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close this bookEmerging World Cities in Pacific Asia (UNU, 1996, 528 pages)
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(introductory text...)

Edited by Fu-chen Lo and Yue-man Yeung

Produced in association with
The Chinese University of Hong Kong

United Nations
University Press
TOKYO - NEW YORK - PARIS

The United Nations University is an organ of the United Nations established by the General Assembly in 1972 to be an international community of scholars engaged in research, advanced training, and the dissemination of knowledge related to the pressing global problems of human survival, development, and welfare. Its activities focus mainly on peace and conflict resolution, development in a changing world. and science and technology in relation to human welfare. The University operates through a worldwide network of research and postgraduate training centres, with its planning and coordinating headquarters in Tokyo.

The United Nations University Press, the publishing division of the UNU, publishes scholarly books and periodicals in the social sciences, humanities, and pure and applied natural sciences related to the University's research.

Note to the reader from the UNU

The objective of the United Nations University Programme on Mega-cities and Urban Development, initiated in 1990, is to examine the growth and management of large metropolitan agglomerations, especially in the developing world, in regard to the patterns and projects of their growth, the demographic and economic causes, and the social, economic, and environmental consequences.

After the release of Mega-city Growth and the Future (Tokyo: UNU Press, 1994), which analysed the mega-city phenomenon on a global level, this book was undertaken to provide new data, analyses, and insights that will enhance our understanding of mega-cities and the patterns of globalization in the Pacific Asia region. This book will be followed up with similar analyses of Latin America and Africa, as well as a special edition on Tokyo.

© The United Nations University, 1996

The views expressed in this publication are those of the authors and do not necessarily reflect the views of the United Nations University.

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Preface

The present project on the Asian-Pacific Urban System has its genesis in a Symposium on the Mega-city and the Future co-hosted by the United Nations University and the Population Division of the United Nations in Tokyo in October 1990. A number of participants sharing a common interest in Asian cities discussed the prospects of mounting a research project that would address the emerging and close connections between global restructuring and Asian cities, particularly those situated along the Western Pacific Rim. The role of these cities in a global economy warranted a systematic investigation, for it is increasingly recognized that the Asia-Pacific region has become the fastest growth region in the world. The critical importance of its cities in spearheading economic growth and socio-economic transformation is the major focus of this project.

A project proposal crystallizing some of the thoughts and propositions expressed in Tokyo was soon prepared. The document was discussed at a project development meeting in April 1991 co-hosted by the Korea Research Institute for Human Settlements (KRIHS) in Seoul and the United Nations University. Work was assigned to participants and, for several countries/cities, there was still the need to identify researchers from the region to undertake the work. In any event, the process of identifying scholars to focus attention on a common theme covering all major countries and cities in Pacific Asia was soon successfully completed.

The next and final project meeting was held at the Chinese University of Hong Kong in February 1992. Most of the papers were presented and discussed, with the need in some cases for revision or additional work given the common focus of the project. The task of following up on the remaining work took a good deal more time than anticipated but was eventually completed in the late summer of 1993.

The successful conclusion of the project has made it incumbent on us to thank many individuals and institutions. First and foremost, we wish to express our deep appreciation to the United Nations University for financial support of the project, particularly to Dr. Roland Fuchs, its Vice-President, who not only gave his personal blessing but attended the meetings in Tokyo and Seoul. The substantive and continuing administration of the project fell on the Hong Kong Institute of Asia-Pacific Studies of the Chinese University of Hong Kong, which is a partner with the United Nations University in this project and its publication. We wish to thank our colleagues in both institutions for assisting the project in diverse ways over the years.

In particular, at the Institute Janet Wong handled all the correspondence with contributing authors, and Irene Lai and Lui Siu-yun, of the Urban and Regional Development in Pacific Asia Programme, provided competent research assistance. At the University's Department of Geography, Jane Wan and Yu Yuk-mui typed and retyped parts of the manuscript, and S. L. Too deserves all the credit in drawing and redrawing all the illustrations. Above all, our heart-felt thanks go to all contributing authors, who have responded conscientiously to our requests for information, data, and perspectives to make the project as internally consistent as possible. Dealing with substantive matters by mail and over long distances is not the most desirable method, but, with understanding and perseverance, we have finally achieved our common goals in this project and, we hope, are one step closer to reaching an understanding of the shifting and growing importance of the cities in the Asia-Pacific region. Finally, we are grateful for the constructive comments by two anonymous referees to which we have responded to the extent possible. We are responsible for any remaining shortcomings and errors.

The editors
Tokyo and Hong Kong

(introductory text...)

Fu-chen Lo and Yue-man Yeung

In the last two decades of the twentieth century, it has become more evident that the process of globalization has become part of our daily lives. Choosing between domestic and foreign products, living with foreign neighbours or looking for a job abroad, facing a floating exchange rate and concerning ourselves with the global debt crisis or European Union integration, all reflect aspects of the globalization process. The world economy has changed in fundamental ways, particularly in the past few years, such that its driving force, its cutting edge, and its operating modes are being rapidly restructured and reshaped. A new international division of labour, with an accent on globally integrated production and the transnational corporation, has dawned. The multinational corporation, which rose rapidly during the 1970s, has now become common in every corner of the world. Global factories, global manufacturing production, and global financial networks and producer services have given new substance to global dimensions of economic production processes and the way in which countries and cities can contribute to them. Indeed, world cities, following the original proposition by Friedmann and Wolff (1982), have spawned a spate of provocative and original studies. At a recent meeting to review the status of research in world cities, it was declared that the world city hypothesis had become a paradigm, after noting the intellectual force that the idea appeared to have generated (Friedmann, 1993).

Although this volume can be situated in the context of world cities, its primary conceptual underpinning is global economic restructuring and how cities in the Asia-Pacific region have been responding to it. In this process, it is undeniable that certain large cities, especially world cities, have reaped the largest dividends because of the functions and services they provide, making them a class of their own and facilitating their wealth accumulation.

A central thesis of this study is the new concept of the functional city system. A functional city system is a network of cities that are linked, often in a hierarchical manner based on a given economic or socio-political function at the global or regional level. For instance, a worldwide network of airline hubs, global banking and financial headquarters, branches, and their networks, and even an Islamic network of cities, including pilgrim flows, can all be considered functional city systems. A given functional city system thus does not necessarily include certain cities with the same size population, nor will it coincide with an entire national urban hierarchy. The collection of different functional networks of a city serves to define that city's external linkages with the world economy and its status within the world city system. A city grows in importance if it performs effectively and efficiently a number of key functions that another one does not. It is submitted that this functional city system may more accurately depict the present evolving relations between cities in dynamic and interdependent interactions in a changing global economy, in preference to the hitherto popular formulation of cities in core-periphery, dependency, and linear relations. In contrast to the essence of the core-periphery theory, under the present regime of a highly integrated and evolving global economy the boundaries between the core and the periphery have become blurred. It is no longer necessary to subscribe to the simple concept of North-South dependency, because some of the multinationals from newly industrialized countries in the traditional South have started to penetrate cities in the North. These functional city systems are superimposed on a city, woven together into a mutually reinforcing, interdependent web. Cities are thus no longer defined by population size, but rather are defined by the operation of their externally linked functions. For example, Singapore serves as a hub of several functional networks, including imports and exports, telecommunications, international airlines, and international finance, thereby determining its extensive external linkages. In the present borderless economy, it is the acquisition and accumulation of functions that can determine the centrality and role of a city in the world economy.

The functional world city system

Since the thirteenth century, the historical roots of the present functional world city system can be traced through at least four periods of development. The first period began, with the elements of a world system in place, in the thirteenth century (Abu-Lughod, 1987). The system was centred around a number of central places and port cities that linked the old world from Europe to the Orient through seven or eight interlocking subsystems. The long-distance trade conducted through cities via sea or land routes was a new-found source of wealth, additional to the traditional source of wealth derived from the agricultural hinterland. It was a period of thriving economic development and scientific and cultural achievements in well-established and efficiently administered empires ranging from China and India to Ottoman Turkey. In the thirteenth and sixteenth centuries, Hangzhou and Constantinople (later renamed Istanbul) were the largest and most flourishing cities in the world. Indeed, the Eastern dynasties and empires dominated any semblance of a global economy up to the sixteenth century, with their cities playing pivotal economic roles and displaying greater wealth and continuity than the states and regimes that rose and fell around them. In Europe, Venice and Genoa, then Seville, Bruges, and Amsterdam, and later London successively rose in importance as they became significant centres of trade and industry. Similarly, the fortunes of Baghdad, Cairo, Constantinople, Malacca, and Hangzhou waxed and waned according to the importance they commanded in trade and economic production. Religion often played a major role in Arab trade as Islam was part of the trade when it was extended to parts of the Orient. There is little doubt that the key cities in these early centuries were the linchpin of an inchoate global economy.

Rather than Europe, it was the Eastern empires, particularly China, that appeared as more likely candidates to effect innovatory economic change and lead the world (Marcus, 1986; Knox and Agnew, 1989). However, China's inward-looking policies after its successful exploratory sea voyages during the Song and the Ming dynasties did not capitalize on an obvious early advantage to expand economic opportunities overseas. Similarly, the Arab world failed to develop merchant capitalism, although whether or not Islam was a barrier to the accumulation of capital is subject to debate. The crucial reorganization of the world system occurred between 1250 and 1400, which can be attributed to systematic geopolitical and demographic causes that tipped the balance in favour of Europe (Abu-Lughod, 1987). Meanwhile, spectacular European successes in maritime explorations in the sixteenth century, followed by equally breathtaking achievements in the Industrial Revolution in the eighteenth century, saw the rapid ascendancy of European power and wealth. A new set of cities emerged to serve this new world order, thus marking the beginning of the second period of the world functional city system.

The main thrust in this second phase of the world economy was the evolution of a new spatial division of labour based on higher technology capable of devising industrial production processes that were machine driven and more efficient than manual power, while the supply of raw materials and markets for manufactured products lay in less developed countries. An exploitative economic relationship was developed between European countries and a number of trading empires spreading across the tropical and equatorial parts of the world. Advances in the Industrial Revolution enabled European nations to exploit internal and external economies of scale for developing new products and for acquiring wealth. It was industrial capitalism at its best from the European standpoint. To dramatize the effect of the Industrial Revolution, it has been shown that in 1700 the population of Europe's colonial empire was only 10 per cent of its own population, and the volume of its imports from those colonies amounted to about 0.1 million metric tonnes. By contrast, in 1940 the population of the colonial empire, both formal and informal, was 200 per cent of the population of the countries concerned, and the volume of imports from the colonial or semicolonial sources reached 70 million metric tons (Bairoch, 1988:506). The growing wealth and importance of cities in Europe and North America stimulated the growth and emergence of very great cities in these regions during this period. By 1820-1830, London had replaced Peking as the largest city in the world. At the same time, "colonial" cities had been founded in a number of developing countries, many sited at locations with port facilities so that they could be connected in the global economy. New transportation technology in the railway and steamboat industries enabled markets, resource areas, and factories to be connected despite their great physical separation. This mode of industrial capitalism erected on the foundation of unequal exchange persisted until the twentieth century, when the United States and later Japan also joined the Europeans in such development because of their having acquired the necessary technology to exploit new markets, labour, and energy. The world economy came into being, consisting of a core, defined by relatively high incomes, advanced technology, and diversified production, and a periphery characterized by low incomes, primitive technology, and undiversified production (Knox and Agnew, 1989:85).

The colonial world economy began to crumble after World War II, with one country after another in the developing world gaining independence during the 1950s and 1960s. This ushered in the third period of the global economy in which national development, political independence, and industrialization loomed large in many developing countries as they pursued their own style of development. The extent to which developing countries succeeded in generating true economic growth varied widely, with African countries faring the worst and Asian countries the best, and Latin American countries in between. Some successfully adopted industrialization for import substitution, but most remarkable was the export-oriented manufacturing that some East Asian countries vigorously pursued with outstanding effect. Transnational corporations from developed countries and effective policy incentives such as the development of export-processing zones in developing countries each played a major role in reshaping a manufacturing production pattern worldwide. More than 60 per cent of manufactured exports from developing countries are now sold to developed countries (Knox and Agnew, 1989:263), as the product cycle and comparative advantage have made it propitious for many production plants to be located in developing countries. The differential rate of development in developing countries during this period was accompanied by the rise and rapid growth of mega-cities in these countries; many were superimposed on and expanded from their colonial roots but others derived their rapid growth from a period of indigenous national development. Brasilia, Mexico City, Seoul, Bombay, and Bangkok are some of the cities that have grown rapidly as a result of national development policies. Taken together, the numerous mega-cities in the developing world not only outnumber their counterparts in developed countries but have themselves become vital links in the new global economy.

During the post-war period, the United States dominated the global economy with its military might, economic power, and technological leadership. Under the United States' hegemony, mass production linking to mass consumption, or simply "Fordism," was developed to perfection. The European Economic Community also emerged as a major economic force. The old production paradigm, with an emphasis on raw materials and locational advantages, was being replaced by one highlighted by the mobility of capital and technology mediated by transnational corporations. Opportunities were maximized in resource utilization, labour pools, and consumer markets in different parts of the world, in particular in developing countries. Major metropolitan areas in developed and developing countries were reshaped and repositioned in a more interconnected and interdependent global economy.

Since the Industrial Revolution, long waves of economic structural changes can be recognized (Van Duijin, 1982). Each long wave is dominated by an underlying techno-economic paradigm that pervades the economy and provides the overall scope of the production structure. Briefly, the previous paradigm shifts involved the movement from early mechanization to steam power and railways, to electrical and heavy engineering, and then during the 1930-1990 period to Fordist mass production, named after the technological process for mass-market production being developed in the United States. During this period of the Fordist techno-economic paradigm, major cities in industrialized nations became centres of growth for super- and hyper-consumer markets, financial services, and new technology. Increasingly these world cities became centres of hierarchical control of multinational affiliates around the globe. The speed and flexibility of air and automobile transportation allowed the world city greater power and influence over government and business.

The Fordist wave coincided with the post-World War II industrial development of much of the third world. The availability of relatively cheap resources permitted a build-up in production capacity, leading to mass production and consumption. The increasing interdependence of the North and South was brought about by cross-border movements of raw materials, goods, capital, and technology. Consequently, the world cities began to assist in the process of globalization of national economies. During this period, developing nations industrialized through import substitution financed by the earnings of primary products, oil, timber, and other natural resource exploitations. The sharp decline in the relative prices of commodities vis-à-vis manufactured goods in the early 1980s further aggravated the import-substitution industrialization in many developing countries based on the old paradigm. The crossroads of the old and new paradigms is evident in many industries where there is increasing technological fusion of the past and emerging paradigms. The innovative combination of traditional mechanization with electronics is producing a new generation of factory automation, robotics, and numerical control machine tools. In office automation, the digitalization of telecommunications has rejuvenated traditional products and other telecommunications equipment. A similar attempt is being made in the introduction of new materials and robotics in the automobile industry. These streams of new technologies are beginning to transcend a broad cross-section of industries in the old Fordist mass production paradigm. Developing countries trapped under the old regime are becoming less competitive, while Japan and the Asian newly industrializing economies (NIEs) are very focused on the next generation of technologies. Those world cities that are able to tap the new, rapidly growing, knowledge-intensive industries have been able to rise in global prominence and therefore play a role in the world city system. The future power of a world city will be in its capacity to identify and formulate policies on the basis of new technologies that are likely to transform the existing paradigm.

The fourth and present period is signalled by structural adjustment of the global economy, which began with a new wave of technology in the third quarter of the twentieth century and has accelerated during the past few years. It is characterized by economic links beyond national territories, with the globalization of economic activities. It is a global shift on a large scale, in which the former straightforward core-periphery relations are being transformed into more complex and fragmented production processes that slice through national boundaries (Dicken, 1992). Several mega-trends, as chapter 2 reveals, have conspired to restructure the global economy and create new opportunities. The new phase of international division of labour occurring in this period has led to a gradual decline of manufacturing production capacity in industrially advanced economies, which increasingly specialize in service industries. For instance, 69 per cent of the US GNP is now dominated by service industries. Technology, particularly in telecommunications, new materials, biotechnology, and new energy sources, has become a key factor in shaping the pace and nature of the global economy. A network of world cities or global cities forms the vital links upon which the world system rests. A hierarchy of these cities can be identified depending on the range of key functions they perform.

During the 1980s and 1990s, the global economy has experienced a series of economic structural adjustments triggered by the relative decline of the once-powerful industrial centres of the United States, the European Union, and more recently Japan and by the rise of rapid industrialization in several developing countries. This has changed the configuration of mega-cities and defined new conditions for their transformation towards the twenty-first century. In a global economy that couples spatial dispersal with economic integration, new roles are being created for world or global cities, as command posts of the world economy, as financial centres, as production sites, and as consumer markets. World cities are not mere outcomes of a global economic machine, but rather the loci of key structures of the world economy itself (Sassen, 1991).

What this book offers

Within the framework of the recent global economic restructuring and the acceleration of globalization tendencies following the conclusion of the Cold War, this book is aimed at a systematic appraisal of the internal and external factors as they affect individual cities and national urban systems within Pacific Asia. Pacific Asia, which is synonymous with the Western Pacific Rim, includes the countries in East and South-East Asia. It is recognized that many of the indices that would measure globalization influences at the national or city levels are not published or easily constructed. Consequently, proximate indicators are often used and data are incomplete and unsatisfactory. Be that as it may, the project participants used a number of variables to measure a range of influences not just confined to the economic sphere.

The book is divided into three parts. Part 1 examines the functional linkages of the Asia-Pacific region in two chapters, which establish the conceptual and overall background in which the changing urban system in the region can be better understood and later chapters can be related. In particular, the mega-trends that have an effect on globalization processes are highlighted. The interplay between global structural adjustments and the role of cities is illustrated for Pacific Asia. What this book lacks is a systematic examination of the nature and pattern of financial flows within the region and their relations to the world cities in the region. As an illustration of changing functional linkages, Peter Rimmer has detailed the recent innovations in transportation and telecommunications in the region and the way in which cities are shifting in importance and centrality. A new trend appears to be emerging, giving enhanced importance to certain large cities that have benefited from economies of concentration and infrastructure investment.

Part 2 surveys the extent to which globalization has affected individual cities as well as national urban systems in eight chapters. These cover most countries along the Western Pacific Rim and reflect their differential responses to the shifting global economy and their own changing positions within it. The relationships between the economic structural adjustments experienced in individual countries, on the one hand, and globalization forces and urban transformation, on the other, are reflected in a number of cases that have been selected for this study.

The clearest expression of the changing roles of a city in the region over time can be seen in Tokyo. Three stages of development may be distinguished. In the 1960s, Tokyo clearly emerged as a national magnet in the Japanese economy, to which population and development were drawn. Then, in the 1970s Tokyo developed and strengthened with greater contributions to the national economy by developing itself as a financial, telecommunications, and transnational corporation centre. At the same time, decentralization of its manufacturing capacity, while keeping central managerial functions, began to be evident within Japan. However, its full integration as a world city emerged only in the 1980s, when Tokyo developed a new division of labour and industrial restructuring by relocating manufacturing production to cities abroad, particularly in the Asia-Pacific region, again retaining key central managerial functions and R&D within Japan. The comparative advantage of Tokyo and cities within the Asia-Pacific region was being capitalized in the process. Japan emerged as one of the leading economies in the world. Tokyo's status as a world city grew as a consequence, for it had become increasingly integrated with the global and regional economies. Its importance within the Japanese urban system has also increased, as it has become a giant urban agglomeration of more than 30 million inhabitants within its daily commuting distance.

The recent development of Seoul and Taipei further epitomizes the regional response to economic globalization and the seizing of new economic opportunities as the Asian NIEs are in a position to seek development beyond their shores. In both cases, labour-intensive manufacturing has been decentralized to offshore locations, such as countries in the Association of South East Asian Nations (ASEAN), coastal China, and, recently, Viet Nam, where labour and other costs of production are lower, leaving capital-intensive types of production within their countries. The urban pattern within South Korea and Taiwan, however, has shown some interesting contrasts. Within South Korea, Seoul has emerged as the overarching urban agglomeration and the problem has been to halt Seoul's unwanted growth since the 1980s. In Taiwan, on the other hand, Taipei has grown at a more subdued pace, with the southern port city of Kaoshiung exerting a countervailing effect to give rise to an urban corridor across the island from north to south. The kind of urban concentration exhibited in Seoul is absent in Taiwan.

Looked at in a regional context and over time, Japanese offshore industrial relocation to the Asian NIEs in the 1960s and 1970s may be viewed as the first wave of regional economic development. Similar developments in the ASEAN countries in the 1970s and 1980s constituted the second wave. In the 1960s and 1970s, ASEAN countries had limited manufacturing development in import-substitution industries. Rapid economic development actually began in 1985, with the Plaza Accord and the remarkable appreciation of the Japanese yen. Japan was anxious to relocate its manufacturing production abroad within the region in order to maintain its competitive edge. This was followed by a similar appreciation of their currencies by South Korea and Taiwan in 1986 and 1987. They, too, were keen to maintain their export manufacturing competitiveness and needed cheaper locations from which to do so. ASEAN countries presented just the right mix of conditions for this offshore manufacturing to take place. As a result, foreign direct investment in ASEAN countries increased sharply and this facilitated a major economic restructuring of these countries from being commodity exporters to manufacturing exporters in the 1980s. Structural reorientation also occurred in the early 1980s, when commodity prices collapsed, hence providing the ASEAN countries with timely and critical relief from their previous over-dependence on primary commodity exports for their national income. This new infusion of growth impulses has given renewed strength to their large cities. Thus Bangkok, Kuala Lumpur, and Jabotabek have grown rapidly and in new functions. By virtue of their traditional and new-found importance, they have become well articulated with the new global economy. However, within these urban agglomerations, it is their fringe areas that have experienced the fastest rates of growth and the most rapid physical transformation. These areas have relatively more land and somewhat less stringent regulatory controls on manufacturing-related growth and investment by transnational corporations. The rapid growth and transformation of these urban fringe areas are components of physical and social change that have not been adequately dealt with by the governments concerned.

In contrast to the other ASEAN countries, the Philippines has been experiencing slow rates of growth for decades. Political instability and other problems have not made the island nation attractive to foreign investment compared with its neighbours, which experienced massive foreign investment particularly in the second half of the 1980s. In fact, because of economic stagnation, sustained emigration and labour migration to the Middle East countries have occurred for two decades. Consequently, Manila has been bypassed by some of the positive effects of globalization, and until recently persistent neglect of social and economic infrastructure has resulted in the deterioration of the quality of life, particularly for the urban poor.

The third wave of regional economic development refers to foreign investment and development in the coastal regions of China since the mid-1980s. The opening of China to the world for a new style of development began in 1978, with the adoption of an open policy and economic reforms, initially with the establishment of four Special Economic Zones in Guangdong and Fujian. This was accelerated in the late 1980s, with the end of the Cold War, as similar development was pursued in other coastal areas of China, such as in Dalian, Qingdao, Shanghai (Pudong), and other port cities in north China. However, the focused and accelerated development along the coastal region has led to heightened economic and social disparity between the coastal and interior parts of China, with grave implications for policy formulation and the future. The coastal region's visible success and attraction have generated massive rural-urban and urban-urban migrations that have led to waves of floating population, variously estimated at 50-80 million, from less developed inland provinces and the rural areas within the coastal provinces. These population surges have created new opportunities as well as challenges for the coastal cities. China's coastal cities are being integrated with the economies within the Asia-Pacific region and increasingly with the world, but no world city in a functional sense has yet emerged to date.

Part 3 examines the phenomenon of urban transformation in Pacific Asia in a new climate of economic globalization at different scales. First, the expression of a borderless economy may be found in the Singapore Growth Triangle, in which the participating countries of Singapore, Malaysia (Johore), and Indonesia (Riau Islands) have displayed excellent economic complementarities. There is a clear division of labour, and population movement within the area is strictly controlled by territorial boundaries. Thus accelerated economic development takes place, within a controlled environment, and population movement is seemingly not a problem.

The Hong Kong-Zhujiang Delta represents another variant of the borderless economy, in which ever closer economic integration is occurring between Hong Kong and the Zhujiang Delta. Obvious economic disparity exists between Hong Kong and the delta region, but the lucrative symbiosis between the two lands is a powerful economic motivation for greater integration. This trend of closer economic integration will become even stronger in the future as Hong Kong is due to return to Chinese sovereignty in 1997. Although the region includes Macau-Zhuhai, it is really Hong Kong's economic and cultural influence over a large delta region that looms large in its current and future development. Many urban centres in the delta, including Guangzhou, are drawn to Hong Kong like a star cloud. The whole region, with Hong Kong providing key leadership in services, market information, and infrastructure, is growing rapidly and is a physical and economic entity to be reckoned with in the years to come. It has been forecast to become a huge urban agglomeration of 40 million inhabitants in the twenty-first century.

Finally, a bird's-eye view of the region seems to suggest the possibility that a large-scale urban corridor stretching between the Tokyo area and north-east China via the two Koreas is yet another borderless economy at an advanced stage of development. This extended urban belt connects four major megalopolises in North-East Asia and includes some of the most developed parts of Asia in terms of infrastructure provision, technology and economic power. In the present climate of political détente, visionary plans for improved connectivity between the countries have been proposed, such as an underwater link between Pusan in South Korea and north Kyushu in Japan. Other more modest plans include the development of a bullet train within South Korea. All these can only improve the physical and social infrastructure for the benefit of all cities and their inhabitants concerned. The urban corridor is, in a sense, a forerunner of what the urban future will be like for other parts of the coastal region in Pacific Asia.

References

Abu-Lughod, Janet (1987), "The Shape of the World System in the Thirteenth Century," Studies in Comparative International Development 22:3-25.

Amin, Ash and Nigel Thrift (1992), "Neo-Marshallisan Nodes in Global Networks," International Journal of Urban and Regional Research 16(4): 571-587.

Bairoch, Paul (1988), Cities and Economic Development: From the Dawn of History to the Present. Translated by Christopher Braider. Chicago: University of Chicago Press.

Dicken, Peter (1992), Global Shift: The Internationalization of Economic Activity, 2nd edn. London: Paul Chapman Publishing.

Friedmann, John (1993), "Where We Stand: A Decade of World City Research." Paper presented at the Conference on World Cities in a World-System, Sterling, Va., 1-3 April.

Friedmann, John and Goetz Wolff (1982), "World City Formation," International Journal of Urban and Regional Research 6(3): 309-344.

Knox, Paul and John Agnew (1989), The Geography of the World-Economy. London: Edward Arnold.

Marcus, Irwin M. (1986), "Introduction: A Historical Overview of the Global Economy." In: Edward W. Gondolf, Irwin M. Marcus, and James P. Dougherty (eds.), The Global Economy. Boulder, Colo.: Westview Press, pp. 1-12.

Sassen, Saskia (1991), The Global City: New York, London, Tokyo. Princeton, N.J.: Princeton University Press.

Van Duijin, J. J. (1982), The Long Wave in Economic Life. London: Allen & Unwin.

(introductory text...)

Yue-man Yeung and Fu-chen Lo

Introduction

When Jean Gottmann published his celebrated study, The Megalopolis, in 1961, he perceived the megalopolis to be the incubator of new urbanization and a new urban form not only on the North Atlantic seaboard, which was the focus of his enquiry, but also in other parts of the world that were to experience similar development processes that enveloped the study area (Gottmann, 1961; Gottmann and Harper, 1990). Since then, megalopolises have been identified to have been formed in many parts of the world. In the closing years of the twentieth century and the dawn of a new one, a new urban form appears to be in the making in Pacific Asia. This region has been growing rapidly over the past few decades and, going by recent trends and portents, will likely remain a growth region to be reckoned with in the world in the twenty-first century.

Traditionally, cities, metropolises, or megalopolises took shape and character largely as a result of economic and social processes operating within national territorial confines. Over the past two decades a new set of production and economic processes operating at the global level have been impinging on some of the cities and have given rise to new urban forms, particularly as they affect very large or mega cities.

In recent years, increasing attention has been devoted to mega-cities of the world, generated by their unabated growth in population and the deteriorating urban condition. It is suggested that, despite various efforts,1 there is still at best a feeble attempt to capture the dynamic changes in Pacific Asian cities, in particular how long-term structural changes, regionally and globally, might affect them in the future. What roles will these cities play in the twenty-first century in the development of the region and beyond? There is a need to create an awareness of change in these cities if their future is to be directed in positive ways. This is one of the modest aims of this volume, so that not only do we know what forces are working and will continue to shape our cities, but, by gaining a deeper understanding of the forces at work, we shall also be in a better position to chart our future.

Cities in Pacific Asia have been growing rapidly and transforming themselves functionally and physically. As an especially vibrant growth region of the world, its cities have felt the full impact of global economic restructuring and enhanced economic interdependence among nations. These new and powerful global forces have differential impact on the cities in the region and, for some, have heightened their roles and importance in national economic development and international linkage.

In order to realize the goals of the project to examine the spatial consequences of global restructuring in the Asia-Pacific region, this chapter is divided into four parts. First, it will outline and highlight the salient trends in global structural adjustment in so far as they affect the growth and role of cities. Second, the changing regional economy in Pacific Asia and its strengthening relative importance globally will be described. Third, as a result of the interaction of the first two sets of forces, emerging urban forms in Pacific Asia will be explored. Finally, a futuristic statement will be offered on what are the likely factors that will bring further changes in urban scenarios.

Global restructuring and uneven growth

Although the past two decades witnessed worldwide economic upheavals unleashed by the oil crises of the 1970s, there have also been fundamental adjustments in production, resource utilization, and wealth accumulation so that global interdependence and regional economic blocs have emerged as notable consequences, with profound social and economic impacts on life everywhere at present and in the future. At least several worldwide trends with far-reaching implications may be distinguished.

First of all, the prices of oil and other primary commodities began to collapse in the early 1980s, an outcome that may be attributable to the long-run decline of material input in production in industrially advanced economies. For example, the material input in most of the high-valued trade manufacturing products, machinery, and electronic-related goods has declined in relative terms. According to one estimate, Japan now requires 50 to 60 per cent of resource input to produce the same level of GNP compared with 10 years ago. The effect of these reinforcing tendencies has contributed to the precipitous decline in the share of fuels and non-fuel primary commodities in world trade from 43.5 per cent in 1980 to 28.4 per cent in 1987 (Lo and Nakamura, 1992). In fact, Drucker (1987:21) was most perceptive in pointing to three fundamental changes that have occurred since the 1970s in the very fabric of the world's economy. First, the primary products economy has come "uncoupled" from the industrial economy, thereby diminishing the role of resources. Second, in the industrial economy itself, production has come uncoupled from employment, with industries shifting from being labour intensive to being knowledge intensive. Third, capital movements rather than trade in goods and services have become the engines and driving force of the world economy. The "symbol economy" of financial flows and transactions has emerged to overshadow the "real economy" of the production of trade in goods and services.

Concomitant with the decline in the role of material resources in production has been the rise of capital, in particular the internationalization of capital, as a major driving force in the global economy (Wallace, 1990:6). Similarly, production processes, services, even domestic currency and the state have vital international dimensions in order to be in tune with the global economy. The Plaza Accord of 1985, and the resultant dramatic appreciation of the Japanese yen against the US dollar, had an especially beneficial effect on some countries in the Asia-Pacific region. Currencies were realigned and foreign direct investment (FDI) from Japan increased spectacularly in the region as well as in other parts of the world. With this huge increase in capital movement, countries and cities in Pacific Asia have been more tightly wedded in a web of economic relationships, indeed interdependence, whose long-term consequences are profound. Capital mobility is one facet of the new international division of labour (NIDL) in which cities are perceived to play pivotal roles in an interconnected network of multinational firms and cities (Friedmann and Wolff, 1982; King, 1990). The world of modern capitalism is both a worldwide net of corporations and a global network of cities (Smith and Feagin, 1987:3).

As a result of the structural adjustments touched upon above, each country/city finds itself in a situation of changing comparative advantage in terms of cost and technological considerations for the location of production. The best illustrative example is the experience in Pacific Asia during the past two decades. Japan in the 1960s, followed by the Asian newly industrializing economies (NIEs) of Hong Kong, South Korea, Singapore, and Taiwan in the 1970s, finding escalating labour costs in their own countries, began to relocate manufacturing plants to places within the region with abundant but relatively inexpensive labour supply. This pattern of shifting comparative advantage has been vividly described as the "flying geese." Japan led the pack in a consecutive take-off sequence of economic development in first relocating light manufactured goods industry to NIEs in the 1970s (Yamazawa, 1990).2 Then the NIEs shifted from light manufactures to durable consumer goods and machinery products and the ASEAN (Association of South East Asian Nations) group shifted from raw material exports to manufacturing exports. Consequently, Japanese inter-industrial linkages with the NIEs and ASEAN in chemical products, metal products, machinery and transport equipment, and construction have strengthened over time at the expense of the United States (fig. 2.1). An East Asian industrial belt comprising Japan, the NIEs, and ASEAN has been formed with strong intra- and interregional structural linkages (Lo and Nakamura, 1992). With a strong presence of the relocated investment in the form of FDI, ASEAN countries were able to gain a quick recovery from the slump in the price of primary commodities in the early 1980s. For other countries, strong economic incentives provided an effective bridge between technological know-how and production. Added to these was the technological leadership offered by Japan, which possessed 60 per cent of the world's industrial robots.

Underlying most of the trends identified above is technological change seen as a determinant of structural change. In this respect the range and speed of innovations in micro-electronics and communication since the late 1980s have been breathtaking. The cluster of new innovations in computers, electronics, robotics, telecommunications, new materials, and biotechnology has been facilitating production processes, speeding up and revolutionizing business trans actions, and permitting creativity. In fact, the new micro-electronics "chip" technology is resource saving and maximizes diseconomies of scale and flexibility in production. Being knowledge intensive, a new techno-economic paradigm coinciding with the fifth Kondratieff cycle is said to have been created, providing a formidable challenge to the Fordist mass production paradigm of massive resource utilization and scale economies of standardization. A new era of telecommunications, information technology, and widened opportunity is generally considered to have arrived (Lo, 1994). This technological frontier is predicted to expand rapidly in the years ahead into the twenty-first century, with promising prospects of economic growth and return. Japan and the NIEs are already investing heavily in high-technology industries in preparation for the future (Lo and Nakamura, 1992).

Fig. 2.1 Comparison of Japanese and US inter-industrial linkage with East and South-East Asian countries (measured by inducement coefficient from an international input-output table) (Source: Roland Fuchs et al., eds., Mega-City Growth and the Future, Tokyo: United Nations University Press, 1994, p. 113, based on Shunichi Furukawa, International Input-Output Analysis, Tokyo: Institute of Developing Economies, 1986)

Induced Countries

Japan

USA

Inducing Countries

India

Malaysia

Philippines

Singapore

Thailand

Korea

India

Malaysia

Philippines

Singapore

Thailand

Korea

Industrial Sector

Food, beverage & tabaco

·












Textile & leather products

O

O

O

·

·

O

·

·

·



·

Lumber & wood products




O






·


·

Pulp, paper products & printing

O

O


O

·

·




·


·

Chemical products

O

·


O

O

+




·


·

Petroleum refining













Rubber products



O


·

+



·



·

Non-metallic mineral products




·









Metal products

+

·

+

+

O

+






O

Machinery

+

O

·

O

O

+

·

·


O


O

Transport equipment

+

O

O

+

+

+



·

·


·

Other manufacturing industries

O

·

O

O

·

O



·




Construction

O

O

·

O

·

·




·



+ Inducement coefficient of more than 0.4
O Inducement coefficient of between 0.2 and 0.4
· Inducement coefficient of between 0.1 and 0.2

The uneven spatial, economic, and social effects of the global restructuring trends adumbrated above have been played out in a variety of ways in different regions, countries, and cities, with some standing to benefit whereas others lose. With the acceleration of these trends, the uneven growth that has become evident is likely to persist and intensify.

Global restructuring is related to shifting industrial location. Take the example of the Japanese consumer electronics industry. Innovations and continuous technological changes are used to create new growth markets as mature products decline, a verification of Vernon's product life cycle (Vernon, 1966). The commercialization of many more new innovations based on this new techno-economic paradigm awaits economic incentives to create new mega-demands.

One of the more direct effects of the new capitalist world economy is the erosion of the economic base of cities in the advanced economies at the core. The cities in the United States and Western Europe have been suffering from the effects of deindustrialization since the 1970s accompanied by a continuous decline in blue-collar jobs in the traditional industrial centres. It is also evident that the structural change in those metropolises has coincided with the increasing role of the service sector. Lately a new trend towards information-processing and high-technology industries has begun to serve as the new impulse for future growth. However, this does not necessarily occur in some of the old metropolises. Some old cities are no longer competitive in their manufacturing plants built in a past era based on often outdated technology. Los Angeles, for example, witnessed the progressive tertiarization of its urban core, selective deindustrialization, and reorganization of capital and labour (Soja et al., 1983; Soja, 1987).

More telling, however, has been the loss of manufacturing jobs in London and plant closures because it is no longer favoured in industrial investment. The same experience was repeated in major US cities such as Detroit, Houston, Los Angeles, and New York. Employment and production have been "uncoupled," with chronic high levels of unemployment and jobs created primarily in the service sector (Wallace, 1990:6-8). Urbanists in these countries began to look beyond national boundaries to the larger economic system that supported them for explanations. This has led to a flurry of globally oriented urban research over the past decade (Timberlake, 1985; Friedmann, 1986; Meyer, 1986; Wallerstein, 1987; King, 1990).

The converse of the relative decline of major cities in core economies has been peripheral industrialization by core country transnational corporations facilitated by such measures as free trade zones, tax holidays, and ready infrastructure. The past two decades witnessed, for the first time, the historical switch to production of manufactured products in third world cities for re-export to the home markets in core cities (Smith and Feagin, 1987:10).3 Equally important, NIEs have developed their own transnational corporations to exploit undeveloped markets. For them, economic and spatial integration have gone hand in hand. They have extended beyond their national confines to capitalize on new economic opportunities. The internationalization of production, finance, banking, and services, coupled with cheap labour and advances in telecommunications and information, has minimized the importance of national boundaries in the decision to locate production plants (Friedmann, 1986; Nakakita, 1988). The borderless economy has become a distinctive feature of the new global economic system. From this standpoint, the Asia-Pacific region has been a major beneficiary of these trends, as later paragraphs will show.

The uneven growth across regions and cities has given rise to a host of issues that confront the world community, including the massive current account surpluses in Japan, West Germany, and the Asian NIEs (especially Taiwan), the United States' twin fiscal and trade deficits, the developing countries' mounting cumulative debt burdens, the deterioration in commodity prices, and the worsening savings-investment gap in developed economies (Shinohara and Lo, 1989:46; Lo and Nakamura, 1992). What has, however, emerged in the new global economy is a bipolar structure of development, with the United States, or more broadly the North American Free Trade Area, the European Union, and an Asia-Pacific regional bloc as three main clusters of economic and productive forces. With politics playing second fiddle to economics since the collapse of communism in Eastern Europe and the Soviet Union, geo-economics has apparently superseded geopolitics (Chin, 1991). It is in this changing climate of a new reorganization of world development that the next section will focus on Pacific Asia. With increasing integration consequent upon global adjustment over the past two decades, a new pattern of world economy has emerged. A new economic world is taking shape.

A new Asia-Pacific economic interdependence

Since 1970 the value of trade across the Pacific has grown far faster than that across the Atlantic. By 1983, trans-Pacific trade became larger in absolute terms, signalling the beginning of the age of Pacific dominance in the world economy (Lo et al., 1989:93). Pacific Asia has become one of the fastest-growing core regions of the world, with progressive restructuring of production linkages, trade relations, and foreign investments representing a transitional phase in the broader restructuring process occurring in the world economic system.

To begin with, it is instructive to highlight the remarkable economic miracle that Japan has been able to achieve since 1945. With an area only 4 per cent that of the United States and a population 51 per cent of the United States', Japan's GDP soared from 8.4 per cent in 1960 to 20.2 per cent in 1970 and to 60 per cent in 1989 of that of the United States. Japan has become the biggest creditor country, with approximately US$400 billion of net credit since 1989, as opposed to the United States, which has sunk to become the biggest debtor country since 1986, with a net national liability surpassing US$400 billion at the end of 1990. Also, the centralization of economic power in Japan is formidable. Japan leads the United States in the three interrelated foundations of global economic power: finance, manufacturing, and technology. Japan possesses the world's 10 largest banks and 315 of the world's top 1,000 corporations, and leads in 25 of 34 technologies considered essential for a post-industrial world (Nester, 1990). Japan as the leader has helped to give new prominence to Pacific Asia and the role of the country in the world economy that the region has helped to shape. Klein (1989:27) sums up the situation well:

The economic centre of gravity has moved eastward. During the next decade or two, I expect to see the centre squarely in the Asian-Pacific area.

There will be more nations classified as having advanced (developed) industrial status.

The above statistics are meant to help understand the recent restructuring of trade relations in the Asia-Pacific region. In the past two decades regional growth and expansion have been driven by what is sometimes termed the bipolar trade relation, linking Pacific Asia with the United States and the European Community. With the relatively slow growth of the US economy and the European Union market in the coming decade, it is widely believed that a more balanced regional trading system with increasing inter- and intra-industrial trade in Pacific Asia centred around Japan will be developed and strengthened in the years ahead (Lo et al., 1989).

Indeed, during the past two decades there have been many developments in Pacific Asia that have drawn the countries towards greater structural interdependency from the standpoint of linkages in production and marketing. By the mid-1980s, Japan had already outstripped the United States in inter-industrial relations with the NIEs and ASEAN in finished goods and raw materials. Since 1973 ASEAN countries have become net exporters of non-durable consumer goods and have continued to expand rapidly in this direction. The NIEs that first began with the export of non-durable consumer goods in the 1960s have since 1970 developed with considerable success an export market in durable consumer goods. Japan, on the other hand, began to import non-durable consumer goods in 1970 but capital goods and durable consumer goods continued with their consistent and high export performance. This pattern of regional functional specializations represents part of the division of labour resulting from structural change and locational shifts of comparative advantage that have the effect of increasing complementarily and structural interdependence among countries in the region (figs. 2.1, 2.2, and 2.3). With Japan currently importing only 5 per cent of its intermediate goods requirement, there is much scope for further increasing trade between it and the NIEs and ASEAN countries in the future (Lo et al., 1989). The obvious leading position of Japan in Pacific Asia as a pace-setter of development and innovations and as the first of the "flying geese" pattern of development in the region is illustrated in figure 2.4, in which all pertinent countries in the region are arrayed along the GNP curve for Japan with a time-lag of achieved levels reached by the other countries.

Export-led growth adopted by many countries in the region as a vital development strategy has been a generator of wealth. In the past two decades, Japan and the NIEs were high exporters to the United States and the European Community, binding them in what has been referred to earlier as the Pacific Triangle trade relation. Yet by the mid-1980s, gradual change in this structure became necessary as the United States began to experience serious twin deficits and pressured Japan and the NIEs to stimulate their own domestic demand and restructure their economies. Meanwhile, the Pacific Asian trade surplus against the United States and the European Community increased in momentum. By 1987, the US trade imbalance with the Japan-NIEs-ASEAN axis exceeded US$100 billion, while the European Community suffered a US$30 billion trade imbalance (Grosser and Bridges, 1990; Lo et al. 1992). As part of the adjustment strategy, Japan sharply appreciated the yen in 1985 against the US dollar, which had the effect of benefiting the NIEs that achieved rapid growth because of the "three low" phenomena, namely, low effective currency exchange rates, low cost of raw material imports, and low cost of production. They became the direct beneficiaries of the Japanese expansion in manufacturing imports as the continued openness of the US economy also became a concern.


Fig. 2.2 Percentage share of manufacturing exports in Asian NlEs and ASEAN, 1965-1988 (Source: Fu-chen Lo and Naronchai Akrasance, eds, The Future of Asia-Pacific Economies Emerging Role of Asian NIEs and ASEAN, Delhi: Allied Publisher, 1992)

There are, as well, changes in trade relations within the region. By 1987, Japan's trade with the NIEs had increased so sharply that it was of roughly the same magnitude as that with the 12 countries of the European Community, with imports from the NIEs having grown from 5 per cent in 1980 to 13 per cent in 1987. Japan's trade with the ASEAN countries declined in relative terms because of the general decline in raw materials and fuel per unit of production. Consequently, the ASEAN countries shifted from commodity exports to manufacturing exports, thanks to substantial increases in FDI in this period, giving birth to a new phase of industrialization. Among the NIEs, trade grew in absolute terms during the 1980s but did not increase in relative terms. In part a reflection of the NIEs' export-oriented development strategy, ASEAN trade has been more concentrated in Pacific Asia than that of the NIEs. In all, there have been efforts by both the NIEs and the ASEAN countries to move import sources away from Japan and export shipments away from the United States (Grosser and Bridges, 1990).


Fig. 2.3 Changing comparative advantage in NIEs and ASEAN (trends in trade specialization coefficients) (Source: Fu-chen Lo and Naronchai Akrasance, eds., The Future of Asia-Pacific Economics: Emerging Role of Asian NIEs and ASEAN, Delhi Allied Publisher, 1992) - KOREA


Fig. 2.3 TAIWAN


Fig. 2.3 THAILAND


Fig. 2.3 MALAYSIA


Fig. 2.3 PHILIPPINES


Fig. 2.3 INDONESIA


Fig. 2.4 Trend in GNP per capita in Japan and other Asian countries, 1988 (Note": (1) based on IMF International Financial Statistics and other national statistics; (2) estimated figures in the year 2010 based on projection undertaken by EPA, Japan; (3) ANIEs 4 = Korea, Taiwan, Hong Kong, and Singapore; ASEAN 4 = Thailand, Philippines, Indonesia, and Malaysia. Source: Economic Planning Agency [Japan], Year 2010 Committee Report, 1991)

A major source of dynamism that has powered much of the economic restructuring and trade relations within the region has been FDI, which has made up a higher proportion of total capital flows than in other developing regions, in preference to borrowing from world capital markets. An indication of the attraction of Pacific Asia to FDI and of intra-Asia differentiation is that, in the period 19811985, 92 per cent of all FDI to Asia was destined for the NIEs, the ASEAN group, and China. Also, more than 70 per cent of the annual flow of Japanese total FDI is directed to the same countries (Panchamukhi, 1990). Investment flows are a key indicator of growing regional interdependence, and offer the opportunity of access to new technology, management, and marketing skills. Japan has become the largest single investor in Pacific Asia, despite the importance of the United States and the European Community in certain countries (table 2.1). Pacific Asia's catch of Japanese FDI has declined in relative terms but still reached 11.7 per cent in 1988 at US$5.2 billion. Another variant of the FDI flows is that the NIEs themselves have begun to invest heavily in ASEAN since the mid-1980s. South Korea invested over US$250 million in cumulative stock in 1988 and Taiwan US$86 million in 1987 in ASEAN. South Korea's overseas investment worldwide hit a record of US$959 million in 1990, an increase of 68 per cent over the previous year (Clifford, 1991). Hong Kong has been reported to be a leading provider of FDI in the region, especially in the Pearl River Delta. All these sizeable FDI flows emanating from within Pacific Asia have contributed markedly to growing regional economic integration and interdependence (Grosser and Bridges, 1990). A non-treaty trading bloc is fast becoming a reality in Pacific Asia, which may be viewed in stark contrast to trading bloc formation elsewhere. There is every prospect that this region will grow even stronger as Australia and New Zealand pursue strategies of "Asianization" and as China further advances its economic reforms and open policy. In this restructured and increasingly integrated regional economy, the role and importance of the cities, mega-cities in particular, cannot be overemphasized.

Emerging Pacific-Asia urban corridors and formulation of the functional city system

Figure 2.5 depicts the distribution of "million cities" in Pacific Asia by the year 2000. The pattern is not radically different from the previous decades, except perhaps that a few more new cities have crossed into this size. By and large it is a static depiction of the distribution of large cities that does not take into account or capture the fundamental and profound economic restructuring and interdependence that have been occurring in the region and in the world.

Table 2.1 Approved direct foreign investment in ASEAN, 1986-1988 (US$ million and % share)


Recipient country

Investing country


Malaysia

Thailand

Indonesia

Philippines

Taiwan

1986

34.6 (8.1)

1.7 (1.5)

17.3 (2.2)

0.4 (0.5)


1987

98.5 (13.2)

59.9 (18.5)

7.9 (0.6)

9.0 (5.4)


1988

384.3 (19.1)

97.0(10.3)

914.1 (22.7)

106.8 (26.7)

Korea

1986

2.1 (0.5)

0.2 (0.1)

21.5 (2.7)

0.0 (0.0)


1987

9.0 (1.2)

4.2 (1.3)

15.5 (1.3)

0.7 (0.4)


1988

23.3 (1.2)

11.9 (1.3)

82.1 (2.0)

0.5 (0.1)

Hong Kong

1986

22.5 (53)

8.7 (73)

59.8 (-)

7.3 (9.4)


1987

11.8 (1.6)

13.6 (4.2)

122.1 (9.8)

22.8 (13.7)


1988

129.5 (6.4)

23.6 (2.5)

228.2 (5.7)

23.2 (5.8)

Singapore

1986

42.0 (9.8)

3.7 (3.1)

105.3 (13.2)

0.3 (0.3)


1987

135.0 (18.1)

2.1 (0.6)

12.9 (1.0)

0.9 (0.5)


1988

172.1 (8.6)

13.7 (1.4)

149.0 (3.7)

2.0 (0.5)

NIEs

1986

101.3 (23.7)

14.3 (12.0)

84.3 (10.5)

8.0 (10.2)

(sub-total)

1987

254.3 (34.1)

79.8 (24.7)

158.4 (12.8)

33.5 (20.1)


1988

709.3 (35.3)

146.2 (15.5)

1,373.4 (34.1)

132.5 (33.1)

Japan

1986

67.6 (15.8)

63.7 (53.4)

324.6 (40.6)

22.3 (28.5)


1987

185.0(24.8)

140.1 (43.3)

512.1 (41.3)

28.8(17.3)


1988

561.1 (27.9)

535.0 (56.6)

233.4 (5.6)

105.9(26.4)

USA

1986

12.5 (2.9)

5.4 (4.6)

128.4 (16.0)

22.4 (28.7)


1987

71.1 (9.5)

22.3 (6.9)

62.0 (-)

36.0 (21.6)


1988

252.6(12.6)

61.2 (6.5)

669.2 (16.6)

104.1 (26.0)

World

1986

427.9 (100)

119.4 (100)

800.4 (100)

78.2 (100)


1987

745.5 (100)

323.4 (100)

1,239.7 (100)

166.6 (100)


1988

2,010.5 (100)

944.5 (100)

4,022.7 (100)

400.5 (100)

Source: Economic Planning Agency, Japan.

