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Rise of the an Toli N TiErs Turke UrbNiTion Review Public Disclosure Authorized Report No. 87180-TR Public Disclosure Authorized Rise of the Antolin Tiers Turke Urbnition Review Public Disclosure Authorized Public Disclosure Authorized Socil, Urbn, Rurl, Resilience Globl Prctice Group The World Bnk April 2015 Public Disclosure Authorized tepav türkiye ekonomi politikaları araştırma vakfı Report No. 87180-TR Rise of the Antolin Tiers Turke Urbnition Review Socil, Urbn, Rurl, Resilience Globl Prctice Group The World Bnk April 2015 I Rise of the Anatolian Tigers - Turkey Urbanization Review © 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: [email protected]. II TABLE of CONTENTS ACKNOWLEDGEMENTS X FOREWORD XI ExecUTIVE SUMMARY 1 CHapter 1: ENABLING A SYstem OF Cities for National GrowtH 9 The Magnitude and Pace of Turkey’s Urbanization 9 Placing Turkey in the Context of Global Urbanization Trends 12 The Economic Vocation of Cities 13 Lessons from Turkey’s System of Cities 16 Developing a System of Cities: The Metropolitan Municipality Law 17 Connecting the Hinterland: Early Infrastructure and Settlement Planning 19 Addressing Regional Inequities: Targeted Provision of Municipal Services in Small Rural Towns & Engaging with the Private Sector in Advanced Cities 20 Managing Rural-Urban Migration: A Permissive Policy Stance on Informal Settlements 21 Meeting Housing Needs: Social Housing and Evolution of the TOKI Model 23 CHapter 2: CITY COMPETITIVeness 25 Urban Density as Contributor to Agglomeration Economies 32 The Importance of Human Capital to City Competitiveness 36 The Importance of Connectivity to City Competitiveness 39 Key Findings and Policy Recommendations 40 CHapter 3: ImproVING Access to AffordaBLE HOUSING IN TURKISH Cities 41 Identifying the Vulnerabilities of the Housing Sector in Turkey 44 Vulnerability 1: Affordability 46 Vulnerability 2: Legal Rights 52 Vulnerability 3: Access to Housing Finance 52 Vulnerability 4: Supporting Infrastructure 54 Vulnerability 5: Opportunities for Income 58 Priorities for Policy 58 Coordinating Land Use Planning with Infrastructure Provision and Risk Mitigation 61 Creating Institutions for Valuation 62 Continuing Efforts in Opening Financial Markets and Increasing Credit Availability 66 CHapter 4: WHY URBAN Transport Matters IN TURKISH Cities? 67 Trends in Urban Transport in Turkey 67 Cost of Doing Nothing 69 Priority 1 – Rethinking Urban Transport Planning 72 Narrowing Gaps between Laws and Practice 72 Building an Institutional Basis for Successful Planning 73 Integrating Land-Use and Transport Planning 76 III Rise of the Anatolian Tigers - Turkey Urbanization Review Priority 2 – Make Best Use of Limited Financial Resources 77 Maximizing Value-for-Money of Capital Investments 77 Mass Transit Systems 77 Urban Road Networks 79 Improving Operating Efficiency of Public Transport Services 80 Maintaining Transport Infrastructure Assets 81 Priority 3 – Provide Mobility for People, not Automobiles 82 Traffic Management as a Centerpiece of Transport Policy 82 Parking as a Demand Management Tool 83 Transport for Livable Cities 84 Priority 4 – Create a National Framework for Sustainable Urban Mobility Systems 87 Developing a National Policy for Urban Transport 87 Providing Incentives for Reforms and Investments 88 CHapter 5: FINANCING Cities IN TURKEY 91 Municipal Responsibilities and Expenditures 95 Municipal Revenues - Scope and Composition 96 Municipal Revenues 96 Own-source Revenues 98 Taxes, Fees and Charges 100 Capital Revenues and Land-based Financing 101 Potential for Boosting Own-Source Revenues 103 Intergovermental Fiscal Transfer 105 Infrastructure Finance Framework 107 Main Financing Sources and Entities 108 The Public Investment Program 109 The Role of Iller Bank in Development Finance 111 Central Government Oversight 113 Municipal Borrowing and Indebtedness 113 The Framework for Borrowing 114 The Debt Stock and Composition 114 Policy Priorities 116 CHapter 6: INTER-aGENCy CooRdINaTIoN To SUPPort TURkISH Cities 121 Coordination Mechanisms 126 National Policy Focus on Cities 127 Coordinating across administrative Tiers 129 Coordinating across Sectors 130 Streamlining and Coordinating data Collection and Monitoring 