. depth the financial distress and sustainabil- The upper tier covers the region (metropolitan ity risks that small municipalities as a seg- area) to take advantage of economies of scale ment of local administrations are facing. As and to properly mitigate negative side-effects a market segment, this cluster of municipal- that impact a wider area (such as air pollution). ities needs further detailed review. The lower tiers are responsible for local servic- • Harmonize subnational capital investment es, with limited economies of scale effects and planning and programming across multiple regional side-effects (such as street lighting and administrative tiers. Promote improved local parks). Upper-tier governments should be harmonization of capital investment plan- responsible for “services that provide region- ning and programming across multiple tiers wide benefits, generate externalities, entail of administration. Anecdotal evidence sug- some redistribution, and display economies of gests some overlaps and possibly duplica- scale,” while lower tier governments should tions of investment planning and imple- be responsible for services that “provide local mentation across different subnational benefits”. Metropolitan municipalities in Turkey administrations. A more detailed review mirror international practices in the functions could bear this out and potentially point to they are responsible for. 17 Rise of the Anatolian Tigers Figure 7. Turkey’s local administration structure SPAs Metro Municipalities Non-Metro Municipalities Municipalities Local Town and Government Municipal Borough Sector Unions Municipalities Affiliated Institutions Development Agencies Interagency coordination takes on increasing making in different policy spheres, which is re- prominence in countries transitioning through sponsible for enforcement, which is mandated decentralization. Not only will changes in to deliver different services, and how communi- functions take place with decentralization, im- cation can be improved to ensure timely and ef- portant capacity issues arise that may require ficient responses to challenges that arise. Many transitional arrangements to ensure a smooth OECD countries have interagency coordination transfer of responsibility. Understanding the dif- systems that are not organized in a top-down, ferent modes of interagency coordination thus hierarchical order, but are conceived as an in- becomes essential, particularly during the tran- tegrated public support mechanism, which con- sitional period. Interagency coordination gener- tinually evolves in response to changing needs ally takes on three different forms: and challenges. As such, lower and upper levels of government are expected to work together • Vertical coordination—between different to provide key public services, and they assign administrative levels, usually in a hierarchi- responsibilities and tasks according to compe- cal ordering, as with a national ministry and tency, capacity, and effectiveness. a local authority. At provincial and local levels, vertical coor- • Horizontal coordination—between insti- dination is ensured along sectoral lines, with tutions/agencies/departments/units from individual ministries represented in provincial the same administrative level, as between governments. The fact that the central govern- two ministries, between two units within ment executive has representatives at the lo- a ministry, between two municipalities, or cal level allows central government decisions between two departments in a municipality. to more easily find their way at the local level. • Diagonal coordination—with actors exter- Such a mechanism is also important because lo- nal to the public administration, as with the cal administrations are not responsible for key private sector, NGOs, universities, and think functions, such as education and health care, tanks. so these coordination mechanisms serve an im- portant purpose. Vertical interagency coordination requires a clear delineation of responsibilities between Horizontal interagency coordination ideally different tiers of government. It is important enables more coherent and streamlined poli- to know what agency is responsible for policy- cies, more efficient service provision, and bet- 18 Turkey Urbanization Review - Policy Brief ter social outcomes. At the national level, hori- Depending on the required coordination, dif- zontal coordination can involve joint-work of ferent mechanisms can be established. Contin- two or more ministries on certain, regulations, ual interactions may require coordinated work or standards. It can involve joint work and coor- units (joint agencies or commissions), staffed dination between a policymaking agency (Min- specifically to help coordinate and communi- istry of Environment and Urbanization) and a cate across agencies where policy depends on development agency (Housing Development effective joint action. Temporary interactions Administration)—or between a policymaking may be better served by less informal arrange- entity (e.g. Ministry of Development) and an in- ments, such as steering committees or work- vestment entity (Iller Bank). At the local level, it ing groups, where policymakers and technical can involve coordination through a joint service staff from established units convene to solve council among individual municipalities in close common problems jointly. Globally, different proximity to achieve economies of scale in ser- coordination mechanisms have been created to vice provision. It could involve coordination in help solve a variety of policy and institutional trying to mitigate negative externalities of urban challenges, and Turkey already has experience development, such as pollution, congestion, or in the field. poverty). For example, the Washington DC met- ro system is managed, financed, and expanded Strategic plans for regions, provinces, and local with contributions and inputs from different governments can improve coordination. The government tiers: the federal US government, Higher Committee on Regional Development the District of Columbia and the states of Mary- is one example of a formal structure intended land and Virginia, individual counties and mu- to promote central government coordination nicipalities that are serviced by the metro, and in Turkey. Headed and formed by the Prime the private sector. Policymakers in the Wash- Minister, the Committee includes the Minister ington metropolitan