In an historical analysis of the system of world cities between A.D. 800 and 1975, Chase-Dunn (1985) concluded that population size was not a good measure of centrality in the world economy. This finding is echoed by King (1990:37), who maintained that size alone was insufficient to give world city status. Other more important factors may include the strength of the economy to which the city belongs, its location in relation to zones of growth or stagnation in the international economy, its attraction as a potential basing point for international capital, and its political stability. There is, however, a broad consensus that the operation of the new international division of labour is spa tially articulated through a global network of cities (Heenan, 1977; Friedmann and Wolff, 1982; Timberlake, 1985; Henderson and Castells, 1987). This was later extended to the world city hypothesis in which the roles of mega-cities are highlighted (Friedmann, 1986). Friedmann emphasized that the processes of urban change had become increasingly oblivious to national boundaries. Similarly, Nakakita (1988) submitted that the very concept of national boundaries had been altered because of, first, dramatically reduced prices in transportation, information, and communications owing to technological innovations and, secondly, the abundance of business opportunities to transfer managerial resources. An outstanding example of the globalization of Japanese firms is furnished by the meteoric rise of Kumagai Gumi in the construction industry, which captured more than one-third of all overseas contracts won by Japanese construction contractors in 1985 and 1986 (Rimmer, 1990). None the less, in the new territorial dynamics consequent upon global restructuring, many countries are faced with the contradiction of "placeless power and powerless places" (Henderson and Castells, 1987:7). In any event, these arguments provide the explanation for the borderless economies that, on the basis of economic logic and transcending national boundaries, have emerged in several parts of Pacific Asia.


Fig. 2.5 The "million" cities of Pacific Asia, c. 2000

Rather than population size alone, it is by the functions a mega-city accrues that its centrality and importance in the regional, indeed global, system of cities is measured. King (1990:17) has aptly summed up thus:

Internationalization of production and finance has meant the internationalization of administration and control through advanced producer services, activities assisting user firms to carry out administrative, development, and financial functions, whether these are research and development, strategic planning, banking, insurance, real estate, accounting, legal services, consulting, advertising, and so forth. It is this that has extensively changed the employment structure in the "advanced" capitalist countries and it is the growth of such activities and employment that [is seen] as being intrinsic to the formation of world cities.

Hitherto a central conceptual underpinning of the world city system has been one premised upon "dependency." The radical capital theory and the core-periphery framework are variants of this conceptual mould (Friedmann, 1986; Smith and Feagin, 1987; King, 1990). They all denote linear types of economic relationships. What distinguishes the functional urban system in Pacific Asia from previous conceptualizations is its accent on "interdependency" rather than "dependency."

In the context of Pacific Asia, as the globalization of Japanese firms and FDI flows into the NIEs and ASEAN continued, the technological level of these countries further improved. This permitted the deepening of intra-firm trade and the division of labour between head offices and their subsidiaries abroad, thus effecting a greater division of labour between Japan and the concerned countries in the region. In consequence, a dimension of the growing regional economic interdependence has been the devolution of power from the head office to overseas subsidiaries, although overall coordination and R&D functions firmly remain in headquarters in Japan (Nakakita, 1988).

What has emerged here is a "functional city system." The element that distinguishes this new city system from previous conceptual constructs is that what used to drive and sustain the growth of cities was their special advantages with respect to raw materials, location, or transportation endowments, all derived from their spatial relations to an immediate hinterland. In the "functional city system" being identified here, it is the "functions" of a city that largely determine its role and importance nationally, regionally, and globally. In a borderless economy, these functions are spatially footloose and highly sensitive to cost factors and locales that are the most attractive for the generation of those functions. Thus, instead of a city system by population size, a linkage of cities through an important functional network tends to strengthen the external economic, social, and political relations of a given city within the network more than a city outside of the network. As the processes of globalization of production, capital markets, telecommunications systems, airlines and tourism, networks of transnational corporations, flows of new technology, investment and labour force are interwoven and superimposed one over another on major cities across the nations at the world regional level, the accumulation of different functions by a given city forms a foundation for its external linkage and economic strength of growth under the current world economic system. For instance, the populations of Singapore and Bangkok are smaller than that of Calcutta but both Singapore and Bangkok are emerging as world cities as their functional linkages have expanded with the global economic integration and rapid growth of Pacific Asia.

As one illustration of a new global production network of transnational corporations, Fujita and Ishii (1991) examined the locational behaviour and spatial organization of some major electronics firms between 1975 and 1991 and have found as follows. Nine leading Japanese electronics firms increased their new production plants much more rapidly in overseas countries than in Japan. In particular, the share of East Asia is increasing while those of North America and the European Communities are rather stable, which also implies that the share of the rest of the world is decreasing (fig. 2.6). However, their R&D facilities continue to concentrate in the metropolitan areas such as Tokyo or Osaka in Japan located near the world headquarters. This observation also confirms a location theory well known in Japan that when production facilities are relocated and spread over a system of cities the "central managerial function" (Cheusu-Kanri-Kino) tends to concentrate in a major metropolis (table 2.2). The central managerial functions of a given firm include long-term strategic management, financial and legal decision-making, long-term R&D strategy and new product development, information system, quality control, procurement, and overseas planning. In other words, the more a firm decentralizes its production network, the more the decision-making function tends to centralize. Many studies have confirmed that Tokyo's recent growth is basically attributable to the concentration of the world headquarters of Japanese firms spread across the world market. The spread of FDI from Japan has in fact created an ever stronger functional city system of manufacturing production over the world. One of the results of this trend is increasing network relations between Tokyo and a city system spread across NIEs, ASEAN, and the coastal area of Pacific Asia. In a much more limited scope, Korea, Taiwan, Hong Kong, Singapore, and ASEAN countries also have become the home countries of an increasing number of transnational corporations spread across the Asian cities and extending towards the rest of the world. All of this spontaneous growth of a network of industries has reinforced the functional linkage of the Asian cities with the rest of the world.

The spatial transformation in response to the global restructuring may be observed at several levels. At the individual city level, because of the primacy of finance in the new world economy, there is a tendency for capital to be centralized in a fewer number of cities. The importance of any city is directly related to the range of key functions it can attract and provide for in the global division of labour. Briefly, three groups of functions may be identified, namely, goods and commercial transactions, movement of people, and information flows. For manufacturing functions within large cities, such as Bangkok and Jabotabek, they are more likely to be located in the suburban region because of relatively cheaper land costs and more stringent pollution controls on the environment in the urban area.


Fig. 2.6 The location of overseas production plants of nine Japanese electronics firms, 1975 and 1991 (Source: Fujita and Ishii, 1991)


Fig. 2.6 (cont.)

Table 2.2 Location of R&D facilities and plants of nine Japanese electronics firms, 1975-1991


R&D facilities

Production plants

Location

1975

1991

1975

1991

Japan

22

95

207

341

N. America

0

13

7

69

E.C.

0

7

6

50

Asia

0

2

40

123

Other

0

6

20

34

Total

22

123

280

617

Source: Fujita and Ishii (1991). The Japanese electronics firms are Hitachi, Toshiba, Mitsubishi, Matsushita, Sony, Sanyo, Sharp, NEC, and Fujitsu.

The phenomenon of the faster suburban regional growth is amply demonstrated by the population increase data for Jabotabek (chap. 11) and the Hong Kong-Zhujiang Delta (chap. 13). In the former, Jakarta's population grew at an annual rate of 2.4 per cent versus the equivalent of up to 6.3 per cent in Bekasi between 1980 and 1990. Similarly, if Hong Kong is viewed as the centre of the Hong Kong-Zhujiang Delta region, its annual population growth of 2.0 per cent is only a fraction of the more than 30 per cent per year in neighbouring Shenzhen and Zhuhai, two Special Economic Zones, in the period 1978 to 1988 (table 2.3). From this viewpoint, the development of the extended metropolitan areas in Asia (Ginsburg et al., 1991) is highly pertinent.

At another level, several economic hubs have emerged in the region that have essentially taken advantage of a certain complementarity, particularly of labour supply, across national boundaries. Often on a modest spatial scale, four growth triangles have been identified that have combined local resources to profitable use to all countries/cities concerned (Wallace 1991; see fig. 2.7), as follows:

· Batam, Johore, Singapore
· Southern China, Hong Kong, Taiwan
· Penang, southern Thailand, Sumatra
· South Korea, North Korea, Russian Far East

Chu (chap. 13) and Macleod and McGee (chap. 12) have marshalled detailed information to substantiate the concept of borderless cities. In the case involving synergetic relations between Hong Kong and the cities in the Zhujiang Delta, a large proportion of the manufacturing production in Hong Kong has been relocated to southern Guangdong. About 3 million workers in this part of China are reportedly employed in factories funded, designed, and managed by Hong Kong entrepreneurs, taking full advantage of cheap local labour costs and land. Taiwan capital has also been attracted to this mode and locale of production, although much of it has been channelled through Hong Kong intermediaries because of the lack of direct contact between China and Taiwan. These three territories have the makings of a powerful growth triangle as they possess different strengths and experience.

Table 2.3 Varying rates of population growth in Jakarta, Hong Kong, and surrounding cities


Population ('000)

Annual growth rate (%)



1980

1990


Jabotabek

11,893

17,099

3.7

Jakarta

6,480

8,223

2.4

Bogor

2,739

4,007

4.1

Tangerang

1,529

2,765

6.1

Bekasi

1,143

2,104

6.3


1978

1988


Hong Kong-Zhajiang Delta

7,810

12,166

4.5

Hong Kong

4,703

5,736

2.0

Shenzhen

23

322

30.2

Guangzhou

2,065

3,891

6.5

Macau

268

444

5.2

Zhuhai

13

191

30.8

Source: Calculated from chapters 11 and 13.

By contrast, the Singapore Growth Triangle (alternatively called SIJORI triangle) involves three sovereign nations but essentially two paired relations centred on Singapore. Since the mid-1980s, Singapore has been seeking development outwards necessitated by its own structural change. It has found a spatial niche in developing industry, recreational facilities, hotels, and residential development on a large scale in Johore and Batam, with far-reaching social and political implications.

The four growth triangles are examples of the international division of labour over different territorial space. As these cross-border economic agglomerations prove successful, more such growth hubs will emerge in Pacific Asia. There are more subregions in the region that are seriously exploring the possibilities of cooperative development (Yeung 1994).

Batam, Indonesia-Johore, Malaysia-Singapore
Singapore wants to be the hub of a high-tech centre.


Fig. 2.7 Growth triangles in Pacific Asia (Note: * = estimate. Sources: Asia Yearbook 1991; World Book) - Batam, Indonesia-Johore, Malaysia-Singapore


Population

Work Force

Per Capita Income


(in millions)

(in millions)

(in U.S. dollars)

Indonesia

189.4

76.10

430.00

Malaysia

17.9

7.05

5,559.00

Singapore

2.7

1.31

10,810.00

Southern China-Hong Kong-Taiwan
The most developed of the economic growth triangles.


Fig. 2.7 Growth triangles in Pacific Asia (Note: * = estimate. Sources: Asia Yearbook 1991; World Book) - Southern China-Hong Kong-Taiwan


Population

Work Force

Per Capita Income


(in millions)

(in millions)

(in U.S. dollars)

China

1,119.9

553.00

371.00

Hong Kong

5.8

2.73

10,916.00

Taiwan

20.2

8.32

6,889.00

Penang, Malaysia Southern Thailand-Sumatra Indonesia
Indonesia's rickety telephone system may hurt business.


Fig. 2.7 Growth triangles in Pacific Asia (Note: * = estimate. Sources: Asia Yearbook 1991; World Book) - Penang, Malaysia Southern Thailand-Sumatra Indonesia


Population

Work Force

Per Capita Income


(in millions)

(in millions)

(in U.S. dollars)

Indonesia

189.4

76.10

430.00

Malaysia

17 9

7 05

5.559.00

Thailand

55.7

30.50

1,238.00

South Korea-North Korea-Russian Far East
One of the potentially most lucrative growth triangles.


Fig. 2.7 Growth triangles in Pacific Asia (Note: * = estimate. Sources: Asia Yearbook 1991; World Book) - South Korea-North Korea-Russian Far East


Population

Work Force

Per Capita Income


(in millions)

(in millions)

(in U.S. dollars)

North Korea

21.3

7.00

1,069.00

South Korea

42.8

17.90

4,968.00

Russian Far East

291.0

152.00

2,000.00.*

At still another level, which tends to extend over a wider territory and is centred on a number of mega-cities, is the formation of urban corridors in many parts along the Western Pacific Rim (fig. 2.8). Each of these epitomizes the highest level of interconnectedness among the cities they encompass within the delineated limits as part of the regional restructured economy. The urban corridors identified are as follows:

· Pan-Japan Sea Zone

Indo-China Peninsula Zone

· Pan-Bohai Zone

Singapore Growth Triangle

· South China Zone

Jabotabek

It has to be recognized that these urban corridors are at varying stages of formation, some exhibiting but incipient development whereas others are quite advanced in form and connectivity among the mega-cities. The best illustration of a mature urban corridor is provided by Choe (chap. 14), in which an inverted S-shaped 1,500 km urban belt from Beijing to Tokyo via Pyongyang and Seoul connects 77 cities of over 200,000 inhabitants each. More than 97 million urban dwellers live in this urban corridor, which, in fact, links four separate megalopolises in four countries in one.


Fig. 2.8 Emerging subregional economic linkages and urban corridors in Pacific Ada

A number of economic zones have been identified in Pacific Asia that, for geographic and other reasons, have been viewed as having a common interest in more rapid economic development. These are also the regions where urban corridors are likely to develop in the future. If all these zones witness rapid development as advocated, it is not a far-fetched scenario that the coastal region of Pacific Asia will in the future be a continuous urban corridor stretching from Japan/North Korea to West Java (focused on Jabotabek). Along the coastal region of China, the coastal cities have in effect linked an almost continuous corridor of rapidly developing areas from north to south, with the cities playing a catalyzing role in modernization and development and with tentacles of positive growth impulses reaching far to the inland provinces (fig. 2.9; Yeung and Hu, 1992).

Towards the twenty-first century

In the uneven economic growth among the world's major regions resulting from global restructuring, Pacific Asia has come out strongly as a leading growth region. This pattern is very likely to persist to the end of the twentieth century, as two recent long-term projections by the FUGI Global Model and JCER (Japan Centre for Economic Research) would suggest. The projection for the Asia-Pacific economies is very favourable. Whereas Japan's growth rate (at 4 per cent) is the highest among the G7 countries, the NIEs, ASEAN countries, and China will grow at over 6 per cent, making them the fastest-growing countries in the world. It is therefore not entirely groundless for some scholars to suggest that the twenty-first century will be the Pacific Century (Linder, 1986). China, as an Asian country with enormous growth potential and the only remaining communist country in the world of any import, views the internationalization of the world economy as comprising "competitive coexistence," in a notion of "one world, two systems" (i.e. capitalist and socialist) (Keith, 1989). In China's push for modernization and economic reforms, its coastal cities are assigned vital catalytic roles (Yeung and Hu, 1992).


Fig. 2.9 The spread effects of Chinese coastal cities (Source: Yeung and Hu, 1992)

On the basis of recent and projected growth trends, there is little disagreement that simple extrapolation would make the NIEs full-fledged or quasi-advanced industrial nations with GNPs close to those of EU countries by the beginning of the twenty-first century (Shinohara and Lo, 1989:12; Grosser and Bridges, 1990). Japan will replace the United States as the pre-eminent economic superpower in Pacific Asia. Some ASEAN countries will likely graduate to be new little dragons of Asia, with Thailand and possibly Malaysia and Indonesia considered as serious candidates. The Asia-Pacific economy will likely remain a non-treaty economic bloc as it has evolved with economic interdependency and structural linkages further strengthened and refined. Even in the present non-contractual economic coordination arrangement, the volume of trade achieved is comparable to that of the North American Rim involving the United States, Canada, Mexico, and the Caribbean (Keith, 1989).

The continued growth of the regional economy is heavily reliant on the special roles and functions of its mega-cities. Under the new global economy, they are at once the products and instruments of the system of economic internationalization and regional integration (King, 1990:54). The urban corridors that have already been identified will be the locales for furthering the globalization of production and services in Pacific Asia.

As the present political climate veers generally towards détente and the further relaxation of East-West tensions, there are several potential frontiers of urban settlement and economic integration that will have significant long-term impact on the emerging urban system. In Japan, a trend appears to be emerging of the internationalization of local cities, following the manner in which its large cities have been connected with global change. China is publicly committed to the continuation and, in fact, further liberalization of its open policy and hence closer economic integration with the economies in the region. With the recent peace settlement in Cambodia and the restoration of diplomatic relations between the United States and Viet Nam, there is considerable scope for rapid urban growth and economic change/integration in the Indo-China Peninsula in an expected period of active economic cooperation and foreign investment. In North-East Asia, too, there seemed to be a sudden concern among the countries, namely China, North Korea, Mongolia, and Soviet Asia, jointly to develop the part of Pacific Asia that has to date not received enough resources and attention for development (Cho and Valencia, 1991). Finally, there are forces aimed at greater and more effective national (e.g. Indonesia) and regional (e.g. ASEAN) integration in which cities and the urban system are directly involved in a higher degree of economic and technological articulation with national and regional space economies. All these potentially exciting frontiers could radically change the present configuration of cities and the urban system in Pacific Asia in the future.

In order to expand the emerging urban and development frontiers and to consolidate and improve upon existing ones, massive investment in infrastructure is necessary. Rimmer (chap. 3) richly documents the marked increase in linkages and interactions between large cities in Pacific Asia since the 1980s. Countries and cities have invested heavily in infrastructure to facilitate the continued expansion of existing urban agglomerations and new connections among them. For example, the emphasis on developing nodes (ports, airports, and teleports) rather than links is reflected in the current construction of new super airports in Hong Kong at Chek Lap Kok, in Seoul with the New Seoul Metropolitan Airport (NSMA) off the coast of Inchon, in Chitose in suburban Sapporo, and in Osaka with Kansai International Airport on reclaimed land. In like vein, Choe (1992) foresees the future development and economic integration of North-East Asia as being heavily dependent upon investment in infrastructure, especially in transportation. Existing patterns of transportation development leave many missing links across national boundaries that must be bridged to improve regional trade and interaction.

Despite this largely optimistic prospect for Pacific Asia and its cities, there are a couple of dark clouds on the horizon. One extreme view of the present world economy is that it has become "fundamentally unmanageable," because no single institution, whether it be a superpower, a leading corporation, or a supranational agency, possesses the necessary political legitimacy and economic power to coordinate the functioning of the global economic system and to resolve the attendant inevitable conflicts of interest (Wallace, 1990:273). Another view focused on the role of global cities is that, owing to increases in capital mobility and the attendant changes in trade and foreign investment patterns, the ability of cities to determine their own economic destinies has been sharply limited (Glickman, 1987). The ability of firms rapidly to shift production globally makes cities' future less secure, and this affects mega-cities more directly than the lesser cities. As shown in this chapter, mega-cities are the linchpin in the new global economy. However, the mega-cities in Pacific Asia have developed so vigorously in recent decades that the sheer momentum of their growth will probably carry them forward with only a slim chance of these countervailing forces changing their main course of growth and expansion into the twenty-first century.

Notes

1. The World Bank, the United Nations Centre for Regional Development (UNCRD), and the International Development Research Centre (IDRC), among others, have supported studies on urban management and service provision issues. The United Nations Population Division has supported a series of individual city studies.

2. Japanese scholars first initiated studies of the "flying geese" in the 1930s, with Yamazawa's volume as the latest in this tradition. Interestingly, an independent but parallel explanation of the same phenomenon was propounded by Vernon (1966).

3. See also product life cycle theory (Vernon, 1966) and Akamatsu-Yamazawa's flying-geese theory (Yamazawa, 1990).

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(introductory text...)

Peter J. Rimmer

A global system of production and services is being spatially articulated through a network of emerging world cities. In particular, it involves strong linkages and interactions between world cities located in the "triad" of supra-regions - North America (Canada, the United States, and Mexico), a significantly changed Europe, and a dynamic Pacific Asia - and connections and movements between world cities within each jumbo region. Attention here is restricted to linkages and interactions between emerging world cities within Pacific Asia - the fastest-growing region in the global economy.

A major difficulty in pursuing this topic is the past preoccupation with nation-states and the internal structures of individual world cities. Little attempt has been made to establish the strength of the external linkages and interactions underlying the distribution of goods and services within Pacific Asia and the fortunes of individual cities. This raises two issues: what is the nature of the transport and communications networks between world cities; and what is the frequency of movements of goods, passengers, and information along these routes? Attention here is concentrated on the dynamic flows between world cities because the static structure of transport and communications networks has already been analysed in terms of nodes and connections (Rimmer, 1990).

In considering these issues, the first section provides a conceptual framework for examining flows preparatory to identifying the urban agglomerations and discussing data availability. Within this framework, the second section examines goods transactions. The third section analyses movements of people. Then the fourth section studies the flow of routinized information through communications networks. A concluding section raises the subject of going beyond world cities to encompass development corridors -a settlement form more appropriate to a borderless world.

Multilayered flows

Since 1970, much emphasis has been placed on the emergence of global network corporations and the likely impact of new information technologies -satellites and optic fibres - on spatial structures (Castells, 1989). As they have increased the availability of knowledge, these technologies have led to an interest in analysing telephone calls and the transmission of faxes and telexes between world cities. At best, this focus provides a partial analysis of international linkages and interactions because it concentrates on the transmission of routinized and uncomplicated information. It neglects the movements of individuals that are necessary to transfer structurally complex information (i.e. knowledge) in face-to-face contacts, and goods transactions increasingly decentralized because of the decreasing costs of transport, the introduction of robots, and computerized production control. If this conceptual problem is to be overcome, the multilayered flows between Pacific Asia's emerging world cities, comprising goods, people, and information, must be considered (fig. 3.1).

Tri-level flows

In a bid to resolve this issue Kobayashi and Okada (1990) have recognized that movements of goods, people, and information are exchanged between firms (and households) on a spatial network comprising nodes and links. In our analysis, nodes are world cities comprising firms with goods production and information capacities (i.e. universities and research centres). Links facilitate flows. A tri-level infrastructural arrangement is envisaged comprising low-speed transport, high-speed transport, and telecommunications networks to accommodate movements of goods, people, and information (fig. 3.2). In exchanging standardized information, personal contacts can be replaced by telecommunications. Where information is complex, face-to-face contact is necessary for negotiations and the transmission of new knowledge; transport is essential to promote cooperation between workers and more advanced research and development activities.


Fig. 3.1 Multilayered flows between world cities

Accessibility is a key concept because it determines each emerging world city's potential as a generator of goods, people, and information. Also, it reflects the decreasing role of the friction of distance in telecommunications and its persistence in movements of goods and people. Internal network structure within a world city is an important determinant of the regional division of labour. With the highest accessibility, the central node is the prime location for workers handling both structurally complex and uncomplicated information. Owing to the spread of telecommunications, the flow of standardized information at peripheral nodes has increased, therefore workers can be decentralized and face-to-face contact can be replaced by the transmission of data and information.

A major problem is that the expansion of the telecommunications network is outstripping the growth of both high-speed and slow-speed transport networks - the result of opposition from environmental groups. Rather than all three surfaces being shown as equal, they should be tapered to reflect this phenomenon. Although there is some scope for technological substitution between transport and telecommunications, research suggests that the new media will increase rather than reduce the need for face-to-face contact. Inevitably, existing networks will be congested.


Fig. 3.2 The tri-level infrastructural arrangement comprising low-speed transport, high-speed transport, and telecommunications networks (Source: based on Kobayashi and Okada, 1990)

Already, congested road networks and rising truck costs between Japanese world cities are prompting a modal shift from road to rail, coastal shipping, and air (Nikkei, 11 September 1991; 12 September 1991; 13 September 1991; 26 September 1991). The shift, however, has been hampered by saturated railway lines and inadequate port and airport infrastructure. In a bid to accommodate changing relative demands for infrastructure, most investment in urban agglomerations in Pacific Asia will be in nodes (ports, airports, and teleports) rather than in links.1

Urban agglomerations

The United Nations' Prospects of World Urbanization (UN, 1989) provides information on urban agglomerations in Pacific Asia for 1975, 1985, and 2000. In 1985, these agglomerations ranged in size from 19 million people in Tokyo to 310,000 in Vientiane (Laos). Of these, 29 agglomerations were identified as being among the world's "top 100" with populations in excess of 2 million (table 3.1). In selecting world cities for study it is tempting to establish an arbitrary cut-off (say 2 million or 5 million). However, this would mean that many Chinese agglomerations with no direct global connections would have to be included, while agglomerations such as Kuala Lumpur whose international importance belies their population size would be excluded. Further, the Klang Valley Corridor covering the Kuala Lumpur conurbation, Shah Alam, and Klang, and the wider definitions of Jakarta (Jabotabek) and Singapore would also be eliminated. While adjacent cities such as Manila-Quezon, Osaka-Kobe, and Tokyo-Yokohama are grouped together, larger conceptualizations are feasible, as exemplified by Kyoto-Osaka-Kobe (Keihanshin). A strong case exists for collocating Beijing and Tianjin, Hong Kong and Guangzhou, Seoul and Pusan, and Taipei and Kaohsiung as single entities because they function as extended metropolitan areas.

Instead of altering the United Nations' definition of urban agglomerations, 12 representative world cities have been chosen for study: Bangkok, Beijing, Hong Kong, Jakarta, Kuala Lumpur, Manila, Osaka, Seoul, Shanghai, Singapore, Taipei, and Tokyo (fig. 3.3). Between 1975 and 1985, their combined population grew at 8 per cent per annum from almost 66 million to a little under 93 million (table 3.2). A slower rate of growth of 6.4 per cent is anticipated between 1985 and 2000, with the combined population reaching almost 122 million. Over this 25-year period a marked shift in the distribution of world city populations is expected. World cities in South-East Asia will boost their share of the combined population from one-fifth in 1975 to one-third in 2000 - Singapore will be the only South-East Asia centre to experience a relative decline. Conversely, Taipei is expected to be the only emerging world city in East Asia to increase its share of the combined population.

Population is an unreliable guide to judging a world city's status; it has to be supplemented by indicators of commercial transactions, people, information, and financial services. In 1982, this approach was used in a study by Nomura Research Institute (NSK, 1982). Of the 12 cities under review, five were classified as super-integrated, international cities - Seoul as a commercial centre, Hong Kong as a financial centre, and Manila, Singapore, and Tokyo as multi-faceted centres; another five were classified as highly integrated international cities - Taipei and Osaka as commercial centres, Jakarta and Bang kok as information centres, and Kuala Lumpur as a financial centre; and two - Beijing and Shanghai - were unranked because they failed to meet the criteria to be considered as international cities (unlike Kobe, Nagoya, and Guangzhou) (see table 3.3).

Table 3.1 Urban agglomerations with a population of 2 million or more in Pacific Asia, 1985, and their average rate of growth, 1970-2000

Rank in 1985


Population (million)

Average annual rate of
growth (%)


Agglomeration

1970

1985

2000

1970-1985

1985-2000

1

Tokyo/Yokohama (Japan)

14.87

19.04

21.32

1.65

0.75

5

Shanghai (China)

11.41

12.06

14.69

0.37

1.32

10

Seoul (Korea, Rep. of)

5.31

10.07

12.97

4.27

1.69

12

Osaka/Kobe (Japan)

7.60

9.56

11.18

1.53

1.04

14

Beijing (China)

8.29

9.33

11.47

0.79

1.38

17

Tianjin (China)

6.87

7.96

9.96

0.98

1.49

19

Jakarta (Indonesia)

4.32

7.79

13.23

3.93

3.53

22

Manila/Quezon City (Philippines)

3.53

7.09

11.48

4.65

3.21

26

Bangkok (Thailand)

3.11

5.86

10.26

4.22

3.73

29

Hong Kong (Hong Kong)

3.40

5.16

6.09

2.78

1.10

39

Shenyang (China)

3.14

4.11

5.50

1.79

1.94

40

Pusan (Korea, Rep. of)

1.81

4.02

5.82

5.32

2.47

46

Wuhan (China)

2.73

3.40

4.47

1.46

1.82

49

Guangzhou (China)

2.50

3.33

4.49

1.91

1.99

64

Ho Chi Minh (Viet Nam)

2.00

2.78

4.42

2.20

3 09

66

Chongqing (China)

2.46

2.72

3.42

0.67

1.53

67

Rangoona (Burma)

1.43

2.71

4.45

4.26

3.31

70

Chengdu (China)

1.58

2.69

3.98

3.55

2.61

76

Harbin (China)

2.00

2.63

3.56

1.83

2.02

79

Singapore (Singapore)

1.56

2.56

2.95

3.30

0.95

81

Taipei (China)

1.50

2.52

3.78

3.46

2.70

83

Zibo (China)

1.30

2.41

3.76

4.12

2.97

85

Surabaya (Indonesia)

1.47

2.32

3.67

3.04

3.06

86

Xian (China)

1.73

2.28

3.08

1.84

2.01

89

Lupanshui (China)

1.66

2.20

3.00

1.88

2.07

92

Nanjing (China)

1.78

2.16

2.83

1.29

1.80

94

Kitakyushu (Japan)

1.59

2.09

2.39

1.82

0.89

98

Medan (Indonesia)

0.61

2.05

5.36

8.08

6.41

99

Nagoya (Japan)

1.85

2.05

2.11

0.68

0.19

Source: UN (1989).
a. Now known as Yangon (Myanmar)


Fig. 3.3 Urban agglomerations in Pacific Asia in 2000 (Source: UN, 1989)

Table 3.2 Actual and estimated population of emerging world cities in Pacific Asia, 1970, 1985, and 2000


1970

1985

2000

City

Million

Per cent

Million

Per cent

Million

Per cent

Jakarta

4.32

6.6

7.79

8.4

13.23

10.9

Singapore

1.56

2.4

2.56

2.8

2.95

2.4

Kuala Lumpur

0.64

1.0

1.27

1.4

2.56

2.1

Bangkok

3.11

4.7

5.86

6.3

10.26

8.4

Manila/Quezon City

3.53

5.4

7.09

7.7

11.48

9.4

South-East Asia

13.16

20.1

24.57

26.6

40.48

33.2

Taipei

1.50

2.3

2.52

2.7

3.78

3.1

Hong Kong

3.40

5.2

5.16

5.6

6.09

5.0

Shanghai

11.41

17.4

12.06

13.0

14.69

12.0

Beijing

8.29

12.6

9.33

10.1

11.47

9.4

Osaka/Kobe

7.60

11.6

9.56

10.4

11.18

9.2

Tokyo/Yokohama

14.87

22.7

19.08

20.7

21.32

17.5

Seoul

5.31

8.1

10.07

10.9

12.97

10.6

East Asia

52.38

79.9

67.78

73.4

81.50

66.8

Pacific Asia

65.54

100.0

92.35

100.0

121.98

100.0

Source: UN (1989).

The Nomura Research Institute's study was insightful, though it was biased towards information from Japan and ignored agglomerations (e.g. Osaka and Kobe were considered separately). In 1991, an attempt was made by the author to update the material for world cities preliminary to investigating flows of goods, people, information, and capital between them. This provided additional insights into infrastructure but was inconclusive about the fortunes of individual cities. There is little doubt that Hong Kong, Seoul, Singapore, and Tokyo had maintained their first-ranking status. Evidence of Manila's reduced status and Bangkok's claim for upgrading to the topmost ranking could not be substantiated. Although Osaka and Taipei should have had little trouble in maintaining their second-ranked status, improved showings from Kuala Lumpur and Jakarta were not apparent. As is evident from table 3.4, there were few grounds on which Beijing and Shanghai could be classed as international cities in 1991. It is difficult, however, to draw authoritative conclusions from these data. An analysis is required of changes in flows of goods, people, and information over time - a need that comes up against the barrier of data availability.

Table 3.3 Classification of Pacific Asian cities, 1982


JAK

SIN

KUL

BKK

MNL

TPE

HKG

SHA

BJS

OSA

TKO

SEL

Services:

Airport (500,000)

Ö

Ö

Ö

Ö

Ö

-

Ö

-

-

Ö

Ö

Ö

Conventions

7

59

3

0

1

0

4

1

0

8

4

11

Education (no. of universities)

n.a.

n.a.

3

n.a.

7

1

1

n.a.

n.a.

4

11

2

International R&D

4

4

11

24

8

-

1

0

0

n.a.

n.a.

26

Commercial:

Branches major trading company

139

74

39

57

92

91

107

0

32

n.a.

n.a.

73

Head office MNC

0

0

0

0

1

1

0

0

0

20

79

6

Port (over 50,000 tonnes)

Ö

Ö

-

Ö

Ö

Ö

Ö

Ö

-

Ö

Ö

-

Information:

Branches of Japanese newspapers

6

6

0

6

4

0

6

0

6

n.a.

n.a.

6

International organizations

2

0

0

9

2

0

0

0

0

0

1

0

Financial:

Money order market

-

Ö

Ö

-

Ö

-

Ö

-

-

-

Ö

-

Capital market

-

-

-

-

-

-

Ö

-

-

-

-

-

Japanese banks and securities

Ö

Ö

Ö

Ö

Ö

Ö

Ö

-

-

Ö

Ö

Ö

Evaluation

2

1

2

2

1

2

1

4

4

2

1

1

Source: NSK (1982).
Abbreviations: JAK - Jakarta; SIN - Singapore; KUL - Kuala Lumpur; BKK - Bangkok; MNL - Manila; TPE - Taipei; HKG - Hong Kong; SHA - Shanghai; BJS - Beijing; OSA - Osaka; TKO - Tokyo; and SEL - Seoul.

Evaluation: 1 = Super-integrated international city; 2 = Highly integrated international city; 3 = International city; 4 = Unranked.

Table 3.4 Classification of Pacific Asian cities, 1991


JAK

SIN

KUL

BKK

MEL

TPE

HKG

SHA

BJS

OSA

TKO

SEL

Services:

Airport (1 mill.)

Ö

Ö

Ö

Ö

Ö

Ö

Ö

-

-

Ö

Ö

Ö

Conventions, 1992

2

34

n.a.

16

11

4

110

3

25

5

34

10

Education (no. of universities and colleges)

12

5

10

12

22

n.a.

n.a.

6

17

13

57

18

Hotel management companies (no. of chains)

4

7

3

5

4

2

7

3

2

4

4

1

Commercial:

Head office MNC













Fortune 500

0

0

1

0

0

1

0

0

0

111a

11

Top 500 Asia Pacific companies

2

50

80

60

80

30

100

0

0

150a

100

Top 50 airlines

1

1

1

1

0

1

1

0

0

0

3

1

Port (over 1 mill. TEUs)

-

Ö

-

-

-

Ö

Ö

-

-

Ö

Ö

Ö

Information:

International organ izations

42

41

49

99

83

0

0

0

0

0

88

31

Financial:

Top 100 banks

0

0

0

0

0

0

1

0

1

0

30

4

Sources: Besser (1991); Fortune, 30 July 1990; EPL (1989); M (1992); UIA (1989).
Abbreviations: JAK - Jakarta; SIN - Singapore; KUL - Kuala Lumpur; BKK - Bangkok; MNL - Manila; TPE - Taipei; HKG - Hong Kong; SHA - Shanghai; BJS - Beijing; OSA - Osaka; TKO - Tokyo; and SEL - Seoul.
a. Figures refer to both Osaka and Tokyo.

Table 3.5 Checklist of transactions between emerging world cities in Pacific Asia

Goods and commercial transactions

Information flows

Express freight

Base international organizations

HQs/branches MNCs (Fortune 500)

Consultancies

Ports (container movements)

International franchises


Optical fibre networks

Movement of people

Satellite TV

Air passengers

Telephone calls

Conventions

Trading companies

Education (overseas university students)


International schools

Capital flows

Labour movement

Banking institutions

Sports Olympics

Money markets

Tourists


Universal expositions


Data availability

An ambitious list of items was earmarked for investigation comprising goods and commercial transactions, movement of people, and information and capital flows (see table 3.5). If dynamic changes in international linkages and interactions between Pacific Asian world cities are to be traced, however, the minimum requirement is to obtain dyadic data for at least two points in time. A major problem is the availability of appropriate statistics. Most dyadic data are not for world cities but for coarse areas (supra-regions or countries). For example, the tourism statistics for Pacific Asia are available only by country (WTO, 1990). The problem is complicated by some economies collecting statistics by country of residence. They include Malaysia and Hong Kong (table 3.6). Other countries record statistics only by nationality, notably China, Japan, and South Korea (table 3.7). Yet Indonesia, the Philippines, and Singapore supply statistics by both country of residence and nationality. No figures are provided for Taiwan by either country of residence or nationality, though they do exist (ROC, 1990a,b,c). These complications preclude effective use of annual tourism statistics, though some provide breakdowns by mode (air, sea, and road). Others supply information on tourist motivations (business, holidays, and visits to friends and relatives).

Table 3.6 Tourists from abroad within Pacific Asia by country of residence, 1988 ('000)

From/To

Ind

Sin

Mal

Thai

Phil

Taiw

HK

Chin

Jpn

Kor

Indonesia

-

n.a.


n.a.

7

n.a.

106

n.a.

n.a.

n.a.

Singapore

347

-


n.a.

24

n.a.

187

n.a.

n.a.

n.a.

Malaysia

105

n.a.

2,598

n.a.

16

n.a.

127

n.a.

n.a.

n.a.

Thailand

9

n.a.


-

10

n.a.

186

n.a.

n.a.

n.a.

Philippines

10

n.a.


n.a.

-

n.a.

159

n.a.

n.a.

n.a.

Taiwan

33

152

31

-

56

-

1,094

n.a.

n.a.

n.a.

Hong Kong

29

124

44

n.a.

133

n.a.

-

n.a.

n.a.

n.a.

China

n.a.

n.a.

n.a.

n.a.

2

n.a.


-

n.a.

n.a.

Japan

158

682

154

n.a.

182

n.a.

1,240

n.a.

-

n.a.

South Korea

20

55

n.a.

n.a.

16

n.a.

101

n.a.

n.a.

-

Source: WTO (1990).
Abbreviations: Ind - Indonesia; Sin - Singapore; Mal - Malaysia; Thai - Thailand; Phil -Philippines; Taiw - Taiwan; HK - Hong Kong; Chin - China; Jpn - Japan; Kor - South Korea.

Table 3.7 Tourists from abroad within Pacific Asia by nationality, 1988 ('000)

From/To

Ind

Sin

Mal

Thai

Phil

Taiw

HK

Chin

Jpn

Kor

Indonesia

-

n.a.

n.a.

32

7

n.a.

n.a.

n.a.

32

10

Singapore

320

-

n.a.

248

18

n.a.

n.a.

65

35

18

Malaysia

110

n.a.

-

867

17

n.a.

n.a.

n.a.

46

16

Thailand

8

n.a.

n.a.

-

9

n.a.

n.a.

66

47

13

Philippines

10

n.a.

n.a.

40

-

n.a.

n.a.

71

102

51

Taiwan

34

156

n.a.

135

n.a.

-

n.a.

n.a.

411

124

Hong Kong

10

n.a.

n.a.

n.a.

n.a.

n.a.

-

n.a.

31

62

China

n.a.

n.a.

n.a.

n.a.

90

n.a.

n.a.

-

109

0

Japan

161

700

n.a.

449

180

n.a.

n.a.

591

-

1,124

South Korea

21

n.a.

n.a.

65

16

n.a.

n.a.

n.a.

341

-

Source: WTO (1990).
Abbreviation: Ind - Indonesia; Sin - Singapore; Mal - Malaysia; Thai - Thailand; Phil -Philippines; Taiw - Taiwan; HK - Hong Kong; Chin - China; Jpn - Japan; Kor - South Korea.

Similar problems occur with statistics on overseas students (table 3.8). Data are available for Singapore, the Philippines, China, Japan, and Korea for the period 1985-1988 (UNESCO, 1991). There is no information for Indonesia, Malaysia, Thailand, Taiwan, and Hong Kong as hosts. Moreover, in 1988, the China data are actually those for 1983 and the Singapore data are for 1987. These problems seemed insuperable and the ambitious list of items was narrowed to a consideration of transport and communication flows.

Table 3.8 Foreign students by country of origin, 1988


Source

Host

Ind

Sina

Mal

Thai

Phil

Taiw

HK

Chinb

Jpn

Kor

Total

Ind

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Sina

50


3,687

23

21

n.a.

7

1

0

0

3,789

Mal

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Thai

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Phil

282

4

34

1,028

0

n.a.

150

229

41

295

2,063

Taiw

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

HK

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Chinb

3

19

0

27

6

n.a.

0

0

806

488

1,349

Jpn

574

88

983

616

41

n.a.

207

10,422

0

562

13,493

Kor

4

2

57

8

12

n.a.

2

0

562

0

647

Total

913

113

4,761

1,702

80

n.a.

366

10,652

1,409

1,345

21,341

Source: UNESCO (1991).

Abbreviations: Ind - Indonesia; Sin - Singapore; Mal - Malaysia; Thai - Thailand; Phil - Philippines; Taiw -Taiwan; HK - Hong Kong; Chin - China; Jpn - Japan; and Kor - South Korea.
a. Singapore data are for 1987.
b. China data are for 1983.

This decision was supported by city-pair data being available for air freight, air passenger, and air mail within Pacific Asia. Even then problems still remain because no corresponding regional figures for seaports and telecommunications exist. Consequently, some heroic assumptions have to be made about world cities dominating national spatial economies. Although this may be an acceptable proposition for many world cities (e.g. 90 per cent of Thailand's exports originate in Bangkok), it does not hold true for Beijing and Shanghai in China, and Osaka and Tokyo in Japan. On occasions, therefore, recourse is made to data-rich countries (e.g. Japan) and cities (e.g. Hong Kong) to provide case-study material. As data availability determines the depth to which international linkages and connections between Pacific Asian world cities can be studied, there is a more detailed preamble to information sources in examining international freight and mail, passengers, and telecommunications.

International freight and mail

Discussions of goods and commercial transactions have to be focused on trade figures. Preparatory to any discussion of international freight, the key features of Pacific Asia's intraregional trade have to be examined. With the exception of the city-states of Hong Kong and Singapore, trade statistics are provided only for countries. Statistics derived from the Australian National University's International Economic Data Bank are available between 1978 and 1990 (though those for 1990 are estimates). In discussing the key trends, interest is centred on 1983 - a year reflecting recovery from a worldwide recession - and 1989 - the most recent year for which a full set of data is available.

In 1983, Japan was the pivot of Pacific Asia's trading system (table 3.9). It enjoyed favourable trading relations with all Pacific Asian countries. The other feature was the key role played by the traditional entrepôts of Hong Kong and Singapore - the former as the de facto economic capital of China and the latter as the hub for South-East Asia, particularly for Indonesia and Malaysia. Although they had no trade with China, both Korea and Taiwan had strong but dependent relations with Japan.

By 1989, there had been a marked shift in the value of Pacific Asia's trade owing to East Asia's share increasing from almost 62 per cent in 1983 to over 76 per cent in 1989 (table 3.10). Japan had maintained its pivotal position, holding surpluses with all economies except Indonesia. There were, however, marked gains in Hong Kong, Taiwan, and, to a lesser extent, China and Korea. With the exception of Thailand, all economies in South-East Asia experienced a relative loss as the sub-region's share of Pacific Asia trade declined from 38 per cent in 1983 to 24 per cent in 1989. How have these changes affected the fortunes of individual world cities? A useful starting point is to examine container movements because they are most likely to reflect the shifts in trade.

Goods transactions

International container movements

The incorporation of containers into multimodal transport systems is still undeveloped in Pacific Asia because of poor infrastructural facilities in China, Indonesia, and Thailand, and protectionism in Korea and Taiwan. Shipping, therefore, is the key support to physical distribution within Pacific Asia. To appreciate the complexities of interactions between world cities, an understanding of hub/feeder operating structures is necessary. Most cities are located within close proximity to each other and can be reached within two or three days- a 10-day voyage being the extreme case (table 3.11). There are, however, problems in discussing container movements by sea between world cities. Not only are several world cities not maritime centres, but data on origin and destination by ports are not available. There are, however, estimated country data for container movements on individual shipping routes within Pacific Asia in both 1983 and 1991 (though the figures are not strictly comparable).

Table 3.9 The value of trade Pacific Asian countries, 1983 (US$ million)


Ind

Sin

Mal

Thai

Phil

Taiw

HK

Chin

Jpn

Kor

Total

Ind

-

3,128

58

49

242

220

182

27

9,678

327

13,911

Sin

3,465

-

3,843

944

421

325

1,482

213

2,008

457

13,158

Mal

59

3,182

-

578

163

350

245

157

2,782

661

8,177

Thai

120

518

285

-

68

63

317

107

960

91

2,529

Phil

30

139

162

20

-

74

158

22

948

149

1,702

Taiw

429

713

224

264

246

-

1,648

0

2,498

222

6,244

HK

598

926

215

242

378

178

-

2,495

966

380

6,378

Chin

49

567

186

195

143

0

5,797

-

4,517

0

11,454

Jpn

3,552

4,449

2,772

2,508

1,744

5,081

2,383

4,918

-

6,005

33,412

Kor

252

537

226

218

180

150

817

0

3,383

-

5,763

Total

8,554

14,159

7,971

5,018

3,585

6,441

13,029

7,939

27,740

8,292

102,728

Source: International Economic Data Bank, Australian National University.

Abbreviations: lnd - Indonesia; Sin - Singapore; Mal - Malaysia; Thai - Thailand; Phil - Philippines; Taiw - Taiwan; HK - Hong Kong; Chin - China; Jpn - Japan; and Kor - South Korea.

Table 3.10 The value of trade between Pacific Asian countries, 1989 (US$ million)


Ind

Sin

Mal

Thai

Phil

Taiw

HK

Chin

Jpn

Kor

Total

Ind

-

1,809

210

238

143

709

529

534

9,252

907

14,331

Sin

415

-

6,110

2,465

663

891

2,823

1,199

3,828

866

19,260

Mal

1,038

4,948

-

615

325

890

770

481

4,016

1,254

14,337

Thai

161

1,423

577

-

103

392

761

527

3,398

299

7,641

Phil

57

217

100

157

-

241

302

50

1,581

160

2,865

Taiw

932

1,975

693

1,107

775

-

7,030

0

9,086

1,134

22,732

HK

567

2,158

516

2,158

812

777

-

18,817

4,525

1,915

32,245

Chin

208

1,643

332

477

359

0

22,003

-

8,180

0

33,202

Jpn

3,288

9,199

4,107

6,811

2,370

16,097

11,472

8,477

-

16,491

78,312

Kor

626

1,499

512

717

464

1,247

3,352

0

13,167

-

21,584

Total

7,292

24,871

13,157

14,745

6,014

21,244

49,042

30,085

57,033

23,026

246,509

Source: international Economic Data Bank, Australian National University.
Abbreviations: Ind - Indonesia; Sin - Singapore; Mal - Malaysia; Thai - Thailand; Phil - Philippines; Taiw - Taiwan; HK - Hong Kong; Chin - China;
Jpn - Japan: and Kor - South Korea.

Table 3.11 Distance and voyage time of ax-Shanghai and ex-Kobe voyages to major Asia-Pacific ports, 1989 (voyage speed It knots)

Port

Ex-Shanghai distance (nautical miles)

Days

Ex-Kobe distance (nautical miles)

Days

Hong Kong

823

2.9

1,387

4.8

Jakarta

2,519

8.7

3,034

10.5

Keelung

419

1.5

926

3.2

Kobe

787

2.7

-

-

Pusan

493

1.7

623

2.1

Singapore

2,181

7.6

2,699

9.4

Shanghai

-

-

787

2.7

Yokohama

1,039

3.6

362

1.3

Source: Yamada (1989:7).

In 1983, container movements in Pacific Asia amounted to 2.7 million TEU (i.e. 5.4 million TEU as containers are handled twice, once at each end of the route) (NMCL, 1985). Total traffic only is given for individual routes (i.e. there is no breakdown by origin and destination). When flows over 100,000 TEU are mapped, a dominant network involving Japan and the newly industrializing economies is evident (Hong Kong, South Korea, Taiwan, and Singapore) - a reflection of high volumes of components being manufactured in different countries and being transported to a single destination for final assembly (fig. 3.4). Thailand, the Philippines, and the USSR featured as out-liers of this network, but China, Indonesia, and Malaysia did not figure prominently.

