Prime Numbers

Megacities

FP's guide to the coming urban age.

Over the next two decades, the world will see a burst of urban expansion at a speed and on a scale never before witnessed in human history. But not all the world will take part. When you hear about the coming urban age, it's really a story about rising Asia and the two countries that will define this new era of the megacity: China and India. Half of Asia will become urbanized, and nearly a billion people will shift from countryside to cityscape. Trillions of dollars will need to be spent on roads, trains, power plants, water systems, and social services. And it's going to happen in less than half the time that it took the West. China and India will account for two-fifths of the world's urban growth, but they are pursuing wildly different strategies for managing this shift. Beijing's approach is systematic: The government has invested ahead, allocated land, plotted out transportation networks, and given its cities the freedom to raise capital. New Delhi, meanwhile, hasn't done enough to prepare. So while China has embraced a future of office parks and high-speed rail, India is just waking up to its new urban reality.  

Who Goes Where

In just two decades, China will have a whopping 44 urban areas boasting populations larger than 4 million. India will have 11 such cities. Who will live there? In China, the answer is simple: migrants from rural areas. Growth in India’s cities, by contrast, will mainly be organic. The country’s population is also much younger than China's. A mere 16 percent of India’s population will be over 55 in 20 years, while 28 percent of China's will be.

*Correction: In the graphic below, the map of Spain should be the map of Brazil and state "more than the population of Brazil."

What Needs Building?

It’s the stuff of dreams for developers and construction companies. If current trends hold, China will need 40 billion square meters of combined residential and commercial floor space over the next 20 years -- equivalent to adding one New York every two years. India, on the other hand, needs to start building between 700 million and 900 million square meters of combined residential and commercial space each year -- equivalent to adding more than two Mumbais or one Chicago each year.

Transportation

China has the potential to revolutionize mass transit -- it already has plans for building new metros, highways, and high-speed trains in its top 170 cities. In fact, Beijing has already begun investing heavily in this sector; between 2004 and 2006 alone, spending on urban transportation increased almost 50 percent. New Delhi's spending on transportation infrastructure, however, needs to pick up urgently. At its current rate of metro and road construction, India is headed for gridlock on a massive scale. The country needs to build 350 to 400 kilometers of metro rail every year to keep up with its current standards -- but that’s more than 20 times the capacity that has been built in the past decade.

Energy

It's hard to understate what a massive impact the coming urbanization in China and India will have on energy markets. Demand for power in China's cities will more than double from today’s level, accounting for roughly 20 percent of global energy consumption. Meeting that need will call for huge investments in coal, of which China is already the largest international buyer. India's power targets are also ambitious; the country hopes to add 62,000 megawatts to its grid by 2012. If trends continue, India's carbon dioxide emissions will grow nearly sevenfold by 2030, while China's will nearly double.

The Price Tag

Urban growth will come with a high price tag -- a whopping $35-$40 trillion in China and $2.2 trillion in India over the coming two decades. In addition to all the building and public infrastructure, China and India will need to invest heavily in delivering services -- everything from education to health care to social security. As China's over-65 population more than doubles and migrants flood its cities, government spending on health care will struggle to keep up, rising from 19 percent to 21 percent of GDP. Even with China’s massive economic growth, paying the bill won’t be easy. Many of Chi-na’s largest cities are self-sufficient, but other smaller and newer areas are already running deficits. India’s urban spending, meanwhile, is already very low by international standards.

What Will It Be Like to Live There?

The megacity will be home to China's and India’s growing middle classes -- creating consumer markets larger than to-day’s Japan and Spain, respectively. In China, the number of urban middle-class households will quintuple; in India it will grow nearly fourfold. India's wealthiest urban households -- those earning more than 1 million rupees a year (about $22,000) -- could number 11 million, more than the total number of households in Australia today. In both countries, the wealth gap between rural and urban areas will grow with urbanization. Urban GDP per capita will exceed rural GDP by 3.5 times in China and more than five times in India.

Jobs

Jobs in the cities will be more prevalent, productive, and lucrative in urban China and India than in rural areas.

China's ranks of university graduates -- growing by 26 percent annually -- will mostly work in cities, which will compete to recruit their skills.

In India, three-quarters of new urban jobs will be in the service sector.

Traffic Nightmare

Even if China and India build roads and metro rail as fast as practically possible, they still won't be able to match the soaring rates of car ownership and urban growth. The number of vehicles in China, for example, has grown three times faster than the capacity of roads over the last 20 years. In Beijing, traffic speed has already dropped to less than half of London’s. India’s predicament is even worse; if the country invests in its urban infrastructure at the predicted rate -- an estimated $300 billion over 20 years -- traffic across the country could literally come to a standstill.