area recognized the need of Development as well as other ministers that for a metropolitan transit system that spanned may have a say in the topics discussed. Not a several jurisdictions to promote the competi- self-standing body, it meets periodically to dis- tiveness of the city-region. Improved mobility cuss issues that cut across sectors. For example, and access to job opportunities for residents liv- to better coordinate policies and public invest- ing across the metropolitan area helped break ments, representatives from agriculture, indus- down the collective action dilemma even for try, tourism, transportation, and spatial devel- policymakers with quite different political views opment may be brought together. One of the and affiliations. Committee’s key functions is to ensure coordi- nation and coherence between economic de- Diagonal coordination seeks to make the most velopment planning (for which the Ministry of effective use of public funds by leveraging pri- Development is responsible) and spatial devel- vate participation and citizen engagement. It opment (for which the Ministry of Environment starts from the premise that the public sector and Urbanism (MOEU) is responsible). Such a is not always best equipped or financed to pro- coordinated framework can ensure the links vide directly all of the services it is mandated between these two vital dimensions of regional to deliver. It creates the opportunity to mobi- development. lize and attract private capital. It enhances fiscal space for local governments, shifting resources Several key actors in spatial planning need to public goods and social services that the mar- to be actively engaged. MOEU and MOD, two ket does not necessarily respond to. And it shifts critical players, are far from being the only play- commercial risk to a private provider. Most mar- ers. The Ministry of Transport, Maritime Affairs ket-based economies engage the private sector and Communications (MOTMC), for instance, is in public service provision, and there is broad taking a more active role in promoting sound experience of both successes and failure. Tur- urban transport policy and investments at the key’s public sector institutions have extensive local level. This could be effectively achieved by experience of working with the private sector, developing more detailed guidelines and stan- from water and sewage provision to solid waste dards, as well as providing a platform for local management, and public transport. administrations to share experience and learn 19 Rise of the Anatolian Tigers from one another, and from international good ministration and Control, public institutions practice. Today, MOTMC’s oversight role does have to prepare strategic plans that include not come into the picture until a metropolitan measurable objectives, and they have to mea- municipality contemplates investing in light rail sure their own performance according to pre- or metro mass-transit systems. determined indicators. Moreover, the Ministry Infrastructure is one of the most powerful of Finance is authorized to determine “the com- tools for guiding city growth. New city growth patibility of administrations’ budgets with the often follows existing infrastructure. Even if performance indicators stated in the strategic master development plans and implementation plans.” These measures encourage the develop- master plans aim to set the tone for peri-urban ment of programmatic budgets, but in practice expansion, new developments tend to follow they can be a challenge to implement without the easiest point of entry. So, many new devel- proper information systems and common stan- opments sprout up along existing roads, both dards for monitoring. Many local authorities due to easy access to the rest of the city and be- simply include a list of indicators in their stra- cause water, sewage, and electricity are usually tegic plans, but more often than not these indi- close by. Naturally, new residents will want to cators come without a baseline that would al- settle where land is cheaper, and where trans- low proper monitoring. A well-developed urban port costs and service costs can be lower. Ring data platform could help establish baselines, roads often serve as unofficial growth bound- enable cities to adopt performance indicators aries to control the outward expansion of the for improvement, and benchmark against good city. But such investments are usually large in performers both within country and interna- scale, outside city administrative boundaries, tionally. and crossing several jurisdictions. So, a central government agency (MOTMC) is often needed to coordinate and fund the works. One of the biggest challenges to urban devel- opment in Turkey is the lack of a well-designed system of data collection and monitoring of urban indicators. Examples include urban plan- ning data (monitoring of green space area per city), energy efficiency data, and urban trans- port data (monitoring transport networks and modal share). Moreover, different agencies col- lect data independently, often using their own methodologies, and prepare their strategies, policies, and plans based on those data. When Turkey’s urbanization experience offers many different agencies measure the same phenom- important lessons for developing countries enon in different ways, this may lead to differ- in the incipient and intermediate phases of ent outcomes, and policies can be formulated urbanization. It has not only come through in contradictory ways. It is therefore critical to a very challenging period of massive demo- have an information platform for collecting, graphic change, but has been able to lever- managing, and analyzing urban data to provide age this into important economic and social an overview of the performance of cities within gains. As it proceeds in the years ahead, its the system. KENTGES, Turkey’s Urban Develop- second generation urban agenda will need to ment Strategy, provides a basis for systemati- ensure that the benefits of urbanization are cally monitoring urban development indicators not outweighed by the costs. This will require and for analyzing and formulating policy. a broad-based policy agenda to promote sus- Reliable data would enable the development tainable cities, linking national and local gov- of monitorable performance indicators. Ac- ernment efforts that can build upon Turkey’s cording to Law 5018/2003 on Public Fiscal Ad- successes of the past. 20