A major difficulty in interpreting this pattern of regional integration is that it comprises both: (a) intraregional movements carried by 100 major short-sea container lines within Pacific Asia (57 per cent); and (b) feeder flows to mainline deep-sea services (43 per cent) involving European and trans-Pacific markets (table 3.12). The three top intraregional routes of around 200,000 TEU included Japan - Taiwan, Japan-South Korea, and Japan-Hong Kong. These figures underlined Japan's pivotal importance as an intraregional force. Apart from high-intensity feeder routes, such as Japan-Korea and Singapore-Thailand, most container lines operated multi-port itineraries, with double or triple calls at a centre to assemble cargo. Many of the flows within Pacific Asia, however, were still made up of break-bulk rather than containerized cargo. Four flows of around 100,000 TEU accounted for 40 per cent of all feeder traffic to Europe and North America: Japan-South Korea, Singapore-Thailand, Taiwan-Philippines, and Japan-USSR. These covered the main lines (e.g. Sea-Land, American President Line, Maersk, Scan Dutch, and Evergreen Line) using a mix of direct line-haul calls, dedicated feeder vessels, and common carriers.


Fig. 3.4 Container movements between countries in Pacific Asia, 1983 (Source: NMCL, 1985)

Table 3.12 Container flows flows Pacific Asia, 1983

Route

Feeder

Intra-regional

Total


'000 TEU

Per cent

'000 TEU

Per cent

'000 TEU

Per cent

Japan-South Korea

140

12.0

210

13.6

350

12.9

Japan-Taiwan

30

2.6

250

16.2

280

10.3

Japan-Hong Kong

60

5.1

190

12.3

250

9.2

Hong Kong-Taiwan

60

5.1

150

9.7

210

7.8

Singapore-Thailand

130

11.1

22

1.4

152

5.6

Taiwan-Philippines

110

9.4

38

2.5

148

5.5

Japan-Singapore

28

2.4

100

6.5

128

4.7

Singapore-Hong Kong

37

3.2

87

5.7

124

4.6

Japan-USSR

95

8.1

10

0.7

105

3.9

Other

480

41.0

483

31.4

963

35.5

Total

1,170

100.0

1,540

100.0

2,710

100.0

Source: NMCL (1985).

The importance of feeder container services for the port-shipping systems of world cities in the early 1980s is shown in figure 3.5. By then the hubs for mainline services were: Port Klang (Kuala Lumpur), important for Far East/Europe trades; Singapore and Hong Kong, the traditional entrepôts; Kaohsiung, which had just emerged to challenge Hong Kong as a mainline location for some trans-Pacific operators involved in the development of West Coast United States ports and landbridge access to Mid-Western and Gulf markets; Pusan, which previously had strong feeder links to Hong Kong and Japan, and had been a major hub since 1979; and Kobe-Osaka and Tokyo-Yokohama, which dominated port activities in Japan (Robinson, 1985, 1989, 1991). Both Japan and Hong Kong had strong feeder links with the Soviet ports of Nakhodka and Vostochny, which offered important multimodal and landbridge links to Europe via the Trans-Siberian Railway. The other ports included: Bangkok, which was limited by draft and length restrictions on vessels negotiating the Chao Phraya River, and had strong connections with both Singapore and Hong Kong; Jakarta's Tanjung Priok and Manila, which were still essentially feeder ports though they had aspirations for mainline services; and the Chinese ports, which were just receiving their first container vessels.


Fig. 3.5 Short-sea and deep-sea shipping services in Pacific Asia during the early 1980s (Source: Robinson, 1991)

Between 1983 and 1991, Pacific Asian world cities were part of the world's fastest-growing container market. Spurred by the globalization of manufacturing, an annual growth rate of 10 per cent was experienced. In 1991, Nippon Yusen Kaisha (NYK) estimated 3 million TEU were generated within the region - a figure larger than the Far East-Europe trade and on a par with the eastbound trans-Pacific trade (PDI, 1991). When these container movements are mapped by routes in figure 3.6, the strong links between Japan and the newly industrializing economies can be seen to have persisted. Indonesia, Malaysia, and Thailand have been incorporated into the main network, with the second wave of manufacturing stemming from the movement of capital from Japan and the NIEs to lower-cost resource locations. China and the Philippines, however, did not have annual flows in excess of 60,000 TEU, though forecasts suggest a marked upsurge in their trade between Pacific Asian world cities.

The main backbone route was between Japan and Singapore. Most two-way routes, however, comprised both local and feeder cargoes and had not reached the point where the volume attracted large operators on a long-term basis or justified them as independent trades (table 3.13). On balance, Korea, Japan, and Singapore were "sources" (i.e. outflows exceeded inflows). Conversely, the other economies - Hong Kong, Indonesia, Malaysia, the Philippines, Taiwan, and Thailand - figured as "sinks" (i.e. inflows exceeded outflows). No data are available for routes including rapidly growing markets in southern China and Viet Nam.

Given the huge potential for trade between Pacific Asia's emerging world cities, shipping lines have flooded routes with surplus capacity, driving rates below the costs of providing the service - a phenomenon that has prompted a search for a mechanism to stabilize the market (Yamada, 1989). An uneven demand throughout the year makes the trade very difficult to manage. Total cargo on the Japan-Bangkok route does not exceed 10,000 TEU per month, but Japanese Lines deploy that capacity each week and have to compete with other mainline carriers (American President Line, Maersk, and Sea-Land), dedicated end-to-end intraregional carriers (Singapore's Pacific International Line and Regional Container Line, Taiwan's Cheng Lie Navigation and Wan Hai Steamship Company), and wayport operators. With such a diverse carrier base it is not surprising that rates between Japan and Singapore in 1991 were US$800 per TEU - the same as in 1983. The importance of the unstructured intraregional trade, however, should not be overestimated because it comprises raw materials to be transformed into products for shipment to the United States and Europe. Despite its growth it is still largely an auxiliary trade whose final customers are in North America and Europe.


Fig. 3.6 Container movements between countries in Pacific Asia, 1991 (Source: PDI, 1991)

Table 3.13 Estimated monthly movements of containers within Pacific Asia, 1991


Destination

Origin

Jpn

Kor

Taiw

HK

Phil

Sin

Mal

Thai

Ind

Totala

Jpn

-

11,800

14,500

15,000

1,700

14,000

5,000

9,000

6,500

77,500

Kor

16,300

-

2,900

6,900

1,200

1,600

600

1,200

2,100

32,800

Taiw

10,500

2,600

-

6,500

1,800

4,500

1,800

2,000

4,500

34,200

HK

10,000

3,300

5,000

-

2,300

13,000

1,300

1,500

4,200

40,600

Phil

2,400

500

700

900

-

600

100

100

300

5,600

Sin

20,000

1,000

9,500

11,000

1,000

-

8,500

8,500

4,000

63,500

Mal

2,700

800

1,200

2,100

300

600

-

300

400

8,400

Thai

7,500

500

2,000

2,500

200

2,000

200

-

200

15,100

Ind

4,400

700

1,400

1,400

150

350

350

250

-

9,000

Totala

73,800

21,200

37,200

46,300

8,650

36,650

17,850

22,850

22,200

286,700

Source: PDI (1991:A4).
Abbreviations: Jpn - Japan; Kor - Korea; Taiw - Taiwan; HK - Hong Kong; Phil - Philippines; Sin - Singapore; Mal - Malaysia; Thai - Thailand; and Ind -Indonesia.
a. The totals have been amended from the original.

Shipping line strategies coupled with economic growth have sparked marked port development in and around world cities. Like Kaohsiung, Hong Kong has extension plans at Tsing Yi and Lantau, and Singapore at Pulau Brani, to enhance their superhub status derived from their manufacturing bases and pivotal locational positions in shipping line itineraries. In South Korea, the new port of Kwangyang will offer Seoul an alternative outlet to the Port of Pusan, which handled 2.4 million TEU in 1989 - one-third above its design capacity. In Thailand, the addition of Laem Chabang, located some 130 km south-east of Bangkok, is designed to relieve the capital's congested port of Klong Toey, which handles over 1 million TEU annually - though the newcomer is having difficulty in attracting shipping lines. Finally, there is a glut of expansion projects at lesser ports, such as Port Klang (Kuala Lumpur), Manila, Shanghai, Tanjung Priok (Jakarta), and Tianjin (Beijing), which have been designed to attract cargo previously handled by the ports of neighbouring world cities.

This last set of ports is poised to take advantage of foreign investment in national economies and of schemes for deregulation and privatization (e.g. by allowing the entry of foreign carriers into Indonesia's protected markets and by allowing the private sector to run Manila's and Laem Chabang's wharves). A counter to the concentration of activity on emerging world cities is aid from international funding agencies to develop regional ports (e.g. Johore and Penang in Malaysia, Surabaya and Belawan in Indonesia). Although these may attract bulk cargoes, there are few signs of a marked decentralization of containerized cargoes from the superhubs. As the national economies sustaining the world cities shift from resource-based activities to manufacturing, it will be necessary to provide cargo centres at airports to handle higher-valued goods. Already this has been reflected in an increase in sea-air cargoes (e.g. from Japan to Hong Kong and Taiwan by sea and to Bangkok and other points in South-East Asia by air).

International air freight

Attention in discussing international air freight is focused on distances between Pacific Asia's world cities (table 3.14). The longest leg between world cities is 5,795 km between Jakarta and Tokyo, and the shortest is 300 km between Singapore and Kuala Lumpur. Hong Kong is the network's pivot because it has the shortest total distance to all other centres. A major difference in studying international air freight interactions between Pacific Asia's world cities compared with shipping, however, is that the quality of transport - punctuality, service frequency, and cargo collection and delivery - is the key. Time is more important than distance. To meet this desideratum, just-in-time systems are being adopted within the region assisted by:

(a) the pluralization of carriers (e.g. the introduction of Nippon Cargo Airlines);

(b) the development of new airports to overcome limited airport capacity created by service expansion (most marked in Japan where work is proceeding on the second phase of the New International Airport at Narita, the construction of the new Kansai International Airport, and the seaward expansion of Tokyo International Airport at Haneda); and

(c) changes in the structure of the air freighting industry in an attempt to upgrade general cargo and express services through merger (e.g. Federal Express and Flying Tigers, the heavyweight cargo airline), investment (e.g. Japanese Airlines investment with Lufthansa in DHL), and development of comprehensive air cargo information systems for logistics control.

Table 3.14 Air distances between Pacific Asian cities (km)


JAK

SIN

KUL

BKK

MNL

TPE

HKG

SHA

BJS

OSA

TKO

SEL

JAK

-

560

1,190

2,335

2,780

3,900

3,270

4,480

5,255

n.a.

5,795

5,355

SIN

560

-

330

1,445

2,460

3,245

2,585

3,800

4,575

n.a.

5,330

4,670

KUL

1,190

330

-

1,205

2,485

3,340

2,535

3,750

4,525

n.a.

5,335

4,620

BKK

2,335

1,445

1,205

-

2,200

2,520

1,715

2,685

3,305

n.a.

4,615

3,700

MNL

2,780

2,385

2,485

2,200

-

1,175

1,130

2,460

3,120

n.a.

3,015

2,625

TPE

3,900

3,245

3,340

2,520

1,175

-

805

2,020

2,795

n.a.

2,125

1,475

HKG

3,270

2,585

2,535

1,715

1,130

805

-

1,215

1,990

n.a.

2,905

2,085

SHA

4,480

3,800

3,750

2,685

2,460

2,020

1,215

-

1,080

n.a.

1,805

2,200

BJS

5,255

4,575

4,525

3,305

3,120

2,795

1,990

1,080

-

n.a.

2,115

2,585

OSA

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

-

n.a.

n.a.

TKO

5,795

5,330

5,355

4,615

3,015

2,125

2,905

1,805

2,115

n.a.

-

1,195

SEL

5,355

4,670

4,620

3,700

2,625

1,475

2,085

2,200

2,585

n.a.

1,195

-

Source: Besser (1991:552).
Abbreviations: JAK - Jakarta; SIN - Singapore; KUL - Kuala Lumpur; BKK - Bangkok; MNL - Manila; TPE - Taipei; HKG - Hong Kong; SHA Shanghai; BJS -Beijing; OSA - Osaka; TKO - Tokyo; and SEL - Seoul.

These developments have to be borne in mind when looking at changes in international freight movements between pairs of Pacific Asia's emerging world cities, and movements intended to make greater use of local airports outside their borders.

Statistics from ICAO permit an examination of scheduled air freight interactions and linkages between pairs of world cities for both 1983 and 1990. No distinction is made, however, between different market segments -express (next day guaranteed delivery), comprising small packages that are highly service sensitive, general cargo (second day delivery), comprising large items that tend to be price sensitive, and the traditional 72-hour airport-to-airport service. Nevertheless, information on air freight is available for both calendar and financial years and the data used refer to the year ending 31 March in each year. In analysing the tabulated data the strategy is to assess the degree to which cargo is concentrated on the "top five" airports. Then attention is focused on interpreting maps showing dominant unidirectional flows in excess of 10,000 tonnes. Interest is also centred on the net balance between inward and outward cargoes to determine the prime "sources" and "sinks" in the world's fastest-growing air cargo network.

Table 3.15 Origin and destination of air freight within Pacific Ada, 1983


Origin

Destination

City

Tonnes

Per cent

Tonnes

Per cent

Jakarta

6,615

1.6

5,985

1.4

Singapore

41,285

9.7

61,151

14.4

Kuala Lumpur

10,170

2.4

15,317

3.6

Bangkok

44,310

10.5

24,607

5.8

Manila

14,657

3.5

19,739

4.7

South-East Asia

117,037

27.7

126,799

29.9

Taipei

76,621

18.1

29,246

6.9

Hong Kong

87,883

20.7

79,425

18.7

Shanghai

430

0.1

667

0.2

Beijing

523

0.1

2,602

0.6

Osaka

18,089

4.3

23,952

5.7

Tokyo

84,520

19.9

111,475

26.3

Seoul

38,658

9.1

49,595

11.7

East Asia

306,724

72.3

296,962

70.1

Pacific Asia

423,761

100.0

423,761

100.0

Source: ICAO (1984).

In 1983, 423,761 tonnes were moved between world cities in Pacific Asia. The "top five" world cities generated almost 79 per cent of the air cargo. Hong Kong was the major generator, with 21 per cent of the total, closely followed by Tokyo (20 per cent) and Taipei (18 per cent), with a marked gap to Bangkok (11 per cent) and Singapore (10 per cent) (table 3.15). Seoul (9 per cent), however, was almost on a par with Singapore and Bangkok. Under 5 per cent were Osaka, Manila, Kuala Lumpur, and Jakarta, with Beijing and Shanghai making a negligible contribution. The "top five" destinations for air freight accounted for 78 per cent of the total. The composition of the "top five," however, was different, with Tokyo the recipient of more than one-quarter of all flows. It was followed by Hong Kong (19 per cent), Singapore (14 per cent), Seoul (12 per cent), and Taipei (7 per cent). The other significant destinations were Osaka (6 per cent), Bangkok (6 per cent), and Manila (5 per cent), and, to a lesser extent, Kuala Lumpur (4 per cent) and Jakarta (1 per cent). The Chinese world cities, however, were insignificant.


Fig. 3.7 Air cargo movements between world cities in Pacific Asia, 1983 (Source: ICAO, 1984)

When the major routes are mapped, the intensity of interaction between Tokyo, Seoul, Taipei, and Hong Kong is highlighted - a repetition of the strong linkages evident in container movements in the same year (fig. 3.7). The other world cities tied to the network, albeit by smaller masses of cargo, are Bangkok, Osaka, and Singapore. Beijing, Manila, and Shanghai did not have any connections in excess of 10,000 tonnes. The major "source" in the network was the Taipei-Hong Kong-Bangkok axis. Tokyo figured as the major "sink," followed by Singapore and Seoul.

Table 3.16 Origin and destination of air freight within Pacific Asia, 1990


Origin

Destination

City

Tonnes

Per cent

Tonnes

Per cent

Jakarta

37,540

2.8

23,140

1.7

Singapore

164,380

12.1

181,164

13.4

Kuala Lumpur

44,651

3.3

36,274

2.7

Bangkok

132,232

9.8

73,895

5.4

Manila

40,863

3.0

31,836

2.3

South-East Asia

419,666

31.0

346,309

25.5

Taipei

172,031

12.7

116,593

8.6

Hong Kong

227,911

16.8

199,046

14.7

Shanghai

4,464

0.3

1,045

0.1

Beijing

2,314

0.2

1,815

0.1

Osaka

61,345

4.5

79,517

5.9

Tokyo

214,450

15.8

344,089

25.4

Seoul

253,382

18.7

267,149

19.7

East Asia

935,897

69.0

1,009,254

74.5

Pacific Asia

1,355,563

100.0

1,355,563

100.0

Source: ICAO (1991).

By 1990, a marked change had occurred, with the total air cargo being handled increasing to almost 1.4 million tonnes - an annual increase of almost 37 per cent (table 3.16). The degree of concentration had lessened as the "top five" accounted for 76 per cent of the total a 3 per cent decline since 1983. Also, there had been changes in the importance of individual world cities, with Seoul (19 per cent) generating most traffic - more than double its share in 1983. It was followed by Hong Kong (17 per cent), Tokyo (16 per cent), Taipei (13 per cent), and Singapore (12 per cent). The only other world city challenging for inclusion in the "top five" was Bangkok (10 per cent) as there was no other centre above 5 per cent. On the other hand, the "top five" destinations were responsible for almost 82 per cent - a 4 per cent increase on the 1983 figure. Tokyo was still the major destination (25 per cent), with Seoul (20 per cent) the nearest challenger followed by Hong Kong (15 per cent), Singapore (13 per cent), and Taipei (9 per cent). Only two other centres exceeded 5 per cent Osaka (6 per cent) and Bangkok (5 per cent). Although currently much of Osaka's cargo is handled in Tokyo, there is no guarantee that after completion of the new Kansai International Airport this cargo will be switched - quality of service, as noted, not distance is the key desideratum.

A graphical analysis of the flows highlights how the network has expanded and deepened, with the most dominant links exceeding 40,000 tonnes (fig. 3.8). These comprise Bangkok, Hong Kong, Seoul, Singapore, Taipei, and Tokyo. The Seoul-Tokyo and Hong Kong-Tokyo legs exceeded 93,000 tonnes and the Taipei-Tokyo leg 72,000 tonnes. An analysis of the major "sources" reaffirms the presence of the Bangkok-Hong Kong-Taipei axis, with Jakarta, Kuala Lumpur, Manila, and Shanghai as minor "sources." Tokyo is the major "sink," with inflows exceeding outflows by 130,000 tonnes - the other "sinks" (Osaka, Seoul, and Singapore) all being less than 30,000 tonnes.

An examination of changes between 1983 and 1990 highlights the volatility of air freight movements (table 3.17). This analysis pinpoints the faster growth of world cities in South-East Asia. As both Manila and Bangkok failed to keep pace with events, the positive showings were confined to Jakarta, Kuala Lumpur, and, above all, Singapore, which had ambitions to be a "global cargo city." The net gain among world cities in South-East Asia was at the expense of Taipei, Hong Kong, and Tokyo, although all other centres made positive showings, with Seoul experiencing a massive increase. These results raise the question of which world city should be regarded as the air cargo hub for Pacific Asia - Federal Express is considering Taipei. They also prompt an investigation of air mail patterns to determine whether they are a carbon copy of air freight or differ because of their higher information content. Using the comprehensive set of statistics on air mail in 1983 and 1990, a similar analysis to that of air cargo is undertaken.

International air mail

The growth of courier services and technological changes in telecommunications have brought about some complex problems in international air mail movements between Pacific Asia's world cities. In Japan, for example, international sea mail declined continuously after the late 1970s in both Tokyo and Osaka but air mail grew markedly until the mid-1980s. However, since then air mail trends in Japan have been more or less constant, suggesting alternative forms of international linkages and interactions are being used.


Fig. 3.8 Air cargo movements between world cities in Pacific Asia, 1990 (Source: ICAO, 1991)

In 1983, 21,065 tonnes of air mail were moved in interactions between Pacific Asia's world cities (table 3.18). The "top five" world cities were responsible for 79 per cent of the air mail generated. Tokyo (34 per cent) was the dominant node, followed by Hong Kong (15 per cent), Seoul (12 per cent), Taipei, and Singapore (both 9 per cent). Apart from Manila and Bangkok (both 7 per cent) and Osaka (5 per cent), no other centres made a significant contribution. The degree of concentration among the "top five" destinations was 72 per cent. The major recipient was Tokyo (25 per cent), followed by Manila and Seoul (both 13 per cent), Hong Kong (12 per cent), and Taipei (10 per cent). Singapore and Bangkok (both 8 per cent) challenged for a place in the "top five" ahead of Kuala Lumpur and Jakarta (both 5 per cent). The remaining centres - Osaka, Beijing, and Shanghai - received a negligible amount of air mail.

Table 3.17 Changes in air height tonnage within Pacific Asia, 1983 and 1990


1983

1990

Change 1983-1990

City

Tonnes

Per cent

Tonnes

Per cent

Tonnes

Per cent

Jakarta

6,615

1.6

37,540

2.8

+30,925

+1.2

Singapore

41,285

9.7

164,380

12.1

+123,095

+2.4

Kuala Lumpur

10,170

2.4

44,651

3.3

+34,481

+0.9

Bangkok

44,310

10.5

132,232

9.8

+87,922

- 0.7

Manila

14,657

3.5

40,863

3.0

+26,206

-0.5

South-East Asia

117,037

27.7

419,666

31.0

+302,629

+3.3

Taipei

76,621

18.1

172,031

12.7

+95,410

-5.4

Hong Kong

87,883

20.7

227,911

16.8

+140,028

-3.9

Shanghai

430

0.1

4,464

0.3

+4,034

+0.2

Beijing

523

0.1

2,314

0.2

+1,791

+0.1

Osaka

18,089

4.3

61,345

4.5

+43,256

+0.2

Tokyo

84,520

19.9

214,450

15.8

+129,930

- 4.1

Seoul

38,658

9.1

253,382

18.7

+214,724

+9.6

East Asia

306,724

72.3

935,897

69.0

+629,173

-3.3

Pacific Asia

423,761

100.0

1,355,563

100.0

+931,802


Source. (lCAO, 1984,1991).

An examination of the flow pattern highlighted Tokyo's dominant position (fig. 3.9). Flows above 1,000 tonnes involved the Hong Kong-Tokyo, Tokyo-Seoul and Tokyo-Manila routes. Major "sources" were Tokyo, Osaka, Hong Kong, and Singapore. The major "sinks" were Manila, Jakarta, and Kuala Lumpur, and, to a lesser extent, Beijing, Taipei, Bangkok, and Seoul.

Table 3.18 Origin and destination of air mail within Pacific Asia, 1983


Origin

Destination

City

Tonnes

Per cent

Tonnes

Per cent

Jakarta

79

0.4

1,008

4.7

Singapore

1,870

8.8

1,769

8.3

Kuala Lumpur

305

1.4

1,031

4.8

Bangkok

1,460

6.8

1,600

7.5

Manila

1,505

7.0

2,711

12.7

South-East Asia

5,219

24.4

8,119

38.0

Taipei

1,989

9.3

2,189

10.2

Hong Kong

3,177

14.9

2,551

11.9

Shanghai

4

0

12

0.1

Beijing

5

0

26

1.5

Osaka

1,086

5.1

233

1.1

Tokyo

7,356

34.4

5,266

24.7

Seoul

2,529

11.9

2,669

12.5

East Asia

16,146

75.6

12,946

62.0

Pacific Asia

21,365

100.0

21,065

100.0

Source: ICAO (1484).

In 1990, almost 40,000 tonnes of international air mail were moved between Pacific Asia's world cities - an annual increase of over 12 per cent since 1983. The "top five" world cities generated more than 84 per cent of the cargo. Hong Kong (25 per cent) had usurped Tokyo (23 per cent) as the major generator of air mail, with Seoul (17 per cent), Taipei (10 per cent), and Bangkok (9 per cent) making up the "top five" (table 3.19). The only other significant generators were Manila and Singapore (both 5 per cent) and Osaka (3 per cent). The contributions of Kuala Lumpur and Jakarta (both 1 per cent) and Shanghai and Beijing were negligible. Receipts of international air mail among the world cities were more dispersed, with the "top five" attracting almost 73 per cent. Among the "top five" destinations, Tokyo (27 per cent) maintained its dominant position, followed by Taipei, Manila, and Seoul (all on 12 per cent), Bangkok (9 per cent), Hong Kong (8 per cent), Singapore (7 per cent), Osaka (5 per cent), Jakarta (4 per cent), and Kuala Lumpur (2 per cent). Contributions by Beijing and Shanghai were insignificant.

A consideration of the dominant flows highlighted the intensification of the network and the increase in the number of connections in excess of 500 tonnes (fig. 3.10). The main feature was the deepening of connections between world cities in East Asia. Four of the seven major flows over 1,000 tonnes involved Tokyo. Flows on the Seoul-Tokyo leg superseded Hong Kong-Tokyo as the most heavily trafficked. Kuala Lumpur, Beijing, and Shanghai had no major connections. The major "sources" were Hong Kong and Seoul. Manila was the major "sink," followed by Tokyo, Jakarta, Taipei, Singapore, and Osaka, with Beijing, Shanghai, and Bangkok as minor "sinks." The most striking feature compared with the air freight network was the incorporation of Manila into the network - presumably a reflection of Filipinos domiciled in major world cities throughout Pacific Asia.


Fig. 3.9 Air mail movements between world cities in Pacific Asia, 1983 (Source: ICAO, 1984)

Table 3.19 Origin and destination of air mail within Pacific Asia, 1990


Origin

Destination

City

Tonnes

Per cent

Tonnes

Per cent

Jakarta

390

1.0

1,747

4.4

Singapore

1,876

4.7

2,665

6.7

Kuala Lumpur

557

1.4

888

2.2

Bangkok

3,476

8.7

3,582

9.0

Manila

2,038

5.1

4,923

12.3

South-East Asia

8,337

20.9

13,805

34.6

Taipei

3,973

10.0

4,931

12.3

Hong Kong

10,117

25.3

3,258

8.2

Shanghai

14

0.0

108

0.3

Beijing

62

0.2

336

0.8

Osaka

1,367

3.4

1,971

4.9

Tokyo

9,282

23.2

10,948

27.4

Seoul

6,787

17.0

4,582

11.5

East Asia

31,602

79.1

26,134

65.4

Pacific Asia

39,939

100.0

39,939

100.0

Source: ICAO (1991).

An analysis of changes in the generation of international air mail shows a shift of over 3 per cent from world cities in South-East Asia to their counterparts in East Asia (table 3.20). The main negative showings were Singapore - a leader in Electronic Data Interchange (EDI) - and Manila. These were sufficient to offset the positive showings of Bangkok and Jakarta. In East Asia the principal losses were recorded by Tokyo and Osaka - a reflection of Japan's lead in shifting from an industrial to a post-industrial society. These relative losses were more than offset by major gains in Hong Kong and, to a lesser extent, in Seoul. Are these changes replicated in international passenger transport or is there yet another pattern consistent with the face-to-face transfer of structurally complex information?


Fig. 3.10 Air mail movements between world cities in Pacific Asia, 1990 (Source ICAO, 1991)

International passengers

Rapid changes are sweeping over international scheduled airlines, prompted by deregulation which, since 1978, has allowed United States mega-carriers -United, Delta, Continental, Northwest, and US Air - to spread their hub-and-spoke network activities throughout the world and to force realignments within the industry (i.e. they carry passengers from one foreign country to another via their home base). In Pacific Asia, the United States mega-carriers are fighting to obtain more of the burgeoning traffic stemming from high growth rates in order to benefit from the marketing advantages of hub-and-spoke systems - lower information costs, high quality of service, and more rewards from frequent-flyer programmes for the individual passenger (Tretheway, 1990). Regional airlines are responding to the challenge through privatization (e.g. Japan Airlines, 1987), simple carrier alliances (e.g. Singapore International Airlines with Delta), new airlines (e.g. Air Nippon Airlines, Asiana Airlines, and Eva Airlines), and strong carrier alliances (i.e. by taking a minor equity in a foreign carrier). Growing airport and airway congestion has sparked off a round of new airport proposals in Hong Kong, Osaka, and Seoul, as well as agreements to start or expand flights to airports outside the bounds of world cities (e.g. Fukuoka, Nagoya, and Sapporo in Japan, Macau, and Shenzhen in China).

Table 3.20 Changes in international air mail tonnage within Pacific Asia, 1983 and m


1983

1990

Change 1983-1990

City

Tonnes

Per cent

Tonnes

Per cent

Tonnes

Per cent

Jakarta

79

0.4

390

1.0

+311

+0.6

Singapore

1,870

8.8

1,876

4.7

+6

-4.1

Kuala Lumpur

305

1.4

557

1.4

+252


Bangkok

1,460

6.8

3,476

8.7

+2,016

+1.9

Manila

1,505

7.0

2,038

5.1

+533

-1.9

South-East Asia

5,219

24.4

8,337

20.9

+3,118

-3.5

Taipei

1,989

9.3

3,973

10.0

+1,984

+0.7

Hong Kong

3,177

14.9

10,117

25.3

+6,940

+10.4

Shanghai

4

0

14

0.0

+ 10


Beijing

5

0

62

0.2

+57

+0.2

Osaka

1,086

5.1

1,367

3.4

+281

- 1.7

Tokyo

7,356

34.4

9,282

23.2

+1,926

- 11.2

Seoul

2,529

11.9

6,787

17.0

+4,258

+5.1

East Asia

16,146

75.6

31,602

79.1

+15,456

+3.5

Pacific Asia

21,365

100.0

39,939

100.0

+18,574


Sources: ICAO (1984,1991).

Table 3.21 Travelling times by air between Pacific Asia's world cities


Timea

City

JAK

SIN

KUL

BKK

MNL

TPE

HKG

SHA

BJS

OSA

TKO

SEL

JAK

-

1.35

2.00

3.15

4.00

5.20

4.25

5.50

5.10

7.45

7.10

6.55

SIN

1.35

-

0.50

2.15

3.15

4.20

3.45

4.10

5.00

6.05

6.50

6.10

KUL

2.00

0.50

-

1.50

3.45

4.20

3.35

4.40

5.55

6.55

6.40

6.45

BKK

3.15

2.15

1.50

-

3.05

3.40

2.40

3.40

3.45

5.15

6.20

5.15

MNL

4.00

3.15

3.45

3.05

-

1.50

1.50

2.55

3.35

3.30

3.50

3.40

TPE

5.20

4.20

4.20

3.40

1.50

-

1.35

2.40

3.15

2.30

3.10

3.40

HKG

4.25

3.45

3.35

2.40

1.50

1.35

-

1.05

1.50

3.05

4.00

3.15

SHA

5.50

4.10

4.40

3.40

2.55

2.40

1.05

-

1.45

3.10

3.45

4.20

BJS

5.10

5.00

5.55

3.45

3.35

3.15

1.50

1.45

-

4.10

5.00

5.05

OSA

745

6.05

6.55

5.15

3.30

2.30

3.05

3.10

4.10

-

1.00

1.30

TKO

7.10

6.50

6.40

6.20

3.50

3.10

4.00

3.45

5.00

1.00

-

2.15

SEL

6.55

6.10

6.45

5.15

3.40

3.40

3.15

4.20

5.05

1.30

2.15

-

Source: ABC (1991).
Abbreviations: JAK - Jakarta; SIN - Singapore; KUL - Kuala Lumpur; BKK - Bangkok;
MNL - Manila; TPE - Taipei; HKG - Hong Kong; SHA - Shanghai; BJS - Beijing; OSA -
Osaka; TKO - Tokyo; and SEL - Seoul.
a. Only flying times are shown (those in italics refer to services via Hong Kong). The length of time in transfer points depends on the date and time of flying.

Raw distances used in discussing air freight need to be replaced by travelling time between major world city airports (table 3.21). The longest travelling time is 7 hours and 45 minutes between Jakarta and Osaka and the shortest is 50 minutes between Singapore and Kuala Lumpur. Again, Hong Kong is the pivot of the network as all Pacific Asia's world cities can be connected to it in the shortest possible time. Attention here, however, is focused on changes within Pacific Asia's international passenger market.

The same source of information is used for analysing international passenger traffic as for air freight and air mail - international scheduled airlines for individual world-city pairs (i.e. ICAO, 1984,1991). A major drawback to interpretation, however, is the absence of a breakdown of passengers into two distinctly different types of consumers: business (i.e. must-go travellers), who are highly sensitive to frequency of service, and leisure travellers, who are highly sensitive to price.

International air passengers

In 1983, over 12.4 million international air passengers travelled between Pacific Asia's world cities (table 3.22). The "top five" accounted for almost 70 per cent. Hong Kong (20 per cent) was the major generator, followed by Singapore (15 per cent), Tokyo (14 per cent), Taipei (11 per cent), and Bangkok (10 per cent). Other prominent generators were Manila (8 per cent) and Seoul (7 per cent), and Osaka and Kuala Lumpur (both 6 per cent). The contributions of both Beijing and Shanghai were negligible. As the respective inbound and outbound flows are more or less evenly balanced there is little point in discussing them separately.

Table 3.22 Origin and destination of air passengers within Pacific Asia, 1983


Origin

Destination

City

Passengers

Per cent

Passengers

Per cent

Jakarta

334,942

2.7

344,952

2.8

Singapore

1,877,879

15.1

1,921,102

15.4

Kuala Lumpur

780,690

6.3

750,252

6.0

Bangkok

1,193,758

9.6

1,137,386

9.1

Manila

927,577

7.5

880,347

7.1

South-East Asia

5,114,846

41.2

5,034,039

40 4

Taipei

1,356,207

10.9

1,321,699

10.6

Hong Kong

2,462,072

19.8

2,515,632

20.2

Shanghai

23,785

0.2

14,498

0.1

Beijing

29,423

0.2

55,422

0.5

Osaka

798,724

6.4

833,398

6.7

Tokyo

1,784,776

14.3

1,823,196

14.7

Seoul

874,152

7.0

846,101

6.8

East Asia

7,329,139

58.8

7,409,946

59.6

Pacific Asia

12,443,985

100.0

12,443,985

100.0

Source: ICAO (1984).

A graphical analysis of major links highlights the Kuala Lumpur-Singapore connection and the importance of the Tokyo-Hong Kong-Bangkok axis, with dominant flows exceeding 500,000 (fig. 3.11). Links between 250,000 and 500,000 brought Seoul, Osaka, Taipei, Manila, and Jakarta into the network. On this score both Beijing and Shanghai were "stranded." A discussion of "sources" and "sinks," however, has to be muted because, as noted, the margins were quite small owing to inbound and outbound movements being more or less evenly balanced. For the record, the major "sources" were Bangkok, Manila, Taipei, Kuala Lumpur, Seoul, and, to a lesser extent, Shanghai. The major "sinks" were Hong Kong, Singapore, Tokyo, Osaka, and Beijing.


Fig. 3.11 Air passenger movements between world cities in Pacific Asia, 1983 (Source: ICAO, 1984)

In 1990, almost 23 million international air passengers moved between Pacific Asia's world cities - an annual increase of 12 per cent since 1983. The "top five" generated over 70 per cent - a marginal increase since 1983 (table 3.23). Hong Kong (19 per cent) maintained its pivotal position, with Tokyo (17 per cent) experiencing the greatest growth, moving ahead of Singapore (15 per cent) into second place, and Bangkok (11 per cent) taking over fourth place from Taipei (10 per cent). The other major change was the rise of Seoul (9 per cent) and, to a lesser extent, Jakarta (3 per cent), but Manila and Kuala Lumpur (both 6 per cent) lost ground. Both Beijing's and Shanghai's contribution was negligible.

Table 3.23 Origin and destination of air passengers within Pacific Asia, 1990


Origin

Destination

City

Passengers

Per cent

Passengers

Per cent

Jakarta

741,013

3.2

777,367

3.4

Singapore

3,336,695

14.5

3,444,805

15.0

Kuala Lumpur

1,323,578

5.8

1,196,873

5.2

Bangkok

2,470,926

10.8

2,571,777

11.2

Manila

1,299,088

5.6

1,206,042

5.2

South-East Asia

9,171,300

39.9

9,196,864

40.0

Taipei

2,271,606

9.9

2,186,133

9.5

Hong Kong

4,289,112

18.7

4,174,254

18.2

Shanghai

44,183

0.2

45,100

0.2

Beijing

57,771

0.2

49,130

0.2

Osaka

1,279,580

5.6

1,316,688

5.7

Tokyo

3,801,039

16.5

3,744,377

16.3

Seoul

2,073,373

9.0

2,275,418

9.9

East Asia

13,816,664

60.1

13,791,100

60.0

Pacific Asia

22,987,964

100.0

22,987,964

100.0

Source: ICAO (1991).

An analysis of dominant links in 1990 highlighted the intensification and deepening of international interactions between world cities in Pacific Asia (fig. 3.12). The 1983 Tokyo-Hong Kong-Bangkok axis, with unidirectional flows in excess of 500,000 passengers per annum, has expanded to Seoul-Tokyo-Hong Kong-Bangkok-Singapore-Jakarta. Besides "Main Street," there is also a Hong Kong-Taipei-Tokyo link and an offshoot from Singapore to incorporate Kuala Lumpur. The Tokyo-Seoul link exceeded 1 million passengers. Minor links carrying between 250,000 and 500,000 passengers brought both Osaka and Manila into the network but not Beijing and Shanghai, which remained isolated. Differences between inbound and outbound flows revealed Hong Kong was the "dominant source," with an excess of 115,000 passengers - a reflection of the high proportion of non-local passengers stemming from its position as the dominant trans-Pacific gateway. Other centres featuring as "sources" included Kuala Lumpur, Manila, Taipei, and Tokyo. Seoul, with a deficit of 202,000, was the dominant "sink," followed by Singapore and Bangkok, and, to a lesser extent, Osaka and Jakarta. Beijing and Shanghai were almost evenly balanced.


Fig. 3.12 Air passenger movements between world cities in Pacific Asia, 1990 (Source: ICAO, 1991)

Table 3.24 Changes in numbers of air passengers within Pacific Asia, 1983 and 1990


1983

1990

Change 1983-1990

City

Passengers

Per cent

Passengers

Per cent

Passengers

Per cent

Jakarta

334,942

2.7

741,013

3.2

+406,071

+0.5

Singapore

1,877,879

15.1

3,336,695

14.5

+1,458,816

-0.6

Kuala Lumpur

780,690

6.3

1,323,578.

5.8

+542,888

- 0.5

Bangkok

1,193,758

9.6

2,470,926

10.8

+1,277,168

+1.2

Manila

927,577

7.5

1,299,088

5.6

+371,511

-1.9

South-East Asia

5,114,846

41.2

9,171,300

39.9

+4,056,454

- 1.3

Taipei

1,356,207

10.9

2,271,606

9.9

+915,399

-1.0

Hong Kong

2,462,072

19.8

4,289,112

18.7

+1,827,040

- 1.1

Shanghai

23,785

0.2

44,183

0.2

+20,398

-

Beijing

29,423

0.2

57,771

0.2

+28,348

-

Osaka

798,724

6.4

1,279,580

5.6

+480,856

-0.8

Tokyo

1,784,776

14.3

3,801,039

16.5

+2,016,263

+2.2

Seoul

874,152

7.0

2,073,373

9.0

+1,199,221

+2.0

East Asia

7,329,139

58.8

13,816,664

60.1

+6,487,525

+1.3

Pacific Asia

12,443,985

100.0

22,987,964

100.0

+10,543,979


Source: ICAO (1984, 1991).

As passenger flows will be a critical determinant of the relative status of Pacific Asia's world cities, the analysis is extended to highlight differences between 1983 and 1990 (table 3.24). This underlines the faster growth of world cities in East Asia. The only centres to experience a net gain in South-East Asia were Bangkok and, to a lesser extent, Jakarta. In East Asia the growth was narrowly focused on Tokyo and Seoul as both Hong Kong and Taipei experienced slower growth rates. Care has to be exercised in interpreting these changes because, as noted, it is not possible to disentangle business and tourist traffic. In turn, this makes it difficult to assess the impact of the replacement of air passenger transport by telecommunications.

International telecommunications

Analysing telecommunications interactions between world cities presents a problem. The most comprehensive set of data is contained in the International Telecommunication Union's statistical yearbook (ITU, 1988). Since 1973, it has provided a complete set of telecommunications parameters and economic data for the 180 member countries of the International Telegraphic Union (ITU) (Luhan, 1989). It has collected data on various branches of common carrier telecommunications - telephone, telegram, telex, and data transmission. This source provides a guide to the size of telecommunications systems, traffic, and staff, and distinguishes between domestic and international traffic. Apart from showing that the world's highest growth occurred in Pacific Asia, an analysis of international traffic does not provide any information on interactions between countries, let alone world cities.

There are no comparable statistics to those produced by the United States' Federal Communications Commission showing international message telephone services and telegraph and telex services between the continental United States and overseas countries. Evidence from Japan shows that the most common medium for corporate communications with the rest of Asia is facsimile, followed by the telephone and the telex (MPT, 1988). Telex use relative to facsimile use has been comparatively high because the telephone network between Japan and the rest of Asia has not been as well developed as that between Europe and North America. Greater use of the telephone has been encouraged by the small distance between Japan and the rest of Asia.

The most useful sources for studying Pacific Asia's telecommunications are publications from the International Institute of Communications (Staple and Mullins, 1989; Staple, 1990). They trace telecommunications traffic to and from 16 countries, including Japan, Hong Kong, Singapore, South Korea, Taiwan, and Thailand. Although China, Indonesia, the Philippines, and Malaysia are excluded, figures are provided for them when major telecommunication correspondents are given for the selected countries. As no information is provided on linkages and interactions between world cities, these country data have to suffice as a guide to Pacific Asia's "telegeography. "

International "telegeography"

When the traffic patterns for public voice circuits measured in MITT (Minutes of Telecommunications Traffic) are mapped for the fiscal year 1988 (April 1988 - March 1989), three economies feature as key "sources" - Japan, Hong Kong, and Singapore - and one - Taiwan as a major "sink" (fig. 3.13). The position of Japan - a "junction state" for South Korea, Taiwan, and Hong Kong - reflected its marked growth in outbound traffic since the late 1980s. Hong Kong, a net exporter to Taiwan and telecommunications entrepôt for China, directed almost one-third of its outbound traffic to the mainland. China's market increased annually during the mid-1980s at between 40 and 50 per cent and propelled its Ministry of Posts and Telecommunications into the "top 25" international carriers in 1988, albeit in last place.2 Singapore has dominant connections with Indonesia, Japan, Hong Kong, and Taiwan. The lesser prominence of Taiwan, as of South Korea, has stemmed from reluctance to open home markets to external competitive pressures, which are guaranteed to boost international traffic.3 Although Thailand, like Indonesia, has pretensions to being a key telecommunications player, its traffic is much smaller than that of other Pacific Asia counterparts.4

Paradoxically, Thailand (60 per cent) is more heavily dependent on telecommunications correspondents within Pacific Asia than are other economies. Taiwan (57 per cent), Hong Kong, and Singapore (54 per cent each) are the next most dependent on Pacific Asia markets, followed by South Korea (39 per cent) and Japan (37 per cent). This dependence is likely to increase with the region's continued economic expansion, fuelled by intra-Pacific Asia investment and tourism. Within the region it will be reflected in the growth in facsimile traffic, increased per capita flow of outbound traffic, and the progressive switch from outgoing international letters to international telephone calls and facsimiles.5

Conclusion

An analysis of the data on linkages and interactions between world cities has highlighted the marked dynamism in Pacific Asia since the early 1980s. It has pinpointed the intensification of transport and communications networks. Initially, there was a concentration on emerging world cities in East Asia, but the spread of capital to South-East Asia has seen the deepening of networks to incorporate its world city aspirants more fully. This is reflected in their increased percentage of air cargo. Conversely, East Asia's world cities have boosted their share of air passengers to redress the balance enjoyed by their South-East Asian counterparts in proportion to their total population.


Fig. 3.13 Telecommunications between countries in Pacific Asia, 1988 (Source: based on Staple, 1990)

All world cities, with the exception of Beijing and Shanghai, have recorded marked overall growth in transport and communications. There have been, however, considerable differences depending on the particular yardstick. Leads and lags have occurred. Some world cities have grown more rapidly than others. Seoul and, to a lesser extent, Jakarta, for example, have experienced faster rates of relative growth than have other world cities in all transport and communications sectors, whereas Manila has been dogged by slower rates across the board. Both Hong Kong and Taiwan have failed to keep pace in air cargo and air passengers. Some world cities have grown in particular sectors. For instance, Singapore and, to a lesser extent, Kuala Lumpur and Osaka have improved their positions as generators of air cargo. Conversely, Bangkok and Tokyo have boosted their share of air passengers.

As this fluidity is likely to continue, interpretation is problematical. If there is too much disaggregation there is a real danger of being overwhelmed by a plethora of different variables. These range from the hoary favourites of population and distance to strategic alliances following the globalization of transport and communications activities and the development of logistic network strategies. Given these developments, a Pacific Asia focus is fraught with problems, as the relative status of world cities hinges as much on their external relations with the European and North American blocs as on intra-regional forces.

These considerations are reflected in figure 3.14, which shows the "power" relationships between Pacific Asia's world cities based on transport and communications interactions. Tokyo is the pivot of both external and internal connections. Not only does it have strong linkages with the pivots of the European and North American blocs, but it is the junction for the emerging world cities serving the newly industrializing economies - Singapore, Hong Kong, Taipei, and Seoul. Part of Singapore's strength is drawn from being the junction for Bangkok, Kuala Lumpur, and Jakarta. Hong Kong fulfils a similar role for Manila. At present, it is difficult to tie Beijing and Shanghai into the emerging system of world cities as this study has underlined the tenuous nature of their international connections.

Looking ahead, all forecasts show that growth rates for transport and communications flows in Pacific Asia will be above world averages. The logical extension of this pattern of development is to recognize that linkages and interaction between Pacific Asia's world cities will create development corridors - areas of intense short-distance movement (cf. Ginsburg et al., 1991). This phenomenon has already occurred with the emergence of the Japan Development Corridor from Sapporo to Kita Kyushu. Two new entities are emerging - an East Asian Development Corridor stretching from Pusan to Hong Kong and the South-East Asian Development Corridor running from Chiang Mai to Bali. These are likely to spread, with the addition of Vladivostok and Hanoi to the East Asian Development Corridor and of Ho Chi Minh City to the South-East Asian Development Corridor. Inevitably, new transport and communications superhubs will have to seek locations outside these corridors.


Fig. 3.14 "Power" relationships between Pacific Asia's emerging world in transport and telecommunications, 1992

Acknowledgements

The research assistance afforded by Barbara Banks and Christine Tabart is much appreciated. The maps were drawn by Nigel Duffey, Cartographic Unit, Research School of Pacific Studies, Australian National University, Canberra, ACT, Australia.

Notes

1. Scheduling, under the conventional practice of carrying goods from the airport or seaport to the factory and distribution to clients, has become difficult to maintain. In April 1991, Japan IBM introduced a "Comprehensive Plan for Company Distribution" (Kaisha Sogo Butsuryu) in an effort to overcome this problem (Nikkei, 26 September 1991). A Systems Package Centre (SPC) comprising a cluster of warehouses has been developed in Tokyo and Osaka to store parts carried by ship from factories in the United States. In accordance with the specifications established by clients, the parts are marshalled on an assembly line in the SPC prior to delivery by truck. This new system has enabled US producers to switch from air to sea freight and has reduced the inventories at local factories.

2. Other Pacific Asia-based international carriers among the world's top 25, according to Staple (1990:16), included Japan's KDD or Kokusai Denshin Denwa (ranked 10th) and Taiwan's DGT (ranked 24th). By the mid-1990s, China's Ministry of Posts and Telecommunications became a major international power. By 1990, outgoing traffic from both Hong Kong and China was over 500 million MiTT - almost two-thirds of Japan's outgoing traffic. Major international communications ports are located in Beijing, Shanghai, and Guangzhou.

3. Liberalization of South Korea's closely regulated and structured market was planned for 1992.

4. In 1991, there were 300,000 subscribers in Jakarta out of 1.5 million lines in Indonesia. Only 14 per cent of subscribers had access to international line traffic.

5. As noted by Staple (1990:45-46), 0.15 per cent of Japan's traffic in 1988-1989 was international, compared with 1 per cent for the United States and 2 per cent for the United Kingdom. In 1988, Japan's ratio of international letters to telephone calls was 2:1, whereas the latter exceeded the former for the first time in the United States. This situation is likely to change in Japan with the introduction of language translation services.

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(introductory text...)

Junjiro Takahashi and Noriyuki Sugiura

Introduction

Whereas the Japanese economy has often been under scrutiny in various ways, with both theoretical and practical concerns, its direct consequences, i.e. the Japanese regional and urban system, have been surprisingly little analysed in a comprehensive manner (Glickman 1979; Nakamura and White, 1988).

The regional and urban system of a country is both the condition and the result of its techno-economic development. The rapid techno-economic expansion during the post-war period (1955-1970) in Japan drastically transformed the previous regional and urban system into a more complex and dynamic one. Several research reports on that period estimate that more than 30 million people moved, one way or another, during that transition. It is, however, of great importance to recognize that the more rapid and far-reaching changes in the techno-economic environment in the 1970s and 1980s, internationally as well as domestically, literally forced the recently established Japanese urban system to reorganize itself, and thus bring Japanese society into a new, uncharted phase of development (Sassen, 1991). The Japanese regional and urban system in the early 1990s had to face some fundamental changes and the problems associated with these changes.