Service Gap

China's biggest urban challenge may be water; already, it has little to spare. Some 70 percent of water use today traces back to agriculture, but demand from urban consumers and commercial enterprise is on the rise. Even if the sheer amount of water isn’t the problem, location will be; the country will need to spend more than $120 billion on water systems in the coming years to transport, store, and manage supplies. In India, service delivery will fall woefully short of demand in coming years across most urban infrastructure sectors.

Prime Numbers

The Pirate Den

Inside the modern business of wreaking havoc on the high seas.

LESS THAN A DECADE AGO, the world was congratulating itself on a job well done. The most treacherous international shipping lanes through the Strait of Malacca and the Singapore Strait had finally been tamed after years of brazen pirate attacks. But a far more dangerous threat soon emerged, with more spectacular seizures of cargo and skyrocketing ransoms: Somalia's pirates. With a long coastline, lawless shores, and a steady stream of vulnerable targets, the quintessential failed state is a buccaneer's dream. Attacks there went from 16 percent of the global total in 2007 to more than half last year with no end in sight, despite intensive international efforts to protect the seas. Today's pirates are maddeningly difficult to stop, and it has much to do with who they are: ransom-seeking cartels with sophisticated financial backers. These aren't your great-grandfather's brigands -- they use advanced geographical positioning equipment to trace targets and carry a bountiful supply of small arms. They ply their trade in the world's ungoverned spaces, relying on corrupt and compliant officials to look the other way.

What They Want

Pirates are after just one thing: booty. Be it monetary or material wealth, what pushes pirates to sea is the hunt for their next payday. And it's not just the now-infamous ransoms collected almost weekly off Somalia's deadly shores. Pirates also steal anything they can -- crew equipment, electronics, clothes, or even the ship itself. Of the 980 successful attacks in the last five years, 527 involved theft of goods onboard. In fact, it's the preferred model in Southeast Asia, South Asia, South America, and the Gulf of Guinea. Hijacking and kidnapping, by comparison, most popular off the coasts of Somalia, Nigeria, and Malaysia, occurred 159 times during the same period, with 867 individuals captured off Somalia in 2009 alone. Is piracy ever about more than just loot? The sole exception might be Nigeria, where it has taken on an overtly political character. There, local movements seeking a more equitable division of Nigeria's oil wealth have targeted rigs and offshore installations, kidnapped foreign oil workers, and bunkered oil. Little evidence shows pirates targeting specific people or industries elsewhere; they simply select the most vulnerable and potentially lucrative targets.

Safe Haven

Pirates seek high rewards with minimal risks, making Somalia -- the world’s least-governed state -- the perfect pirate haven. It has the longest coastline in continental Africa, and more than 20,000 ships pass annually through channels nearby. Even with a low success rate for attacks, the combination makes the potential for ransoms enormous. Meanwhile, the risks are small. Of the 650 Somali pirates caught since late 2008, 460 have already been released, according to Lloyd's Market Association, the research arm of the famous insurance exchange. In Africa, only Kenya and the Seychelles have agreed to prosecute suspected pirates. Nor is there much chance that pirates will get shut down on shore; local authorities are often all too happy to take a cut of the profits.  

High Trade

The Somali pirate business began relatively benignly when disgruntled local fishermen took to forming a "coast guard" to expel foreign trawlers taking advantage of the country's inability to patrol its shores. But today, piracy is a well-organized, modern-day business backed by deep-pocketed financiers. The average Somali makes far less than $1,000 a year; even low-level pirates can make upwards of $20,000.

Damage Control

Avoiding modern-day piracy is expensive. Ships' insurance rates skyrocket, alternative courses add time and money to a trip, and ransom payments can run into the tens of millions. As of March, Lloyd's had named 19 countries (either in whole or in part) as "war risk zones," a designation made by the association's aptly named Joint War Committee. Ships sailing through these zones have the options of either rerouting their course or paying higher fees, depending on the ship and its cargo. Unfortunately for shippers, avoiding the Gulf of Aden, easily the world's most dangerous route, adds two to three weeks to the journey. As a result, most companies accept the rate hike and take their chances. 

They're Everywhere

Although it makes fewer headlines, piracy is also a significant problem outside the Horn of Africa. In fact, pirate watchers worry most of all that Somalia will offer a powerful example to criminal forces in other weakly governed states: that if they take up the profession, they too can take minimal risks and win sky-high rewards.

 

False Flags Who suffers the most from piracy is anyone's guess. German, American, Japanese, or Turkish ships, for example, often don't fly their own flags; instead, they register with 32 "open registry" countries, such as Panama and Liberia, that sell "flags of convenience." Shippers simply pick which country's laws best suit them, and often, that means the one with lower labor standards, fewer taxes, and laxer safety standards.

Stopping It

Piracy has been stopped before, and not just by the British Empire. Indonesia, for example, made rapid strides against piracy in the past decade. Today, a flotilla of ships from 17 navies patrols Somalia's coast. But with just a handful of vessels matched against a pirate playground larger than the Mediterranean, the plunder goes on.