132 Conclusions and Policy Recommendations 133 References 138 IV LIST of FIGURES Figure 1: Average Urban Area Population Size Comparison for Turkey and 26 EU Countries 9 Figure 2: Growth in Share of Urban Population in Turkey and Comparator Countries (1950-2015) 10 Figure 3: Zipf’s City Rank-Size Power Law 11 Figure 4: Global Mapping of Country Performance in Urbanization Rate and GDP per capita Change 14 Figure 5: Share of Total Population for Selected Cities in 2000 and 2012 15 Figure 6: Gross Value Added by Nuts 2 Region, 2004-11 16 Figure 7: Water Supply and Sanitation Service Pricing and Domestic Consumption per Capita in Turkey and Comparator Countries 17 Figure 8: Development of Railways and Population Concentrations in Turkey in 2000 19 Figure 9: Turkey Substantially Expanded Public Expenditures on Water, Wastewater and Solid Waste Infrastructure between 2003 and 2008 20 Figure 10: Turkey’s Water and Sanitation Service Coverage (1991-2011) 22 Figure 11. Average Number of Firms per Inhabitant 26 Figure 12: Spatial Distribution of Firms Established through 2006 28 Figure 13: Spatial Distribution of Firms Established between 2007 and 2012 28 Figure 14: Distribution of Firms Across City Sizes – by Sector 30 Figure 15: Average Employment per Inhabitant in and around Izmir 31 Figure 16: Population and Density in Turkish Cities 32 Figure 17: Inefficient urban expansion when land prices are distorted 33 Figure 18: Spatial Distribution of Firms – by Sectors 34 Figure 19: Average Growth Rate of Population in Metropolitan Municipalities by Geographical Area (2000-11) 35 Figure 20: Average Size of Firms (Old and New) 35 Figure 21: Simulated Number of Firms per District and Distance to City Center, for an average city and an average large city 35 Figure 22: Diversity and Average Ubiquity in Turkey’s Cities 36 Figure 23: Human Capital in Turkey 37 Figure 24. Human Capital across Turkey’s Cities 37 Figure 25: Human Capital and Distance to City Center 38 Figure 26: Spatial Distribution of National Expenditures on Education in 2001 and 2011 38 Figure 27: Transport as an Obstacle to Doing Business 39 Figure 28: Trends in urban population and housing needs for Turkey and its major urban agglomerations 42 Figure 29: Trend in housing starts to need ratio in Turkey 43 Figure 30. Trends in share of gross domestic savings and value addition in dwellings to GDP 44 V Rise of the Anatolian Tigers - Turkey Urbanization Review Figure 31. The share of housing rent on total expenditure increased more for the poorest households between 2005 and 2009 46 Figure 32. Growth in rent, utilities and consumption between 2005 and 2009 47 Figure 33. The house price index and house rent index across Turkish cities 48 Figure 34: Trends in House Price and Cost Indices 48 Figure 35: Distribution of housing construction and occupancy licenses across producing sectors 51 Figure 36: Trend in Financial Sectors’ Performance in Turkey 53 Figure 37: Weekly trend in real interest rate and housing loan financing in Turkey 54 Figure 38. Hanoi presents an example of uncoordinated plans for housing and mas transport 55 Figure 39. Poorest households live in more vulnerable structures 58 Figure 40: Vehicle ownership growth much faster than GDP growth between $4,000-8,000 per capita 67 Figure 41: Annual growth rate of private car ownership compared to GDP per capita growth (2001-2010) 67 Figure 42: Relationship between GDP per capita and motorization rate, trends during 2003-2009 70 Figure 43: Relationship between motorization rate and road sector energy consumption, trends in selected countries during 2003-2009 70 Figure 44: Organizational Structure of Transportation-Related Functions of the Gaziantep Metropolitan Municipality 75 Figure 45: Organizational Structure of Transportation-Related Functions of the Eskisehir Metropolitan Municipality 75 Figure 46: International comparison of public transport mode: Capacity vs. Capital Costs 77 Figure 47: Sub-national expenditures in percent of GDP, 2010 91 Figure 48: Local Administration Sector Revenues and Expenditures 2007-2013 (TRL bn.) 92 Figure 49: Local Administration Sector Current Budget 2007-2013 93 Figure 50: Current Balance in percent of Budget Revenues 2006-2013
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