One of the prevailing forces that triggered the change was undoubtedly the widespread adoption of varying and powerful forms of Information Technology (IT), not only in industrial and business activities but also in society at large, at the very critical moment when the international role of the Japanese economy was growing and changing (Castells, 1989; Kodama, 1991; Sassen, 1991).

This chapter will explore the fundamental nature of these changes, as manifested in the forms of spatial systems and organizations, in the following interlinked aspects: How has the Japanese regional and urban system evolved? What are the structural and functional characteristics of this system? What are the critical problems as epitomized by the Tokyo Metropolitan Area? And what are the prospects for the future and the policy implications from the viewpoint of regional and urban planning?

Japanese urbanization in perspective: An overview, 1955-1991

Rapid economic expansion and growth, which commenced as early as 1950, inevitably transformed the fundamental structure of the Japanese regional and urban system. Prior to that transformation, the Japanese spatial system was characterized by its duality: the urban and industrial areas on the one hand, and the rural and agricultural areas on the other. Despite the radical transition in the process of industrialization and its accompanying urbanization process since the mid-nineteenth century, the urban and the rural still remained two distinctive entities.

When the post-war techno-economic growth began to speed up, every economic resource was mobilized and handed over to the market mechanism. Of the various economic resources, human resources (i.e. the labour force) were the most visible. As is often the case with theories of economic development, the uneven distribution of employment opportunities and clear differences in wages should trigger massive internal rural-urban migration, which indeed happened to the Japanese regional and urban system. During the period 1955-1970, the net in-migration to three major metropolitan areas (namely Tokyo, Osaka, and Nagoya) reached approximately 9 million people. With natural increase, the population of these three metropolitan areas alone increased more than 10 million in less than two decades.

The consequence of these changes was twofold. The out-migration areas had to face devastating depopulation, while the metropolitan areas were forced to cope with the problems of overpopulation and congestion, which urgently needed to be rectified, necessitating comprehensive readjustment and decentralization policy efforts.

During the period of rapid economic growth and massive social migration in 1955-1970, a fundamental change in the structure of the Japanese regional and urban system had taken place. This was the shift from the dualistic system, where the urban-rural dichotomy was prominent and meaningful, to the monolithic system, where this dichotomy became blurred and unrealistic. By about 1970, nearly three-quarters of the total population were defined as urbanites, and, perhaps more importantly, even a small town in a remote area was functionally integrated into one nationwide urban and regional "umbrella" system.

Within this newly emerged nationwide urban network, two distinctive subsystems were interlocked. One was the metropolitan areas and the other was the micropolitan areas, which were made up of groups of small and medium-sized cities and towns. The metropolitan areas were further subdivided into two groups: three major metropolitan areas, namely Capital Tokyo, Osaka, and Nagoya; and four regional core metropolitan areas, namely Sapporo, Sendai, Hiroshima, and Fukuoka (see the maps in the Appendix).



-Tokyo


-Three major metropolitan areas

-Osaka

Metropolitan areas


-Nagoya



-Sapporo


-Four regional core metropolitan

-Sendai


areas

-Hiroshima



-Fukuoka

-Micropolitan areas (groups of small and medium-sized cities and towns)

The monolithic urban system emerged around 1970. The formation and development of this system were far from smooth and even. During the first half of the period of rapid economic growth (19551965), the main stream of rural-urban migration was from the rural areas (later defined as micropolitan areas) to the three major metropolitan areas. This trend changed when the three major metropolitan areas became overpopulated and began to suffer from severe congestion. During the second half of the 1960s, the main trend forked in two different directions. One flow changed direction towards the regional core city of each region, thus accelerating the growth of four regional core metropolitan areas. The other became the overflow movement within the three major metropolitan areas, which led to the dynamic and extreme expansion outwards to the suburbs. During the 1960s, it was not exceptional to observe a 30-50 per cent annual population increase in the suburban fringes of these three metropolitan areas. Among them, Tokyo Metropolitan Area experienced the most dynamic and far-reaching transformation. In the late 1960s, its suburban fringe already stretched as far as 40 km from the city centre.

The outward expansion movement was literally explosive in its speed and magnitude, but this suburban development could not offer a solution to the new build-up of metropolitan problems, but rather worsened the overall situation. Building huge dormitory towns in the suburbs created an enormous number of commuters whose workplaces were still concentrated within a 5 km radius of the central business district (CBD) areas.

In response to these drastic changes, the government took various policy initiatives, the most important of which was the decentralization of growth poles. In line with national economic planning based upon a series of Keynesian macroeconomic policies, the government encouraged and financially supported industries to relocate their plants and production sites out of the three major metropolitan areas. Along with this policy, the government increased public spending in the micropolitan areas for their industrial infrastructure as well as for more direct support for the depopulated, industrially declining areas. In that period, government aid and grants for agriculture changed their content and significance, while still lingering as a politically sensitive issue. In 1962, 60 per cent of total public investment went into the metropolitan areas, but by the end of 1975 the micropolitan areas received nearly half of total public investment.

As a result of these policy interventions, a considerable proportion of manufacturing industries (such as steel, petrochemical, ship-building, and heavy machinery industries) moved out and built their new plants in the micropolitan areas, in order to generate incomes regionally.

It was, however, a historical irony that, when the income-generating industries moved out to these micropolitan areas, the technological innovation and the international environment of the Japanese economy swiftly changed and began to dismantle the previous structure that had brought about the fastest-growing economy among nations. In this restructuring process, the leading industries were replaced by newly emerging high-tech industries such as micro-electronics. Then came the first oil crisis in 1973, which accelerated this replacement process on a larger scale. Through the agonizing process of redirection and adjustment to the new economic environment, the rapidly growing sectors began to take a lead in the economy, in which innovations of information technology and their adoption played crucial roles. Among the various manufacturing industries, microelectronics (semi-conductors, computers, and communication equipment) and other related manufacturing industries, such as automobile and consumer durable goods, became the major sources of employment, technological innovation, and the macroeconomic multiplier affecting the overall economy.

In the tertiary sector, finance (banking, securities, and insurance), distribution (wholesale and retail), and services (especially producer services) began to equip themselves with and fully utilize the new information technology. They grew fast to lead the ongoing restructuring process.

All these new growing sectors were highly concentrated within the major metropolitan areas, especially within the Capital Tokyo Metropolitan Area. In addition to the industrial reorganization, the rise of the Japanese yen in international business transactions had a devastating effect upon small and medium-sized industries as well as large-scale heavy industries in the micropolitan areas, which lost their international competitive edge.

These multiple transitions over a short period had a considerable influence on the Japanese regional and urban system. The most significant impact was the productivity gap between the metropolitan areas and the micropolitan areas, which widened again. In the early 1980s, these trends became pronounced and irreversible. As in the case of the period of rapid techno-economic growth and expansion in previous decades, the drastic shift of economic resources and social components among industrial sectors, as well as among regions, inevitably came into play. These new trends towards new growth may be summarized as follows.

Population - A new migration trend

Figure 4.1 shows the long-term trend and the magnitude of incoming population to the three major metropolitan areas. There was massive net in-migration in the 1960s, which was followed by a decade of adjustment in the 1970s. In the 1980s, however, the net in-migration to these areas began to increase again at the level of 100,000 people per year. This was considerably lower than the net in-migration at the peak of the rapid economic expansion in the 1960s, but this time there was a significant difference in the source of migration.


Fig. 4.1 Net migration to Japan's three major metropolitan areas, 1955-1990 (Source: 1990 Census)

Tokyo Saitama, Chiba, Tokyo, KanagawaKen Osaka Kyoto, Osaka, Hyougo, NaraKen Nagoya PNGu, Aichi, Mie-Ken

From 1955 to 1970, the three major metropolitan areas had somewhat similar patterns, but after 1970 Osaka and Nagoya metropolitan areas turned out to be out-migration areas, with only the Capital Tokyo Metropolitan Area gaining in net in-migration. The Tokyo Metropolitan Area had never lost its population, and it became virtually the only area to increase its population through migration. Needless to say, the Tokyo Metropolitan Area exhibits the biggest natural increase in population owing to the massive in-migration of people of reproductive age in previous decades. The combination of these trends in the 1980s led the population of the Tokyo Metropolitan Area to grow at a far greater rate than any other area in the nation. Perhaps more importantly, Osaka and Nagoya metropolitan areas became the out-migrating areas to the Tokyo Metropolitan Area. In this way, the fundamental structure of the three major metropolitan systems began to disintegrate and crumble.

The globalization of the Japanese economy

One of the most significant changes in the Japanese economy is that it has come to play a key role in the internationally interlinked world economy. As Japan became the largest creditor nation in the world in the early 1980s and continuously demonstrated its industrial strength in international competition with a major trade surplus, it was inevitable that Tokyo should become one of the key international financial centres. Besides its economic power, its geographical location contributed to its new status. In an age of international economic interdependency and international telecommunications networks, international financial transactions require a global, 24-hour transaction system. Tokyo was naturally chosen as the third key centre for that system, in addition to New York and London.

The fact that Tokyo became the third international financial centre had a significant impact not only upon Tokyo itself, but also upon the Japanese urban system as a whole. Tokyo was expected to provide all sorts of new international business establishments with various facilities and services, which might not be directly related to domestic economic and financial transactions and the everyday life of its citizens. In fact, the notorious land price increase in the second half of the 1980s was often attributed to the sudden increase in the demand for office space in the city centre.

After the Plaza Accord in 1985, the rise of the Japanese yen put the economy into a short slump, but industries reorganized themselves promptly and effectively to develop new strategies for growth. One was the expansion of the offshore production system, and the other was to reduce overall production costs by implementing computerized manufacturing systems, often referred to as Factory Automation (FA) and Computer Integrated Manufacturing (CIM). The first strategy established the new international division of labour, and the flexible manufacturing system, with its high precision and high values, brought about even greater roles for research and development functions and marketing and sales functions. Numerous corporations rushed to establish their headquarters offices in Tokyo for their overseas operations and globally integrated management. In this way, the globalization of the Japanese economy accelerated the concentration of various business functions in Tokyo and its metropolitan area.

Industrial reorganization based on information technology

The fastest-growing sector in the Japanese economy in the 1980s was the service sector, in terms of its value-added and its employment. This does not necessarily mean that the service sector grew by itself, but, on the contrary, it has been revealed that other sectors of the economy increasingly demanded various highly specialized services in order to maintain their competitive edge. Among the fastest-growing service industries were those related to computer business, both hardware and software. These service industries were naturally concentrated in Tokyo Metropolitan Area.

Another important trend in relation to the impact of information technology is based on the fact that severe international competition and the demand for continuous growth had given rise to the recognition of the crucially important role of R&D functions. During fiscal year 1985, the total amount of R&D investment in Japan exceeded capital investment for the first time in its history, and the ratio of R&D to capital investment has become increasingly larger (Kodama, 1991). The spatial implication of this trend is enormous, because production sites and facilities are relatively dispersed all over the nation, whereas R&D facilities and institutions are rather concentrated in one critical area - the Capital Tokyo Metropolitan Area.

Labour shortages

The average unemployment rate in the 1980s stabilized around 2.5 per cent. This implies that full employment has been accomplished, and that wage rises exert a steady pressure on the economy. In fact, average wages in the 18-25 age group rose considerably in the past decade. As the economy grew rapidly again, and certain sectors expanded faster than others, the adjustment process became more difficult to ascertain; the new job opportunities required more sophisticated skills and were highly specialized. Against this backdrop, the service sector became polarized into two different segments in the metropolitan areas. One comprises jobs that require specialized skills, such as computer software services, and the other comprises semi- or unskilled "manual" jobs such as delivery services and sales assistance in highly mechanized retailing services. The problem is that the advancement of information technology in virtually every aspect of business and urban daily life requires a more technologically sophisticated workforce, hence the stronger pressure on higher wages. Large corporations have been coping with this techno-shortage by providing various training and retraining programmes, both on and off the job, to upgrade the quality of their workforce and human resources. In 1990, in-house training programmes throughout the nation became a US$8 billion business.

Another important consequence of this trend is the shortage of manual labour, especially in the metropolitan areas, such as construction workers and workers in dirty, dangerous, and rough jobs. The gap has been filled with foreign labour from the third world and illegal immigrants, who become conspicuous in the metropolitan landscape and often create their own ethnic ghettoes.

Governmental policy efforts

In 1987, the Fourth National Comprehensive Development Plan was announced by the government's National Land Agency. The fundamental issues in that plan, targeting the year 2010, were radically different from previous ones. The new plan replaced the previous scheme of ecologically sound, stable growth and development with a scheme for a multi-centred regional and urban system to be achieved through the maximum use of advanced information technology. The reason behind this drastic change lay in the "hyper" concentration problems in the Capital Tokyo Metropolitan Area. According to the latest Census in 1990, nearly 30 million people lived and worked in Tokyo and three other surrounding prefectures. Needless to say, metropolitan issues, especially Tokyo's problems, came to be the top priority on various political agendas.

With the increase in in-migration to the metropolitan areas and the aggravation of urban problems, the government gradually changed its spending policy, whereby the metropolitan areas received more public investment than in the previous decade. Thus the gap between the metropolitan and the micropolitan areas in terms of government support began to be reversed again. Furthermore, the government announced that US$4 trillion would be spent in the 1990s to build a new infrastructure for the age of information technology and to improve the quality of life. The details of this "mega" spending and investment are not yet available.

All these trends since the 1980s undoubtedly indicate that the Japanese regional and urban system is undergoing a process of transition. The rest of this chapter will delineate this transition and examine its essence.

Functional and structural changes

The essential characteristic of the present transformation of the Japanese urban system is that the system is reorganizing from a hierarchical urban system to a uni-centred urban network in which the Capital Tokyo Metropolitan Area is emerging as the centre for the inter-urban and inter-regional transactions and communication.

Tokyo has been the capital of the nation since the middle of the nineteenth century, and has accumulated various urban functions over the period. It is, however, important to point out that each region and each major metropolis had maintained relative functional autonomy and self-sufficiency for a long time. It is this situation that has been challenged and manifestly altered by the emergence of the new trends since 1980s. As was pointed out above, innovations in industry and business and the globalization of the economy played decisive roles in this fundamental transition. The up-graded production systems and their accompanying specialized service industries hastened the rapid accumulation of key urban functions in relatively few chosen metropolitan areas, especially in the Capital Tokyo Metropolitan Area, thus creating even greater concentration.

Table 4.1 shows how fast and to what extent the three major metropolitan areas have been accumulating some key urban functions since 1970. Three important trends may be noted.

Table 4.1 The accumulation of urban functions




Share (%)




Index

Source

Year

Tokyo areaa

Osaka areab

Nagoya areac

Other metropolitan areas and micropolitan areas

Population

Census

1970

23.0

14.8

8.3

53.9



1975

24.2

15.0

8.4

52.4



1980

24.5

14.8

8.4

52.2



1985

25.0

14.7

8.5

51.8



1990

25.7

14.7

8.5

51.1

Banking

BOJ

1970

53.2

24.3

8.0

14.5



1975

57.9

22.0

6.8

13.3



1980

66.9

17.3

5.8

10.0



1985

78.9

11.5

3.6

6.0



1988

83.4

9.4

3.1

4.1

Balance of loan

BOJ

1970

47.6

22.0

7.0

23.5



1975

49.1

21.3

6.5

23.1



1980

49.6

19.6

5.9

24.9



1985

52.6

18.1

5.9

23.4



1989

56.8

17.3

5.1

20.8

Employees of foreign banks

EPA

1969

66.9

29.5

3.5

0.0



1975

76.3

19.5

2.5

1.7



1981

85.6

12.8

1.0

0.6



1986

86.6

12.5

0.5

0.4

Number of foreign corporate establishments

EPA

1972

58.1

19.2

5.7

17.0



1975

62.6

17.2

5.2

15.0



1981

66.8

17.4

5.0

10.8



1986

62.5

18.7

4.9

13.9

Employees of information businesses

EPA

1969

52.5

19.3

7.4

20.8



1975

53.5

16.8

7.6

22.1



1981

55.9

16.3

7.6

20.2



1986

57.5

14.2

8.1

20.2

Employees of specialized service industries

EPA

1969

27.8

14.4

7.4

50.3



1975

32.3

14.8

7.6

45.3



1981

33.8

15.3

7.6

43.3



1986

34.4

15.9

8.1

41.6

Employees of other service industries

EPA

1969

37.3

16.5

7.4

38.8



1975

34.5

18.8

6.7

40.0



1981

35.0

17.3

7.2

40.5



1986

35.4

16.8

6.6

41.1

Wholesale sales

MITI

1970

38.9

25.1

10.9

25.1



1976

38.8

22.1

9.8

29.4



1979

37.7

21.4

10.1

30.9



1982

42.3

19.4

9.5

28.7



1985

41.5

19.5

10.1

28.8



1988

39.7

19.4

11.1

29.8

Corporate headquarters offices

EPA

1970

59.5

22.1

5.8

12.6



1975

58.4

20.1

5.4

16.1



1980

59.4

19.1

5.5

16.0



1985

59.4

18.3

5.5

16.9



1988

59.0

17.5

5.7

17.8

Employees of research organizations

EPA

1969

47.4

12.8

4.5

35.4



1975

49.2

13.5

4.2

33.1



1981

46.3

13.4

5.0

35.4



1986

46.5

13.8

4.8

35.0

Number of students

Ministry of Education

1970

50.6

20.4

6.7

22.3



1975

48.2

20.9

7.1

23.9



1980

45.0

20.1

7.2

27.7



1985

44.0

19.7

7.2

29.2



1989

42.7

19.3

7.4

30.6

Manufacturing production

MITI

1970

20.4

20.4

12.6

36.6



1975

27.0

18.0

12.7

42.2



1980

26.6

16.5

13.2

43.7



1985

25.6

15.8

14.3

44.2



1988

24.8

15.5

14.9

44.7

Employees of cultural services

Census

1970

50.9

17.5

5.7

25.9



1975

50.9

16.6

5.9

26.5



1980

50.7

15.8

6.1

27.4



1985

51.3

15.7

6.1

26.9

Sources: Census, 1985,1990; Bank of Japan, Annual Report 1989; Economic Planning Agency, White Paper, 1989; MITI, Census of Manufacturing, 1988; Ministry of Education, White Paper, 1990.
a. Tokyo area consists of Saitama, Chiba, Tokyo, and Kanagawa prefectures.
b. Osaka area consists of Kyoto, Osaka, Hyogo, and Nara prefectures.
c. Nagoya area consists of PNGu, Aichi, and Mie prefectures.

First, the major functions such as financing, information technology, and internationalization of business have been highly concentrated in the three major metropolitan areas.

Second, among the three major areas, the Capital Tokyo Metropolitan Area has come to dominate in crucial functions such as financial transactions, international business, and corporate headquarters, while the second-largest metropolitan area, the Osaka Metropolitan Area, has been losing ground in the new trend.

Third, as a corollary of the first two trends, the dependence of the micropolitan areas upon the Capital Tokyo Metropolitan Area has increased.

The dominance of the Capital Tokyo Metropolitan Area created two significant movements. The first was the dismantling of the previous urban hierarchical system, and even small and medium-sized micropolitan cities and towns began to establish direct transactional links with the Capital Tokyo Metropolitan Area, bypassing their regional metropolises, especially in terms of transportation and communications. Kushiro and Obihiro, for instance, try to bypass Sapporo, while Kochi and Miyazaki treat Hiroshima and Fukuoka, respectively, the same way.

The second movement was the acceleration of the outward expansion movement within the Capital Tokyo Metropolitan Area. In the latter half of 1980s, it became an undeniable fact that the Capital Tokyo Metropolitan Area further expanded and annexed several adjacent prefectures, and it came to cover 11 prefectures besides Tokyo itself (Kanagawa, Saitama, Chiba, Ibaragi, Tochigi, Gumma, Fukushima, Niigata, Nagano, Yamanashi, and Shizuoka).

In this way, by the late 1980s Tokyo had become a world mega-city that could no longer be compared with any other major city in Japan in terms of its scale and complexity. Furthermore, it is crucially important that Tokyo be analysed, and therefore properly understood, at different levels of the spatial system, namely, (1) the anchor city of an expanded Capital Metropolitan Area, (2) the summit city of a nationwide metropolitan network, and (3) the key city of a global/international, techno-economic, transactional network. Therefore, it is easy to understand that the overwhelming concentration in the Capital Tokyo Metropolitan Area is, in essence, the direct result of the collapse of multidimensional functional spaces upon a single geographical plane, and the intense spatial competition among various urban functions at different levels.

The emergence of Tokyo as a mega-city does not simply reflect the rapid growth of one big city, but rather it implies a change in the total urban and regional system of Japan. The impact of innovations on industry and business and the globalization of the economy affected the entire system, with three significant consequences: (1) competition among various metropolitan areas, (2) high regional and local functional concentrations, and (3) the reorientation of micropolitan areas.

First, as the system of three distinguishable major metropolitan areas disintegrated and the new uni-centred urban system began to emerge, each metropolitan area, including four regional core metropolises, came to compete with the others for further growth and even survival. Osaka and Nagoya could no longer maintain their national influence, and they tried to link up with the new system dominated by Tokyo by exploring ways to differentiate themselves in terms of urban functions and to establish complementary functions to the Capital Tokyo Metropolitan Area. Two big national projects, for instance, were launched in the 1980s in the Osaka Metropolitan Area: one was the construction of the new international airport in Osaka Bay, and the other was the Kansai (Osaka Region) Techno-Research Complex on the hills adjacent to Osaka, Kyoto, and Nara prefectures. All these efforts were directed at re-establishing the region in the new urban system in the age of international business and information technology. Nagoya, the homeland of the Toyota automobile industry, is trying to redefine its metropolitan function as high-tech-based design and innovation.

As traffic congestion worsened, Fukuoka and Osaka keenly competed to establish their status as the second international gateway, particularly to North-East and South-East Asian countries. Kitakyushu threatened the distributional functions of Kobe with respect to international cargo. In short, the key players try hard to stay in the game, but the rules of the game have clearly changed.

Second, the intense concentration within the Capital Tokyo Metropolitan Area has often constituted a national political issue in urban and regional planning, but even higher concentration has been developing at each regional and local level.

Figure 4.2 shows the rate of population increase by city size during the period 1985-1990. In the major metropolitan areas, as city size decreases, the rate of population increase goes up. This implies that in these areas suburban expansion has been under way. In the provincial or micropolitan areas, in contrast, the tendency is clearly the opposite. As city size decreases, the rate of population increase drops sharply. This suggests that the larger a city is, the faster it grows. In particular, the regional core metropolises such as Sapporo, Sendai, and Fukuoka recorded much faster growth than the three major metropolitan areas.


Fig. 4.2 The population growth rate by city size, 1985-1990 (Source: 1990 Census)

Furthermore, the increasing importance of administrative and R&D functions, along with high-tech-based production systems, attracts more employment and business opportunities to urban centres at the regional and local levels. Figure 4.3 depicts the population concentration in the three major metropolitan areas. Throughout the 1980s, the micropolitan areas experienced absolute population declines. It is, however, important to note that, within all these micropolitan areas, the new concentration occurred at the level of cities and towns. In the period 1980-1990, the prefectural seats grew impressively and concentrations at the prefectural level became even higher than those within metropolitan areas (table 4.2). Opinion on the interpretation of the high and rapid concentration at the prefectural level is divided. One interpretation is that these prefectural seats, in fact, put a brake on further depopulation in their areas; thus they function as a "dam." The other view, however, maintains that the concentrated population in prefectural seats often further increases migration to the regional metropolises and eventually to the Capital Tokyo Metropolitan Area; thus they function as a "siphon." Recent statistics indicate that the former interpretation describes the goal of regional policy intervention but the second interpretation coincides with reality, more or less. Even Sapporo - one of the fastest-growing regional cities - is predicted to begin losing its population when the potential for intra-prefectural migration is exhausted by the middle of 1990s.

Third, against this backdrop, each micropolitan city and town is trying urgently to reorient its planning efforts to survive. The small cities and towns in micropolitan areas used to be a part of the larger regional unit, but now this hierarchical system itself has lost ground. Industrial reorganization has taken away their income-generating industries, and only aged people, poorly equipped with high technology, are left behind. In this context, the Fourth National Comprehensive Development Plan was announced by the National Land Agency in 1987. This made a radical departure from the previous key policy by stating that income transfer would replace the growth pole policy in order to cope with the reality of the situation in the micropolitan areas. In other words, the industrial relocation policy was unable to solve the ongoing problems, and each micropolitan area should take initiatives to establish direct economic links in terms of transportation and communications to the metropolitan areas, so that the income flows that are generated in the metropolitan areas can be adequately circulated in the region. In addition to this policy framework, regional revitalization programmes were, in principle, aimed at reorganizing the micropolitan areas on the basis of their own resources. The key was, and still is, how to build a low-density society with full access to modern technology and amenities, in which the principal policy for development must differ from the policies for a high-density society such as Tokyo. Tourism and leisure-related industries seem to be one of the few hopes for these low-density areas, and each micropolitan city and town is groping for a way out. Despite the vigorous development efforts in micropolitan areas, the leisure-related revitalizing "dream" projects suffered a severe setback when the national economy was struck by recession in the early 1990s.


Fig. 4.3 Natural increase and net migration by prefecture, 1980-1985 and 1985

Table 4.2 The concentration of population in the prefectural seats, 1980-1990 (population of prefectural seat/population of prefecture x 100)

¯

Prefecture



1980

1985

1990

Hokkaido

­

­

25.13

27.16

29.62

Aomori

­

­

18.87

19.28

19.40

Iwate

­

­

16.11

16.42

16.61

Miyagi

­

­

38.03

39.39

40.84

Akita

­

­

22.66

23.63

24.63

Yamagata

­

­

18.93

19.43

19.82

Fukushima

­

­

12.19

13.01

13.18

Ibaraki

¯

¯

8.42

8.40

8.25

Tochigi

­

­

21.07

21.72

22.05

Gumma

­

­

14.34

14.43

14.55

Tokyo area:

Saitama

¯

­

6.60

6.43

6.52

Chiba

¯

¯

15.76

15.32

14.93

Tokyo

¯

¯

71.88

70.62

68.82

Kanagawa

­

­

40.05

40.27

40.35

Niigata

­

­

18.67

19.19

19.64

Toyama

­

­

27.67

28.08

28.67

Ishikawa

­

­

37.31

37.35

38.02

Fukui

­

­

30.33

30.60

30.68

Yamanashi

¯

¯

24.77

24.30

23.52

Nagano

­

­

15.56

15.76

16.09

Shizuoka

¯

¯

13.29

13.10

12.86

Nagoya area:

PNGu

¯

¯

20.93

20.29

19.85

Aichi

¯

¯

33.55

32.78

32.20

Mie

­

­

8.59

8.62

8.76

Shiga

­

­

19.93

20.29

21.26

Osaka area:

Kyoto

¯

¯

58.28

57.18

56.14

Osaka

¯

¯

31.25

30.41

30.03

Hyogo

­

­

26.57

26.73

27.33

Nara

­

­

24.63

25.11

25.39

Wakayama

­

¯

36.87

36.92

36.91

Tottori

­

­

21.69

22.24

23.13

Shimane

­

­

17.27

17.61

18.30

Okayama

­

­

29.16

29.86

30.82

Hiroshima

­

­

36.02

37.03

38.09

Yamaguchi

­

­

7.22

7.76

8.23

Tokushima

­

­

30.21

30.88

31.66

Kagawa

­

­

31.67

31.97

32.21

Ehime

­

­

26.68

27.88

29.26

Kochi

­

­

36.18

37.18

38.43

Fukuoka

­

­

23.90

24.58

25.71

Saga

­

­

18.91

19.11

19.36

Nagasaki

­

­

28.10

28.19

28.44

Kumamoto

­

­

29.36

30.23

31.47

Oita

­

­

29.33

31.20

33.02

Miyazaki

­

­

22.99

23.74

24.58

Kagoshima

­

­

28.31

29.16

29.85

Okinawa

¯

¯

26.72

25.75

24.94

Average of major metropolitan areas

30.74

30.34

30.03

Average of micro politan areas

24.02

24.52

25.11

Source: Census, various years.

New growth upon new accumulation: The Capital Tokyo Metropolitan Area

It is now clear that Tokyo has been the centre for the new growth since the 1980s, and various urban functions compete and cooperate to orchestrate and control the hyper-production system of the nation as well as the global economic network. It has often been overlooked, however, that the Capital Tokyo Metropolitan Area is not only the hub of the hyper-production system but also, perhaps, the largest consumer market in the world today. More than 30 million people within the commuting area are consuming daily. Population as a mass is one thing, but more importantly the average disposable income per household in the area is estimated to be around US$30,000 per year. A huge population with high spending power, combined with highly diversified tastes and lifestyles, inevitably make the area the most attractive market in the nation.

In the following, the hyper-agglomeration of urban functions in and around the Capital Tokyo Metropolitan Area will be briefly examined.

As figure 4.4. shows, the Capital Tokyo Metropolitan Area does not dominate every aspect of urban function. Rather, its expansion has concentrated in certain sectors, namely financing, wholesaling, information-related industries, and specialized service industries. As figure 4.5 indicates, the growth in secondary industry is faster in the micropolitan areas in terms of employment, while the metropolitan areas in general are strong in the expansion of tertiary industry, especially in the sector of specialized services, such as the computer software business. It is this specialized service sector that would be the key to understanding the recent transition and agglomeration of urban functions in the Capital Tokyo Metropolitan Area. The clarification of the nature of new agglomeration needs to examine not only the magnitude of concentration, but also the quality of its content. For that, the crucial aspects are as follows:

(1) governmental functions
(2) business and financial/administration functions
(3) distribution and transportation functions
(4) manufacturing and R&D functions
(5) service functions
(6) education and research functions
(7) media functions

First, as the nation's capital, Tokyo hosts the key governmental functions -legislative, administrative, and judicial - as well as foreign diplomatic representatives, both embassies and legations. The executive offices are concentrated in one specific area, Kasumigaseki, which is adjacent to the national Diet (parliament). In addition to these central and national administrative and legislative authorities, there are also numerous Tokyo offices of local governments. These facts in themselves do not necessarily make Tokyo special compared with the counterparts in other nations, but the structure of administration and bureaucracy really makes a substantial difference.


Fig. 4.4 The concentration of economic functions in Tokyo Metropolitan Area, 1985 (Sources: Census, 1985, 1990, Mm, Census of Manufacturing, 1988; MITI, Census of Commerce, 1988; Report by Bank of Japan, 1989; Economic Planning Agency, White Paper, 1989; Ministry of Education, White Paper, 1990; Ministry of Construction, White Paper, 1990)

More than two-thirds of all public levies are collected by the national government, and a considerable proportion is redistributed throughout the nation by way of fiscal expenditure. As a result, all local governments combined spend two-thirds of all taxes, including their own local taxes. This fiscal structure in intergovernmental relations unavoidably attracts various administrative functions to the capital Tokyo.


Fig. 4.5 Employment increase by industry and area, 1985 - A


Fig. 4.5 Employment increase by industry and area, 1985 - B

Furthermore, the government holds the power of authorization and permission, which necessarily encourages numerous office functions, of both the public and private sector, to concentrate in the capital. For instance, numerous kinds of authorization and permission by the Ministry of Transport alone amount to more than 10,000 a year!

Second, the power of authorization and permission could be crucial to certain industries, and naturally proximity to the government, both geographical and otherwise, becomes important in running their businesses. It should, however, be noted that there is more to the reasons why the headquarters functions of industry and business are concentrated in the capital, especially in such areas as Marunouchi and Otemahci, than just easy access to governmental power. As decision-making points and command posts, headquarters functions come to congregate in certain locations so as to establish the best access to business information, both domestic and international. In the age of telecommunications and computerization, nothing is more precious than business lead-time.

Financing its business is, perhaps, by far the most important function of all business administration. Tokyo has been the largest financial centre of the nation for a long time, but since the 1980s Tokyo has become one of the key international financial centres and the Tokyo Stock Exchange exceeds the New York Stock Exchange with respect to stock volumes and stock values. Financial business is also the forerunner to implementing information technology. The recent development of a highly sophisticated computer system for banking costs approximately US$1 billion of capital investment per bank. In the age of international business and telecommunications, these investments are unavoidable. Thus they create more demand for IT-based producer service industries in the area.

Third, banking and insurance are not the only businesses to have been highly computerized. Rather, the thoroughgoing development of technological innovation has come into play in industries such as distribution industry and high-tech-based manufacturing industry. The distribution system in Japan used to be one of the most complex systems. Each industry and its subgroup had its own distributional network, and these differed by region. By the development of high-speed transportation networks throughout the nation, these old systems were replaced by more cost-efficient, large-scale distribution systems, which have access to both production sites and markets.

Transportational accessibility becomes crucial, and numerous distribution centres have been constructed and operated on the outer fringes of the Capital Tokyo Metropolitan Area. These distributional reorganizations interconnected the market and various production sites outside the previous metropolitan area, and thus created a functionally integrated, expanded Capital Tokyo Metropolitan Area in the 1980s.

Fourth, the Capital Tokyo Metropolitan Area accumulated the largest manufacturing agglomeration in the nation throughout the period of rapid techno-economic growth and after, but the nature of manufacturing industry and its locational characteristics have changed drastically during the past two decades. Through industrial reorganization, heavy industry, which was once the leading sector of the entire economy, was replaced by high-tech-based, light and knowledge-intensive industries. A direct consequence of this was the shift in industrial location from the coastal industrial zone, which was most suitable for heavy industry, to the inland/interior industrial zone, which usually has access to clean air and water, high-speed transportation such as highways and airports, and the markets (fig. 4.6).

In this way, manufacturing industry has been decentralized on three different geographical scales: (1) within the metropolitan area, from the coast to inland, (2) to the micropolitan areas, and (3) to offshore operations.

The production process itself was highly integrated by computer systems, and factory automation has been further developed; together, these have had two significant consequences. One was that the importance of marketing and building efficient distributional channels was increased. The other was that the functions of R&D became crucial to the competitive edge across all manufacturing industries. As was pointed out earlier, in 1985 total R&D investments came to exceed capital investments in Japan. This crucial fact implies that rapid economic growth and the expansion of employment are expected in places where R&D investments are located. Table 4.3 and figure 4.7 clearly show the staggering concentration of R&D investments in the Capital Tokyo Metropolitan Area.

Fifth, the implementation of information technology in industries such as banking, wholesaling, and retailing, and in manufacturing itself, has spurred economic expansion and boom in the nation. Also, it has created the fastest-growing sector among all industries, namely the specialized producer service for business and industrial establishments, as well as for affluent consumers. Here again, the spatial discrepancies are prominent and the major metropolitan areas, in particular the Capital Tokyo Metropolitan Area, have grown the most and the fastest in terms of both employment and economic value.


Fig. 4.6 Industrial decentralization from Tokyo, 1975-1984 (Source: Kiyoji Murata, ea., Industrial Capital Tokyo, Tokyo: Toyo Keizai, 1988)

Sixth, the government has been taking the policy initiative to decentralize universities and colleges, since the unbalanced development patterns would be reproduced and magnified by the concentration of institutions for higher education. During the past two decades, numerous universities and colleges in Tokyo have been relocated or newly built outside the city, although they remain within a distance of 45-50 km from the city centre, and they have also tried to re-establish links with the fastest-growing and most dynamic city. However, they have found it hard to counteract the high concentration in Tokyo, since such departments as science and engineering usually worked closely with the R&D laboratories in the region, and other departments were also related to various metropolitan activities.

Table 4.3 R&D establishments in Tokyo Metropolitan Area


Materials

Assembly

Consumables


Total

Chemicals

Oil/coal

Ceramics/soil &stone

Iron &steel

Non-ferrous metals

Metal goods

Subtotal

General

Electrical machines

Transport

Precision

Subtotal

Food- stuffs

Fibre

Paper& pulp

Others

Subtotal

Others

Japan

842

282

21

32

27

27

12

401

49

96

31

15

191

70

64

24

28

186

64

Ibaraki

21

5

1

1

-

2

1

10

1

4

-

-

5

1

2

1

-

4

2

Tochigi

10

2

1

1

-

2

-

6

-

1

-

-

1

2

-

-

-

2

1

Gumma

41

7

-

-

1

1

-

9

-

1

-

-

1

4

-

-

-

4

0

Yamanashi

2

-

-

-

-

-

-

-

-

1

-

1

2

-

-

-

-

-

0

Nagano

7

2

-

-

-

-

-

2

-

1

-

-

1

3

1

-

-

4

0

Subtotal

54

16

2

2

1

5

1

27

1

8

-

1

10

10

3

1

-

14

3

Saitama

63

22

2

5

1

5

2

37

1

5

4

2

12

3

-

2

2

7

7

Chiba

44

14

1

2

1

1

3

22

4

1

1

-

6

6

2

-

3

11

5

Tokyo

167

63

1

5

3

4

-

76

10

13

4

10

37

13

3

6

11

33

21

Kanagawa

149

37

9

2

3

2

3

56

15

30

8

3

56

14

6

-

3

23

14

Subtotal

423

136

13

14

8

12

8

191

30

49

17

15

111

36

11

8

19

74

47


477

152

15

16

9

17

9

218

31

57

17

16

121

46

14

9

19

88

50

Source: National Land Agency, Annual Report on Regional Economy, 1988.


Fig. 4.7 Locations of R&D by region, 1985-1987 (Source: National Land Agency, Annual Report on Regional Economy, 1988)

Lastly, media functions are mostly concentrated in Tokyo, where information flows in from all over Japan and from abroad. All the major daily newspapers are affiliated with major television networks, and almost all key programmes are produced in Tokyo. Without exception, the major media conglomerates, including NHK, a very influential public television company, have their headquarters in the middle of the city. The irony is that these media often criticize the high concentration in the uni-centred urban system but they are the last to move out.

New agglomeration and ''Tokyo problems''

As the economy again grows rapidly, the question has arisen whether or not Tokyo will be able to support the transitional process, providing the necessary infrastructure and up-graded facilities not only for business and industry, but also for citizens to improve their standard of living. What are the acute problems that Tokyo has to cope with? What are the potential obstacles to further growth in the twenty-first century? These are the questions to be examined in this section. First, the general conditions of metropolitan development and transition will be reviewed, and then some urban issues, which are new to Tokyo, will be studied.

As the Capital Tokyo Metropolitan Area expands, the demand for water, both domestic and industrial, has increased considerably, but at the moment and for the foreseeable future the water supply in the metropolis is secure in principle.

As for the energy supply, both electricity and gas (LNG and LPG) are sufficient. After two oil crises, the diversification of power-generating sources has taken place, and the dependence upon oil has been considerably reduced. The nationwide electricity supply network has also been developed so as to cope with and adjust to excess demand at the marginal level through interregional supply arrangements.

As general awareness of environmental issues became well established in society, environmental concerns came to constitute an indispensable part of urban and regional planning in the 1980s. In the Capital Tokyo Metropolitan Area, notorious air pollution such as photochemical smog in the 1960s and 1970s has been greatly reduced by strict regulations and the mandatory introduction of flue gas desulphurization processes in various factories and plants. The overall level of air pollution in the area has been improved, but there still remains contamination by automobile exhaust fumes. Exhaust emission control has been effective, but the ever-increasing auto-traffic in general weakens its effect. As for water pollution, the quality of water, in both the river and the Bay, is also considerably improved by efficient sewage-processing plants. In some large-scale redevelopment projects, recycled water has begun to be used. Environmental issues have now become more related to the preservation of the ecological system in the exceedingly crowded metropolitan environment.

One of the biggest issues for the local authorities in the metropolis is waste, both industrial waste and household waste, and in particular non-combustible waste, not because the technology is not available to process such waste, but rather because of problems in the geographical location of processing facilities. The local administration has to cope with its citizens' "NIMBY" (Not-In-My-Back-Yard) attitudes. The average weight of daily waste per person has almost doubled in the past two decades, and in the metropolitan areas is twice as great as that in the micropolitan areas. In Tokyo, 1.1-1.3 kg of waste per person has to be collected daily. In the city of Tokyo alone, two-thirds of the total waste (2.6 million tons per year) is processed (burnt), while the other one-third is used for landfill in the Bay. In the next decade, more effective collecting and processing systems will be needed, and the administrative principle will be that the waste should be processed where it is produced, i.e. in our own backyards.

Transportation problems constitute a multifaceted planning issue in Tokyo. As regards the mass-transit system, the train and subway systems are run at the limits of their safety capacities, and the well-known commuters' "hell" is a part of daily life for Tokyo and its adjacent prefectures. The road system is narrow and congested, and fails to offer effective alternatives for commuting by bus. The fundamental reason for this is still the fact that workplaces are highly concentrated in the central parts of the city while the residential areas are dispersed and developed further and further away from the workplace. Suburban development in Tokyo is strikingly different from that in the United States, and the filtering process in residential areas does not work here. In general, the more recent your arrival in Tokyo, the further away you must find your housing, thus creating an enormous outward expansion along the major commuter routes.

As for private transit, the automobile seems to be becoming an economically non-viable means of transportation during the working day in the middle of Tokyo. The notorious traffic congestion in and around Tokyo is essentially caused by the structure of the road system, which radiates from the city centre, without having an effective bypass system for through traffic. The construction of beltways, belt highways in particular, connecting all the interregional highway systems outside of the densely inhabited areas is the top priority in planning for transportation. The biggest threat and obstacle to the implementation of this policy lies in the difficulty of acquiring the necessary land owing to the formidably high price of land. Thus transportation issues are directly related to land issues in the Capital Tokyo Metropolitan Area.

From the viewpoint of micro-economics, land issues in Tokyo are simply the result of the fact that the demand for land exceeds supply, which is due to competition for space among various urban functions of the global city Tokyo. The cause may be simple, but the consequences and implications are tremendously complex and serious.

Of the various types of competition for urban space, the demand for office space has been explosive, especially in the CBD area close to the government and corporate headquarters. In addition to the growth in tertiary industry and its advanced service sector, the implementation of information technology has accelerated the construction of office buildings adequately equipped with state-of-the-art technology and telecommunications. The demand for "intelligent office buildings" remains strong, and new construction of these kinds of building has spread into the surrounding areas, especially into the redevelopment areas of the waterfront. The situation is best illuminated in the office vacancy rate in Tokyo (fig. 4.8). Regardless of the phases of the business cycle, office space in Tokyo is virtually fully occupied. This situation has remained unchanged even during the current economic setback.


Fig. 4.8 The trend in the office vacancy rate in Tokyo, 1975-1987 (Source Economic Planning Agency, White Paper, 1990)

In response to the increasing demand for office space, two related planning efforts are being undertaken. One is to redevelop the present office districts as high-rise office centres, and the other is to develop new decentralized business centres around the present CBD area. The Tokyo Metropolitan Government has been active in restraining high-rise building in the central business districts, while encouraging development of sub-centres such as Shinjuku, Shibuya, Ikebukuro, Ueno, Osaki, and Kinshicho. In addition, it is trying to keep the last frontier, the landfilled vast open space on the Bay, as the final resort. The purpose of this decentralization policy is to reduce the pressure of high land prices and congestion. The overall supply of office space in the next decade is now predicted to meet increased demand, and a serious shortage of office space will not occur in Tokyo.

Whereas office space is provided in accordance with the demands of the economy and innovations in engineering and construction, the housing situation is disturbing. There is a public consensus that drastic measures are needed to remedy the situation. The housing issue is perhaps the most serious of all Tokyo's problems.

In 1967 the number of total housing units in Japan exceeded the number of total households, meaning that the most basic housing condition, in terms of providing shelter, was resolved. This does not mean that there was no housing problem. Quite the contrary, the housing issue constitutes the most acute problem in Tokyo, since most people feel their housing conditions are inadequate - too distant, too small, and too expensive. Although 1.5 million housing units are constructed in Japan each year, the majority of these are in the metropolitan areas. Tax advantages for home-ownership have been introduced and special loans for housing at lower rates and longer terms have been provided, but the demand for adequate housing is much higher than the supply. In the nation, more than 60 per cent of households are home-owners, but in Tokyo that rate drops sharply to just above 40 per cent (table 4.4). A similar percentage of Tokyo residents find their housing in privately rented houses and apartments. The cost of housing creates constant pressure on the standard of living, and the average age of the first-time home-buyer is considerably higher than in other advanced economies (table 4.5). The price of a private single-family detached house has become astronomically expensive, and it requires nearly 10 years' income (table 4.6) for a small plot of land and the house on it! Despite high annual incomes by international standards, their housing conditions make most residents of Tokyo feel deprived and draw the conclusion that it is the land system that creates these unjust conditions.

Table 4.4 Home-ownership and rental housing in Tokyo


Tokyo




No. ('000)

Per cent

Japan (%)

Owned houses

1,762

44

63

Rented houses

2,238

56

37

Public

393

10

8

Private

1,612

40

24

Company housing

233

6

5

Total

4,000

100

100

Source: National Land Agency, 1990.

Table 4.5 Home-ownership by age in Tokyo Metropolitan Area

Age

Home-ownership (%)

Average

54

-24

4

25-29

16

30-34

37

35-39

54

40-44

64

45-49

68

50-54

72

55-59

76

60-65

75

65+

73

Source: Ministry of Construction, White Paper, 1990.

Against this backdrop, local governments are trying to take some policy initiatives, including changes in and reinforcements of land-use regulations, in particular zoning policy, but fragmentation and land-use changes are unstoppable. It is important to point out that the land issue and the related housing issue are not a single problem, but rather a complex and compound issue; they can be solved only by the implementation of a broader and more powerful comprehensive planning scheme.

Table 4.6 The relationship between annual income and the cost of a standard apartment in Tokyo

Distance from the city centre (km)

Ratio of yearly income (1989)

0-10

17.28

10-20

17.28

20-30

8.43

30-40

7.68

40-50

7.00

50-60

7.04

60+

5.17

Average for the Tokyo area

8.90

Source: Ministry of Construction, White Paper, 1990.

Another serious consequence of spatial competition among various urban functions is depopulation in terms of inhabitants in some areas of Tokyo, leading to the disintegration of some communities and neighbourhoods. The latest census results show that the most depopulated areas in Japan are small towns and villages in remote places in micropolitan areas and the centre of Tokyo, where office buildings have been enthusiastically constructed. The older housing stock, with the older residents gone and a gentrification process under way, fails to exude a sense of place, thus the old traditional urban communities tend to vanish. New development tries to create more space, not place. There seems to be no place for the disadvantaged and the handicapped in this process, and so far very little low-income housing has been provided in the new developments. The local governments work hard to cope efficiently with those in need through their welfare and social service programmes, Once the community system has disintegrated, the cost of maintaining certain standards of living will become prohibitive, and the burden should be linked to the fast-growing sector of the metropolitan economy.

In response to the gentrification movement, many citizens began to realize the importance of the cultural heritage of the city, and historical preservation programmes (covering historic buildings and parks, and historic districts and landscapes) have been organized. The National Trust system is under consideration as possibly being applicable to the programme.

Finally, natural hazards, namely earthquakes, have always been a top priority planning issue in Tokyo. The breaking up of the ground, the collapse of smaller buildings and elevated highways, and multiple fire hazards are well simulated in civil engineering. Fire drills are compulsory in schools, but the effects are yet to be seen. Surprisingly, Tokyo remains an open, defenceless city in the face of a nuclear threat. Making the national urban system more impregnable is crucially important in this regard.

The new growth and hyper-concentration since the 1980s have created new types of urban problems in Tokyo. Here again, the rapid internationalization of the economy and the irreversible impacts of information technology have played crucial roles in the changes.

First, Japanese society is rapidly becoming an ageing society, owing to the fact that life expectancy is constantly rising, now being over 80 years. At present, the proportion of elderly people is much higher in micropolitan areas, but the absolute number of people over 65 years old is increasing in metropolitan areas. The post-war baby-boomers will be reaching the age of retirement in the first decade of the twenty-first century. The problems associated with ageing are twofold. One is the burden of supporting these old people. The distribution of elderly people is far from even, and local taxes will not be able to fill the gap between the demand for social welfare programmes for elderly people and fiscal affordability. The other problem is that, since the rapid economic growth in the 1960s, the various urban designs and allocations of social amenities have been aimed at people who work. The potential problems are now definitely just around the corner.

Second, rapid internationalization brought unexpected numbers of foreign workers into Tokyo. This multiple ethnicity is quite new to the metropolis. The number of foreigners grew by more than 200,000 in the five years from 1986 to 1990, reaching a level of 1,075,317, which is 0.9 per cent of the total population. Even if the number of Koreans residing in Japan is excluded, the figure more than doubled from 190,000 to 390,000. The more serious aspect is the explosive increase in illegal immigrants. The number of illegal immigrants in custody alone increased fivefold from 1986, from 8,100 to 36,000. They come mainly from such countries as Bangladesh, Korea, Malaysia, the Philippines, and Pakistan. South American countries, such as Brazil and Peru, are supplying new sources of illegal immigrants. These illegal immigrants are mostly employed, if at all, as unskilled manual labourers and in the service sector, and are often outside the social security net, lacking even the minimum medical care. Within the metropolitan area, they tend to gather to live, establishing ethnic ghettoes in the midst of poverty and serious crime.

Third, as has been pointed out above, the urban land issue has complex and serious consequences for urban planning and urban life itself. The biggest problem might lie in the fact that the gap between the haves and the have-nots is widening and relative urban poverty is possible in the midst of an affluent society. In a society of winner-takes-all, the issue of social justice will soon be put on the political agenda. In addition to economic inequality, and perhaps more realistic from the planning viewpoint, "techno-poverty" will constitute a major urban problem. Technological innovations are implemented in the urban human-made environment so rapidly that some people are excluded from the benefits of new technology. Older people, in particular, fail to adjust themselves to the new environment, while sharing the burden with the rest. Some cannot use even the cash dispenser machines at banks. Friendlier machines and systems are yet to be developed.

