The major features of such integration in the global economy would be :
I. The growing importance of international trade and investment.
II. The increasing global mobility of factors of production.
III. The driving force of technology.
IV. The growing importance of knowledge-based industries.
V. The critical role of market size.
VI. The need to adopt agile business practices.
VII. The necessity of forging international strategic alliances.
To be successful as a city in this new milieu, it is essential to plan effectively, encompassing areas such as land use, infrastructure needs, realistic projection of cost, and implementation.
Thrust Areas for action
Decentralization and Self Financing
Decentralize the instruments of infrastructure provision so that the agencies providing such infrastructure services are able to finance themselves and can respond flexibly to the changing demands of a growing city.
Effective Public-Private participation (PPP)
Private investment in public transport should be allowed to flourish in such a way that high service levels are achieved at low economic and financial cost. This is indeed possible through extensive use of private initiatives within a public regulatory framework. A key problem will be to manage a fast expanding supply of developed urban land for housing and other purposes. Rapid in-migration makes the demand for housing grows much faster than normal population growth. Land development induces investment in infrastructure such as water supply, sewerage, roads and power supply. All this requires substantial front-end investment.
Dismantling Excessive Controls
The Tenth Five Year Plan underscores a growing recognition of the need to dismantle the extensive controls on urban areas, many of which were established during the years 1975-77, at the national level.
Rationalisation of Tax structure
move towards reducing or eliminating octroi, reducing sales tax, road tax and stamp duty rates while increasing user charges.
National Level Co-ordination necessary
At the national level, the ministry of urban development needs to play an effective role in overseeing urban planning and development. Since most the work in urban development planning is envisaged at the state level, the role of the central ministry is mainly as a nodal organization for coordinating action, providing technical advice and working out detailed urban investment implications.
Governance : Making the government machinery work
Need to strengthen city management. city managements will have to manage and cope with large financial requirements for all kinds of investment for infrastructure service provision. Given the overall fiscal constraints at present, resources will have to be raised increasingly at the local level. Thus urban local governments have to be strengthened at all levels, and made creditworthy.
Appraisal Agencies :
The existence of information asymmetries give rise to the reluctance of investors and lenders to invest in urban projects. The government can help in funding professional institutions specialized in such appraisal techniques, who can then build professional credibility and provide project appraisals that are respected, and therefore address information asymmetries effectively.
Making the most of Financial Markets
Building an IFC would require simultaneous development of all segments of financial market i.e., money market, government securities market, corporate debt market, foreign exchange markets and commodities market because the transactions in all these markets are getting highly interlinked. While some segments of the markets have achieved adequate depth, some still lack liquidity and cling to low volume of transactions. To provide a fillip to the development of a vibrant financial market in India, the following changes in institutional and legal framework could prove critical.
In terms of sequencing, forex markets have to be aligned to external sector reforms and development of financial markets as part of overall reform. Further liberalisation in forex markets have to be harmonised with progress in other areas.
The private corporate debt market, in the absence of a well functioning secondary market, remains illiquid and unpopular among the investing population.
we need to look into the following issues:
• Examination of the issues relating to primary issuances as well as growth of secondary market of corporate debt securities in the light of international experience.
• Examination of the regulatory aspects for the development of the market for Asset Backed Securities (ABS) and Mortgage Backed Securities (MBS).
• Analysing the issues relating to trading, settlement and accounting of corporate debt securities including the issue of DvP settlement for corporate debt market.
• Suggesting measures to enhance transparency in pricing and valuation of corporate debt securities.
There are some of the other pre-conditions that still need greater attention. First although there has been some progress in the enforcement of creditors’ rights, the legal and regulatory system still has a long way to go in this area. The implementation of bankruptcy laws is very tardy so bond investors would have to wait a long time to get any compensation from defaulting companies. Second, the interest rate derivatives market is in its infancy and needs greater development for the easy access of hedging instruments to bond investors. Third, brokerage systems for retailing of either government securities or corporate debt instruments have yet to develop. What the retail investor wants is transparency in pricing, confidence regarding repayment, simplicity and convenience of dealing in the market and low cost. There must be adequate liquidity to enable case of entry and exit. This is difficult to achieve without the presence of market makers who can provide buy/sell quotas on a regular basis, and also have the ability to operate in the market with adequate volumes - a role similar to that of primary dealers in the government securities market.
Regarding banking industry, technological intensity is one area where perhaps we need to do significant ‘catching up’, notwithstanding the rapid strides made over the last few years, though data on this score are difficult to come by. It is wise for Indian banks to exploit this globally state-of-art expertise, domestically available, to their fullest advantage.
Developing Educational Infrastructure
The labor-force characteristics of urban areas will fundamentally and pervasively affect the ability of their businesses and industries to produce goods and services for export and to participate effectively in other international economic transactions. One of the most important features of internationally competitive cities in the future will be their capacity to mobilize skilled labor and managerial resources quickly and efficiently for new tasks as global business opportunities change. The most competitive cities recognize that global enterprises must be located near or have access to knowledge centers that can generate or stimulate innovation and provide a reliable source of skilled workers, technically
trained supervisors, scientists, engineers, and managers. At both the secondary and higher education levels they must focus on teaching how to lear and re-invent, because knowledge of the learning process will become far more important to students in a globally competitive world. A strong foundation in fundamentals must be built on a process of teaching that creates the capacity for lifelong learning.
There is a need to foster PPPs in the education sector.
Enhance Civic Leadership and Community Action
To attract and sustain technology-based manufacturing and services activities that are internationally competitive, urban leaders must promote a common civic perspective in the public and private sectors and a positive attitude about a city’s or metropolitan area’s comparative advantages. An urban culture that encourages and supports cooperation among the public, private, and civic sectors to anticipate and adapt to change is crucial for competitiveness in a global economy. In every city that has successfully restructured its economy, changes came through concerted action and civic commitment.