Future prospects and policy implications

This section will conclude the analytical review of the transitional process of the Japanese urban and regional system since the 1980s, with special emphasis on the hyper-concentration in the Capital Tokyo Metropolitan Area.

The mega-city of Tokyo is still growing rapidly, and its development is even accelerated in order to attract more key urban functions to the area. Where is the future for Tokyo, then?

First, in terms of physical space, there are two potentially available locations for further development. One comprises the eastern and northern parts of the metropolis, namely such prefectures as Chiba and Ibaragi. The other lies in the middle of the city centre, where obsolete infrastructure and old housing stock need to be redeveloped (figs. 4.9 and 4.10). Waterfront developments, however, will be more experimental, rather than substantial, providing models for the future. If these two different types of development are appropriately linked and coordinated, then Tokyo will still be able to offer vigorous urban dynamism.

Second, in terms of policy implications, the future lies in successful decentralization, which must be tackled on three different geographical scales.


Fig. 4.9 The potential area for further development en Tokyo Metropolitan Area (Source: National Land Agency, White Paper on National Land Use, 1990)

First, the Tokyo Metropolitan Government has been advocating effective decentralization within the central business districts, providing multiple business centres around the present highly congested business areas. The Metropolitan Government demonstrated its determination by moving its governmental office from the crowded Marunouchi area to the new business centre in Shinjuku, while leaving the waterfront development on the Bay for the future.

Second, the Governors of the Capital Tokyo Metropolitan Area and the National Land Agency work together to promote intra-metropolitan decentralization. Policy initiatives have been launched, and the means to achieve the goal are twofold. One is to establish an effective transportation system, linking all radiating, uni-centred highway systems through a layered belt highway system, so that key urban functions can be widely distributed over the metropolitan area (fig. 4.11). The other is to redistribute the business centres themselves over the area, linking them to each other with high-tech-based telecommunications networks and rapid transit systems, thus creating reverse commuting flows. The functions of government and business headquarters/administration are expected to disperse (fig. 4.12).


Fig. 4.10 The area requiring redevelopment in Tokyo Metropolitan Area (Source: National Land Agency, White Paper on National Land Use, 1990)


Fig. 4.11 A schematic highway network plan of Tokyo Metropolitan Area


Fig. 4.12 A schematic multi-centred structural plan of Tokyo Metropolitan Area

Third, at the national level, the National Land Agency and the various ministries have been coordinating to redesign the inter-metropolitan network, by promoting the accumulation of central urban functions in other metropolitan areas and regional metropolises. Osaka, Nagoya, and Sendai are viable candidates to become alternatives to Tokyo with respect to key functions, including governmental functions. Since the middle of the 1980s, serious debates on the possibility of transferring the nation's capital have been under way.

All in all, to what extent these planning efforts to decentralize the urban system are successful will be highly dependent upon how effectively decentralization at the three different levels is coordinated.

Finally, after stating all these needs for decentralization, one special comment should be added on the paradox of decentralization.

Centralization and decentralization both occur in a system, and, by definition, change in one subsystem will inevitably generate repercussions in the rest of the system. Decentralization at one level of the system often triggers centralization at different levels and/or in other parts of system. The decentralization of international financial transactions into a bipolar system triggered hyper-concentration in Tokyo. If Tokyo overcomes its centralization problems and successfully decentralizes its functions over the intra- and inter-metropolitan system, then this will create similar hyper-concentrations in, say, the Osaka or Sendai metropolitan areas. Furthermore, if Tokyo becomes decentralized, then its potential to attract business and other urban functions will inevitably rise, thus a new concentration will undoubtedly come into play again. Any policy effort towards decentralization should take into account its "self-defeating" nature. Perhaps the present planning practice of "choking and easing" might be one politically as well as economically viable means to accomplish longer-term reorganization and adjustment.

References

Castells, M. (1989), The Informational City: Information Technology, Economic Restructuring, and Urban-Regional Process. Oxford: Basil Blackwell.

Glickman, N. J. (1979), The Growth and Management of the Japanese Urban System. New York: Academic Press.

Nakamura, H. and J. W. White (1988), "Tokyo." In: Mattei Dogan and John D. Kasarda (eds.), The Metropolis Era: Mega-Cities, vol. 2. Newbury Park: Sage, pp. 123-156.

Kodama, F. (1991), Analyzing Japanese High Technologies: The Techno-Paradigm Shift. London: Pinter Publishers.

Sassen, S. (1991), The Global City: New York, London, Tokyo. Princeton, N.J.: Princeton University Press.

Appendix


Fig. 4A.1 Reference map of Japanese regional system (Source: Glickman, 1979: Appendix)


Fig. 4A.2 The three major metropolitan areas and the regional core cities

(introductory text...)

Sung Woong Hong

Introduction

Over the past three decades South Korea has achieved economic development by relying heavily on export growth. South Korea's trade volume accounted for more than two-thirds of its GNP and 2 per cent of world trade in 1990. The South Korean share in world trade has increased 10 times since the 1960s. Overseas travel has been increasing at a rate of 19.8 per cent annually since the adoption of a liberal economic policy in the mid-1980s. In 1989, 46 out of 1,000 persons travelled abroad. Incoming foreign travellers have also increased at a rate of 13.6 per cent annually since 1985. Currently South Korea is a member of 872 international organizations.

Commodity trade, the cross-border movement of labour, and foreign direct investment will be expanded further. As the Uruguay Round (UR) reached a successful conclusion in 1994, the liberalization of trade in services and commodities on a global basis will be expanded further. At the same time, following the formation of regional economic blocs such as the European Union (KU) and the North American Free Trade Area (NAFTA), Asian Pacific countries have been actively engaged in an effort to form regional economic blocs. This trend towards regional cooperation will enhance cooperation among countries in the region.

Recently, many cities in North-East Asia and the Asia-Pacific region have been initiating regional cooperation on a city-to-city basis. Some of the medium-sized cities actively engaged in such efforts include Kobe, Kitakyushu, and Niigata in Japan, Khabarovsk, Sakhalin, and Irkutsk in the Commonwealth of Independent States (CIS), Jilin, Dalian, and Hunchun in China. As intraregional cooperation progresses, many South Korean cities, including Pusan, Pohang, Ulsan, and Incheon, will resume international functions. There are six cities in South Korea with a population over 1 million. Some of these cities, currently active on a regional basis, will grow into taking global roles in future as the globalization trend advances.

However, with a great concentration of information and professional manpower, Seoul will remain the centre of international affairs in the nation. This chapter traces South Korea's compressed economic growth and the related pattern of spatial development. It also focuses on the development of Seoul's global functions in the process of industrialization. A global city is defined as a city whose "environment" provides global competitiveness for its residents and firms.

In the next section of this chapter, the determinants of globalization are explained and the characteristics of a global city are investigated in terms of the competitiveness of the residents. In the third section, regional development and the migratory pattern in South Korea are reviewed in the light of its economic and industrial development. The fourth section analyses the centrality of Seoul in domestic and global functions. In the fifth section, the consequences of the policy of growth control of past decades are evaluated in the light of recent development patterns in Seoul and the Capital region. Signs of change in the spatial policy are investigated along with globalization processes. The final section summarizes the possible impacts of trade liberalization and industrial restructuring processes on the future roles of Seoul and the Capital region.

The determinants of a world city

What are the factors making a city global? What are the characteristics of residents that make the city global? What makes the spatial domain of people and industry global? If the orientations of the residents of the city are global, is the city global? What are the city "environments" that make people and industry located in the city competitive in the international arena? These are some of the main questions we have to raise at the outset.

A number of published works attempt to define the characteristics and hierarchy of world cities (Cohen, 1981; Friedmann, 1986; Soja, 1986). World cities, according to Friedmann, are characterized by the location of major financial centres, headquarters of transnational corporations (TNCs), and international institutions, the rapid growth of business services, important manufacturing centres, major transportation nodes, population size, etc. (Friedmann, 1986). It is also suggested that the most fundamental feature of a world city is its global service functions (King, 1990). Indeed, "the world city lies at the junction between the world economy and the territorial national state" (Friedmann and Wolff, 1982).

Globalization is not a static concept. The concept of world city varies over time and differs by nation. In this era of globalization, information, commodity trade, and factors of production are shared among all nations. The contrasting ideology of the East and the West has lost its pointedness. In spite of the differences in ethnic and historical backgrounds, nations are converging in their economic objectives and values. In the process, globalization has also been accelerated with the Uruguay Round. The differences in institutions and business practices are also narrowing. All nations are tied to one another through global institutions and individuals in their cities. Therefore, all nations have global cities for their own survival and most cities function well because their residents have personal networks with other world cities.

Traditionally, global industries possess firm-specific comparative advantages over domestic and overseas markets. Firm-specific comparative advantages are linked to the individual firm's capabilities new products requiring advanced production technology and outstanding capabilities in financing, marketing, planning, etc. Another important comparative advantage stems from the socio-economic context of the firm's location. The factors determining these locational advantages range from the work ethics of workers, to the amenities of the city, to the wage and industrial structure of the city where the industry is located or originated. The comparative advantage originating from the location factors can thus be defined on a national, regional, or city basis. Consequently, a world city should be analysed in the light of its specificity in a national context - its urban system, the stage of economic development, and the nature of globalization of the nation.

In classical locational theory, the transportation costs of raw materials and the accessibility of the firm to the market have been treated as the main locational factors. However, in recent years, with the rapid developments in transportation and information technology, the importance of low labour costs or cheap raw materials, as low-order advantages, has decreased. Instead, the locational factors gaining more importance are those created by the industries and the region. They include training programmes for specialists and skilled labour, professionals, R&D centres, access to specific information, and an environment conducive to the coordination of various activities of supporting and related industries. The comparative advantage of industry is a dynamic concept. As industrial development progresses, comparative advantages should be improved in order to be sustained. In the process of industrial restructuring, the accumulation of knowledge- and information-oriented industries in Seoul seems to create such a dynamic environment, suitable for the development of sophisticated and diversified production activities.

A study of the world city can also be based on major determinants that work collectively and cumulatively. Porter (1991) listed four major categories of locational factor in a nation that create locational advantages for industry: factor conditions, demand conditions, related and supporting industries in the nation, and the firm's strategy, structure, and rivalry in relation to other firms. In figure 5.1, Porter's diamond is extended by two additional determinants, namely, government policy and access to the outside world. In the following sections, we will explore the role of government policy and foreign exposure, along with the four determinants, in the process of globalization of Seoul.


Fig. 5.1 The determinants of a global city

During the past 30 years of compressed economic growth, government policy has had a large influence on industrial and spatial development in South Korea. The central government selected strategic industries and developed industrial estates for them, and also employed administrative and financial assistance extensively to support those industries. With the great influence of the central government, domestic and international business transactions are conducted by the central government on a face-to-face basis.

However, with scarce natural resources and a small domestic market, the South Korean economy has inevitably been tied closely with overseas markets. Because of this overseas orientation, the city's contacts with the outside world have proved to be an important attribute in attracting central decision-making functions of various industries. Starting with the large corporations that led South Korea's overseas trade over the decades, other related industries and supporting services are clustered in Seoul and enjoy close contacts with central government agencies and other key decision-making bodies. In addition, manufacturing subsidiaries and vendors not only benefit from close contacts with trading corporations, but also are exposed to various opportunities in a cluster of related businesses. Small vendors establish direct contacts with large overseas clients as a spin-off and these often turn into key suppliers of specific items.

In the South Korean economy, where economic growth oriented to the overseas market was led by strong support from the central government, the central government and international exposure play critical roles in determining the competitiveness of industry. Access to the central government and international exposure are thus important determinants of the global competitiveness of an industry and a region. The determinants of regional growth are, therefore, also the determinants of a city's globalization. All of the determinants of industrial competitiveness are intertwined and reinforce each other in a circular and cumulative fashion ready for the competitiveness of industry and the globalization of a city, at least in the case of Seoul. The global nature of a city should be regarded as the product of the synergistic interplay of the collectivity of determinants.

The spatial pattern of industrialization

Economic policy and regional development

The growth of major cities in the 1960s

In the 1950s, the South Korean economy was barely recovering from the destruction of the civil war. In 1961, per capita GNP was US$83, and agriculture and fishery had the lion's share of GNP (36.9 per cent). The volume of exports was 14.4 per cent of imports, and 78.1 per cent of exports consisted of primary products. Domestic savings were a mere 2.9 per cent of GNP and the population was growing at an annual rate of 3 per cent. There were shortages of domestic raw materials, skilled labour, and capital. The prospect of economic growth was bleak.

The South Korean government launched the first Five-Year Economic Plan in 1962, with an emphasis on expanding labour-intensive light manufacturing. With overseas financing, the plan was expanded to improve the trade balance by increasing production in import-substituting sectors. With limited capital to invest, the investment policy was unavoidably selective in choosing the targets of industry and area. The strategy of growth poles in regional development projects and unbalanced growth in industrial policy were the only options open to the government at the time. The economic planning strategy chosen in the 1960s was, in fact, selective governmental support for export-oriented manufacturing industry, particularly labour-intensive light industries such as shoes, plywood, and textiles. In order to raise the capital to finance public and private investment projects, the government forced domestic savings by high interest rates and taxes, and also by a reverse interest structure (for example, 30 per cent for fixed-term deposits and 26 per cent for a loan in 1966). In addition, international borrowing was extended to finance various infrastructural and regional development projects and to pay for the large trade deficit.

Economic growth in the 1960s averaged 8.8 per cent, almost doubled from the 1950s (4.5 per cent). Growth was prominent in the manufacturing and social overhead investment sectors. Per capita GNP increased sharply during the first five-year planning period, from US$83 in 1961 to US$125 in 1966, and doubled again by the end of the second economic plan (1967-1971) to US$278. Exports increased by 36.2 per cent during the period of the first economic plan. The share of manufacturing products in exports increased from 21.9 per cent in 1961 to 86.0 per cent in 1971.

During the 1960s the growth of industrial activity was heavily concentrated in the vicinity of the major metropolitan areas. To take advantage of the good infrastructure, manufacturing activities were prepared to locate in the major metropolitan areas. Using the same reasoning, the government established sizeable industrial estates in and around Seoul, Pusan, and Taegu. During the period 1960-1969, Seoul accounted for 38.5 per cent of the increase in manufacturing employees (553,790) and Kyungnam province surrounding Pusan took 23.7 per cent. Thus Seoul's share in the nation's employment increased from 23.3 per cent in 1960 to 33.9 per cent in 1970 (see table 5.1). The growth in manufacturing employment in Seoul and Kyunggi province far surpassed that in other regions. The share of manufacturing employment in the Capital region (Seoul and Kyunggi province) increased from 33.6 per cent in 1960 to 49.8 per cent in 1970 (see fig. 5.2).

The regional balance strategy in the 1970s

In the early 1970s, the world economy was shaken by the energy crisis. In addition, the stability of international trade regulated by GATT and IMF was jeopardized by the instability of the US dollar. Domestically, the same period was also marked by a chain of alarming political events, such as "Yushin" (a "revitalizing reform" that included a constitutional amendment to change presidential elections from direct to indirect in October 1972) and the declaration of a National Emergency (December 1972). These events dampened the growth of the Korean economy for several years in the early 1970s.

The South Korean government launched the Third Five-Year Economic Plan (1972-1976) with an emphasis on establishing basic and strategic industries to provide a domestic supply of material inputs for the export sector. To this end, the government directed its resources to the heavy and chemical industries.

In 1973, the economy recovered from the shocks. After 1975, with the recovery of the world economic situation, the effects of the industrial policy were eloquently demonstrated in terms of the growth in labour productivity. The scale of manufacturing operations also increased, from 38.6 workers per firm in 1972 to 61.1 workers in 1981, and the number of establishments also increased from 25,248 in 1972 to 33,431 in 1981. In addition, the government's support for key industries started to have an effect. The share of heavy industry in GNP increased from 35.9 per cent in 1970 to 52.4 per cent in 1981. By 1981, per capita GNP reached US$1,678 (1970 prices).

Table 5.1 Industrial location by region, 1960-1989


No. of workers ('000 and %)

Value-added (billion won and %)

Region

1960

1970

1980

1989

1960

1970

1980

1989

Seoul

64

291

445

526

7

443

6

17


(23.3)

(33.9)

(22.1)

(17.0)

(30.9)

(33.2)

(16.2)

(11.5)

Incheon/Kyunggi

28

104

478

982

2

175

8

49


(10.3)

(12.1)

(23.8)

(31.8)

(10.5)

(13.1)

(22.4)

(33.3)

Pusan

-

137

319

383

-

222

4

11



(15.9)

(15.8)

(12.4)


(16.6)

(11.3)

(7.6)

Kyungnam

65

60

231

407

5

156

7

28


(23.5)

(7.0)

(11.5)

(13.2)

(24.3)

(11.8)

(18.9)

(19.2)

Kangwon

9

19

22

29

1

20

0

1


(3.1)

(2.2)

(1.1)

(1.0)

(4.1)

(1.5)

(1.3)

(1.2)

Chungbuk

7

20

40

73

0

38

1

4


(2.5)

(2.3)

(2.0)

(2.4)

(0.6)

(2.9)

(2.1)

(2.8)

Taejeon/Chungnam

22

45

87

119

1

78

1

5


(8.0)

(5.3)

(4.3)

(3.8)

(5.8)

(5.9)

(3.9)

(3.7)

Jeonbuk

17

36

55

76

1

49

1

3


(6.3)

(4.2)

(2.7)

(2.5)

(5.0)

(3.7)

(2.3)

(2.1)

Kwangju/Jeonnam

17

42

67

108

1

39

3

9


(6.2)

(4.9)

(3.3)

(3.5)

(4.4)

(2.9)

(9.2)

(6.4)

Taegu/Kyungbuk

44

99

263

382

4

107

4

18


(16.0)

(11.5)

(13.1)

(12.3)

(14.2)

(8.0)

(12.1)

(12.1)

Jeju

2

5

4

4

0

3

0

0


(0.7)

(0.6)

(0.2)

(0.1)

(0.3)

(0.3)

(0.1)

(0.0)

Total

275

858

2,011

3,089

22

1,330

35

145


(100.0)

(100.0)

(100.0)

(100.0)

(100.0)

(100.0)

(100.0)

(100.0)

Sources: Economic Planning Board, Report on Mining and Manufacturing Census, 1960, 1970, 1980, 1989.

To mitigate the concentration of population and industrial activities in major metropolitan areas, the government's industrial policy increasingly promoted the establishment of the industrial bases of strategic industries in the provincial areas. The First National Land
Development Plan (1972-1981) and the Third and Fourth Five-Year
Economic Plans aimed to emphasize rural development and regional development. Under the National Land Utilization and Management Act (1972) and the Provincial Industry Development Act (1970), provincial industrial estates were established in the cities of the southern agrarian regions such as Kwangju, Chungju, Iri, Kunsan, and Suncheon.


Fig. 5.2 Regional shares of manufacturing employment, 1963-1989 (Source: Economic Planning Board, Report on Mining and Manufacturing Census, 1960, 1970, 1980, and 1989)

During the 1970s, the increase in the nation's manufacturing employees was 1,255,787, with Kyunggi province accounting for 31 per cent of the total increase, and Seoul and Pusan 16.6 per cent and 17.0 per cent, respectively. Strict policy measures to control growth in the major metropolitan areas seemed to be mildly effective in Seoul and Pusan, reducing their shares in total employment (see table 5.1).

Differential growth of the Capital region in the 1980s

During the period of the Fifth and Sixth Five-Year Economic Plans (1982-1986 and 1987-1991), the policy emphasis shifted towards economic stability and distributional goals. Along with the distributional focus, regional balance became a major policy objective. This was also stressed in the Second National Land Development Plan (1982-1991). With a rather dubious economic rationale, the idea of regional balance had been voiced more loudly by politicians and planners. Stringent policy measures were announced and to some extent implemented to control the growth of the Capital region (including Seoul and Kyunggi province, the area surrounding Seoul) and of Pusan to a lesser degree. The Capital Region Reorganization Law was enacted in 1982 "to redirect the population and industries from the capital region." In addition, under the Rural Income Source Development Act of 1983, 170 Rural Industrial Estates were established in provincial areas. However, the policy measures to control metropolitan growth only diverted the growth pressure to Kyunggi province. The growth of the Capital region accelerated during the 1980s, which, in turn, limited the vitality of Seoul and profoundly degraded the quality of life in the capital city.

The shares of employment in Seoul and Pusan were further reduced in the 1980s. Among the increases in manufacturing employment from 1980 to 1989, 46.7 per cent went to Kyunggi province, while much smaller proportions accrued to Seoul (7.5 per cent) and Pusan (7.9 per cent). The share of manufacturing employment in Seoul and Pusan fell from 50 per cent in 1970 to 29.4 per cent in 1989, while that in Kyunggi province and in Kyungnam province, the area surrounding Pusan, increased much more to offset the reductions in the core cities of the respective regions. The growth in manufacturing employment in Kyunggi region has been particularly vigorous. In 1960, manufacturing employment in Kyunggi province represented only 10.3 per cent of the national total and less than half that in Seoul. In 1989, it constituted 31.8 per cent of the national total, which was almost twice that of Seoul (see table 5.1).

Table 5.2 Rural-urban migration, 1961-1985 ('000 people)


Period


1961-66

1966-70

1970-75

1975-80

1980-85

Urban-urban

702

742

1,087

1,619

2,318

Urban-rural

285

383

558

681

889

Rural-urban

913

1,823

1,754

2,524

2,424

Rural-rural

529

645

563

558

469

Total

2,429

3,593

3,963

5,382

6,100

Population over 5 years old

24,679

27,119

30,452

33,612

36,717

Migration (%)

9.8

13.2

13.0

16.0

16.6

Source: Korea Institute for Population and Health, Study for Population Movements, 1991, p.14.
Urbanization and rural-urban migration

With rapid industrialization, there has been massive rural-to-urban migration. The first wave of migration occurred during the second half of the 1960s.

Rural-to-urban migration constituted more than one-third of the total migration across regional, city, and county administrative boundaries in the 1960s. Rural-to-urban migration gradually increased throughout the 1960s and 1970s, peaking in the second half of the 1970s. During that period, 2,524,000 rural inhabitants, constituting 15.1 per cent of the rural population, moved into urban areas (see table 5.2). The share of the urban population increased from 28.3 per cent in 1960 to 57.3 per cent in 1970 and to 74.4 per cent in 1990 (see table 5.3 and fig. 5.3).

A large proportion of the rural out-migrants moved to Seoul during the past 30 years of industrialization. The rural-to-Seoul migrants constituted 44 per cent of the total rural-to-urban migration in the period 1965-1970 and then decreased gradually to 37 per cent in the period 1970-1975, 31 per cent in 1975-1980, and 30 per cent in 19801985. With the decrease in rural-to-urban migration, urban-to-urban migration had been growing. In the period 1980-1985, the urban-to-urban migration constituted 37.7 per cent of total migration, which was an increase from 28.9 per cent in the period 1961-1966 (see table 5.2). The pattern seems to follow Zelinsky's hypothesis of migration shifting from rural-urban to urban-urban migration with the progress of industrialization (Zelinsky, 1971).

The most noticeable change in migration occurred within the Capital region. The population of Seoul increased from 2.4 million in 1960 to 10.6 million in 1990. The share of immigrants to Seoul peaked in the period 1966-1970, constituting 48.1 per cent of total migrants. It has since been declining gradually. On the other hand, the share of immigrants into Kyunggi province rose from 9.7 per cent in the period 1961-1966 to 30.1 per cent in the period 1980-1985. According to one tentative estimate, the population in the Capital region in 1990 was 18.6 million, constituting 42.7 per cent of nation's total. The population increase in the Capital region amounted to 90.5 per cent of population growth in the nation between 1985 and 1990 (see table 5.4).

Table 5.3 The share of the urban population and the distribution of the industrial labour force, 1920-1990 (%)



Labour force



Year

Urbana population

Agriculture

Mining & manufacturing

Services, etc.

1920

3.3

91.5

1.5

7.0

1925

3.5

89.3

1.6

9.1

1930

4.5

87.9

1.6

10.5

1935

7.4

85.8

1.9

12.3

1940

11.6

-

-

-

1950

18.4

79.4

3.7

16.9

1955

24.4

-

-

-

1960

28.3

65.9

9.2

24.9

1965

33.9

58.6

13.3

28.1

1970

43.1

50.5

17.2

32.3

1975

50.9

45.9

23.5

30.6

1980

57.3

34.0

28.7

37.3

1985

65.4

24.9

30.5

44.5

1990

74 4

-

-

-

Source: Korea Institute for Population and Health, Study for Population Movements, 1991, p. 12.

a. Excluding rural townships ("Eup").

The primacy of Seoul and the capital region

Concentrated growth: A recent trend

Population

In spite of government efforts at decentralization in Seoul and the Capital region, its population has quadrupled during the past three decades. The population growth rate in Seoul and the Capital region peaked during the period 1966-1970 at a rate of 9.4 per cent in Seoul and 6.1 per cent in the Capital region per annum. Population growth in Seoul declined to 2 per cent in the period 1985-1990, while that in Incheon and Kyunggi province increased at a rate of 5.2 per cent. During the period 1970-1979, about 3 million rural immigrants moved into Seoul. But in the period 1980-1989 this fell to 2.3 million. Also net out-migration from Seoul to Incheon and Kyunggi province increased by 120,000 (see fig. 5.4).


Fig. 5.3 Population growth by region, 1960-1990 (Source: Economic Planning Board, Population and Housing Census, 1960-1990)

Table 5.4 Population concentration in the Capital region, 1985 and 1990 ('000 and %)


1985

1990

Increment

South Korea (A)

40,448

43,520

3,072

Capital region (B)

15,820

18,60()

2,780

Concentration (B/A)

39.1

42.7

90.5

Source: Economic Planning Board, Population and Housing Census, 1985-1990.


Fig. 5.4 Migration to and from Seoul, 1970-1979 and 1980-1989 (Source: Economic Planning Board, Annual Report on the Internal Migration Statistics, 1970, 1979, 1980, and 1989)

Manufacturing and services

With rising domestic labour costs and competition from China and the ASEAN nations, the South Korean manufacturing sector has been readjusting its structure from labour-intensive manufacturing to assembly-type production activities such as machine assembly, machinery, electronic equipment, and furniture. The share of employment in the labour-intensive sector (e.g. textiles, apparel, footwear, and rubber products) decreased from 38.8 per cent in 1980 to 29.9 per cent in 1990, while the share of assembly products increased from 33.1 per cent to 45.2 per cent during the same period (table 5.5). In the Capital region as a whole, the pattern of industrial adjustment is not much different from the national trend. However, in Seoul, the share of labour-intensive manufacturing employment is still relatively high.

Table 5.5 Distribution of workers by industry, 1980-1990 (%)


South Korea

Capital region

Industry

1980

1985

1990

1980

1985

1990

Food

5.5

5.8

5.5

5.4

5.9

5.1

Wood

2.4

1.5

1.3

3.5

1.6

1.4

Paper

2.3

2.0

1.9

1.5

2.2

2.0

Petroleum & coal

0.5

0.4

0.4

0.5

03

04

Non-metal

2.8

2.9

2.8

1.7

2.6

2.1

Non-ferrous

0.8

0.5

0.8

1.5

0.5

0.7

Resource products

14.4

13.2

12.8

14.0

13.1

11.7

Leather products

1.3

1.4

1.5

1.7

1.7

2.0

Furniture

0.8

1.1

1.1

1.1

1.7

1.9

Plastics

2.0

3.1

3.5

2.3

3.6

4.1

Fabricated metal

6.0

8.2

7.8

6.5

7.7

7.4

Machinery

4.8

5.4

7.5

5.1

5.5

8.3

Electrical machinery

11.7

12.5

15.2

14.4

16.6

19.4

Transport equipment

5.1

5.4

7.3

3.3

3.0

5.5

Measuring instruments

1.4

1.3

1.3

2.2

1.5

1.4

Assembly products

33.1

38.4

45.2

36.6

41.2

50.0

Textiles

19.1

15.8

12.4

10.1

9.9

7.8

Apparel

10.0

10.0

7.8

14.6

13.8

10.8

Footwear

2.2

3.0

4.5

1.4

1.3

1.0

Rubber

4.0

3.7

2.2

1.2

0.8

1.0

Other manufacturing

3.5

4.0

3.1

5.7

5.8

4.6

Labour-intensive products

38.8

36.4

29.9

33.0

31.7

25.2

Industrial chemicals

2.0

1.7

1.6

1.3

1.4

1.3

Petroleum refineries

0.3

0.3

0.4

0.5

0.3

0.3

Iron & steel

2.8

2.2

2.2

1.8

1.2

1.1

Capital-intensive products

5.1

4.2

4.2

3.6

2.9

2.6

Beverages

1.3

0.8

0.7

1.5

0.6

0.5

Printing

2.5

2.5

2.8

4.8

4.1

4.6

Other chemicals

3.3

3.0

3.0

4.9

4.7

4.0

Pottery & china

0.9

0.6

0.5

0.5

0.5

0.3

Glass

0.8

0.9

0.8

1.0

1.2

1.1

Other special products

8.8

7.8

7.8

12.8

11.1

10.5

Manufacturing

100.0

100.0

100.0

100.0

100.0

100.0

(No. of workers, '000)

1,998

2,397

3,138

779

1,199

1,591

Source: Ministry of Labour, Survey Report on Establishment Labour Conditions, 1991.

With strict controls on industrial location since 1964, the share of secondary industry in the Capital region and Seoul decreased during the period 1980-1990. On the other hand, service industries grew much faster than other sectors of the economy. At the national level, the share of tertiary industry employment in establishments with more than five employees increased from 35.2 per cent in 1980 to 40.1 per cent in 1990. In the Capital region, the share increased from 38.1 per cent to 41.8 per cent, while in Seoul the increase was from 48.7 to 58.1 per cent. Meanwhile, the share of secondary industry decreased from 61.3 to 56.5 per cent in the Capital region and from 50.7 to 41.6 per cent in Seoul (Park, 1992). In 1990, 44.7 per cent of the nation's service industry employment was concentrated in Seoul and 10.3 per cent in Kyunggi province.

Producer services

The growth of producer services, including wholesale, finance, insurance, and real estate, was very conspicuous in the South Korean economy during the 1980s. At the national level, the employment share of producer services increased from 20.7 per cent in 1980 to 30.7 per cent of the service industry as a whole in 1986. In the Capital region, the share of producer services increased more rapidly than the national average. During the period 1981-1986, producer services in the Capital region (including Seoul, Incheon, and Kyunggi province) accounted for 49.7 per cent of the national total. In business services, the region's share was 62.1 per cent of the national total (Lee, 1990). Producer services are concentrated in Seoul, with 59.8 per cent of the nation's employment, with an additional 8.2 per cent in Kyunggi province, which made producer services in the Capital region 68 per cent of the national total in 1990. The rapid increase in producer services is mainly attributable to the growth of business services and wholesale in Seoul and of finance and business services in Incheon.

High-tech and R&D

The number of high-tech industries grew at an annual rate of 9.5 per cent, 1.4 per cent faster than the manufacturing sector as a whole during the period 1980-1984. According to one projection, high-tech industry is expected to grow at the rate of 10 per cent per annum until the year 2000 in South Korea (KRIHS, 1986). The government was aiming to raise the share of R&D investment to 2.5 per cent of GNP by 1991. The semi-conductor, computer, fine ceramics, and auto industries are expected to be the leading sectors in high-tech in the coming years.

The high-tech industries, classified by R&D investment and technological content, have concentrated in Seoul and its satellite cities. Over 60 per cent of semi-conductors are produced in Seoul alone and more than 50 per cent of all high-tech items are produced in the Capital region.

The concentration of high-tech industries in Seoul and the Capital region is paralleled by a concentration of higher education institutions and research institutes operated by manufacturing industries. According to an industrial survey undertaken by the Korea Research Institute for Human Settlements, proximity to a research institution was singled out as one of the more important locational factors for high-tech industry (KRIHS, 1986). The other important locational factors for high-tech industries are proximity to Seoul and existing agglomerations (see table 5.6). It is noteworthy that six locational factors chosen out of 20 factors point to the irrefutable attraction of the Seoul area for high-tech industries. In 1989, more than two-thirds of industry's research institutions were located in the Capital region and one-quarter in Seoul (see table 5.7).

Including 22 research institutions located in Pusan in 1989, 136 research institutions were located in the South-east region. Most of those were affiliated to manufacturing establishments located in Taegu and the neighbouring city of Pusan.

Table 5.6 Major locational factors for high-tech industries

Factor

Response

1. Proximity to research facility

28.8

2. Proximity to Capital region

15.0

3. Agglomeration

17.5

4. Airport and expressway

10.0

5. Skilled personnel

36.3

6. Others

3.8

Source: KRIHS (1986).

Table 5.7 The regional distribution of research institutes, 1989


Capital region

South-east region

Central region

South-west region

Taebaeg region


Total

Seoul

Incheon

Kyunggi province

Pusan

Kyungnam province

Taegu

Kyungbuk province

Chung Chong provinces

Chula provinces

Kangwon province

All industry

674

177

53

222

22

62

19

33

46

23

17

Large firm

329

69

32

107

10

40

3

24

21

15

8

Small firm

344

108

21

114

12

22

16

9

25

8

9

Source: Industrial Research Institute Survey, Data 49, 87-3.

Centrality and global attributes

The centrality of Seoul

Being the capital city for over 500 years since the Yi Dynasty, Seoul has been the nation's centre of politics and culture. The city also has 24 per cent of nation's population, abundant economic opportunities, and quality education. About 41 per cent of nation's population, 47 per cent of manufacturing employees, and 44 per cent of the tangible capital assets of the nation are centred in the Capital region. Above all, Seoul and the Capital region attract skilled workers and professionals from the rest of the country. About 61 per cent of managerial personnel in business and 96 per cent of the top 50 corporations' headquarters are located in Seoul. Seoul has been taking a commanding role in the nation's planning, and in managing and controlling business activities. Seoul is also the centre of academic and industrial research. About 64 per cent of research scientists are associated with private and public research institutions in Seoul. The centrality of Seoul is depicted in figure 5.5.

International exposure

Seoul attracts the majority of international organizations such as communications media, banks, investment consultants, and diplomatic corps (see table 5.8). In 1987, all foreign embassies were in Seoul except one in Pusan, and 15 out of 22 foreign consulates were also located in Seoul. All of 7 stock brokerage offices and 66 foreign bank offices were located in Seoul. All 25 of the offices of foreign media and 8 broadcasting networks were in Seoul. It is no surprise that in 1988, the year of the Seoul Olympics, 92 per cent of all international cultural events and exhibitions were held in Seoul.

In 1985, about 29,000 foreign citizens were resident in South Korea, nearly half of them in Seoul (see table 5.9). The share of foreigners residing in the cities of the Capital region amounted to 54 per cent, including Incheon (6.9 per cent), Bucheon (0.5 per cent), and Sungnam (0.2 per cent). In particular, Seoul dominates the rest of the nation by holding 70.9 per cent of overseas-originated service industries. More specifically, 33 of 37 foreign financial institutions, 22 of 43 hotels, 76 of 114 trading companies, and 25 of 30 communications services were located in Seoul. The proportion of 1.4 foreign residents per 1,000 natives in Seoul was much lower than that of Tokyo (18 per 1,000).


Fig. 5.5 Indicators of the centrality of Seoul (Notes: (1) household excluded; (2) firms with over 5 workers; (3) science and engineering research institute and researchers; (4) science and engineering research institute and researchers; (5) top 50 firms by sales. Source: KRIHS, Basic Strategies for Balanced Development in the Age of Decentralization, 1990, p. 19)

FOREIGN DIRECT INVESTMENT. Currently, there are 3,170 cases of inward foreign direct investment (FDI) totalling US$7.0 billion in South Korea. As of the end of 1989, two-thirds of the cases were from Asian countries, amounting to US$3.8 billion, with Japan standing out (1,922 cases and US$3.5 billion). The United States was the second-largest investor next to Japan, with 717 cases totalling US$1.9 billion. West Germany, Hong Kong, and the United Kingdom were next in order.

About three-quarters of the FDIs are invested in the manufacturing sector. Although only 16.1 per cent of the FDIs in the manufacturing sector are located in Seoul, the satellite cities and suburbs of Seoul have 35.7 per cent of the entire inward FDI in the nation. Thus, 56.4 per cent of FDI projects in manufacturing are located in the Capital region. In terms of the value of FDI in manufacturing, Kyungnam province has the largest share (26.7 per cent), and Kyunggi and Jeonnam provinces are the next in order. In the service sector, however, Seoul has the dominant share in both the number of cases and the amount of investment, with 82.9 per cent and 90.9 per cent, respectively (see table 5.10).

Table 5.8 Foreign agencies in major cities, 1987 and 1990


1987

1990


Seoul

Pusan

Taegu

Seoul

Pusan

Taegu

Embassy

48

1

0

60

0

0

News agency

25

0

0

27

0

0

Communications

9

0

0

13

0

0

Broadcasting

8

0

0

12

6

0

Bank

66

8

0

77

11

0

Major branch office

374

4

0

595

7

0

Convention and sports event

146

4

2

189

4

5

Source: Y. H. Park, "Policy for Global Functions," mimeo, 1991.

Table 5.9 Foreign residents in South Korea, 1980 and 1985


1980

1985

City

Populationa

Per cent

Foreign citizens

Per cent

Populationa

Per cent

Foreign citizens

Per cent

Seoul

8,364,379

22.3

13,763

46.7

9,639,110

23.8

13,355

46.3

Pusan

3,159,766

8.4

2,835

9.6

3,514,798

8.7

2,685

9.3

Taegu

1,604,934

4.3

1,153

3.9

2,029,853

5.0

1,483

5.1

Incheon

1,083,906

2.9

2,075

7.0

1,386,911

3.4

1,995

6.9

Kwangiu

727,600

1.9

341

1.2

905,896

2.2

223

0.8

Taejeon

651,792

1.7

434

1.5

866,148

2.1

461

1.6

Ulsan

418,326

1.1

478

1.6

551,014

1.4

807

2.8

Bucheon

221,463

0.6

66

0.2

456,292

1.1

144

0.5

Masan

386,751

1.0

255

0.9

448,746

1.1

248

0.9

Sungnam

376,840

1.0

18

0.1

447,692

1.1

45

0.2

Total population

37,436,315

29,500

40,448,486

28,834

Source: Economic Planning Board, Population and Housing Census, 1980, 1985.
a. Includes foreign citizens.

Table 5.10 Direct foreign investment (inbound) by region


Cases

Value


Manufacturing

Service

Manufacturing

Service

Region

No.

%

No.

%

US$'000

%

US$'000

%

Total

1,301

100.0

321

100.0

3,184,917

100.0

2,215,369

100.0

Seoul

209

16.1

266

82.9

297,590

9.3

2,014,503

90.9

Pusan

70

5.4

18

5.6

55,029

1.7

103,066

4.7

Taegu

26

2.0

2

0.6

14,041

0.4

2,030

0.1

Incheon

120

9.2

7

2.2

176,610

5.5

10,852

0.5

Kwangju

1

0.1

-

-

125

0.0

-

-

Kyunggi

405

31.1

5

1.6

751,197

23.6

7,446

0.3

Kangwon

9

0.7

-

-

20,726

0.7



Chungbuk

52

4.0

1

0.3

173,827

5.5

3,000

0.1

Chungnam

49

3.8

-

-

90,900

2.9

-

-

Jeonbuk

39

3.0

-

-

77,494

2.4

-

-

Jeonnam

29

2.2

-

-

409,738

12.9

-

-

Kyungbuk

95

7.3

3

0.9

266,429

8.4

2,088

0.1

Kyungnam

195

15.0

8

2.5

849,302

26.7

18,420

0.8

Jeju

2

0.2

11

3.4

1,909

0.1

53,964

2.4

Source: Department of Finance, Foreign Investment Data, 1989, reproduced with the permission of the government.

TOURISM. The number of foreign visitors more than doubled during the 1980s. Although the Seoul Olympics had some isolated effects on tourism, the number of foreign visitors has been increasing steadily (see table 5.11). The purpose of the majority of trips is still sightseeing. However, the share of sightseeing trips has been declining. Even in the Olympic year of 1988, the proportion declined by 4 per cent. According to a 1989 survey, about 93 per cent of foreign visitors come to the Capital region during their trip to South Korea. Most foreign visitors use tourist hotels and about 60 per cent of customers registering at tourist hotels are foreign tourists (KTDI, 1989).

Seoul and Pusan have Kimpo and Kimhae international airports, respectively. Seoul has 76 tourist hotels with 15,725 rooms, which represents 47 per cent of all rooms in tourist hotels. Pusan, next to Seoul, has 12.4 per cent of total room capacity with 4,113 rooms (see table 5.12). In 1987, about 2 million tourists visited South Korea. Most of those tourists visited Seoul and close to half of the tourists visited Pusan. According to a survey, Seoul appears to be the most attractive place for the tourists because of its historical heritage and cultural activities; Pusan and Kyunggi province are the next most popular.

Table 5.11 Number of foreign visitors by purpose, 1980-1988

Year

Sightseeing

Business

Official

Visiting &observation

Other

Total

1980







No.

665,973

83,240

42,992

152,474

31,736

976,415

Per cent

68.2

8.5

4.4

15.6

3.3

100.0

1985







No.

877,800

230,195

64,725

202,322

51,003

1,426,045

Per cent

61.6

16.1

4.5

14.2

3.6

100.0

1988







No.

1,320,405

378,017

71,022

299,846

271,172

2,340,462

Per cent

56.4

16.2

3.0

12.8

11.6

100.0

Source: Ministry of Transportation, Annual Report on Tourism, 1989, p. 49.

Table 5.12 Registered hotels by province


Hotels

Hostels

Condos

Province

No.

No. of rooms

No.

No. of rooms

No.

No. of rooms

Seoul

76

15,725

2

194

-

-

Pusan

43

4,113

2

60

2

436

Taegu

14

952

-

-

-

-

Incheon

6

548

-

-

-

-

Kwangju

4

249

-

-

-

-

Kyunggi

15

867

1

42

1

250

Kangwon

11

1,019

3

188

4

1,083

Chungbuk

7

477

2

185

-

-

Chungnam

14

1,110

1

61

1

107

Chonbuk

5

440

-

-

-

-

Chonnam

10

525

-

-

-

-

Kyungbuk

16

1,910

-

-

2

352

Kyungnam

22

2,261

-

-

-

-

Jeju

23

2,997

-

-

1

116

Source: KTDI (1989:231).

AIR TRANSPORT. Overseas trade had been growing since the early 1960s and reached 84.9 per cent of GNP in 1981. Owing to the recent expansion of the domestic market, the share of trade in GNP has slightly decreased, but it was still in the range of 65.5 to 76.9 per cent during the period 1985-1990. Because of the concentration of manufacturing activities and producer service industries in Seoul and the

Table 5.13 Domestic vs. overseas telephone calls by region (%)


Overseas calls

Domestic long- distance calls

Share of population



Region

(A)

(B)

(C)

(A)/(C)

(B)/(C)

Seoul

64.4

27.9

24.4

2.6

1.1

Kyunggi/Incheon

11.9

18.8

18.3

0.7

1.0

Pusan/Kyungnam

11.0

16.8

17.2

0.6

1.0

Taegu/Kyungbuk

3.8

10.6

11.7

0.3

0.9

Chungchong/Taejeon

2.9

9.9

10.3

0.3

1.0

Jeonnam/Kwangju

1.9

7.3

8.4

0.2

0.9

Jeonbook

1.1

3.8

4.8

0.2

0.8

Kangwon

0.9

4.1

3.7

0.2

1.1

Jeju

1.6

1.1

1.2

1.3

0.9

Sources: National Statistical Office, Major Statistics of the Korean Economy, 1991; Ministry of Communications, Statistical Yearbook of Communications, 1991.

Capital region, a large proportion of manufactured products produced in Seoul and the Capital region are exported. The share of air passengers and cargoes handled at Kimpo Airport, located in the vicinity of Seoul, constituted 86.6 per cent and 95.7 per cent of total passengers and cargoes, respectively, in 1989.

OVERSEAS TELEPHONE CALLS. The importance of Seoul in international affairs is clearly demonstrated in table 5.13. In comparison with its share of domestic long-distance calls, its share of international calls, originated and destinated, is disproportionately large. Domestic long-distance calls to and from Seoul constitute 27.9 per cent of the national total whereas overseas calls from and to Seoul are 64.4 per cent of the nation's overseas calls. The table also shows domestic and overseas telephone usage per capita. Whereas the share of domestic calls is proportional to the share of population in Seoul, with a quotient of 1.1, the share of overseas calls is 2.6 times larger than the share of the population. The Capital region's share of overseas calls is much smaller than its share of the population and also smaller than manufacturing employment. This seems to indicate the role differentiation between Seoul and the rest of the Capital region. Seoul seems to provide most of the international links not only to the nation but also to the Capital region, which has been gaining importance as the nation's industrial growth centre since the 1980s. The dominance of Seoul seems more pronounced in international central business functions.

Seoul as a world city

As discussed previously, global cities should be defined and evaluated in their national context. Therefore the degree of international exposure in a nation's urban system can provide some insights into the development of a city's competitiveness and the reach of the geographical area in which its residents are active. To gain a general perspective of Seoul in the family of world cities, it is worthwhile to compare some of the global attributes of Seoul in relation to other world cities.

CORPORATE HEADQUARTERS. A disproportionately large share of the top 500 manufacturing corporate headquarters is located in the major cities in the core countries: Tokyo (99), London (43), New York (40), Paris (22), Osaka (21), Chicago (15). Seoul had 5 and ranked 17th among the major cities of the world. In 1991, Seoul had 11 of the Fortune 500 (Fortune, July 1991).

BANKS. In 1991, 14 of the headquarters of the world's top 1,000 banks were located in Seoul, ranking it sixth among the world cities. The largest number of headquarters is located in London (30) followed by Tokyo (23), Paris (21), and Taipei (16) (see table 5.14).

INTERNATIONAL CONFERENCES. According to the Union of International Associations (UIA), in 1990 Paris ranked top with 361 international conventions, followed by London (268), Brussels (194), Vienna (177), and Geneva (166). Seoul ranked 23rd with 60 such events. In Asia, Singapore ranked first with 136 events followed by Tokyo (81) and Hong Kong (74) (see table 5.15).

Table 5.14 Top 1,000 bank headquarters, 1991

Rank

City

No. of HQ

1

London

30

2

Tokyo

23

3

Paris

21

4

Taipei

16

5

Frankfurt

15

6

Madrid

14

6

Seoul

14

8

New York

12

8

Bangkok

12

10

Vienna, Rome, Osaka

11

13

Lisbon

10

Source: The Banker, July 1991.

Table 5.15 International conventions by major cities, 1989 and 1990

1989

1990

Rank

City

No. of conferences

Rank

City

No. of conferences

1

Paris

388

1

Paris

361

2

London

261

2

London

268

3

Geneva

170

3

Brussels

194

4

Brussels

165

4

Vienna

177

5

West Berlin

160

5

Geneva

166

5

Madrid

139

5

West Berlin

166

7

Vienna

129

7

Madrid

151

8

Washington D.C.

120

8

Singapore

136

9

Singapore

111

9

Amsterdam

108

10

Rome

108

10

Washington D.C.

101

11

Amsterdam

101

11

Strasbourg

100

12

Strasbourg

82

12

Rome

91

13

Hong Kong

74

13

New York

87

14

Stockholm

73

14

Copenhagen

85

15

New York

72

15

Hague, The

83

16

Copenhagen

70

16

Tokyo

81

17

Tokyo

69

17

Stockholm

80

18

Helsinki

62

18

Hong Kong

74

18

Buenos Aires

62

19

Barcelona

70

20

Munich

59

20

Budapest

69

20

Rio de Janeiro

59

21

Rio de Janeiro

68

22

Manila

55

22

Helsinki

67

23

Hague, The

54

23

Seoul

60

25

Bangkok

52

24

Manila

58

28

Beijing

49

25

Beijing

53

33

Seoul

45

26

Bangkok

51

Source: Union of International Associations, Yearbook of International Organizations, 1990.

According to UIA figures, Seoul had 17 international organizations, based mostly on UN-related affairs, and ranked 17th. The number could increase gradually in the future since Korea became a member nation of the United Nations in 1991.

A new perspective in spatial policy: Globalization

Decentralization policy

Growth management and the decentralization of Seoul have been the most enduring government policies pursued consistently since the early 1960s. In 1964, the government announced metropolitan population growth prevention measures to curtail in-migrants to the large metropolitan areas, particularly Seoul and Pusan. Retrospectively, the population in Seoul in the early 1960s was barely one-quarter of the size of the current population.

The objectives of the government policy advocated in the early 1960s were not much different from those of the 1970s and 1980s. However, many argue that the government's real objectives in pursuing growth control and population dispersal in Seoul were for reasons of national security. Under the military threat from North Korea, President Park Chung Hee was seriously considering constructing a new capital city further south in the area near Taejeon. Thus, it is conceivable that the growth control policy in the 1960s and 1970s was essentially aimed at serving national security objectives.

Since then, the government has announced a series of policy measures to control the growth of Seoul and the Capital region, including the Population Dispersal Plan for Seoul (1975), the Population Redistribution Plan for Capital Region (1977), the Restriction on Construction of Public and Large Buildings in the Capital Region (1982), and the Capital Region Readjustment Plan (1984). In addition, there have been two National Land Development Plans during the period 1972-1992 emphasizing the decentralization of Seoul and the Capital region and regional balance.

To achieve its policy objectives, the government relied heavily on regulations to restrict the construction of new facilities in the Capital region and to relocate certain activities from Seoul. In addition, under the Capital Region Readjustment Plan, the Capital region was divided into five zones within which activities are controlled with varying degrees of land-use restrictions. There are restrictions on "population-generating activities" in these five areas. For example, construction of new college campuses has been prohibited in all five zones, with one exception, while the numbers of student enrolments in the region are also strictly regulated by the government. The five areas are the Relocation Promotion Area, the Development Promotion Area, the Growth Management Area, the Environment Preservation Area, and the Development Reservation Area (see fig. 5.6). The restrictions on various activities in each zone are summarized in table 5.16.

Revisions to the decentralization policy

According to one estimate, in 1989 about 59 per cent of the factories in the Capital region were operating illegally. There are small firms engaged in activities different from their official operating permits. Despite the government's efforts to decentralize large metropolitan areas, specifically Seoul, there is evidence that agglomeration economies in Seoul and large metropolitan areas are still significant, favouring those industries located in Seoul (Hong, 1986).


Fig. 5.6 The Capital region and the five strategic areas

The decentralization policy, which relies heavily on direct regulatory measures, has not proved very successful during the past 30 years. The results of the very restrictive Capital Region Readjustment Plan have also been less than satisfactory. Population growth in the Relocation Promotion and Growth Management areas has been twice as fast as the national average (see table 5.17). Agglomeration economies in Seoul and the importance of the Korean tradition of face-to-face contact in various activities seemed to outweigh the planners' idealism and the government's regulations.

Table 5.16 Restrictions on activities in the five zones of the Capital region


Area


Relocation Promotion

Growth Management

Development Promotion

Environment Preservation

Development Reservation

College: New

X

X

+

X

X

Expansion

+

+

+

+

+

Teaching institution

+

O

O

O

O

Factory

X

X

+

+

+

Public office

+

+

+

X

X

Business and shopping complex

+

+

+

X

X

Training facility

X

X

+

X

X

Residential development

+

+

O

+

+

Source: Ministry of Construction. X: not permitted; +: partial permit with review; O: permitted

Table 5.17 The annual population growth rate of South Korea and the Capital region, 1970-1990 (%)


Area

Period

South Korea

Capital region

Relocation Promotion

Growth Management

Development Promotion

Environment Preservation

Development Reservation

1970-75

2.3

4.5

4.7

8.9

1.7

-0.9

-0.9

1975-80

1.5

3.9

2.8

7.3

0.1

-0.1

-0.8

1980-85

1.5

3.5

2.9

6.6

0.1

0.7

-0.2

1985-90

1.5

3.2

2.2

6.6

1.4

1.0

0.1

Source: Economic Planning Board, Population and Housing Census, 1970-1990.

Recently, some of these restrictive measures have been reluctantly revised by the government. During the period 1990-1991, more than half of the manufacturing activities in the Capital region without operation permits were legalized. The number of categories of manufacturing allowed in urban areas was expanded from 17 industrial sectors in 1977 to 190 sectors in 1990. The restrictions on small-scale operations were lifted by raising the size of operation from 5 to 16 employees or more. In addition, the ceilings on college students in the Capital region have been relaxed to allow an increase of 2,000 students a year during the five years starting 1992.

New town development and balanced growth

In the late 1980s, the positions of the government and planners gave in to development pressure arising from the housing shortage. Following the development of the Green Zone in Kaepo, Koduk, Mokdong, and Madeul plain on the outskirts of Seoul, five large-scale new town development projects are planned for the vicinity of Seoul. They are Bundang, Pyungchon, and Sanbon to the south of Seoul and Ilsan and Joongdong to the west (see fig. 5.6). The total population of the five new towns is expected to reach 1.2 million, with a total area of 294 km2.

These new towns will all be within 20 km and one hour's commuting distance from the central business district of Seoul. Accessibility to Seoul from the new satellite cities will be improved by the construction of an intraregional transportation network. A mass transit system will be established between Seoul and the satellite cities by means of an electrified rail system.

Unlike the existing satellite cities, which are oriented towards industrial development, the new towns will be inclined towards tertiary industries. According to the government blueprint, Ilsan, located near to Kimpo Airport, for example, is planned to house international business and hotels with European-style residential developments. Many have reservations about the effectiveness of this ambitious housing construction project in improving housing conditions for the poor and homeless, while some government economists assert that the new town projects are mainly responsible for lowering the price of housing in 1991 and 1992 in Seoul. However, the real controversy lies in the fact that the new housing stocks in the Seoul metropolitan area could serve as a reservoir for people and economic activities still willing to move into the area. Thus, this new town policy seems to be a departure from the policy of decentralization and growth control in Seoul.

The new town development would appear to be a frontal blow to the long-standing philosophy of many Korean planners. However, as mentioned earlier, under the great force of the market mechanism and economies of agglomeration, Seoul and the Capital region attract the bulk of economic activities and migrants from the rural areas. Housing conditions in Seoul, especially for squatters in the romantically nicknamed Moon Village (Daldongnae), have become a social issue and a serious political liability. With planners still trying to decide how to reconcile spatial balance and the effectiveness of "oversized" major metropolitan regions, political needs seem to have prevailed in constructing new towns in Seoul metropolitan area. The new town development controversy, thus, continues.

Spatial policy in globalization

In the midst of globalization, South Korean industry is in the process of restructuring. The South Korean economy faces harsh competition in world markets. The price competitiveness of Korean manufacturing products has been sliding with rapid wage increases in recent years. The competitive advantages in labour-intensive, standardized mass production lines have been snatched by the newly industrializing labour-abundant countries, particularly South-East Asian countries and China. Domestically, the policies of balanced regional growth and decentralization remain as the untarnished goal of many planners. However, the overwhelming power of agglomeration in Seoul and the Capital region, channelled through the market mechanism, may have been eloquently demonstrated in Seoul and the Capital region.

The disparity between the target and the actual growth in Seoul and the Capital region has also contributed to creating severe bottlenecks in various infrastructure and housing projects. The high cost of living, housing costs in particular, in Seoul and the Capital region seems to lead the increases in general wages and prices and, thus, the production costs of the nation.

To revitalize Seoul and the Capital region, redirection of the policy from growth control seems inevitable. The goal of regional balance should still be pursued, but the policy should be in the form of indirect economic measures encouraging regional growth in the provincial areas. The economies of agglomeration of Seoul and the Capital region should be maintained as long as feasible to support industry's competitiveness in world markets. At the same time, regional balance should be pursued in the form of decentralized concentration by encouraging the growth of large cities, rather than forcibly dispersing growth from Seoul to the backward regions. The global functions of Seoul need to be developed further so that it can serve as a gateway to the world for South Korea and play a global role to match that of the global cities of the world.

Conclusions

Globalization is the reality of the 1990s. In the coming years, many nations will go through industrial restructuring to accommodate a new international division of labour. In consequence, there will be a large increase in international trade and in cross-border movements of labour and machinery, FDI, and other forms of international cooperation. After two decades of compressed economic growth, the comparative competitiveness of South Korean industries is being contested in world markets. During the past few years of democratization, labour costs increased far more rapidly than in Taiwan, Singapore, and Hong Kong. On the other hand, South Korean industries are lagging behind in technological development to offset the wage hike. Major South Korean export sectors, such as textiles and consumer electrics, are losing their competitive edge to China and the ASEAN countries. After a short-lived trade surplus in the three years 1986-1989, the trade deficit exceeded US$10 billion in 1991. In these circumstances, South Korean companies are forced to search for new areas of investment (FDI) and trade partners abroad.

The growth of Seoul and the Capital region has been regarded as resulting from the compressed economic growth of the nation. The government initiated the decentralization policy for Seoul and the Capital region in the early 1960s. In spite of restrictive policy measures, population and industrial activities in the region have been growing. The economies of agglomeration in Seoul and the Capital region continue to attract various industries including producer services and high-tech and information-oriented industries.

A world city is characterized by the competitiveness of its residents. The global competitiveness of the residents makes the city global. Therefore, a global city is one with "environments" favouring the competitiveness of the residents. With Seoul's stringent regulations to control metropolitan growth, bottlenecks are created in transportation, housing supply, and other infrastructures. The quality of life has been deteriorating, especially as regards air and water pollution and severe traffic congestion. For the nation's competitiveness, the residents of Seoul should be competitive in world markets. Therefore, it is necessary to revitalize the "environments" of Seoul by modifying the spatial policy of growth control in Seoul and the Capital region.

In relation to its city size and the export orientation of the national economy, the city of Seoul is relatively deficient in terms of its international activities. But some new factors are likely to change the role of Seoul in the world system. First, South Korea became a member nation in the United Nations, along with North Korea, in October 1991. South Korea will thus participate more widely in UN-related activities. Seoul will house most of these activities and their office space. With the liberalization of services under United Nations agreements, an influx of various service activities is expected from the advanced nations, especially in producer services such as banking, insurance, communications, and professional services. With the increasing trend towards regional cooperation in the Pacific Asian countries, Seoul will become a major centre of regional cooperation in the Far East.

The long-standing government policy of decentralization for the Seoul-Capital region has obviously been ineffective in controlling the further agglomeration of Seoul. Although the signs of a population "J" turn from the region have very recently been detected, especially in manufacturing activities, the concentration of producer services and information in Seoul is increasing. At the same time, Seoul's role as a central city is increasing.

The restructuring of various spatial policies seems to be inevitable. The new emphasis of planning in Seoul and the Capital region should be on restructuring the functions of the area more efficiently. With globalization, the management of the growth of the region became important. Therefore, the growth control policy in Seoul and the Capital region should be coupled with growth management to enhance the efficiency of the spatial system of the region and the government's efforts to develop large cities in the provincial areas.

References

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Friedmann, J. (1986), "The World City Hypothesis," Development and Change 17(1): 69-83.

Friedmann, J. and G. Wolff (1982), "World City Formation: An Agenda for Research and Action," International Journal of Urban and Regional Research 6:309-344.

Fortune, 124(3), July 1991.

Hong, S. W. (1986), "On Agglomeration and Regional Equity: A Study of Productivity in Manufacturing and Migration," Korea Spatial Planning Review 5.

King, A. D. (1990), Global Cities. London and New York: Routledge.

KRIHS [Korea Research Institute for Human Settlements] (1986), Hi-Tech Industries and Regional Development, vol. 86-4, p. 85.

KTDI [Korean Tourism Development Institute] (1989), Tourism Annual, p. 231.

Lee, H. Y. (1990), "Regional Differential Growth and Spatial Division of Labor in Producer Service Industries," Korean Journal of Regional Science 6(2): 123-147.

Park, S. W. (1992), "New Direction for Planning the Capital Region," KRIHS, mimeo, p. 7.

Porter, M. E. (1991), The Competitive Advantage of Nations. London: Macmillan.

Soja, E. (1986), "Modernity and Locality: Internationalization in Greater Los Angeles." Paper presented to the ESRC Conference on Localities in an International Economy, UWIST, Cardiff, UK, September.

Zelinsky, W. (1971), "The Hypothesis of the Mobility Transition," Geographical Review 61:219-249.

(introductory text...)

H. H. Tsai

Introduction

There has been a close association between the growth of exports and urbanization in Taiwan, because export growth has stimulated industrialization, and industrialization has spurred further urbanization and the formation of a national urban system.

Taiwan is endowed with only a small amount of land and limited natural resources. Nevertheless, the island has achieved an economic miracle that is widely admired. During the past four decades, the government has adopted a variety of policies and strategies to promote Taiwan's economic development. In the years immediately following the retrocession of Taiwan to the Republic of China, the government wisely channelled US aid to investments that provided the basis for further development and helped stimulate the growth of agriculture. Support from agriculture fostered the take-off of industry, which, in turn, provided positive feedback to agriculture. Within a relatively short time Taiwan had an agricultural surplus to sell abroad. Strategies for the development of labour-intensive import-substituting industries and the establishment of export-oriented industries were later introduced to promote industrialization. Rapid industrialization, in turn, has been the driving force behind urbanization and urban growth.

According to the cumulative causation concept proposed by Jaffe (Jaffe and Stewart, 1951), "As commercial and manufacturing activities greatly expand, it becomes necessary for a much larger proportion of the population to assemble in large aggregations in cities, for only in that way can these activities be carried on efficiently. The large-scale growth of urban centres, in turn, is one of the elements that affect the rate of population growth." In Taiwan's case, a city tends to develop wherever an export-oriented industry is located.

The liberalization of world trade since the late 1950s has stimulated demand for exports manufactured in Taiwan. This helped Taiwan gain a foothold in world markets, making export-oriented industries the engine of Taiwan's industrialization. Furthermore, technology can be transferred easily, either by technical cooperation with foreign companies or through overseas investment. Such transfers have been another source of Taiwan's industrialization. Both export-oriented and technology-intensive industries are urban oriented and have created job opportunities in urban areas.

Population has thus been attracted to the cities, speeding the process of urbanization. In addition, overseas capital has flowed into urban infrastructure, housing, power, and transportation. Urban living conditions have been improved and living standards raised, further augmenting the growth of cities.

This chapter first presents a brief sketch of the national urban system in Taiwan, and then describes the macro-structural change in population and employment. It then examines the spatial dimension of economic structural change and the international dimension of the national urban system. An analysis of the impact of globalization on the mega-city of Taipei and its policy implications is also provided.

The nature and development trend of the national urban system

Definition of urban

Urbanization on Taiwan has intensified in step with the island's rapid economic development and industrialization. The term "urbanization" can be defined in many ways, including: (a) the concentration of populations (Eldridge, 1942); (b) the process in which the in-migra

tion of people to cities blends into an urban lifestyle; (c) the process in which urban culture spreads to agricultural villages; (d) the development of urban areas; and (e) the process in which the proportion of people living in an urban area increases (Hsing, 1982). Of these definitions, the last one is the most quantitative. For this reason, it is the one most often used. Generally speaking, urbanization is the process in which the proportion of people living in towns increases with economic growth.

In Taiwan, towns with a population of over 50,000 are defined as urban areas. Taiwan is administratively divided into 2 central municipalities (Taipei in the north and Kaohsiung in the south), 5 provincial cities, and 16 prefectures. Each prefecture has at least one prefectural city and several towns and hsiang (rural districts). Generally speaking, the central municipalities and provincial cities are big cities, the prefectural cities are of intermediate size and serve mostly as the administrative centres of prefectures, while towns and hsiang contain semi-urbanized townships and rural areas.

Taiwan has also been divided into the Northern, Southern, Central, and Eastern regions to facilitate planning. The Northern region includes Taipei City, Keelung City, Taipei Prefecture, Taoyuan Prefecture, Hsinchu City and Prefecture' and Ilan Prefecture; the Central region is made up of Taichung City, Miaoli Prefecture, Taichung Prefecture, Changhua Prefecture, Nantou Prefecture, and Yunlin Prefecture; the Southern region includes Kaohsiung City and Prefecture, Tainan City and Prefecture, Chiayi City and Prefecture, Pingtung Prefecture, and Penghu Prefecture; the Eastern region includes Taitung Prefecture and Hualien Prefecture (fig. 6.1).

Level of urbanization

The level of urbanization is based on the ratio of the urban population to the total population. If the urban population is calculated according to the number of people living in cities with a population of over 50,000, and the level and growth of urbanization are estimated according to the time-period, only 24.1 per cent of Taiwan's population was urbanized in 1950. The ratio of urban to rural population was 3:10. By 1960, the island's urban population had risen to 39.6 per cent of the total population, and the corresponding urban-to-rural population ratio was 0.7, double that of 1950. By 1970, the corresponding figures were 55.0 per cent and 1.2, with the urban population already exceeding the rural population. In 1980, the urban population had increased to 66.1 per cent of the total, and the urban-to-rural population ratio stood at 1.9, indicating an urban population nearly twice that of rural areas. By the end of 1989, Taiwan's urban population had reached 14.9 million, accounting for 74.1 per cent of the total population. The urban-to-rural population ratio had risen further to 2.9 (table 6.1).


Fig. 6.1 Taiwan's urban hierarchy and regions (Source: Council for Economic Planning and Development, Comprehensive Development Plan in Taiwan (A Brief, In English), Taipei: CEPD, 1974)

Table 6.1 Level of urbanization, 1950-1989 ('000 persons)

Year

Urban population

Rural population

Total population

Urbanization level (%)

1950

1,818

5,741

7,559

24.05

1960

4,280

6,512

10,792

39.66

1970

8,071

6,605

14,676

54.99

1980

11,766

6,039

17,805

66.08

1989

14,892

5,215

20,107

74.06

Source: Ministry of Interior, Population Statistics, Taiwan-Fukien Area, 1951, 1961, 1971, 1981, 1990.

Table 6.2 Annual growth rate of the population, 1951-1989 (%)

Period

Urban population

Total population

1951-1960

8.94

3.62

1961-1970

6.48

3.08

1971-1980

3.91

1.98

1981-1989

2.65

1.36

1951-1989

5.54

2.54

Source: Calculated from table 6.1.

Rate of urbanization

Comparing the urban population growth in each time-period with the overall average annual population growth rate of Taiwan, it can be seen that in the 1950s the average annual urban population growth rate was 8.9 per cent, far higher than the overall population growth rate of 3.6 per cent. This indicates that a massive migration was under way from rural areas to the cities. However, starting in the 1960s, the gap between the two growth rates began to narrow. By the 1980s, the average annual urban population growth rate was 2.7 per cent, while the overall annual population growth rate was 1.4 per cent. The reduction in the difference between these two rates means that out-migration from agricultural areas had already begun to ease (table 6.2). The high urban growth rate was caused by rapid urbanization resulting from industrialization. Young people, who generally have a high fertility rate, are attracted to the cities. As a result, urban areas grow rapidly not just because of a high net inward migration rate but also because of a high birth rate.

Table 6.3 Population growth by type of city, 1961-1989


Population (million)

Average growth rate


1961

1989

1961-1989

Taiwan total

11.2

20.1

2.1

Central municipalities

1.7

4.1

3.2

Provincial cities

1.3

2.3

2.2

Prefectural cities

1.3

4.1

4.2

Towns and hsiang

6.9

9.6

1.2

Sources: Ministry of Interior, Population Statistics, 1962,1990; Council for Economic Planning and Development (CEPD), Urban and Regional Development Statistics, 1990.

Based on an administrative hierarchy, cities in Taiwan are divided into four categories: central municipalities, provincial cities, prefectural cities, and towns plus hsiang. Table 6.3 shows the population growth of the four types of administrative unit during the period 1961-1989. The average annual growth rate of the central municipalities (3.2 per cent) exceeded the 2.1 per cent average annual growth of Taiwan as a whole. Prefectural cities grew by 4.2 per cent annually. Towns and hsiang grew at the much lower rate of 1.2 per cent, less than the natural population growth rate, which indicates considerable out-migration. The prefectural cities experienced the fastest growth, helping to balance growth between cities. Most of the medium-sized cities are located near a metropolis and may be considered satellite cities. Their rapid growth has been part of metropolitan development.

Urban hierarchy and urban system

In the early 1950s, Taipei City, whose residents numbered 610,000, was Taiwan's only city with a population surpassing 500,()00. At the same time, the only city with a population of between 250,000 and 500,000 was Kaohsiung City (268,000). In 1989, Taipei City was still Taiwan's largest city (pop. 2,700,000), followed by Kaohsiung City (1,400,000), Taichung City (747,000), Tainan City (676,000), and Panchiao (531,000). These figures reflect the growth and rise of Taiwan's major cities.

The number of cities with a population of more than 50,000 has increased considerably. Between 1950 and 1989, the number of cities with a population of between 50,000 and 100,000 showed the greatest increase, followed by cities in the 250,000-500,000 category (table 6.4). These statistics indicate that small and medium-sized cities are growing faster than large cities. An examination of table 6.5 shows that differences in the distribution of the total population between categories narrowed considerably over the period 1950-1989, indicating that the phenomenon of primate cities has not occurred in Taiwan. A study conducted in 1980 revealed that Taiwan's urban hierarchy followed the rank-sized rule.

Table 6.4 Number of cities by sue, 1950-1989


City size ('000 persons)

Year

0-50

50-100

100-250

250-500

500-1000

1000-2000

2000+

1950

309

2

5

1

1

-

-

1960

287

21

6

3

1

-

-

1970

261

43

9

3

1

1

-

1980

245

51

13

4

2

1

1

1989

231

58

16

8

3

1

1

Source: See table 6.1.

Table 6.5 Population distribution by city scale, 1950-1989 (%)


City size ('000 persons)

Year

0-50

50-100

100-250

250-500

500-1000

1000-2000

2000+

Total

1950

75.92

1.93

10.45

3.55

8.15

-

-

100.00

1960

60.34

11.92

7.35

10.23

-

10.16

-

100.00

1970

45.00

19.00

9.80

8.50

5.64

12.06

-

100.00

1980

33.92

21.22

12.17

7.27

6.50

6.59

12.33

100.00

1989

25.94

19.33

12.32

12.42

9.72

6.83

13.44

100.00

Source: See table 6 1.

In 1950, 10 of Taiwan's 20 largest cities were located in the Central region, 6 were in the Northern region, and 4 were in the Southern region. The 10 largest cities showed relatively high variation in population, unlike those in the 11th to the 20th position. This indicates that, although most population centres were in the Central region, their spatial distribution was quite even. Starting in 1960, Taiwan's population had already begun to move northward and southward.

Table 6.6 The regionali distribution of the 20 largest cities, 1950-1989

Region

1950

1960

1970

1980

1989

Northern

6

7

10

11

12

Central

10

7

4

2

2

Southern

4

5

5

6

6

Eastern

0

1

1

1

0

Total

20

20

20

20

20

Source: See table 6.1.

After 1980, only 2 of the island's 20 largest cities were in the Central region. The Northern region became home to 12 of the island's 20 largest cities, and the Southern region accounted for 6 (table 6.6).

In 1989, Chungho, Yungho, Hsinchuang, Hsintien, Sanchung, and Panchiao gradually rose in the urban hierarchy, owing to their location near the centre of the Taipei Metropolitan Area (fig. 6.2). Since the Eastern region is mountainous, and transportation and communications are relatively poor, development has been comparatively slow. In fact, the urban hierarchy in the region has fallen. Taichung City, the core of the Central region, has maintained considerable growth. Meanwhile, the Kaohsiung Metropolitan Area in the Southern region has sustained rapid growth, especially in the central city and major satellite cities such as Fengshan.

Although the spatial distribution of the major cities has inclined northward and southward since the 1960s, the actual spatial distribution has remained extremely even. Except for the Eastern region, there is a metropolitan area in each region. Thus, although the spatial distribution of the population in Taiwan is concentrated in cities, a type of multi-nucleated development and dispersed concentration can still be seen.

An urban system is defined in terms of size, function, and service area (or area of influence), and by differences in the social, economic, and cultural activities of cities within a specific region. Spatially speaking, a hierarchical relationship is formed. Cities higher in the hierarchy are larger and have a higher functional level. They also have a more expanded sphere of influence and more complex social, economic, and cultural activities. Cities within the hierarchy perform functions according to a division of labour. These close ties create an orderly relationship within the system.


Fig. 6.2 The 20 largest cities in Taiwan, 1989

At present, the urban hierarchy in Taiwan can be divided into five levels (fig. 6.1):

Level I:Agricultural villages

The smallest of the agricultural villages has a population of 4,000. Spatially, they are found at 2-5 km intervals.

Level II:General towns

General towns are usually district seats and are home to a population of between 10,000 and 50,000. They are interspersed at 5-10 km intervals. The sphere of influence of these towns extends to roughly 50,000-100,000 people.

Level III:Local centres

Local centres are generally independent towns, but several are included within metropolitan areas. A local centre is home to roughly 100,000 people. However, its population can swell to upwards of 500,000 in metropolitan areas. Local centres are found every 15-40 km, and their sphere of influence extends to roughly 200,000-800,000 people.

Level IV: Regional centres

Most of the regional centres lie in metropolitan areas. However, a few may be independent towns, such as Taitung and Hualien. An independent town usually has a population of 200,000, while the population of a regional centre may surpass 2 million. A regional centre's sphere of influence extends to an entire region, with a population ranging from 600,000 to 10,000,000. Regional centres are found every 80 km or so.

Level V: The political, economic, and cultural centre of Taiwan

Besides being the centre of the island's Northern region, Taipei Municipality serves as the island's political, economic, and cultural centre. Its direct sphere of influence covers the entire Taipei Metropolitan Area, comprising a population of 5 million.

Thanks to railway electrification and completion of the Sun Yatsen Freeway in the mid-1970s, travel time between the Northern and Southern regions has been reduced to 4 hours, transforming the hierarchical relationship between urban systems. The sphere of influence of the Taipei Metropolitan Area has gradually spread throughout the Northern region and Taiwan. The Taichung Metropolitan Area's sphere of influence extends throughout the Central region. The Kaohsiung Metropolitan Area's sphere of influence has spread to cover the entire Southern region.

Structural change

Population

In 1950, one year after the central government of the Republic of China had moved to Taiwan, there were about 8 million people living on the island. By 1990 the population had risen to 20.4 million, with a population density of 566 persons per km2, making Taiwan one of the most densely populated areas of the world. The population of Taiwan grew at the rate of 2.37 per cent annually from 1951 through 1990. The growth of Taiwan's population was determined almost totally by the natural increase rate (birth rate - death rate) since there was little international in-migration during the period. Owing to a rising level of education and fewer children per family (a result of population policy), the birth rate has been decreasing since 1960, while improved medical care and higher living standards have led to a fall in the death rate. Because the birth rate has fallen more rapidly than the death rate, the natural rate of increase has steadily declined. Table 6.7 shows that the annual population growth rate decreased from 3.5 per cent in 1960 to 1.2 per cent in 1990. The crude birth rate, 43 per 1,000 in 1950, declined thereafter, with especially sharp decreases recorded between 1960 and 1970 (owing to the government's family planning programme, inaugurated in 1964). The rate decreased further to 27 per 1,000 in 1970 and to 17 per 1,000 in 1990. The crude death rate declined dramatically from 11 per 1,000 in 1950 to 7 per 1,000 in 1960, reached a trough of around 4.8 per 1,000 in 1980, and rose slightly to 5.2 per 1,000 in 1990. The natural rate of increase rose moderately during the period 1950-1960, from 31.8 per 1,000 to 32.6 per 1,000. It then decreased sharply to 22.3 per 1,000 in 1970, owing to a steep decline in the crude birth rate. After 1970 it declined steadily and was 11.4 per 1,000 in 1990 (table 6.7).

For the purposes of structural classification, the population can be divided into three groups: youths (0-14 years old), people of working age (15-64 years old), and the elderly (65 + years old). In 1950 these three groups accounted for 41.3 per cent, 56.2 per cent, and 2.5 per cent, respectively, of the total population. The proportion of the population consisting of youths increased in 1960 owing to the postwar baby boom, but it has decreased in tandem with the decline in fertility since then. By contrast, the proportion of the working-age group decreased between 1950 and 1960, but has risen gradually since 1960. Meanwhile, the proportion of the elderly increased steadily between 1960 and 1990. In 1990 youths accounted for 27.3 per cent of total population, those of working age for 66.6 per cent, and the elderly for 6.1 per cent (table 6.8).

Table 6.7 Growth rate of the population, and births and deaths in Taiwan, 1950-1990


Population growth rate

Natural increase

Birth rate

Death rate

Year

(%)

(0/00)

(0/00)

(0/00)

1950

2.13

31.82

43.29

11.47

1960

3.46

32.58

39.53

6.95

1970

2.38

22.26

27.16

4.90

1980

1.86

18.62

23.38

4.76

1990

1.22

11.35

16.55

5.21

Source: See table 6.1.

Table 6.8 The age distribution of the population, 1950-1990 (%)


Age group


Year

0-14

15-64

65+

Total

1950

41.3

56.2

2.5

100.0

1960

44.4

53.2

2.4

100.0

1970

40.1

57.1

2.8

100.0

1980

32.4

63.4

4.2

100.0

1990

27.3

66.6

6.1

100.0

Source: See table 6.1.

There have also been changes in the distribution of the regional population. Attracted by the island's largest metropolis, Taipei, people have moved in increasing numbers to the Northern region. Taipei has become Taiwan's first "globalized" city and has provided more job opportunities than any other city on the island. In 1971, population in the Northern region was only a little more than that in the Southern region, with the two regions accounting for 34.9 per cent and 33.0 per cent of Taiwan's total population, respectively. However, since then the Northern region has been absorbing an increasing number of people and the Southern region has been losing population. By 1990, 42.4 per cent of Taiwan's total population was concentrated in the Northern region and 29.6 per cent was in the Southern region. The proportions of the total population in the Central region and in the Eastern region have also declined, with the former decreasing from 27.9 per cent in 1971 to 25.1 per cent in 1990, and the latter from 4.2 per cent to 3.0 per cent, respectively (table 6.9).

Employment

Total employment in Taiwan increased from 2.9 million in 1952 to 8.3 million in 1990. It grew at an annual rate of 2.8 per cent, slightly faster than the population growth rate of 2.5 per cent, during the period 1953-1990. Among industries, employment in secondary industry grew the fastest, increasing 5.2 per cent annually during the same period. The main source of growth in industrial employment was growth in manufacturing jobs, which increased 5.4 per cent annually. Tertiary industry employment grew 4.2 per cent annually between 1953 and 1990, while employment in primary industry shrank 1.1 per cent yearly (table 6.10).

Table 6.9 The population distribution of Taiwan by region, 1971 and 1990 (%)


Region


Year

Northern

Central

Southern

Eastern

Total

1971

34.90

27.86

33.04

4.20

100.00

1990

42.37

25.06

29.58

2.99

100.00

Source: See table 6.1.

Table 6.10 Employment by industry, 1952 and 1990


Employment (million)

Growth rate (1953-90)

Year

Total

Primarya

Secondaryb

Tertiaryc

Total

Primary

Secondary

Tertiary

1952

2.93

1.64

0.50

0.79





1990

8.28

1.06

3.39

3.83

2.77

-1.14

5.19

4.24

Source: Council for Economic Planning and Development (CEPD), Taiwan Statistical Data
Book, 1991.

a. Primary industry includes agriculture, forestry, fishery, and poultry and lifestock raising.

b. Secondary industry includes mining and quarrying, manufacturing, electricity, gas and water, and construction.

c. Tertiary industry includes such services as commerce, transport, and storage, communications, finance, insurance, real estate, and business services, and community, social, and personal services.

Changes in the economic structure during the past four decades have led to a sharp decrease in agriculture's share of total employment, to only 13 per cent in 1990. In the meantime, secondary industry's share rose to 41 per cent, and that of tertiary industry to 46 per cent (table 6.11). The increase in secondary industry's share of employment has been due to growth in manufacturing employment. Manufacturing is the most important subsector of secondary industry, and its contribution to employment has been very significant. In the 1960s, the government succeeded in creating additional employment opportunities by promoting labour-intensive export-oriented industries. As a result, about 43 per cent of incremental employment was absorbed by manufacturing during the period 1953-1990. Between 1973 and 1983, more than 51 per cent of incremental employment was absorbed by manufacturing, a situation similar to that of the industrializing nations of Europe at the turn of the century. After reaching a peak, manufacturing's contribution to employment slowed (tables 6.11 and 6.12), both because of the transformation to a service economy and because of the transformation from labour-intensive to capital- and technology-intensive manufacturing. Meanwhile, the rapid industrialization stimulated the growth of the service sector, which is labour intensive. This created not only jobs for new workers but also re-employment opportunities for displaced workers and those leaving agriculture. As the fastest-growing sector of the economy, tertiary industry is expected to increase its share of total employment still further in years to come.

Table 6.11 Shares of employment by industry, 1952-1990 (%)


Industry


Year

Primary

Secondarya

Tertiary

Total

1952

56.1

16.9 (12.4)

27.0

100.0

1960

50.2

20.5 (14.8)

29.3

100.0

1970

36.7

28.0 (20.9)

35.3

100.0

1980

19.5

42.4 (32.6)

38.1

100.0

1990

12.9

40.9 (32 0)

46.3

100.0

Source: See table 6.10.
a. Manufacturing's share of total employment in parentheses.

Table 6.12 Incremental employment absorbed by manufacturing, 1953-1990



Manufacturing

Period

Total increase (million)

Million

Per cent

1953-60

0.54

0.15

27.8

1961-72

1.48

0.70

47.3

1973-83

21.2

1.09

51.4

1984-90

1.21

0.34

28.1

1953-90

5.35

2.29

42.8

Source: See table 6.10.

The spatial dimension of economic structural change

The spatial pattern of investment

Because of growing population pressure on arable land in the 1950s, the government initiated a series of land reforms and innovative improvements in agriculture. When agricultural output stagnated in the late 1960s, the government made every effort to improve the agricultural infrastructure, building many new irrigation systems and dykes to prevent damage from floods and coastal storms. Other measures included guaranteed farm prices, the encouragement of multi-purpose cultivation, and the consolidation of farms to raise management efficiency. The successful implementation of these agrarian reforms and development strategies induced many farmers to remain on the land. Since 1973, the government has also implemented rural construction and infrastructure projects to foster agricultural growth and improve the rural environment, hoping to reduce the income differential between farmers and non-farmers. Improvement of the agricultural economy has helped to slow the pace of urbanization.

When Taiwan was retroceded to the Republic of China, the government adopted a primary import-substitution strategy in order to save foreign exchange. The strategy promoted the dispersion of food-processing plants and small-scale textile mills to create more job opportunities in the rural areas. Cities gradually formed around these industrial establishments. Hsinchu, with its booming textile mills, is a good example. During the 1960s, economic policy emphasized labour-intensive industries and promoted export industries through the gradual liberalization of foreign trade, low-interest loans, and tax rebates to export-oriented businesses. Manufacturing growth, especially that of export-oriented industries, contributed to the growth of the medium-sized cities. In the early 1970s, the government emphasized heavy (energy-intensive) industries, most of which were located in Kaohsiung. Jobs attracted people from rural areas and helped Fengshan (near Kaohsiung) to grow rapidly. Fengshan's position rose from 14th among Taiwan's largest cities in 1970 to 11th in 1980. After the first oil crisis, the policy emphasis shifted to structural adjustment and the promotion of so-called strategic or capital-intensive industries. These urban-oriented industries also absorbed many in-migrants and promoted urban growth. By the 1970s, extensive movements of people both northward and southward had begun to result in regional population disparities. To address this problem, the government commissioned the Council for International Economic Cooperation and Development (CIECD) to draft a comprehensive development plan for Taiwan. The plan, approved by the Executive Yuan and formally launched in 1979, was a physical plan focusing on new townships, housing construction, transportation, harbour development, industrial zoning, electrical power plants, steel production, and shipbuilding. These and other major construction projects provided a great boost to the industrial development of Taiwan and helped to raise living standards.

During the 1970s, the government implemented the Ten Major Construction Projects, including the North-South Freeway, Suao Harbour, Taichung Harbour, railway electrification, the Taoyuan International Airport, and the North-Link Railway (fig. 6.3). These projects affected the distribution of population. The North-South Freeway and railway electrification projects link all the major cities along the west coast of Taiwan, shorten travel times between the north and the south, and promote Taiwan's economic and social development. The North-Link Railway gives the eastern part of the island better access to the Taipei Metropolitan Area, facilitating eastern out-migration. Taichung Harbour facilitates the import and export of materials and products for Taichung's industrial development. Following the completion of the Ten Major Construction Projects, the government launched the Twelve Major Construction Projects and the Fourteen Major Construction Projects.

Infrastructure affects both regional population distribution and regional economic activities. Most of the investment capital for the Ten, Twelve, and Fourteen Major Construction Projects was concentrated in the north and the south. This induced people to move northward or southward and thus stimulated the formation and expansion of cities.

The encouragement of export-oriented industries brought rapid industrialization and urbanization, and stimulated the development of the service sectors. Promoting international trade also encouraged tertiary industries. To strengthen infrastructure and develop human capital, transportation, communications, and social overhead capital were promoted. Tertiary industry provides a strong stimulus to the growth of urban areas, and has been a major factor in the expansion of metropolitan areas and urbanization since the 1970s. The formation of the Taipei Metropolitan Area, with its very high employment ratio in tertiary industry, is a typical example.


Fig. 6.3 The location of the Ten Major Construction Projects, 1970s (Source: Council for Economic Planning and Development, The Evaluation of the Ten Major Construction Projects, Taipei: CEPD, 1979)

In the early stages of economic growth the government stressed capital efficiency and economies of agglomeration. It invested in social overhead capital (education, sanitation, health, and other public services) in cities. The marginal cost of urban public services almost always exceeds the price charged to the user, hence the subsidy fails to be capitalized into rent. This "urban bias" also promoted migration to the cities. On the other hand, the growing agricultural sector, exporting an agricultural surplus, was able to absorb a substantial portion of the population increase, restraining, at least temporarily, the out-migration of people to the cities.

In addition, most of Taiwan's institutions of higher education are located in cities, and the Chinese have traditionally placed a high value on education. People are strongly motivated to pursue higher education and are therefore attracted to the cities. Urban public housing has also attracted people from the countryside and thus affected city growth and city distribution.

Industrial location policies

Owing to the development of rural resource-oriented industries and the launching of the first and second four-year plans in the 1950s, both of which focused on fostering industrial development via agriculture, industry grew rapidly and was widely dispersed throughout the island by the 1960s. The improvement of infrastructure (highways and railways connecting the Kaohsiung and Keelung harbours) accelerated the growth of local resource-oriented and labour-intensive industries. This is the reason industry became rooted in rural areas and cities sprang up all over the island.

The development of industrial estates occurred in two ways, export-processing zones and industrial districts, in three stages. During the 1960s, in order to introduce and diffuse technology, the first export-processing zone was set up in 1966 in Kaohsiung, a harbour city. Two more zones were added, one in Tantzu, Taichung Prefecture, and the other in Nantzu, Kaohsiung City, in the 1970s. Export-processing zones contributed importantly to production, and created many employment opportunities. A major concern of the first stage, the 1960s, was to meet industrial investors' demand for land and to enhance industrial development in the Taipei and Kaohsiung areas. The total area devoted to this purpose during the decade was only 229 ha. Except for the Kaohsiung export-processing zone, all industrial estates were located in the Northern region. This concentration of industrial estates accelerated the pace of urbanization at both ends of the island. All new industrial estates developed during the 1970s were located in widely dispersed rural areas. About 66.9 per cent of the total developed area was in the Southern region, 23.5 per cent in the North, 7.6 per cent in the Centre, and 2.1 per cent in the East (table 6.13 and fig. 6.4). This uneven distribution reflects the emergence of the Southern region as an industrial area. The major goal was to stimulate industrial development in rural areas so as to retard out-migration to cities.

Table 6.13 Regional distribution of industrial estates, 1960-1990 (hectares)


Region


Year

Northern

Centrala

Southerna

Eastern

Total

1960

229

-

(66)

-

229

1970

1,559

503 (23)

4,442 (88)

140

6,644

1980

2,179

1,921

1,026

18

5,144

1990

-

248

-

-

248

Source: Industrial Development Bureau, Ministry of Economic Affairs, "Introduction of Industrial Development in Taiwan," 1991.

a. Export-processing zones in parentheses.

In order to promote balanced regional growth, industrial estates were located with a view to influencing the distribution of population and economic activities in the 1980s and thereafter. Table 6.13 also shows that more industrial estates were established in the Northern and Central regions in the 1980s than in the 1970s. Urban areas are the product of industrial development. With the dispersion of industrial estates, cities spread all over the island.

Economic structural change

From 1949, the government encouraged agricultural production to meet the need for food, and agriculture dominated the economy until 1960. Agricultural production accounted for 32.2 per cent of gross domestic product (GDP) in 1952, and industry for only 19.7 per cent. In other words, industrial production was only about 60 per cent of agricultural production.

Taking advantage of Taiwan's abundant labour force, the government employed a strategy of promoting exports to maintain economic growth and developed industrial estates in rural areas. As a result, the value of industrial output surpassed that of agriculture for the first time in 1962, with the former accounting for 28.2 per cent of GDP and the latter for 25 per cent. Industry thereupon began to play the leading role in Taiwan's economic development. From 1962 through 1986, the pace of industrialization accelerated and industry was the mainstay of the economy. By 1986 industry's share of GDP had risen to 47.6 per cent, while agriculture's had decreased to 5.5 per cent. At the same time, a structural transformation was occurring in industry itself, with the private industrial sector accounting for a larger share of industrial output than public enterprises, and heavy industry assuming greater importance than light industry. The location of industrial estates at both ends of the island accelerated the pace of urbanization.


Fig. 6.4 The development status of industrial districts in Taiwan, 1991 (Source: Ministry of Economic Affairs, A Brief of Industrial District Development in Taiwan, 1991)

With rapid industrialization, tertiary industry grew quickly. Services overtook industry as the dominant sector of the economy in 1988. The service sector's share of GDP reached 49.3 per cent that year, compared with a 45.7 per cent share for industry (table 6.14). Since then, service industries have dominated the Taiwan economy. Dynamic structural change is characterized by changes in the availability of resources - increases or decreases in labour, capital, raw materials, technology, etc. As the pace of industrialization quickened, the industrial structure shifted away from labour-intensive light industry to capital-intensive heavy and chemical industries, and then to knowledge-intensive high-tech industry. As a result of successive stages of import substitution and export expansion, as well as the location of industrial estates, industry grew rapidly, becoming the engine of Taiwan's sustained and rapid economic growth and the impetus behind the formation of the urban system.

Table 6.14 Change ID the economic structure: shares of GDP, 1952-1990 (%)

Year

Total

Agriculture

Industry

(Manufacturing)

Services

1952

100.0

32.2

19.7

(12.9)

48.1

1960

100.0

28.5

26.9

(19.1)

44.6

1962

100.0

25.0

28.2

(20.0)

46.8

1973

100.0

12.1

43.8

(36.8)

44.1

1984

100.0

6.3

46.2

(37.6)

47 5

1986

100.0

5.5

47.6

(39.7)

46.9

1988

100.0

5.0

45 7

(37.8)

49 3

1990

100.0

4.3

43.0

(34.1)

52.7

Source: CEPD, Taiwan Statistical Data Book, 1991.

The economic status of Taiwan's regions also changed significantly between 1966 and 1989. As its population has grown, the Northern region has gained importance in production, with its share of Taiwan's GDP increasing from 45.1 per cent in 1966 to 50.3 per cent in 1989. By contrast, the economic importance of the Central and Eastern regions has diminished, with their shares of GDP decreasing from 22.8 and 3.7 per cent in 1966 to 19.5 and 2.2 per cent in 1989, respectively. The economic weight of the Southern region has remained quite stable, with its share of GDP decreasing from 28.5 per cent in 1966 to 28 per cent in 1989. Table 6.15 shows the industrial division of labour among Taiwan's four regions according to the principle of relative advantage. Because of a relatively abundant agricultural labour force, primary industry has been concentrated in the Central and Southern regions, which accounted for 37.4 and 38.9 per cent, respectively, of Taiwan's agricultural GDP in 1989. With the development of industrial estates, secondary industry has been spreading over the Southern and Central regions, with those regions increasing their shares of total industrial GDP from 26.4 and 18.1 per cent, respectively in 1966 to 29.7 and 18.7 per cent in 1989. Owing to rapid industrialization, urbanization, and the emergence of metropolises, tertiary industry has become heavily concentrated in the Northern and Southern regions, which accounted for 53.7 and 25.5 per cent, respectively, of total service sector GDP in 1989.

Table 6.15 Regional shares of Taiwan's GDP, 1966 and 1989 (%)


1966

1989

Region

Total

Primary

Secondary

Tertiary

Total

Primary

Secondary

Tertiary

Taiwan

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Northern

45.05

17.75

53.47

52.49

50.27

17.28

49.95

53.68

Central

22.77

36.75

18.09

19.21

19.49

37.43

18.73

18.44

Southern

28.45

38.68

26.39

24.93

28.00

38.92

29.71

25.51

Eastern

3.73

6.82

2.05

3.37

2.24

6.37

1.61

2.37

Source: CEPD, Urban and Regional Development Statistics, Republic of China, 1991.

Table 6.16 Exports, Indstrialization, and urbanization, 1953-1989 (%)

Period

Growth rate of exports

Growth rate of industry

Growth rate of urban population

Level of urbanization





29 (1953)

1953-60

4.4

11.7

8.6a

40 (1960)

1961-72

27.4

17.6

6.1

57 (1972)

1973-83

21.4

9.6

3.7

70 (1983)

1984-89

17.5

8.7

2.3

74 (1989)

Source: CEPD, The Modernization of Taiwan's Economy, 1991

a Growth rate between 1954 and 1960.

The international dimension of the urban system

The rate and pattern of Taiwan's urbanization have been influenced more by national and international economic trends than by planning or public policy. This situation can be seen in table 6.16. When exports grew at a rapid rate, so did industry. The growth rate of the urban population almost paralleled those of exports and industry, except for the period 1953-1960. The level of urbanization increased with industrial development.

Urbanization in Taiwan has been the consequence of industrialization, and industrialization has been driven by exports. Export growth, in turn, has been induced by foreign effective demand. That is, Taiwan's urban system has been significantly influenced by changes in the international economy and the globalization of economic growth.

Overseas (private foreign and overseas Chinese) investment and technology transfers have helped to promote Taiwan's industrialization. Given Taiwan's abundance of labour but lack of capital and technology in the early stage of economic development, the policies promoting both labour-intensive agriculture and labour-intensive manufacturing were well conceived. At the same time, the government also established policies to continue improving the investment climate and encouraging an inflow of overseas capital and technology. There were many incentives and guarantees for overseas investors, such as the establishment of industrial districts, export-processing zones, and an industrial-scientific park, and the introduction of a five-year income tax holiday and accelerated depreciation.

Overseas investment

During the 39 years from 1952 through 1990, overseas investment in Taiwan totalled US$13.25 billion. By area of origin, Japan was the source of US$3.68 billion, or 28 per cent of combined foreign and overseas Chinese investment; the United States trailed in second place with US$3.29 billion, or 25 per cent; followed by Europe with US$2.01 billion, or 15 per cent. Overseas Chinese contributed US$1.95 billion, or 15 per cent of the total.

This inflow of capital made a significant contribution to Taiwan's economic development and the formation of its urban system. Most overseas capital was invested in large-scale manufacturing, including capital-intensive, technology-intensive, and higher value-added industries, and in urban infrastructure, such as housing, power, and transportation. Statistics show that over 60 per cent of overseas investment in Taiwan is concentrated in electronic and electrical products, chemicals, services, and machinery, equipment, and instruments (table 6.17). These products are also Taiwan's major exports and are produced in urban areas. The growth of export industries has spurred both industrialization and urbanization.

Table 6.17 The top four recipients of overseas investment, 1952-1990

Industry

% of total overseas investment

Electronic & electrical products

23.80

Chemicals

19.92

Services

12.14

Machinery, equipment & instruments

7.98

Source: See table 6.16.

Table 6.18 Distribution of multinational corporations in Taiwan, 1989 (%)


Establishments

Capital

Taipei City

64.56

57.22

Kaohsiung City

1.53

1.12

Kaohsiung County

1.47

1.12

Taiwan Area

100.00

100.00

Source: Industrial Development Bureau, Ministry of Economic Affairs, "Overseas Investment Statistics," 1990.

Moreover, statistics for the year 1989 show that 65 per cent of the multinational corporations operating in Taiwan are based in Taipei. In addition, 57.22 per cent of their investment is concentrated in that city, although Kaohsiung and provincial cities have also received foreign capital investment (table 6.18). Since technology always follows foreign investment, it is understandable why Taipei is Taiwan's leading city.

The formation of Taiwan's 20 largest cities has been the consequence of industrial and service agglomeration. The sites of these cities correspond to the locations of Taiwan's top five export-oriented manufacturing industries: textiles and garments, electrical machinery and apparatus, machinery, metal products, and chemicals. According to a correlation analysis of export-oriented industries and city spatial distribution, the correlation coefficient between these two variables was larger than.7 for 1966, 1976, and 1986 (table 6.19), and the effect of globalization (in terms of exports) on city spatial distribution is growing over time.

Some will question whether multinational corporations have significantly affected the formation of Taiwan's large cities as they have in respect of primate cities in third world countries. The multinational corporations operating in Taiwan export over half of the products they produce on the island. This is especially true of the multinational corporations from the United States and Japan. Although considerable overseas capital has flowed into Taiwan and is concentrated in Taipei (accounting for about 3-7 per cent of Taiwan's total capital formation during 1952-1990, as shown in table 6.20), it has been insufficient to stimulate the formation of a primate city in Taiwan.

Table 6.19 Correlation coefficient spatial distribution between the employment of export oriented industries and population

Year

Correlation coefficient

1966

.74

1976

.77

1986

.86

Table 6.20 Capital invested by multinational corporations as a percentage of Taiwan's capital formation, 1952-1990 (%)

Year

Capital formation (NT$ million)

Capital from multinational corporations (NT$ million)

Per cent

1952

2,643

11

0.4

1960

12,618

563

4.5

1972

81,082

5,067

6.3

1983

492,861

16,205

3.3

1990

934,704

61,936

6.6

Source: Calculated from CEPD, Taiwan Statistical Data Book, 1991.

Technology transfer

Industrialization has been the driving force behind economic growth in post-war Taiwan. An increasing ability to adopt new technology is one of the most important factors behind industrialization. The adoption of technology involves the successful introduction to the market-place of improvements in the transformation of inputs into outputs. Improvements cover activities ranging from the imitation of existing products with mature technologies to self-starting technology-based innovations. Such improvements are an integral part of the process of economic development.

Manufacturing was for many years the most dynamic and fastest-growing sector in Taiwan owing to technology transfer from advanced countries. Rapid increases in industrial output - in particular, the sequential growth of the textile and electronics industries - provided the basis for self-sustaining economic growth. Manufacturing's contribution to real gross domestic product increased at an average annual rate of 12.0 per cent between 1962 and 1990. Within manufacturing, the most dynamic subsectors were the export-oriented textile, garment, and electrical and electronics industries, which experienced annual real growth rates of 10.1, 13.3, and 20.3 per cent, respectively. These significant differences in growth clearly reflect the dynamic process of change made possible by new economic opportunities and technological innovations. Channels for the adoption of technology include overseas investment and technical cooperation with foreign high-tech enterprises. The most popular method is technical cooperation projects between foreign firms and companies in Taiwan, including the transfer of technical know-how and patent licensing. The major reason for setting up export-processing zones was to transfer and diffuse new technology. The diffusion of technology from the developed world favours modern, large-scale urban industries and thus promotes city growth. New high-tech industrial parks and science parks will be built to further promote technological progress and innovation in Taiwan.

The internationalization of business

Limited natural resources and a small domestic market meant that Taiwan had to export to achieve fast growth. Foreign trade became the major driving force of rapid economic growth. In the 1950s, foreign trade was small, grew slowly, and was consistently in deficit. At the turn of the 1950s, the government adopted export-oriented development policies, including fiscal and monetary policies to facilitate the rapid structural transformation of local industries and to encourage exports. Annual exports subsequently rose from US$200 million in 1961 to US$2 billion in 1971, a tenfold increase over 10 years. Foreign trade produced a surplus. By 1988, the Republic of China's total exports had risen to over US$60 billion, representing a 302-fold increase over a period of 27 years. The rapid export growth has made Taiwan 13th among the world's major exporters. On the other hand, Taiwan's imports also rose rapidly, from US$300 million in 1961 to US$50 billion in 1988, making Taiwan the 16th largest importer in the world.

Exports accounted for 8.6 per cent of gross domestic product(GDP) in 1953, when the government launched the First Four-Year Plan. The share gradually increased and reached its peak at 58.1 per cent in 1986, then decreased to 47.7 per cent in 1990 owing to a rise in international protectionism. Imports were 13.8 per cent of GDP, higher than exports, in 1953. The share grew steadily and reached 30.4 per cent in 1970, almost equal to that of exports. Imports as a percentage of GDP peaked at 53.7 per cent in 1980, decreasing to 42.2 per cent by 1990 (table 6.21).

Table 6.21 Exports and imports as a percentage of GDP, 1953-1990

Year

Exports

Imports

1953

8.64

13.81

1961

14.00

21.08

1970

30.31

30.36

1973

47.21

41.91

1980

52.53

53.72

1986

58.10

38.30

1990

47.70

42.24

Source: Directorate-General of Budget, Accounting, and Statistics (DGBAS), Statistics of National Income, 1991.

Table 6.22 Small and medium-sized enterprises as a percentage of total business establishments, 1971 and 1986

Year tertiary industry

Secondary and Manufacturing

1971

97.77 91.50

1986

97.52 91.09

Source: DGBAS, Report on the Industrial and Commercial Census, Taiwan-Fukien Area, The Republic of China, 1973 and 1988.

Foreign trade is vital to Taiwan's economy, and most enterprises are trade oriented, especially those in manufacturing. As mentioned above, almost half of Taiwan's domestic production is exported. Most export products are produced by small and medium-sized establishments (with fewer than 50 workers), and such establishments accounted for about 91 per cent of manufacturing establishments in both 1971 and 1986 (table 6.22). The implication is that there has been a close relationship between world demand and the development of small and medium-sized enterprises in Taiwan. Furthermore, because of Taiwan's sound infrastructure, convenient transportation, well-developed communications, the transfer of commercial skills from trading companies, and the predominance of small and medium-sized enterprises, Taiwan's business establishments are well dispersed throughout the island. This has helped promote an even distribution of cities and accelerated the urbanization of medium-sized cities. The medium-sized cities comprise prefectural cities, the administrative centres of counties, and the satellite cities of metropolises.

The impact of globalization on the mega-city of Taipei

Definition of mega-city of Taipei

The mega-city of Taipei is defined as the Taipei Metropolitan Area. The boundary of the Taipei Metropolitan Area has changed over time. This chapter uses the boundary given in Issues and Development Strategies of the Taipei Metropolitan Area, a study commissioned by the Ministry of Interior. The boundary has been defined according to the interdependence of vicinity areas, commuting and shopping areas, sewerage systems, water supply systems, flood protection projects, mass-transit networks, population growth, population density, and current common problems. The Taipei Metropolitan Area includes Taipei Municipality, Panchiao, Sanchung, Hsinchuang, Hsintien, Yungho, Chungho, Hsichih, Tucheng, Shulin, Yingko, Luchou, Wuku, Taishan, Linkou, Sanhsia, Pali, Tamshui, Sanchih, Shihmen, Shenkeng, Shihting, Wulai, Pinglin, and Kueishan. With regard to administrative units, it consists of a core city (Taipei Municipality) and 24 towns and hsiang, with an area of 1,896 km2. Taipei Municipality occupies an area of 272 km2, 14.4 per cent of the metropolitan area (fig. 6.5).

Socio-economic characteristics of the Taipei Metropolitan Area

The core city of the Taipei Metropolitan Area, Taipei, had a population of only 0.3 million in 1940. When the central government of the Republic of China relocated to Taipei in 1949, Taipei's population increased dramatically. There were 1.15 million people in Taipei in 1961 and 2.70 million in 1989, 2.35 times the number in 1961. Table 6.23 shows that the metropolitan area had a population of 1.81 million (including a core city of 1.15 million and a periphery of0.66 million) in 1961, and 5.64 million (2.70 million and 2.94 million, respectively) in 1989. The population of the Taipei Metropolitan Area grew 4.1 per cent per year between 1962 and 1989. The periphery grew at the rate of 5.5 per cent, much faster than the core-city growth of 3.1 per cent. The peripheries of Taipei City have enjoyed a spillover effect that has created many more job opportunities than in other cities. Meanwhile a number of industrial estates are spreading into the periphery, such as the Tu-Chen industrial estate, the Shu-Lin industrial estate, the Lin-Kou and Northern Special Area, and the Kuang-In and Taoyuan industrial estates. There are also some traditional textile and food-processing factories in Panchiao, Hsinchuang, and Sanchung. These plants, most of which are labour intensive and export oriented, created many job opportunities in earlier years and attracted many people to this area, contributing importantly to the rapid growth of medium-sized cities.


Fig. 6.5 The location and boundary of Taipei Metropolitan Area

Table 6.23 Population and population growth rate in the Taipei Metropolitan Area, 1961-1989


Population (million)

Growth rate (%)


1961

1989

1962-71

1972-81

1972-89

1962-89

Taipei Metro.

1.81

5.64

5.3

4.2

2.7

4.1

Core city

1.15

2.70

4.6

2.3

2.2

3.1

Periphery

0.66

2.94

6.0

6.8

3.2

5.5

Source: Ministry of Interior, Population Statistics, Taiwan-Fukien Area, 1962, 1972,1973, 1982, 1990.

Table 6.24 Natural population growth rate in the Taipei Metropolitan Area, 19601990 (per thousand)


Taipei Metropolitan Area

Core city

Periphery

Year

NIR

BR

DR

NIR

BR

DR

NIR

BR

DR

1960

31.40

37.58

6.17

30.00

34.95

4.95

33.11

40.77

7.66

1970

23.92

28.12

4.20

22.12

25.89

3.77

26.49

31.31

4.82

1980

19.29

23.07

3.79

16.21

19.96

3.75

22.31

26.13

3.82

1990

12.14

16.03

3.89

10.69

14.61

3.92

13.43

17.29

3.86

Source: See table 6.22.
Abbreviations: NIR - natural increase rate; BR - birth rate; DR - death rate.

It can be seen that the periphery's growth rate reached its peak during 1972-1981, and then dramatically decreased. The period between 1972 and 1981 was the golden era of Taiwan's exports, and Taiwan began to enjoy a foreign trade surplus from 1971. With the expansion of exports, the export-oriented industries grew rapidly and attracted population into the periphery.

Population growth is determined by migration and natural growth. Table 6.24 shows that the periphery also had a higher natural growth rate than the core city. The total population growth rates in both the periphery and the core city were higher than the natural growth rate. This implies that people in the core city are better educated, have higher incomes, are more sophisticated, and have lower rates of fertility and mortality than people in the periphery. The migration factor has had a greater influence on population growth than natural increase.

Table 6.25 Age structure of the Taipei Metropolitan Area, 1970-1990 (%)


Taipei Metro.

Core city

Periphery

Year

0-14

15-64

65+

0-14

15-64

65+

0-14

15-64

65+

1970

39.4

58.0

2.6

37.9

59.7

2.4

41.3

55.7

3.0

1980

32.2

64.2

3.6

30.0

66.0

4.0

34.4

62.3

3.3

1990

27.4

67.2

5.4

24.8

68.8

6.4

29.5

65.7

4.7

Source: See table 6.23.

Looking at the age structure of the Taipei Metropolitan Area, it can be seen that those of working age (15-64) and the elderly increased their shares of the total population between 1970 and 1990, whereas the share of young people (0-14) decreased. A comparision of table 6.25 and table 6.8 shows that the Taipei Metropolitan Area has a larger share of working-age population and a smaller share of elderly than the Taiwan Area as a whole. However, the core city has larger shares of working-age people and the elderly and a smaller share of youth than the periphery.

The employment structure of the Taipei Metropolitan Area has been influenced by economic globalization and the expansion of exports. Secondary industry's share of total employment showed the most rapid rate of increase, growing from 28.6 per cent in 1971 to 38.1 per cent in 1989. Tertiary industry's share remained stable, amounting to 59.6 per cent in 1971 and 59 per cent in 1989, although it dropped to 57.5 per cent in 1981. The share of primary industry declined dramatically, from 11.8 per cent in 1971 to 2.9 per cent in 1989.

Comparing the employment structure of the core city and the periphery, it can be seen that in 1989 the core city was dominated by tertiary industry, and the periphery by secondary and tertiary industries. Tertiary industry maintained roughly the same level of importance in the core city throughout the period 1971-1989. As primary industry declined, secondary industry was given a boost by the growth of manufacturing. The employment structure in the periphery showed different changes. The total employment share of tertiary industry increased from 45.7 per cent in 1971 to 48.5 per cent in 1989. The share of secondary industry soared from 34.4 per cent in 1971 to 45.9 per cent in 1981 as a result of an increase in world demand. Owing to the world recession, it increased only slightly between 1981 and 1989, from 45.9 per cent to 47.5 per cent. The share of primary industry decreased precipitously, from 19.9 per cent in 1971 to 4.0 per cent in 1989 (tables 6.26-6.28).

The impact of globalization

Taipei, the political, economic, social, cultural, and military centre of Taiwan, occupies 272 km2 in the northern part of the island. Because of the city's many advantages - well-developed infrastructure, highways, railways, a mass-transit system, and a domestic airport - it has expanded rapidly over the years and its population has grown apace. Although Taipei does not have an international airport or harbour, it is located near the Taoyuan International Airport and Keelung Harbour (both of which can be reached within half an hour). It is therefore one of the main stops for Euro-Asia airlines and Far East airlines.

Table 6.26 Employment structure of the Taipei Metropolitan Area, 1971-1989 (%)


Industry


Year

Primary

Secondary

Tertiary

Total

1971

11.8

28.6

59.6

100.0

1981

5.1

37.4

57.5

100.0

1989

2.9

38.1

59.0

100.0

Source: See table 6.22.

Table 6.27 Employment structure of Taipei City, 1971-1989 (%)


Industry


Year

Primary

Secondary

Tertiary

Total

1971

6.0

24.0

70.0

100.0

1981

3.9

28.6

67.5

100.0

1989

1.8

29.1

69.1

100.0

Source: See table 6.22.

Table 6.28 Employment structure of the periphery, 1971-1989 (%)


Industry


Year

Primary

Secondary

Tertiary

Total

1971

19.9

34.4

45.7

100.0

1981

6.1

45.9

48.0

100.0

1989

4.0

47.5

48.5

100.0

Source: See table 6.22.

Taipei has many medium-sized satellite cities endowed with abundant labour, which has made possible the rise of light, export-oriented industries in the city and its periphery. Owing to a good investment climate, foreign capital and advanced technology were introduced first in Taipei, and many multinational corporations have established branches there. According to statistics on overseas investment cov ering the period from 1953 to 1990, 65 per cent of foreign-invested companies engaging in the manufacture of electrical appliances and electronics, chemicals, and machinery and in the provision of such services as transportation, banking, insurance, and trading, were located in Taipei. The Industrial and Commercial Census of 1976 and of 1986 showed that most trading companies (export, import, or both) in Taiwan were located in the Taipei Metropolitan Area: 82.4 per cent in 1976 and 87.9 per cent in 1986, with 78.8 per cent and 84.6 per cent, respectively, concentrated in the core city. Thus concentration in the core city seems to be increasing (table 6.29). Nevertheless, it should be noted that foreign trading companies that have set up branches in Taipei have helped to collect orders for Taiwan's small and medium-sized manufacturing firms, which are spread island-wide. In addition, foreign banking is also heavily concentrated in Taipei. The number of foreign banking units increased rapidly from 7 in 1976 to 33 in 1986. Of these only one unit is located outside Taipei City.

In summary, owing to its special administrative status, favourable location, and abundant human resources, Taipei's infrastructure was already well developed when the government introduced its export-promotion strategy in the 1960s. Taking advantage of its own abundant labour, Taipei, together with its periphery, expanded rapidly, and its favourable investment climate attracted considerable foreign capital. Overseas investment, accompanied by new technology, flowed not only into manufacturing and services such as trading companies and banking, but also into urban social overhead capital (hospitals, education, housing, etc.), creating many job opportunities and improving the living environment. As a result, many residents of other areas were induced to relocate to Taipei. The improvement in living conditions further increased investment opportunities, which, in turn, attracted more foreign capital. This favourable circular cumulative causation has been the driving force behind Taipei's growth.

Table 6.29 Distribution of trading companies, 1976 and 1986 (%)

Year

Taipei Metro.

Core city

Periphery

Taiwan Area

1976

82.4

78.8

3.6

100.0

1986

87.9

84.6

3.3

100.0

Source: DGBAS. Report on the Industrial and Commercial Census, Taiwan-Fukien Area, Republic of China, 1978,1988.

By no means does this imply that the favourable circular cumulative causation will continue indefinitely. Overcrowding always produces negative social effects, which may slow or even terminate a city's expansion. In fact the serious traffic jams and air pollution with which Taipei is nowadays confronted are encouraging a growing number of people to migrate to the city's periphery.

Policies and policy implications

Policies

During the 1960s, dramatic industrialization and export growth encouraged urbanization. By the 1970s, population had gravitated to two regional poles: the North (with Taipei as the regional centre) and the South (with Kaohsiung as the regional centre). In the prosperous North and South, housing and public facilities were strained by increasing demand. The social costs attributed to traffic congestion, air and water pollution, and the improper use of natural resources were increasing. In contrast, the less developed regions (the Centre and the East) experienced out-migration, a shrinking of the agricultural labour force, relatively low family income, poor public facilities, and deterioration in the living environment. In order to check this deterioration, the government emphasized the following policies.

Urban plans

Urban planning addresses the problem of urban growth and urbanization. The major objective is to promote better land use through adequate zoning control (including restrictions on construction and the siting of industrial estates), and to provide more public facilities, such as open spaces and green belts in urban areas. Urban plans are currently in force in 424 areas covering approximately 12.1 per cent of the island. The population in the planned urban areas accounts for 76.6 per cent of the total population.

Metropolitan plans

The intimate relationship between urban and rural areas, as well as between cities, has encouraged planners in Taiwan to seek another level of planning, which focuses on the metropolis and the region. A metropolitan plan is geared to meeting the needs of cities and new urban lifestyles. It aims to provide more sophisticated public facilities, planning for new towns, and the renewal of old sections of cities.

Regional plans

A regional plan considers the goals, policies, and priorities of regional growth. Major features include population distribution, economic activities, land-use patterns, transportation systems, and environmental conservation. Furthermore, to ensure effective implementation of such plans, growth centres such as new towns and growing towns are given priority within the context of the regional plan. Regional plans designate industrial sites to encourage the establishment of plants. More than 70 industrial areas have been developed in this way, promoting the balanced development of residential communities and industries.

Transportation programmes

During the period 1950-1970, transportation programmes included the expansion of the Keelung, Kaohsiung, and Hualien harbours, improvement of the highway system, construction of the north-south and the eastern railway systems, construction of the Taipei and Kaohsiung international airports, the development of inter-city road systems, and the improvement of rural roads. These programmes encouraged further dispersion of industrial establishments and contributed to a more even spread of regional population.

Through the 1970s and 1980s, the government implemented the Ten, the Twelve, and the Fourteen Major Construction Projects. These projects were transportation oriented and included the North-South Freeway, Suao Harbour, Taichung Harbour, railway electrification, the Taoyuan International Airport, the North-Link Railway, new cross-island highways, the Around-the-Island-Railway, widening the Pingtung-Oluanpi Highway, improving traffic flow in the Kaoping region, the undergrounding of Taipei's railway, the Second Trans-island Freeway, highway expansion (including expansion of the Binghei Highway and the Third Provincial Highway), and a mass-transit system in Taipei.

Table 6.30 Regional allocation of capital for major construction projects 1973 1990 (%)


Major Construction Projects



Ten

Twelve

Fourteen


Region

1973-1979

1978-1984

1984-1990

Total

Northern

23.56

16.87

41.48

32.86

Central

2.34

4.15

14.99

10.45

Southern

36.51

47.46

16.13

26.72

Eastern

0.00

3.00

0.00

0.72

Interregion

37.59

1.15

9.37

11.81

Island-wide

0.00

27.37

18.03

17.44

Total

100.00

100.00

100.00

100.00

Source: Construction and Planning Administration, Ministry of Interior, Study of Regional Development in Taiwan - Conference for National Construction, 1986.

With regard to capital for the three major construction programmes described above, about 32.9 per cent of the total capital allocated was for the Northern region, 26.7 per cent for the South, 10.5 per cent for the Centre, and less than 1 per cent for the East (table 6.30). These figures exclude capital for island-wide and inter-regional projects. It is obvious that the distribution of infrastructure investment in Taiwan has had a crucial impact on regional development and the formation of metropolitan areas and urban systems. This distribution illustrates why the Northern region has been the most developed and the most populated area, and why the Eastern region has been the least developed area and has experienced considerable out-migration.

Programmes for the improvement of social overhead capital

Prior to 1970, most libraries, museums, theatres, colleges, universities, and hospitals were located in Taipei and Kaohsiung. To achieve a better distribution of social overhead capital and to improve the overall level of social welfare and promote balanced regional development, the government has launched the following projects:

(1) Cultural Centre Development Projects: each city or prefecture is required to construct a cultural centre, including a library, a museum, and a music hall.

(2) New Colleges Development Projects: new colleges or universities are planned for construction in the Central or Southern regions. (3) Medical Care Development Projects: medical services will be made available in each "living perimeter."

The implementation of these social overhead capital improvement programmes is expected significantly to reduce the concentration of population in Taiwan.

Agricultural and rural community development programmes

A major impetus behind urbanization is the "push force." For that reason, improvement of the agricultural economy can help decelerate urbanization. When agriculture stagnated in the late 1960s, the government improved the agricultural infrastructure to reduce agricultural production costs. And to raise farmers' income, improve the rural quality of life, and foster agricultural growth the government has carried out rural construction and infrastructural development programmes since 1973.

Implications

The following conclusions can be made regarding the implications of these policies for population deconcentration.

Zoning control, restrictions on construction, industrial estates, green belts, and the provision of more open space have reduced urban sprawl and alleviated the problem of squatting. On the other hand, better job opportunities and facilities in urban areas have continued to attract people to the cities, increasing their population.

Transportation programmes associated with industrial estates (in the regional plans) have promoted the development of medium-sized cities, which has eased in-migration pressure on the big cities and prevented the formation of a primate city.

Programmes to improve social overhead capital have narrowed quality-of-life differences between big and medium-sized cities, helping to balance population distribution.

Improvements in agricultural infrastructure have reduced farm costs, but attempts to increase farm income have been less successful. Programmes for the development of agriculture and rural communities continue to have an impact on urbanization.

Because of a lack of coordination among civil authorities, plans to slow the pace of urbanization have achieved only limited success.

Conclusion

A number of policies have influenced the distribution of population and the formation of the urban system in Taiwan. However, there has been no explicit policy to direct urban development. The rate and pattern of Taiwan's urbanization have been influenced more by national and international economic trends than by planning or public policy. With limited natural resources, Taiwan's economic growth relies heavily on international trade. Export-oriented trade policy has had a major impact on Taiwan's industrialization and industrial structure. Industrialization has further encouraged the movement of people into cities, creating large metropolitan areas. That is, Taiwan's urban system has been significantly influenced by changes in the international economy and the globalization of economic growth.

The well-designed and widely dispersed infrastructure, advances in transportation and telecommunications technology, and efficient public utilities have helped industrial estates spread throughout the whole island and cities have emerged in a multi-nucleated pattern. A primate city has not arisen in Taiwan, although there is a tendency towards the development of large metropolitan areas. The relationship between the sizes and ranks of cities corresponds closely with the rank-size rule. Metropolitan areas have gradually expanded their spheres of influence. Taiwan currently has three metropolitan areas: Taipei in the North, Taichung in the Centre, and Kaohsiung in the South.

The inflow of foreign capital has increased investment in industry and provided new technology for advanced production. A foreign banking network has made possible rapid foreign-exchange transactions. And foreign trading companies have set up a marketing system to collect orders for Taiwan's small and medium-sized enterprises. Because many trading services are provided by the domestic branches of foreign companies, there is no need for industrial firms to be located in central cities. As a result, cities are more widely dispersed than they would otherwise be.

Taiwan's future development will rely heavily on interdependence among countries, an international division of labour, and international cooperation. The inflow of foreign capital provided by multinational corporations will spur competition between the domestic and world markets by promoting the establishment of satellite factories, processing plants, department stores, and retail outlets. Academic, educational, cultural, and technological interchange will link Taiwan more closely with other parts of the world. These developments will affect the growth of commerce and services in Taiwan's cities, and thus speed up urbanization. Metropolitan areas, particularly Taipei, Taichung, and Kaohsiung, will attract an even greater population. Furthermore, the Chungli-Taoyuan region, Hsinchu, and Tainan will become metropolitan areas in the near future. These six metropolitan areas together will then accommodate 80 per cent of Taiwan's total population.

Note

1. A "living perimeter" is a spatial unit for the planning and development of public services. Living perimeters are established to reduce regional differences in the quality of life. To achieve this goal, transportation will be organized so that:

(1) people living in every town and hsiang can reach a service centre within 30 minutes;

(2) people in each living perimeter can reach the nearest metropolitan area within one hour.

Each perimeter will consist of self-contained communities providing living accommodation, recreation, education, and medical and shopping facilities for residents, and will be served by rapid mass-transit networks.

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(introductory text...)

Anthony Gar-on Yeh and Xueqiang Xu

Introduction

The year 1978 is a major turning point in the development of China. At an important meeting of the Communist Party in December 1978, it was decided to focus the country's efforts not on politics and "class struggle" but on economics and the Four Modernizations - in agriculture, industry, national defence, and technology. This involved reducing the dominance of central state planning and permitting a more market-led economy. This also included an "open (door) policy" to open up China to world markets and foreign investments and to promote economic and technical cooperation with other countries. The adoption of economic reforms and an open policy has had a profound influence on the economic development and urban system in China. Economic reforms have improved the national economy and at the same time work together with the open policy in integrating China with the world economy. Economic reforms have freed the market from the rigid state-controlled economy towards a more vibrant domestic market. The increase in the domestic market alone could not have achieved the economic growth that China experienced in the 1980s. Isolated from the world during the Cultural Revolution, it needed foreign investment and foreign technology, particularly production technology, to speed up its economic development and upgrade its production. It is difficult to envisage economic reform without the open policy. It is through this course that China is working its way through economic development.

In contrast to the sudden drastic change from a socialist economy to a free market economy in the former Soviet Union and Eastern Europe, China has adopted a gradual path of reform and development. Its economic reforms are gradual and so is its opening up to the world. Economic reforms are tested in pilot areas and sectors before being applied to the whole country. The opening up of the centrally planned economy to a market economy is carried out gradually. The open policy is also gradual in terms of geographical location and economic sectors. First, foreign investment was limited to the four Special Economic Zones (SEZs) and later extended to other special zones such as the open cities and economic and technological development zones. Secondly, foreign investment was allowed in manufacturing and later extended to property development, and now to the tertiary sector (e.g. shops and banks).

Since 1978, economic development has been rapid. China had an average annual growth rate of 14.3 per cent in the period 1978-1990, which is one of the highest in Asia and the world. Such high economic growth has been achieved through economic reforms and the globalization of its economy. The globalization of its economy is an intentional effect of the open policy adopted in 1978. Because of locational advantage, it is not surprising to find that economic growth is faster in the coastal provinces than in inland provinces. It is hoped that economic growth will later spread to the inland provinces. Coastal cities are developing more rapidly than non-coastal cities. The open policy has had a major impact on the spatial structure and urban system of China, influencing the pace and composition of development in different provinces and cities of China.

Economic reform and globalization in China

The 1978 economic reforms opened China's economy to foreign investment and market processes, reintroduced the private individual economy (geti jingji), with individuals owning their means of production and earning their living through their own labour, and the commodity economy (shangpin jingji). A series of reforms followed the adoption of the economic reform policy. Since 1978, the economic reforms that have affected urban system development in China are mainly rural reform, the open policy, and urban reform.

Rural reform

The early reforms mainly affected the rural areas, where communes were replaced by a production contract, the household responsibility system. Rural land was distributed to households according to household size, and each household bore the sole responsibility of fulfilling a predetermined production quota. After meeting the production quota, households were free to produce whatever they liked and could sell their products in the free market. Households could also contract to run agricultural production units such as duck farms, fish ponds, or orchards. This system has replaced the original commune system where farmers worked together and were paid according to the number of their work points. This reform has aroused the enthusiasm of farmers by the new system of "more pay for more work." Rural production has increased tremendously since the introduction of rural reform. There has been an increase in the number of "specialized households" that make use of special production skills. Households that preferred to engage in non-agricultural activities were allowed to sub-lease their plots to other people. The surplus labour freed from agriculture as a result of the increase in the productivity of farmers has stimulated the development of small enterprises in the rural areas, giving rise to rural urbanization.

The open policy

Foreign investment was considered conducive to economic development in China. The 1978 economic reform has led to the utilization of more foreign investment and the development of SEZs and special districts for attracting foreign investment.

To attract and manage foreign investment effectively, four SEZs Shenzhen, Zhuhai, Xiamen, and Shantou - were established in 1979. The SEZs represented a major attempt to attract foreign capital, enterprises, and technology in strictly demarcated zones, where experiments with new economic policies in dealing with foreign investments could be conducted (Jao and Leung, 1986). The SEZs had the initial objective of producing goods for export to earn foreign exchange. They also acted as social and economic laboratories where foreign technologies and managerial skills might be observed. They offered a range of inducements to foreign investors, including tax holidays, early remittance of profits, and good infrastructure.

Despite some criticisms, the SEZs were considered to be successful and could be used as a model for other cities in economic development. In 1984, 14 other coastal cities were opened up for investment (Yeung and Hu, 1992). These are Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhangjiang, and Beihai (fig. 7.1). These "open cities" were to offer similar concessions to foreign investments as the SEZs, although they are not provided with the same level of central government funding for infrastructure development.

Apart from designating SEZs and coastal open cities to attract foreign investment, other regions were designated as special zones for foreign investment. In 1988, three "open economic regions" were designated- the Yangtze River (Changjiang) Delta Economic Region (around Shanghai), the Pearl River (Zhujiang) Delta Economic Region (around Guangzhou), and the Minnan Delta Economic Region (around Xiamen) (fig. 7.1). They are attempts to spread the benefits of an open policy from the SEZs to other parts of the country.

The designation of SEZs, cities, and regions along the coast for foreign investment is understandable because they are more accessible than interior cities and regions to foreign investments. The open coastal cities and the SEZs were also previous ports in which foreigners had lived and traded with China.

After the adoption of the open policy, some US$27 billion of foreign capital was utilized in the period 1979-1985 (Phillips and Yeh, 1990). Of this, 72 per cent was in the form of external loans, whereas 27.8 per cent was direct investment. Hong Kong provided most of the foreign direct investment, followed by Japan and the United States. Because of the policy of designating SEZs, coastal open cities, and open economic regions along the coast, foreign investment is unevenly distributed spatially. It is highly concentrated in the coastal provinces, particularly in large cities such as Beijing, Shanghai, and Guangzhou and the SEZs of Shenzhen and Xiamen (Phillips and Yeh, 1990).

Urban reform

Urban reform was officially launched by the Third Plenary Session of the Twelve Central Committee of the Chinese Communist Party in October 1984, which adopted a policy to reform the economic structure. It tried to introduce the successful rural economic reform to the urban sector by giving more incentives to individual efforts. It consisted of expanding the autonomy of enterprises, giving material incentives to workers, loosening planning and price controls, replacing state investment with credit finance for industrial development, encouraging small-scale private enterprise, and allowing market forces to determine the distribution of goods and services. Enterprises were allowed to retain and allocate investment, plan production, hire and dismiss employees, and determine bonuses and prices. These reforms were mainly aimed at enterprises but, because most enterprises are located in the urban areas, they were referred to broadly as urban reform.


Fig. 7.1 China's Special Economic Zones, coastal open cities, and open economic regions, 1980s (Source: Phillips and Yeh, 1990)

Prior to the official announcement of the 1984 urban reform, Shashi was designated as the first city to carry out pilot economic structural reforms in July 1981. Since 1981, 74 cities (such as Chongqing, Wuhan, Shenyang, Dalian, Nanjing) have been approved as pilot cities for economic reforms; 20 of them experimented with institutional reform, 27 with banking reform, 14 with housing system reform, and 13 with market-oriented production reform (STB, 1990).

The globalization of china's economy

The economic reforms and open policy of 1978 ended China's earlier hostile attitude to foreign investment and trade and opened China up to the world economy, particularly to Asia. As a result, there has been a marked increase in tourism, imports, exports, and foreign investments. Non-Chinese tourists increased from 0.5 million in 1980 to 1.74 million in 1990 (a 248 per cent growth) and Chinese tourists, mainly from Hong Kong, Macau, and Taiwan, increased from 5.17 million in 1980 to 25.71 million in 1990 (a 397 per cent growth) (STB, 1991). Prior to 1978, the volume of trade was generally small and the major trading partners were mainly communist countries, particularly during the 1950s and 1960s. Since 1978, there has been a large increase in the volume of trade, especially with non-communist countries. Foreign investment was equally emphasized. Legal and administrative reforms have been introduced to attract foreign investment.

Trade

By promoting trade, China hoped to accumulate the funds and technology necessary for modernization. Foreign trade was not always important in the Chinese economy based on the pre-1978 principle of self-reliance. The annual volume of trade between 1950 and 1974 averaged no more than 4 per cent of gross national product (GNP).

This has risen considerably in recent years. In 1990, imports and exports rose to 30 per cent of GNP. Between 1965 and 1980, the average annual growth rate of exports and imports was 5.5 per cent and 8 per cent, respectively; between 1980 and 1985, the average increased further to 8.8 per cent per annum for exports and 17.6 per cent for imports. Imports and exports have increased rapidly since 1978, and since 1987 there has been a trade surplus because of China's fast-growing exports.

The recent role of foreign trade (particularly imports) has been to facilitate and accelerate modernization and economic development by enabling the acquisition of raw materials, machinery, equipment, and technology that are not available or cannot be produced in sufficient quantities domestically.

There has also been a major shift in trading partners since 1978 with the increase in trade with non-communist countries in the West (table 7.1). Trading with Asian countries, particularly Japan and Hong Kong, is extremely important. In 1990, Hong Kong and Japan accounted for 62.3 per cent of total exports and 42.7 per cent of total imports. The trade relationship with Asian countries varies between exports and imports. Exports are mainly to Asian countries whereas imports are mainly from non-Asian countries, especially Western countries. In 1990, 69.6 per cent of exports were to Asian countries and only 44.8 per cent of imports were from Asian countries.

China has a special trading relationship with Hong Kong and enjoys a large trade surplus. In 1990, the surplus was US$10.7 billion, enough to cover a substantial part of its trade deficits with other countries. Much of the exports to Hong Kong is composed of goods originating from Hong Kong and exported to China for processing and then re-exported to Hong Kong. Hong Kong is growing in importance as a staging post for goods into and from China. For many years, about one-third of Hong Kong imports from China were for reexport, but the figure in the mid-1980s rose to half. Apart from providing transshipment services, Hong Kong's efficient banking system handles transactions for China and its indirect trading partners, with which China may currently have no diplomatic ties. For example, in the past, Korea, Malaysia, and Taiwan were such countries.

Exports

China is rapidly developing its export-led economy. The proportion of exports in its GNP rose from 4.6 per cent in 1978 to 16.8 per cent in1990. Hong Kong is an especially important export market for China. It has always ranked among the top three. In the past, most of the exports consisted of food, but increasingly manufactured goods are exported that are then re-exported to other countries.

Table 7.1 China's major trading partners, 1990



Exports

Rank

Country

US$ million

% of total

1

Hong Kong

18,587

42.2

2

Japan

8,871

20.1

3

USA

4,815

10.9

4

USSR

2,133

4.8

5

Singapore

1,863

4.2

6

West Germany

1,816

4.1

7

Italy

707

1.6

8

United Kingdom

704

1.6

9

France

642

1.5

10

Netherlands

614

1.4


Total

40,752

92.5

Total exports


44,078

100.0



Imports


Country

US$ million

% of total

1

Hong Kong

7,854

28.1

2

USA

4,993

17.9

3

Japan

4,055

14.5

4

USSR

1,758

6.3

5

West Germany

1,717

6.2

6

Canada

1,316

4.7

7

France

1,204

4.3

8

Australia

1,199

4.3

9

United Kingdom

829

3.0

10

Italy

530

1.9


Total

25,455

91.2

Total imports


27,912

100.0

Source: Almanac of China's Foreign Economic Relations and Trade, 1991.

Exports produce over 80 per cent of China's foreign currency earnings, with the remainder coming from tourism, labour services, and remittances from overseas Chinese. There has been not only a marked increase in the value of exports but also a structural change. Agricultural products declined from 55.7 per cent of the total value of exports in 1953 to 13.0 per cent in 1990. Light industrial products increased from 26.9 per cent in 1953 to 53.3 per cent in 1990, and heavy industrial products (including petroleum products) increased from 17.4 per cent to 33.7 per cent.

The distribution of exports is uneven, being mainly concentrated in the coastal provinces (fig. 7.2). The coastal provinces accounted for over 71.9 per cent of total exports in 1990. Most exports came from either the coastal provinces, or central municipalities with a strong industrial base, such as Tianjin, Liaoning, and Shanghai, or coastal provinces with a sound agricultural and light industrial base, such as Guangdong and Jiangsu.

Foreign investment

Foreign investment is used as a means of overcoming the shortage of domestic funds and of improving China's management, productivity, and competitiveness so that more may be exported to earn foreign exchange and increase employment. Foreign investment is also used to build China's links with the world economy. Foreign investment is an important instrument of economic change in China (Kueh, 1992). Since the opening up of China in 1978, many types of foreign investment have emerged (Phillips and Yeh, 1990; Khan, 1991):

· Equity joint ventures (EJVs). The foreign and Chinese parties pool money in agreed proportions. They invest in and operate the venture, sharing profits and losses in proportion to their equity stake. This is the form of investment preferred by China.

· Wholly foreign-owned subsidiaries (WFSs). Wholly owned subsidiaries of foreign companies and wholly owned companies can be incorporated in China. The investor will be responsible for capital and input costs, marketing, and management of the venture, which runs for an agreed period. Profits after tax can be remitted overseas.

· Contractual joint ventures (CJVs). The Chinese enterprise provides the land, factory buildings, and labour services for a foreign firm, which provides equipment, capital, and technical expertise. The period of investment is shorter than those for the above methods, usually five to seven years, and the flexibility and short period make CJVs popular with foreign investors.

· Joint explorations. Joint explorations are a form of cooperation seen in the joint exploration for offshore oil. During the two stages of exploration and extraction the Chinese and foreign partners take different levels of risk. For example, in the exploration stage, the financial and other risks lie with the foreign party, whereas in production, both sides contribute to the business.


Fig. 7.2 Regional distribution of exports in China, 1990 (Source: Almanac of China's Foreign Economic Relations and Trade, 1991)

· Compensation trade (product buy-back). The foreign investor receives payment in the form of the goods produced by the enterprise in which an investment is made. This is a form of counter-trade akin to barter, but it may also include payment in the form of other goods bearing no relation to the original venture or equipment supplied. It is popular with the Chinese government as it avoids excessive payments of foreign exchange.

· Other forms of investment and cooperation. A number of other forms of investment exist. For example, leasing has developed since the early 1980s. Intermediate processing of goods has also grown, using materials, equipment, and parts supplied to Chinese firms. This form is particularly important with regard to Hong Kong goods. There are various processing and assembly agreements under which foreign firms supply materials for Chinese enterprises to process or fabricate into finished products according to the foreign investors' designs and specifications.

The variety of forms of investment and cooperation indicates that China is seriously attempting to attract foreign investment and expertise. In the period 1979-1989, foreign capital worth some US$57,624 million was utilized (table 7.2). About 68.2 per cent of this was in the form of foreign loans, while 26.9 per cent was direct foreign investment, and 4.9 per cent other forms of foreign investment such as compensation trade. Loans from foreign commercial banks constituted the major share of foreign loans, with loans from foreign governments coming second. Equity and contractual joint ventures dominated foreign direct investment, constituting 77.9 per cent of total foreign direct investment.

The most popular investment in the period 1979-1990 was in the form of equity joint ventures, followed by contractual joint ventures, with joint exploration projects also of importance. Fully foreign-owned enterprises are relatively unimportant. Compensation trade, while attractive in some ways, has not grown very fast, principally because of the difficulties in reaching agreement on product buy-back and the difficulties in selling some products on the international market where there is strong competition in price and quality.

There is a concentration of foreign loans and foreign direct investment (FDI) from relatively few countries (table 7.3). Japan and the World Bank contributed 57.6 per cent of total foreign loans in 1989, whereas Hong Kong and Macau were the sources of over half of the total FDI. Foreign investments are thus provided largely by Asian investors, financial institutions, and governments. Investments by multinational companies are relatively minor, although more visible in sectors such as offshore oil exploration. Investment from Asia is mainly from Japan and Hong Kong. Japanese investment is mainly in the form of foreign loans whereas investment from Hong Kong is mainly in the form of FDI.

Table 7.2 Utilized foreign capital, 1979-1989

Type of foreign capital

Value (US$m)

Percentage of type

Percentage of total

Foreign loans:

Loans from foreign governments

8,370.7

21.3


Loans from international financial institutions

6,059.7

15.4


Buyers' credit

2,940.9

7.5


Loans from foreign commercial

16,987.9

43.2 banks


Other

4,962.5

12.6


Total

39,321.7

100.0

68.2

Foreign investment:

Equity joint ventures

7,310.7

47.2


Contractual joint ventures

4,754.0

30.7


Fully foreign-owned enterprises

749.4

4.8


Joint exploration

2,679.6

17.3


Total

15,493.7

100.0

26.9

Other foreign investment:

Compensation trade

1,687.3

60.1


Other

1,121.5

39.9


Total

2,808.8

100.0

4.9

Total foreign capital

57,624.2

100.0


Source: Almanac of China's Foreign Economic Relations and Trade, 1984-1990.

The location of foreign investment

In addition to the legal and political reforms to ease the way for foreign investment in China since 1978, a number of geographical areas have been designated as focal points in attracting such investment. Although it is too simplistic to identify a few growth areas in a country that is witnessing such widespread development, it is helpful to examine three main types of areas: SEZs, open coastal cities, and other areas designated to attract foreign investment.

Table 7.3 Major foreign investors in China (with total investment of more than US$50 million), 1989

Country/international financial institution

Foreign loans

Direct foreign investment

Total


US$m.

%

US$m.

%

US$m.

%

Japan

2,595.0

41.3

356.3

10.5

2,951.3

30.5

Hong Kong and Macau

571.1

9.1

2,077.6

61.2

2,648.7

27.4

World Bank

1,026.8

16.3

0.0

0.0

1,026.8

10.6

France

790.1

12.6

4.6

0.1

794.7

8.2

USA

105.7

1.7

284.3

8.4

390.0

4.0

Britain

346.4

5.5

28.5

0.8

374.9

3.9

West Germany

152.8

2.4

81.4

2.4

234.2

2.4

Italy

121.2

1.9

30.3

0.9

151.5

1.6

Sweden

92.4

1.5

3.3

0.1

95.7

1.0

Singapore

2.0

0.0

84.1

2.5

86.1

0.9

Total

5,803.5

92.3

2,950.4

87.0

8,753.9

90.4

Grand total

6,285.7

100.0

3,392.6

100.0

9,678.3

100.0

Source: Almanac of China's Foreign Economic Relations and Trade, 1990.

Special Economic Zones (SEZs)

SEZs were the first areas to be designated to attract foreign investment. Four were initially established in 1979, in Shenzhen, Zhuhai, Xiamen, and Shantou. Hainan Island was added as the fifth SEZ in April 1988. The SEZs represented a major initial attempt to attract foreign capital, investment, enterprise, and technology, which would be located in strictly demarcated "controlled environments." They are similar in some ways to export-processing zones elsewhere in the third world, where an export-oriented industrialization strategy is facilitated by providing legislative and tax concessions, infrastructure, and serviced sites. China's SEZs offer a similar range of financial, legal, and infrastructural inducements to foreign investors, including tax holidays, easy remittance of profits, and prepared sites with services and buildings. They also offer labour savings compared with many other countries in South-East Asia plus, importantly, simplified bureaucratic procedures for investment, customs, and immigration.

China's SEZs are a particular type of export-processing zone (EPZ). The SEZs have the initial objective of manufacturing goods for export to earn foreign exchange but, very importantly, they have been regarded as social and economic laboratories, in which foreign technological and managerial skills might be observed and adopted, albeit selectively. They have had mixed success. For example, they export more of their products into China than overseas. They have sometimes acquired dated, rather than the latest technology. It is also estimated that 40 per cent of foreign investment is not in manufacturing but in tourism or commercial projects.

The SEZs have, nevertheless, grown into important economic entities, somewhat physically and economically cut off from the rest of China. They have developed mixed economies, including vast retail, commercial, and tourist capacity as well as manufacturing.

Open coastal cities

During 1984 and 1985, in spite of some criticisms, the SEZs were being acclaimed by many as examples of what other Chinese cities might achieve. In the spring of 1984, 14 other coastal ports were opened for investment. These "open cities" were to offer similar concessions to the SEZs and, although they are not provided with the same level of central government funding for infrastructure development, Economic and Technological Development Zones (ETDZ) will be established in them to attract foreign investment. However, in June 1985, Deng Xiaoping started to voice misgivings about the SEZs and open cities, and it was announced that foreign investment was to be channelled into four of the biggest coastal cities -Shanghai, Tianjin, Dalian, and Guangzhou - rather than all 14. They would grow in advance of the other 10, which would still be favoured but whose growth, realistically, could not be on a par with that of the four main cities. Despite the official policy, local administrators have continued to promote their cities' "openness."

Other areas favoured for foreign investment

A number of other types of area are also keen to attract foreign investment, with or without special inducements. Some broad areas are being favoured because of their accessibility and other attractiveness to foreign investment. Often, this involves development around an SEZ or a port city in recognition of the spin-offs and enlarged markets offered by such zones. In 1985, three "open" economic regions were designated - the Yangtze Delta Economic Region, the Pearl River Delta Economic Region, and the Minnan Delta Economic Region. These are considered to have relatively advanced economic development and communication systems, and good tertiary education institutions. This opening seems to be an attempt to spread benefits from the SEZs or ports to their surrounding areas.

Some cities such as Guangzhou, Chongqing, Wuhan, Xian, and Dalian have been given the right to cut a considerable amount of bureaucracy in getting their economic plans approved directly by the State Council. This means faster and surer approval of schemes and indicates greater commitment on the part of local officials to economic development and trade.

Other zones were designated for foreign investment. Some of these zones are based on natural resources, others on the existing volume of industry and economic activity. Examples of these are the North China Energy Zone and the Huaihai Economic Region (Phillips and Yeh, 1990).

The regional development strategy of China is to develop the coastal provinces first and then to develop the interior provinces. With the success of the SEZs and the coastal open cities, development is now towards the river ports along major rivers, such as Wuhan. Special development areas are also designated at the border, for example the Tumenjiang development supported by the United Nations Development Programme (UNDP) at the border of China, North Korea, and Russia.

Although foreigners can now invest in most provinces, the designation of the SEZs, open coastal cities, and open economic regions has indicated the priority attached by the government to attracting foreign investment to these areas rather than elsewhere. The reasons seem obvious: agglomeration economies may develop; socio-political control of foreign involvement may be easier; and these areas have better infrastructure and links with the outside world, and ties with Hong Kong and overseas Chinese in South-East Asia. As mentioned above, most of the foreign capital has so far come from Asia, particularly from Japan and Hong Kong.

Spatially, investments are very unevenly distributed. They are highly concentrated in the coastal provinces, particularly around large cities such as Beijing, Shanghai, and Guangzhou, and in the SEZs of Shenzhen and Xiamen (fig. 7.3). The growth of foreign direct investment is also mainly in the Eastern Coastal regions (fig. 7.4).1 Although there are indications of a gradual diffusion of foreign investment into the interior provinces, the impact of foreign investment on most interior provinces to date has been small.


Fig. 7.3 Regional distribution of foreign direct investment in China, 1988-1991 (Source: China Statistical Yearbook, 1989,1990,1991, and 1992)


Fig. 7.4 Growth in foreign direct investment in China, 1988-1991 (Source: China Statistical Yearbook, 1989,1990,1991, and 1992)

Capital from firms in Hong Kong and Macau is concentrated in the SEZs and nearby Guangdong and Fujian provinces. This is largely related to geographical proximity and ethnic ties, which seem to play an important role in the locational decisions of foreign investors. Most of the investment by South-East Asian investors (mainly overseas Chinese) is in Guangdong and Fujian provinces, and those involved seem particularly interested in investing in the districts from which they or their families originated. Their investments are particularly important in the SEZs and small towns in Guangdong and Fujian, especially the Pearl River Delta. By contrast, 50 per cent of North American and European investments are located in large cities such as Beijing, Tianjin, and Shanghai, where better urban and industrial facilities exist.

The sources of exports are also therefore highly concentrated in the coastal regions and particularly the main urban centres, where the level of industrialization is already high. Such regions and towns have greater exposure to the West, and have more job opportunities in foreign joint enterprises, which pay higher salaries than Chinese employers. Migration controls have become less stringent in recent years, but people in the interior still cannot easily move to the coastal provinces to enjoy such benefits. This will tend to increase regional disparities between the coastal and interior provinces. In addition, continued urbanization and growth of large coastal cities will inevitably occur, fuelling the cumulative process of development of the eastern seaboard.

Urbanization and urban system development in China

The urban system in most countries is influenced by market forces. Cities that produce goods and services that are in demand and attract people to live in them will have faster growth than those that do not. Government generally has little direct influence on the development of the urban system. Since World War II, especially in the past two decades, urban systems in the Western countries have been influenced by the regional shift in production as a result of the restructuring of the economy.

In the past, before the adoption of the open policy in 1978, the Chinese government played an important role in urban system development. Politics and public policy were the two most important factors shaping urban development in China (Lo, 1987). They exerted a strong influence over the growth of the urban population (Xu, 1984a), urban system development (Xu, 1984b), city system development (Yeh and Xu, 1990a,b), and the provincial distribution of the urban population (Yeh and Xu, 1984). However, the importance of government's role in shaping urban development has been reduced since the adoption of economic reforms and the open policy in 1978.

In the past, the ability of the government to exert a strong influence on urban development was mainly through population control and resource allocation. A household registration (hukou) system was established in 1954 to stop unauthorized migration from the countryside to the cities and uncontrolled growth of large cities. It divided the population into agricultural (nongye renkou) and nonagricultural (fei nongye renkou), which was used in conjunction with the food rationing system to regulate the monthly quotas of foodstuffs, consumables, and consumer durables (Kirkby, 1985). The household registration system required all neighbourhood residents to register with their local police station. In collaboration with lower-level civilian officials, police ran late-night household registration checks to ensure that people did not move into the neighbourhood without proper registration. The household system was effective in controlling the population in cities because of the widespread rationing of foods and state control of jobs and houses through the late 1970s. Without proper neighbourhood registration, one had no access to many highly subsidized and otherwise unavailable consumer necessities such as grain, cloth, oil, pork, bean curd, and soap. The predominantly publicly owned housing was not accessible and it was the same for the over 90 per cent of all state- and collective-controlled jobs (Whyte and Parish, 1984). The household system was further tightened by a migration law in 1958 that limited the entry of peasants into cities, except those who had obtained work permits from the labour bureau. The household registration system was effective during the Cultural Revolution (1966-1976) in sending youths to the countryside. There was an absolute decrease in the population of the large cities, with a net decrease in the total population of the city system (Yeh and Xu, 1990a,b). Some of the extra-large and large cities were sufficiently depopulated to become large and medium-sized cities.

Resource allocation also played an important role in shaping the social space of cities (Xu, Hu, and Yeh, 1989). Because of the housing allocation system, residential location is mainly governed by one's employment and the location of housing by production/working units in which one is employed. Clusters of social areas were found in Chinese cities and their characteristics were determined by the location of the production units and the population composition and characteristics of those employed by them.

Before the open policy in 1978, with population control and resource allocation, the Chinese government was remarkably successful in shaping the urban system according to its public policy and ideology. The growth of large cities was successfully curtailed, small towns were developing rapidly, and cities and city population were successfully shifted from the coast to interior and border locations. This was the result of a centrally controlled government. Many of the means needed to achieve these results are not available in other countries. Without tremendous central control over human mobility and economic resources, it would not be possible to control the population and to allocate resources to desired places successfully. It was the control over jobs, housing, and daily necessities that made it possible to exclude people from cities. It was the centralized ownership of industry that made it possible to shift resources from larger, coastal cities to interior ones. All this has changed since 1978.

The urban system of China

The urban system of China consists of cities (chengshi) and towns (zhen). The designation of cities and towns is governed by the Ministry of Civil Affairs. The criteria of designation change in different time-periods, reflecting the prevailing urbanization policy, economic development, and political ideologies. These criteria have considerable impact on the number and population of cities and towns in the urban system of China.

Because of better provision of public facilities and more fiscal autonomy, many towns would like to be upgraded into cities. Immediately after 1949, there were no formal criteria for establishing cities. As a result, many cities were established. To control the rapid increase in the number of cities, the State Council passed the "Decision on the Establishment of City and Town Government" in June 1955 (Ministry of Civil Affairs, 1986:461-464). Population size and economic and defence significance became the main criteria for granting city status. Urban centres with a population of more than 100,000 could be granted city status, whereas those of less than 100,000 could be granted city status only if they were an important industrial or mining base, the home of provincial institutes, a large market town, or an important urban centre on the border. Cities established before 1955 that did not meet these criteria were to be downgraded from cities to towns.

These criteria were used until 1963, when the State Council decided that there were too many cities in China. Some urban centres had included considerable rural areas within their boundaries in order to boost their population to the levels necessary to obtain city status. In some cases, the mainly rural population of a city's suburban districts was much larger than the population in its urban district. To correct the abuse of the population criterion, the State Council announced the "Instruction on the Adjustment of the Establishment of City and Town Government and the Reduction of the Areas of City Suburban Districts" in December 1963 (Ministry of Civil Affairs, 1986:464-468). The proportion of agricultural population in a city was not to exceed 20 per cent. If it was over 20 per cent, it had to be reduced. If it could not be reduced, the city government had to obtain approval from the State Council via its respective provincial or autonomous region government. After reducing the areas of the suburban districts, an urban centre would lose its city status if its population could not meet the 1955 population criterion of 100,000. An urban centre losing its city status would revert to its original status as a county or town. These criteria for granting city status continued until 1978. They were relaxed after 1978 to meet the demand for rapid economic development of the open policy and the concomitant changes in the characteristics of cities.

These stringent regulations did not begin to be relaxed until the 1980s. In 1983, a new set of criteria for granting city status were used internally by the Ministry of Civil Affairs. These criteria were finally formally adopted in April 1986 in the "Notice on the Report of the Adjustment of the Criteria of Establishing City Government and the Conditions for City Governing County" (Ministry of Civil Affairs, 1986:470-472). Compared with the previous criteria, more emphasis was given to the employment structure and economic development of the urban centre rather than to population size. An urban centre could be granted city status if it had a non-agricultural population of over 60,000 with an annual GNP of RMB200 million and had become an important economic centre. There are a number of special conditions under which more liberal criteria can apply for designation as a city compared with earlier years.

There are two main types of towns: designated towns (jianzhizhen) and market towns (jinzhen or xiangzhen). The population in the designated towns is reported in the statistical yearbooks of China as part of the urban population but that in market towns is not reported. In 1955, a human settlement could be granted town status by the provincial government if it had a permanent resident population of more than 2,000, of which 50 per cent or more were non-agricultural. In 1964, these figures were raised to 3,000 or more with over 70 per cent non-agricultural population. A human settlement between 2,500 and 3,000 could also be granted town status if its non-agricultural population was over 85 per cent. Many previous towns had lost their town status because of the tightening of the criteria for town designation. The main reason for tightening the designation of cities and towns was to reduce the size of the non-agricultural population to whom the state had to supply grain. In 1983, communes were abolished and townships were revived. There was a sharp increase in the number of towns because of the relaxation of the criteria for designating towns. A township seat with a total population of less than 20,000 may be granted town status if its non-agricultural population exceeds 2,000. For a township of more than 20,000, the township seat may become a designated town if 10 per cent or more of its total population is non-agricultural. Other human settlements that can become designated towns include the seat of county government, small industrial and mining districts, ports, and tourist places in minority regions or in sparsely populated, mountainous, and remote border regions. There has been a marked increase in the number of towns because of the changes in the criteria for the designation of towns. The number of towns jumped from 2,781 in 1983 to 6,211 in 1984.

Urbanization and the definition of urban population

The definition of urban population has been very problematic in China, particularly in 1983 when many counties were abolished and turned into cities and in 1984 when many townships were abolished and turned into towns (Chan and Xu, 1985; Ma and Cui, 1987). The urban population reported in the statistical yearbooks of China refers to the total agricultural and non-agricultural populations within the administrative boundaries of the designated cities and towns, excluding counties under the jurisdiction of cities. This overinflated the urban population of China. If this figure is used for estimating the urbanization level in China, the urbanization level increases from 17.9 per cent in 1978 to an astonishing 51.7 per cent in 1989. Over 63 per cent of the urban population in 1989 were not involved in urban activities. The non-agricultural-based urban population in cities proper (inner cities) and towns is a better estimator of the urbanization level in China because it is less affected by changes in the boundaries of cities and towns and is more involved in urban activities (Ma and Cui, 1987).

Based on official statistics, there has been a marked increase in the urbanization level of China since 1978. However, the major increase in the urbanization level is due not to the increase in rural-urban migration but mainly to the increase in the designation of human settlements as cities and towns and the enlargement of the boundaries of cities and towns. In 1979, the "city leading county" (shidaixian) system was implemented. As a result, many counties were abolished and turned into cities without any change in boundary and name while some others were merged into cities. There was a relaxation of the criteria for establishing cities in 1983 and many counties and towns have been upgraded to cities (Yeh and Xu, 1990b). The number of cities increased from 194 in 1978 to 450 in 1989. In 1984, with the changes in the criteria for designating towns, where a township seat was granted town status if its non-agricultural population exceeded 2,000, many townships (xiang) became towns. The number of towns increased dramatically from 2,781 in 1983 to 6,211 in 1984, adding 73.2 million to the urban population. Of the 73.2 million, 89.8 per cent were agricultural.

The regional distribution of the urbanization level is still similar to that prior to the adoption of economic reforms and the open policy. Most of the relatively highly urbanized provinces are located in the western and northern parts of China, such as Xinjiang, Xizang, Inner Mongolia, Liaoning, Jilin, and Heilongjiang (fig. 7.5). This is because the provincial variation in the urbanization level in China is positively related to per capita economic output, industrialization level, and land area, and negatively related to population density (Yeh and Xu, 1984). Most of the coastal provinces have a high population density and a small land area and therefore do not have a high urbanization level. The open policy has had some effects on the increase in the urbanization level of the coastal provinces. In 1985-1990, provinces with a big increase in their urbanization level were mainly found along the coast or near to the coast (e.g. Guangdong, Anhui, Henan, and Shangdong) (fig. 7.6). If this trend continues, it will change the pattern of regional distribution of the urbanization level in China, with the coastal provinces becoming increasingly urbanized.


Fig. 7.5 Regional variation in the urbanization level in China, 1990 (Sources: China Statistical Yearbook, 1991, and China Urban Statistical Yearbook, 1991)


Fig. 7.6 Regional variation in the increase in the urbanization level in China, 1985-1990 (Sources: China Statistical Yearbook, 1985 and 1991, and China Urban Statistical Yearbook, 1985 and 1991)


Fig. 7.7 Changes in city size distribution, 1978-1990 (Sources: Yeh and Xu, 1990a,b, and China Urban Statistical Yearbook, 1991)

City system

The most spectacular impact of the post-1978 era was the increase in the number of cities. There was a more relaxed attitude towards the establishment of cities. The granting of city status was also used as a mechanism to help local authorities to attract foreign investment. As a result, the total number of cities jumped rapidly from 194 in 1978 to 467 in 1990 and the city population (non-agricultural population in cities proper) soared from 84.1 million in 1978 to 150.38 million in 1990. A relatively large number of small and medium-sized cities were added to the city system.2 As a result, there has been a decline in the proportion of large cities and an increase in the proportion of small cities (fig. 7.7) (Yeh and Xu, 1990a).

The open policy has reversed the previously much emphasized city and economic development in the Western and Central regions. As a result, the trend of decentralization to Western and Central provinces was reversed after 1978, with new cities and population added to the Eastern Coastal region.

Unlike Western countries, where cities play an important role in the economy, the contribution of cities to the economy of China is less significant because of its large rural population. In 1990, they contributed only 35.0 per cent of total GNP. However, cities still play an important role as manufacturing centres and major foci for attracting foreign direct investment. They contribute to over 80 per cent of the total light and heavy industrial output and 69.9 per cent of total foreign direct investment. They also contain a large majority of state and collective enterprise workers and a high proportion of workers (85.2 per cent) in enterprises outside the state and collective enterprise system.

Rural urbanization

The new rural policies, which introduced the "responsibility system," have increased productivity by giving incentives to those who work hard. Farmers can sell their surplus products in the free market after fulfilling the contracted quota. Along with the increase in productivity of farming there has been tremendous growth in rural commercial and manufacturing activities and the revival of market towns. Rural industries are a significant source of income and employment opportunities for peasants (Chang and Kwok, 1990), employing a growing proportion of surplus rural labour. They produce goods and services for the rural economy and have a steady demand for raw materials. Rural savings are reinvested in rural enterprises. With free markets and rural industrialization, there has been a rapid growth of small towns in China. Rural urbanization was praised by Fei (1984) as the solution to China's rural surplus labour problem by allowing people to leave their farmland without leaving their villages (litu bulixiang). Rural urbanization is phenomenal in China. There has been a rapid increase in the number of towns from 2,176 in 1978 to 11,481 in 1988. In some growing regions, such as the Pearl River Delta, small towns are growing faster than the cities, reversing the urbanization trend of most developing countries where cities are growing faster than towns (Xu and Li, 1990). Rural urbanization is highly concentrated in the Eastern Coastal region (Zhou, 1991).

Urban clusters

For some more prosperous areas, such as the Pearl River Delta and the Yangtze River Delta, economic reforms and the open policy have reinforced the development of previously established urban clusters. Some new urban clusters are emerging (Zhou, 1991; Yao et al., 1992) (fig. 7.8). These areas have high levels of urbanization and involve rural labour in non-agricultural activities.


Fig. 7.8 Urban clusters in China

The clustering of cities and towns has a long history in China (Yeh and Xu, 1984). It existed even in the Imperial period (Skinner, 1977). Clusters are located in the plains, deltas, and industrial districts. The four main urban clusters are:

(1) Liaodong Peninsula (Shenyang-Dalian), centring on Shenyang and Anshan. The Shenyang-Dalian region spreads from Shenyang in the north to Dalian in the south. Shenyang is the major industrial town of China and Dalian is the major port. Cities in the region include Anshan, Fushun, Benxi, and Liaoyang. They are connected by railway and expressway and are dominated by heavy industry.

(2) Beijing-Tianjin-Tangshan, focusing on Beijing. Beijing and Tianjin are the dominant cities of this cluster. Other important cities of the region include Tanggu and Tangshan. Beijing, Tianjin, and Tangshan are linked by the Beijing-Shenyang railway.

(3) Yangtze River Delta (Nanjing-Shanghai-Hangzhou), centring on Shanghai. Shanghai is the dominant city of this cluster with Nanjing and Hangzhou as supporting cities. Other cities within the cluster include Wuzi, Suzhou, Changzhou, Ningbo, and Nantong. The Nanjing-Shanghai-Hangzhou-Ningbo railway, the Grand Canal, and the Yangtze River are the major transportation networks linking these cities. With the development of the Pudong new district in Shanghai, there will be much development in this urban cluster in the near future.

(4) Pearl River Delta, centring on Hong Kong and Guangzhou. Guangzhou and Hong Kong are the main cities in this region. The Guangzhou-Kowloon railway, the Pearl River channel, and the Shenzhen-Guangzhou expressway that is under construction are the major transportation links. Because of its proximity to Hong Kong, the Pearl River Delta region has become the region where both the market and openness to the outside world are the most advanced in China. It has the two fastest-growing SEZs in China. Its economic development has been regarded as one step ahead of the rest of China (Vogel, 1989). Investment from Hong Kong has strongly stimulated manufacturing, tourism, and retailing in the region. There are many temporary workers from other parts of Guangdong and from other provinces such as Sichuan, Hunan, and Guangxi.

These clusters are situated either in deltas or on plains with abundant natural resources and a long history of development. They have a high density of population and abundant agricultural or industrial production. Clusters (2)-(4) are China's important agricultural and commercial centres. The capital region and south Liaoning clusters are China's major producing areas of coal and iron, and also China's metal, machinery, petrochemical and industrial centres.

These urban clusters are booming in the economic reform and open policy period because they are located along the coast and are more accessible to the world. Apart from the further development of existing cities, new cities are beginning to emerge within these clusters; for example, Dongguan, Shenzhen, and Zhuhai in the Pearl River Delta, and Changzhou in the Yangtze River Delta.

Economic reforms and the open policy have also led to the emergence of new urban clusters of cities. Two clusters have great potential for further development. They are Shangdong Peninsula, centring on Qingdao, and the Fuzhou-Xiamen (Minnan) area, centring on Xiamen and Fuzhou. A foreign-oriented economy and local manufacturing industries are developing rapidly in these clusters.

(5) Shandong Peninsula - concentrating on Jinan and Qingdao, with Yantai as the major port of the region. The Jiao-Ji (Shantung) and Lan-Yan railways are the major transport links. Because of its proximity to Korea and Japan and abundant agricultural, forest, and fishery products, it has high potential for being developed.

(6) Fuzhou-Xiamen (Minnan). Fuzhou and Xiamen are not strong enough to function as major growth poles. Railway links are still relatively poor but the recently constructed expressway has improved communications within this urban cluster. It has great potential for development if trade between Taiwan and Fujian is allowed. Before economic reform was adopted, industry was quite backward. After the designation of Xiamen as an SEZ and with Quanzhou as a coastal open city, industries with foreign investments and local manufacturing industries are developing very rapidly.

The effects of economic reforms on the urban system in China

The open policy has changed the economic structure of China's cities. More people are working in the tertiary sector and in non-state-owned enterprises. With rising living standards and a need for a better network for selling the products of reformed enterprises, the tertiary sector is growing rapidly. In the 74 main cities surveyed by the State Statistical Bureau, the average percentage of the tertiary sector in the cities' GNP increased from 19.1 per cent in 1978 to 32.6 per cent in 1988. Employment in the tertiary sector increased from 24.2 per cent to 33.9 per cent. Changes in the economic structure of the cities are faster in the SEZs where free markets work better than in other cities. In 1989, 45.9 per cent of the labour force was employed in the tertiary sector in the four SEZs as compared with 31.6 per cent in the 74 economic reform cities and 36.7 per cent in the coastal open cities (table 7.4).

Table 7.4 The labour force in cities proper, 1989 (%)



Economic sector

Type of city

Primary

Secondary

Tertiary

74

Economic reform cities

17.1

51.3

31.6

14

Coastal open cities

9.3

54.0

36.7

4

Special Economic Zones

8.5

45.6

45.9

Source: China Urban Statistical Yearbook, 1990, p. 63.

Table 7.5 Types of employment in the city proper in economic reform cities, coastal open cities, and Special Economic Zones, 1989 (%)



Non-industrial establishments

Industrial establishments

Type of city

State

Collective

Other

State

Collective

Other

74

Economic reform cities

71.9

26.7

1.4

67.0

30.8

2.2

14

Coastal open cities

73.9

24.1

2.0

68.4

28.7

2.9

4

Special Economic Zones

55.3

25.8

18.9

37.1

33.1

29.8

Source: China Urban Statistical Yearbook, 1990, pp. 593, 603.

Despite the existence of non-state-owned enterprises, the majority of people in the cities still work in state-owned enterprises. There has been only a slight increase in the percentage of people in other forms of employment, such as individual enterprises and enterprises with foreign investment. There is wide variation among cities with different degrees of economic reform. There is a much higher percentage of people working in non-state-owned enterprises, particularly individual enterprises and enterprises with foreign investment, in the SEZs than in other types of cities (table 7.5). Some 29.8 per cent of the workers in the SEZs are employed by non-state and non-collective-owned industrial enterprises and 18.9 per cent by non-industrial establishments. In contrast, only around 2.9 per cent and 2.0 per cent, respectively, of workers in the coastal open cities are so employed, which is higher than in other cities under reform. This is mainly the result of the degree of economic reform and the utilization of foreign investment in these cities, with greater economic reform and foreign investment in the SEZs.

Table 7.6 Average foreign direct investment by city size and region, 1988 and 1990 (US$'000)


Western region

Central region

Eastern Coastal region

Total

City size

1988

1990

1988

1990

1988

1990

1988

1990

Small

Average FDI

84

5

88

140

1,785

3,531

776

1,756

Difference between 1988 and 1990 average


-79


52


1,746


980

Medium

Average FDI

8

286

1,606

600

10,347

13,871

608

7,700

Difference between 1988 and 1990 average


278


-1,006


3,524


7,092

Large

Average FDI

0

0

122

2,424

4,966

10,058

3,666

7,790

Difference between 1988 and 1990 average


0


2,302


5,092


4,124

Extra-large

Average FDI

11,973

3,879

3,386

4,416

38,268

44,370

26,405

28,782

Difference between 1988 and 1990 average


-8,094


1,030


6,102


2,377

Total

Average FDI

852

347

587

512

7,588

10,364

3,965

5,289

Difference between 1988 and 1990 average


- 505


-75


2,776


1,324

Source: China Urban Statistical Yearbook, 1989 and 1991.

The effects of globalization on the urban system in China

The open policy has led to a concentration of foreign investment in the Eastern Coastal region. SEZs and open coastal cities benefit more from the open policy than inland cities and have higher economic growth rates (Leung, 1990; Xie and Costa, 1991; Fan, 1992). The distribution of foreign investment is mainly concentrated in the extra-large cities and in the Eastern Coastal region (table 7.6). Quite a sizeable amount of foreign investment is also located in the medium-sized cities in the Eastern Coastal region. However, as reflected by the coefficient of variation, there is great variation between regions and city sizes (tables 7.7 and 7.8). FDI tends to concentrate in the coastal regions and large cities. For most regions and city sizes, the coefficient of variation is higher than 300 per cent. The variations in foreign investment are very high for small, medium-sized, and large cities. But the variation is relatively small in extra-large cities, indicating that most extra-large cities have high foreign investment and less variation. The great concentration of foreign investment is shown in table 7.9. In 1990, the top 20 cities as regards foreign investment accounted for 78.3 per cent of total FDI in cities. All these cities are coastal cities in the Eastern Coastal region. Most of them are located in Guangdong province, which is adjacent to Hong Kong, the major source of foreign investment in China.

Table 7.7 Foreign direct investment in cities by region, 1990

Region

Total FDI US$'000

Per cent

Mean (US$'000)

Standard deviation (US$'000)

Coefficient of variation (%)

No. of cities

Eastern

2,362,930

95.7

10,363

34,982

337.6

228

Central

74,780

3.0

512

1,608

314.1

146

Western

32,350

1.3

347

1,291

372.0

93

Total

2,470,060

100.0

5,289

24,937

471.5

467

Source: China Urban Statistical Yearbook, 1991.

Table 7.8 Foreign direct investment in cities by city size, 1990

City size

Total FDI US$'000

Per cent

Mean (US$'000)

Standard deviation (US$'000)

Coefficient of variation (%)

No. of cities

Small

458,750

18.6

1,576

9,762

619.4

291

Medium

900,930

36.5

7,700

35,589

462.2

117

Large

218,120

8.8

7,790

19,073

244.8

28

Extra-large

892,260

36.1

28,782

52,735

183.2

31

Total

2,470,060

100.0

5,289

24,937

471.5

467

Source: China Urban Statistical Yearbook, 1991.

Table 7.9 Top 20 cities for foreign direct investment, 1990

City

Province

City size

Foreign direct investment (US$'000)

Shenzhen

Guangdong

Medium

349,200

Dalian

Liaoning

Extra-large

200,750

Shanghai

Shanghai

Extra-large

177,190

Huizbou

Guangdong

Small

146,230

Guangzhou

Guangdong

Extra-large

117,010

Beijing

Beijing

Extra-large

105,760

Dongguan

Guangdong

Medium

100,100

Tianjin

Tianjin

Extra-large

83,150

Shantou

Guangdong

Large

81,970

Foshan

Guangdong

Medium

79,230

Haikou

Hoinan

Medium

73,880

Xiamen

Fujian

Medium

72,730

Fuzhou

Fujian

Large

65,100

Zhuhai

Guangdong

Small

62,190

Nanjing

Jiangsu

Extra-large

57,350

Zhongshan

Guangdong

Medium

53,280

Qingdao

Shandong

Extra-large

30,960

Jiangmen

Guangdong

Medium

28,340

Shenyang

Liaoning

Extra-large

27,470

Putian

Fujian

Small

22,720

Total FDI in the top 20 cities



1,934,610

Total FDI in all cities



2,470,060

% of the top 20 cities in total FDI in cities



78.32%

Source: China Urban Statistical Yearbook, 1991.

There is a difference in the source of FDI between northern coastal cities and southern coastal cities. Take Shenzhen and Shanghai, for example. The source of investment in Shenzhen is mainly Asian countries, particularly Hong Kong, whereas Asian FDI is less prominent in Shanghai (table 7.10). In the period 1985-1989, 93.0 per cent of the FDI in Shenzhen came from Asia, with 85.0 per cent from Hong Kong. In Shanghai, only 52.7 per cent of FDI was from Asia and 30.5 per cent was from non-Asian countries. Although Hong Kong was still the largest investor, it constituted only 34.7 per cent of its FDI. Investment from Japan and the United States was more important in Shanghai than in Shenzhen. The pattern of foreign investment is different too. Most of the foreign investment in industries in

Table 7.10 Distribution of the source of foreign direct investment in Shenzhen and Shanghai, 1985-1989 (%)

Source of FDI

Shenzhen

Guangdong

Shanghai

National

Hong Kong

85.0

87.2

34.7

61.5

Japan

5.6

3.2

12.6

12.7

Taiwan

1.0

0.7

0.0

0.0

Singapore

1.2

0.9

5.4

1.2

Thailand

0.3

0.2

0.0

0.4

Korea

0.0

0.0

0.0

0.0

Philippines

0.0

0.0

0.0

0.1

Total main Asian countries

93.0

92.3

52.7

75.9

USA

6.0

4.0

23.7

11.2

Canada

0.3

0.4

2.5

0.3

United Kingdom

0.1

0.1

2.4

1.3

France

0.0

0.2

0.0

0.9

Germany

0.2

0.1

1.6

1.1

Sweden

0.0

0.0

0.0

0.1

Denmark

0.0

0.0

0.0

0.3

Australia

0.2

0.8

0.4

1.1

Total main non-Asian countries

6.9

5.6

30.5

16.4

Other countries

0.1

2.1

16.8

7.7

Total

100.0

100.0

100.0

100.0

Total (US$ million)

1,332.3

3,840.2

1,328.2

13,099.7

% of national total

10.2%

29.3%

10.2%


Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.

Shenzhen is small, whereas foreign investment in Shanghai tends to be large. This is mainly because of the nature of foreign investment from Hong Kong. Foreign investment from Hong Kong is mainly related to outward processing of small industries from Hong Kong, and tends to involve many investors with small capital, utilizing the cheap labour and land in Shenzhen.

There is also a difference between the two cities in the distribution of FDI among different sectors. In the period 1985-1989, over 75 per cent of FDI was in industry in Shenzhen, whereas industry constituted only 41.6 per cent in Shanghai (table 7.11). On the other hand, there is more foreign direct investment in real estate in Shanghai than in Shenzhen.

The country of origin of foreign investment has different impacts on the urban system. Foreign investment from Hong Kong is mainly located in the southern provinces, particularly the Pearl River Delta. Such investment is increasingly located in rural townships, contributing to the rapid rural urbanization of the Pearl River Delta. In contrast, most of the foreign investment from Japan and other countries is located in cities and less in rural areas. However, because of the development of export industries, many towns and cities are producing goods that are exported to different parts of the world.

Table 7.11 Distribution of foreign direct investment by sector in Shenzhen and Shanghai, 1985-1989 (%)

Sector

Shenzhen

Guangdong

Shanghai

National

Agriculture

0.5

2.5

0.3

2.9

Industry

75.3

76.0

41.6

55.1

Geological inv.

0.0

0.2

0.0

3.1

Construction

2.9

2.3

0.6

2.2

Transport/telecom

3.5

2.6

0.3

1.7

Commerce

3.7

2.4

0.5

5.1

Real estate

12.4

12.8

48.9

24.1

Health and sport

0.1

0.1

0.0

0.5

Education and culture

0.1

0.1

0.0

0.4

Scientific research

0.0

0.1

0.0

0.1

Finance and insurance

0.0

0.0

0.0

0.6

Government department

0.0

0.0

0.0

0.0

Other

1.5

0.9

7.8

4.2

Total

100.0

100.0

100.0

100.0

Total (US$ million)

1,332.3

3,840.2

1,328.2

13,099.7

% of national total

10.2%

29.3%

10.2%


Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.

Problems of urban development under the open policy

The open policy, particularly the introduction of foreign investment, a commercial economy, and private enterprises, has greatly influenced urban development in China since 1978. It has weakened the pre-1978 mechanisms of population control and state resource allocation that were effective in shaping urban development to a form desired by the government. The household registration system has been relaxed and there is increasing mobility of people. The development of a free market and the proliferation of individual enter prises outside the state system are rapidly eroding the household system, which was effective in controlling population growth in the cities. The state is less relied on to provide employment and services. People can earn more outside the state system in private enterprises and enterprises involving foreign investment. The Chinese government is no longer able effectively to control urban development. Kwok (1988) observed that large cities were developing more rapidly than the government policy, which aims to "control the growth of large cities, rational development of medium-sized cities, and active development of small cities." There have been rapid changes in the urban system owing to economic reform. As a result, the following pressing issues have to be faced in the rapidly growing cities and towns in the Eastern Coastal region (Yeh and Leung, 1991).

Temporary population

The most remarkable phenomenon in Chinese cities under economic reform is the growth of the temporary population in large and medium-sized cities. There are two types of temporary population. The first type is temporary residents (zanzhu renkou). Unlike permanent residents (changzhu renkou), whose households are registered in the city, temporary residents are mainly people who obtain permission to stay in a city for a fixed period of time. They are mainly contract workers working in factories or on construction sites. The other type is the transient or floating population (liudong renkou). They are people who enter and leave the city within a few days, weeks, or longer. They may be travellers, businessmen, or people looking for jobs. The transient population is normally not reported in city statistics but temporary residents are reported.

Temporary residents can constitute as much as 20-25 per cent of the total number of residents of some cities. In Guangzhou, the percentage of temporary residents is very large, being 38 per cent of the total number of residents (Zou, 1990). In Shenzhen SEZ, temporary residents outnumber permanent residents: in 1991, there were 432,000 permanent residents, but temporary residents numbered 766,000, accounting for 63.9 per cent of the official population in the SEZ (Editorial Board of Shenzhen Special Economic Zone Yearbook, 1992). Some of the temporary residents can become permanent residents after staying in a city for a period of time. The building industry engaged the largest proportion of the temporary population, followed by retailing, especially individual retailing enterprises on the street.

The Institute of Urban and Rural Economic Development in the Ministry of Construction has conducted a detailed study of the characteristics and problems of the transient population in large cities (Li and Hu, 1991). They found that there was a rapid increase in the transient population in large cities. The duration of stay of the transient population has increased. Most of them came to work in the cities, either self-employed or employed in the building and retailing sectors. Most of them came from villages and were mainly males with a low educational background. The existence of the transient population results from the household registration system not being effective in restricting non-registered people in a city under economic reform. Non-registered people can bypass household registration by getting their daily necessities from the free market. The presence of the transient population is alarming in some of the large cities. They have increased the crime rate and overloaded transport, infrastructure, and housing in the city. As social facilities are based mainly on permanent residents, the existence of a temporary population also creates great pressure on social facilities, transport, and housing.

Urban land use and development control

In the past, the internal structure of Chinese cities was strongly influenced by urban planning and state investment. However, these are of diminishing importance when more and more firms and factories are owned by individual enterprises and foreign investment.

The permission for foreign investors to use land and to participate in the property market has rapidly changed the internal structure of Chinese cities (Yeh and Wu, forthcoming). Foreign investors were allowed to use land for a leased period in the Special Economic Zones by paying annual land-use fees as early as 1981, soon after SEZs were established (Yeh, 1985). The adoption of the paid transfer of land-use rights (tudi youchang zhuanrang) in the First Session of the Seventh People's Congress in 1987, which is similar to leasing land to developers, has further opened up the urban property market to foreign investors. Their participation in land leasing and urban land transactions has given rise to new forms of foreign investment in China. Their investments have led to rapid urban renewal in the old urban districts of the cities.

Although a City Planning Act was enacted in December 1989, it was not effective in controlling land development. It mainly required the city government to prepare a master plan, but the provisions are too broad to control site-specific development, leaving too much discretionary decision-making to the building administration and local district governments. Disputes may occur between the applicant for land development and the authority that grants planning permissions. It is difficult to reject a building application on the basis of the existing land-use zones because they are too broad. The actual location, type, and intensity of development may not be what the planners intend to achieve in the master and detailed plans. For example, a site zoned for public building may be used to build tall office buildings, irrespective of whether or not it is a suitable site for office building and whether or not there is a need for cultural and recreational building in the neighbourhood. In the past, most offices, shops, and commercial activities were owned and operated by government departments. All non-residential and non-industrial land was considered to be public building land. This is different from the concept of public building land in the Western free market economy. Most of the land that is considered to be "public land" in China would be regarded as office and commercial land in other countries. Because of increasing private and foreign investment in the cities, land zoned for public buildings may no longer be under the control of the city government. Land zoned for public buildings may be developed into commercial offices and hotels for higher profits by government departments and state enterprises, which intend to make more money, leaving inadequate amounts of land for other public building to meet the demand of the community for sports, cultural, and recreational facilities.

The existing land-use zones are also too general. It is not possible to make sure that certain types of land will be available in the right locations or available at all. For example, land zoned for public building may be used to build offices and hotels, regardless of whether or not they are in the right location. This is why office buildings and hotels seem to be erected at random in the cities. If all public building land is developed into offices, there will not be any land left for public buildings for sports, culture, and recreation.

A new form of land development control is needed to cope with these developments. Shanghai and other cities are now experimenting with the introduction of zoning regulations to control the type and intensity of land use in the city. It is hoped that the objectives of the master and district plans can be better achieved and that there will be less dispute over the type and intensity of development in the planning permit application process. The building administration and local district governments will have less discretion over the type and development intensity of a site. It is hoped that orderly and efficient land development can be achieved, avoiding incompatible land use in wrong locations.

Urban transport

Another major urban problem that has surfaced under the open policy is urban transport. The problem manifests itself in a number of ways, notably inadequate infrastructural development, a rapid increase in motor vehicles, and conflicts over urban land use and between public and private transport.

Take the case of Guangzhou as an example (Yeh and Leung, 1991). Between 1949 and 1986, the city's road length increased from 228 km to 474 km, or by more than 200 per cent, whereas road space expanded from 1.85 million m2 to 5.37 million m2, or by nearly 300 per cent. However, between 1949 and 1988, Guangzhou's bicycles and motor vehicles increased over 80-fold to 1.9 million and 0.158 million, respectively, and passenger travel volume by 27 times to 1.1 billion trips per day. Moreover, whereas the growth rate in vehicles was around 10-12 per cent per annum in the 1970s, it increased to 22 per cent per annum in the 1980s. As the city expanded, and new areas of development such as the Tienhe and Huangpu districts were established, conflicts over land use and traffic arose between old and new city districts. To put it simply, the (old) central city is densely populated and developed, whereas the new districts are more spacious and are at some distance from the central city. This generates uneven cross-traffic, sharp peak hour demands, and increasing commuting or journey distances and time. All of these make the provision of efficient public transport in socialist China not an easy task.

The worsening situation of passenger transport can be attributed to the failure to resolve conflicts between public and private transport. In China, the bicycle may be regarded as a form of private transport, given its functions and characteristics. Yet it is a mode that has been nationally subsidized and heavily interwoven into the social fabric. In Guangzhou, passenger trips are classified as motorized (32.02 per cent), bicycle (29.95 per cent), and walking (38.03 per cent). Passenger trips made by bus and trolley bus account for only 21.63 per cent, or roughly two-thirds of motorized trips and 72 per cent of the bicycle trips daily. Thus the more efficient motorized modes are not being fully utilized or developed, and the significant role of the bicycle poses problems of efficiency, safety, transport planning, and traffic management. Increasingly, the modern private transport mode in the form of motor cycles and private cars is being introduced and further complicates the issue.

Traffic congestion is getting worse in the cities. There is an increase in commuting because of the wider spread of land use and people no longer live next to their workplaces. However, the transport system is not growing fast enough to cope with the increase in passengers and motor vehicles. There is inadequate provision of roads, together with a shortage of traffic control systems and facilities.

Environmental pollution

Environmental degradation is an increasingly serious problem in China. Although the Environmental Protection Act was initially adopted on a trial basis as early as 1979 and finally adopted in 1989, it was not effectively implemented, particularly in small cities and towns. Environmental pollution is better controlled in cities than in towns. Many rural enterprises discharge water without any treatment (Chang and Kwok, 1990). Air pollution is also increasingly severe.

In the Pearl River Delta, one of the fastest-growing regions in China since 1978, the threat to the environment comes not from the major cities in the region but from the rapidly growing small cities and towns (Yeh et al., 1989). Despite the increase in population in Guangzhou in the first five years of the 1980s, the water quality of the section of the Pearl River downstream of Guangzhou showed only a very minor deterioration trend (Huang et al., 1988) because the increase in domestic sewage was offset by a reduction, by as much as 23 per cent, in the discharge of industrial effluents during the same period as a result of tightening environmental control measures in Guangzhou. Industries in Guangzhou were growing at a rate of 12 per cent per annum in this period, but environmental control measures were able to reduce the amount of industrial effluent per industrial production unit by 16 per cent in these five years.

Environmental control is much more relaxed outside the major cities of the Pearl River Delta. The main threat comes from industrial development in small and medium-sized cities and towns and from rural industrialization (Ma and Qiang, 1988). In the eyes of industrialists, one of the attractions of the small and medium-sized cities and towns is their less stringent environmental control measures. Hong Kong and Macau are the major sources of foreign investment in the Pearl River Delta. Some of their polluting industries, such as tannery and dyeing, which are becoming increasingly costly to operate because of tightening environmental controls, have been moved to the Pearl River Delta. Some industrial enterprises in Guangzhou have also moved to the countryside for similar reasons. Rapid industrial development in the small cities and towns has produced a large amount of industrial waste, creating problems that are often beyond the capacity of the local authorities to handle. This has resulted in unabated pollution in many areas, rendering prime agricultural land less productive and causing oxygen depletion and eutrophication in receiving water bodies and subsequent contamination and reduced production of aquatic products (Shen, 1983).

Policy implications and future trends in urban development

The past decade of rapid development of the economy and the urban system is the result of interaction between economic reforms and the open policy. Because of the locational advantage of the Eastern Coastal region, the open policy has made it grow faster than the Central and Western regions. Urban growth and urbanization, especially rural urbanization, are also most rapid in the Eastern Coastal region. With continued economic development as a result of the open policy, more towns in the Eastern Coastal region will be upgraded to become cities in the future, reversing the pre-1978 trend of decentralizing cities to the Central and Western regions. Unless there is a major shift in the existing policy, there will be an upsurge of new cities in the Eastern Coastal region because the majority of the rapidly growing towns are located there, such as the towns in Guangdong and Jiangsu. Furthermore, some towns located in these provinces (such as Dongguan) have already been granted city status in order to have more autonomy and flexibility in attracting foreign investment. Apart from the addition of new cities, the open policy also favours the development of existing cities in the Eastern Coastal region that have better accessibility and an economic base for foreign investment. The recent designation of Pudong in Shanghai as a special development area is an example of this trend. If Pudong development is successful, it may become a model for development of other existing cities.

The open policy has opened the highly centrally controlled economy to a mixture of central and market economies. More and more people do not rely on the state for income and housing. The pre-1978 mechanisms of population control and state resource allocation are becoming less effective in controlling urban development. One of the main manifestations of the weakening of central government in shaping urban development is the marked increase in temporary population in the cities. This is a major problem. In general, the level of urbanization in China is related to the level of industrial development. Although there is some temporary population in the cities, pseudo-urbanization has not yet occurred in China. However, with further development of the free economy and if industrial development cannot catch up with urban population growth, pseudo-urbanization may occur in China. The massive rural-urban migration that has plagued many large cities in less developed countries may appear in China, repeating some of the urban problems experienced by large cities in Asia.

China is in the midst of economic reforms. It is uncertain how much more the free market mechanism will be allowed to operate in the future. The existing form of free market demonstrates that there is an urgent need to improve urban management. In the past, urban development could to a large extent be controlled by the state through the allocation of funding. Since the adoption of economic reform, the introduction of housing and land reform, and the opening up of China to foreign investment, the state and centrally planned economy have less role to play in influencing the development of cities. These new developments are affecting the internal structure of the cities and leading to the restructuring of their land use to reflect market forces rather than the previous state control of land-use allocation based on economic planning. As a result, foreign investment has led to the clustering of commercial housing to form new social areas, the restructuring of land use and urban development, and the designation of new economic and technical development zones for attracting foreign investments (Yeh and Wu, forthcoming).

City governments have less control over the location and timing of development. Without good urban management, the land-use pattern can be chaotic, leading to inefficient use of the land and traffic congestion. There is an urgent need to manage the fast-growing towns and cities in the Eastern Coastal region, otherwise their living environment and traffic conditions will deteriorate. Urban management is particularly needed in small towns which are growing rapidly but with little planning and control. Environmental degradation of towns will be a serious issue if it is left unattended. There is an urgent need to train professionals such as planners and public administrators to plan and manage these towns and cities.

There may be a need to review the appropriateness of the national urban policy - "control the growth of large cities, rational development of medium-sized cities, and active development of small cities" - for guiding city size development. However, there is a weak relationship between city size and economic efficiency. The economic efficiency of cities depends not on city size alone but more on the level of investment, industrial structure, and locational factors. There is also a great variation in economic efficiency among city sizes and regions (Zhou and Yang, 1990). The control of city size does not seem to be an appropriate policy because it may not fully utilize the economic efficiency and locational advantage of some cities. Because of the increasing influence of market forces under the open policy, urban development is moving away from the policy of controlling city size. Most foreign investment has occurred in extra-large and large cities in the Eastern Coastal region. Even the central government is not consistent in this policy. It has just announced a grandiose plan to develop Pudong in Shanghai, one of the largest cities in China. There may be a need to develop different urban development strategies for different regions and such strategies may need to be adjusted periodically to reflect the level of economic development. For example, large cities may be developed in the relatively underdeveloped areas in the Western and Central regions as focal points for developing these areas with the support of some medium-sized cities. Small cities and towns experiencing rapid economic development in the Eastern Coastal region should be allowed to be further developed into medium-sized and large cities to maximize their economic efficiencies and locational advantages.

Although the free market is playing an increasing role in urban development under the open policy, public policy still plays an important role. One of the main reasons for the rapid development of towns and cities in the Eastern Coastal region is that the central government allows them to have more autonomy in attracting foreign investment, which was one of the main factors influencing economic development in the past decade. The central government also designated four SEZs and 14 open coastal cities in the Eastern Coastal region as catalysts for economic development in the Eastern Coastal region. The central government has allocated funding for the development of the SEZs and coastal open cities. Without such policies and investments, towns and cities in the Eastern Coastal region would not have developed so rapidly.

Regional inequality between the Eastern Coastal region and the rest of the country is increasing. This is understandable at present because it is hoped that, once economic development has taken off in the Eastern Coastal region, it will diffuse to the interior provinces. However, there is a need to monitor whether diffusion is occurring in order to determine the need to give selected cities in the interior provinces, such as major river ports along the Yangtze River, similar treatment to that at present enjoyed by cities in the Eastern Coastal region in order to help develop the interior provinces. Accessibility in transportation and communications plays an important role in globalization. Coastal cities are developing more rapidly than non-coastal cities mainly because of their accessibility to the outside world. If China is to develop the interior provinces, its internal transportation and communication systems will have to be improved.

The impact of globalization on the urban system in China is different from that in other developing countries. In other developing countries, globalization is mainly concentrated in a few cities, particularly the primate cities. In China in contrast, although globalization is still concentrated in the coastal provinces, it is more dispersed than in other developing countries. None of the cities or provinces has more than 40 per cent of national total exports or foreign investment. Foreign investment is mainly from Asia, which is a big contrast to other developing countries.

There has been increasing competition among cities and towns for foreign investment. The competition is at all levels: among different districts of a city, among different cities and towns, and among different provinces. To be more competitive in attracting domestic and foreign investment, many preferential treatments are given and sometimes rules are flexibly applied. This has created problems in planning and managing cities and towns. However, more importantly, there is a rise of localism and a lack of cooperation in regional development. Localism is especially visible in regions that are developing very rapidly such as the Pearl River Delta. Four international airports are to be built in Zhuhai, Macau, Hong Kong, and Shenzhen, which are less than 50 km from each other. Unlike in the past, when the state allocated resources for major infrastructure projects, local government can raise funding for infrastructure projects. Because of the lack of coordination, it may be a waste of resources. There is a need to have better coordination of regional development and planning.

The boom in export industries and in foreign investment in the past decade owed much to China's cheap land and labour. With the increase in labour costs and land prices, there is an increase in competition with other countries in Asia, such as Viet Nam. There is a need for China to improve the quality of its labour and its products if it is to stay competitive in the world economy. Cities with better infrastructure and higher-quality labour may need to be developed as commercial centres for better integration with the world economy.

Notes

1. Eastern Coastal, Central, and Western are the regional definitions used in the Seventh Five Year Plan (1986-1990). These are different from the regional definitions commonly used by Chinese researchers in the early 1980s, which also divided China into three regions, i.e. coastal, interior, and frontier. Eastern Coastal region is the same as the coastal region with the inclusion of Jilin and Heilongjiang (i.e. Heilongjiang, Jilin, Liaoning, Beijing, Tianjin, Hebei, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong, Hainan, and Guangxi). Western region excludes Nei Mongol of the frontier region and adds Shaanxi, Sichuan, Guizhou, and Yunnan (i.e. Shaanxi, Sichuan, Guizhou, Yunnan, Ningxia, Gansu, Qinghai, Xizang, and Xijiang). Central region includes Nei Mongol, Shanxi, Henan, Anhui, Hubei, Jiangxi, and Hunan.

2. Cities are classified into four categories based on the non-agricultural population in the city proper (shiqu) and suburban districts (jiaoqu) (State Council, 1984). Extra-large cities are those with a non-agricultural population of over 1 million; large cities are those between I million and 500,000; medium-sized cities are those between 500,000 and 200,000; and small cities are those with less than 200,000.

Acknowledgements

We would like to thank Huaying Hu, Xia Li, Wing Keung Tsang, and Fulong Wu for their assistance in data collection, processing, and mapping for this chapter. We are also grateful to the Urban and Environmental Studies Trust Fund of the University of Hong Kong for financial support for part of the study.

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(introductory text...)

Orville Solon

Introduction

It is often argued that urban primacy in a developing country is largely a product of its colonial past. The dominance of Metro Manila in the Philippine urban system today continues to feed upon the same forces initiated during the Spanish occupation: Manila still serves as the main link to the world economy and remains the seat of political authority. This colonial heritage may be one of the more formidable obstacles confronting efforts to promote broad-based and balanced regional development in the Philippines.

Although the momentum generated by old global factors continues to influence the landscape of the Philippine economy, new global influences have appeared and are becoming more dominant. The concern is that the strength of new global forces, which build upon a more pronounced international division of labour, greater reliance on international finance, and more emphasis on international trade as the main engine for growth, may only reinforce tendencies towards urban primacy. The argument is that new global forces backed by new communications and transport technology work on the world economy through a system of mega-cities and, in so doing, worsen the unevenness of growth within countries (see chap. 2). Evidence showing the tendency of foreign direct investment to locate in and around national capital regions lends some validity to the hypothesis (Fuchs and Pernia, 1989).

However, more recently in the Philippines, the limited success of regional centres like Cebu in Central Visayas, Cagayan de Oro in Northern Mindanao, and Davao in Southern Mindanao in attracting direct foreign investment and in promoting exports raises a number of questions. With global restructuring, can the regional comparative advantages represented by regional urban centres compete directly at the global level? Can the recent changes in transport and communications technology elevate regional centres above the limits imposed by the existing national hierarchy of cities? The argument being suggested concerns the possibility that global influences may be harnessed to promote balanced growth via intermediate regional centres.

A preliminary examination of the question of whether or not new global factors have an inherent influence towards urban primacy is the main purpose of this chapter. This is done by looking at elements of both global and local influences on recent trends in Philippine urbanization. In particular, this chapter will address three questions: (1) Do global and local factors have different effects on urbanization patterns? (2) How do global and local factors affect each other? and (3) Does the existing pattern of urbanization itself affect the way global and local influences are applied across regions?

In asking the first question, this chapter intends to determine the nature and relative influence of global factors. The second question is raised to qualify answers to the first by determining whether the two sets of influences crowd each other in or out. The third question considers the possibility that global factors may not have an inherent predilection for capital cities but are only observed to have such a tendency as they respond to an existing pattern of urbanization. An underlying interest here concerns the prospect of harnessing global forces to develop secondary or regional urban centres.

The analysis here focuses on recent urbanization trends in the Philippines covering the period between 1980 and 1990. An overview is presented in the next section. Subsequently, an attempt is made to determine how changes in the relative levels of urbanization of the 13 regions in the Philippines are affected by global factors, particularly foreign direct investment and exports, using a simple model developed on the basis of the hypotheses and results presented in previous studies of Philippine urbanization such as those by Pernia et al. (1982) and Herrin and Pernia (1987). The hypotheses underlying the model are tested using three-year, thirteen-region panel data. The empirical specification of the model as well as the results are discussed. Concluding remarks are made in the final section.

Table 8.1 Urbanzation trends in the Philippines, 1948-1990


1948

1960

1970

1980

1990

Population ('000)

Philippines

19,234

27,086

36,683

48,101

60,680

Urban areas

3,829

5,810

8,776

12,432

16,371

Metro Manila

1,569

2,462

3,967

5,926

7,929

Urbanization ratiosa

Urban/Philippines

0.199

0.215

0.239

0.258

0.270



(7.75)

(11.53)

(8.03)

(4 39)

Manila/Philippines

0.082

0.091

0.108

0.123

0.131



(11.43)

(18.97)

(13.92)

(6.06)

Manila/Urban

0.410

0.424

0.452

0.477

0.484



(3.41)

(6.67)

(5.45)

(1.61)

Source: National Statistics and Census Bureau, Philippine Statistical Yearbook 1991.
a. Numbers in parentheses are percentage rates of change.

Recent urbanization trends

Indicators suggest that, although the tendency towards the primacy of Metro Manila remains positive, it may be slowing down. Table 8.1 presents three measures of this tendency: (1) the ratio of the urban population to the total population; (2) the ratio of Metro Manila's population to the total population; and (3) the ratio of Metro Manila's population to the total urban population. Rates of changes for these measures between the five census years show that urbanization and urban primacy accelerated until 1970 but declined towards 1990. The upward trend is explained by Pernia et al. (1982) as being the result of the import-substitution programme that was implemented in the 1960s. The decline may be a response to increasing congestion in the metropolis, to rising land values, and to incentives underlying the industrial dispersal programme initiated in the mid-1970s.

The relative decline of the primacy of Metro Manila after 1970 was anticipated by the work of Pernia et al. (1982) and was observed by a more recent study by Lamberte et al. (1990). An explanation for this trend is that Metro Manila's growth spilled over into its peripheral regions: Central Luzon (Region 3) and Southern Tagalog (Region 4).


Fig. 8.1 Regional population shares in the Philippines, 1948-1990 (NCR = National Capital Region; CAR = Cordillera Autonomous Region. Source: National Statistics and Census Bureau, Philippine Statistical Yearbook 1991)

As shown in figure 8.1, the decline has not actually led to more balanced regional growth.

The changing regional distribution of population over the five census years from 1948 to 1990 is shown in figure 8.1. The 13 regions of the Philippines are ranked in terms of the 1990 regional population shares. The almost equal number of marks above (and to the left of) and below (and to the right of) the curve shows how the regional distribution of population tilted over time in favour of Metro Manila (the National Capital Region) and its peripheral regions.

The distribution of the total urban population among the different regions may be more telling about other aspects of recent urbanization trends. Figure 8.2 shows that Metro Manila has the highest concentration of urban population with a 5 per cent share. Whereas it was