PHILIPPINE PLANNING~

PHILIPPINE PLANNING JOURNALVol. XXIV, No.1, October 1992

Issue EditorDavid Leonides T. Yap

Managing EditorDelia R. Alcalde

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TABLE OF CONTENTS

The Role of Infrastructure in Urban, Rural, 1and Regional Development:A Survey of Literature

Sophremiano B. Antipolo

The Urban Land Nexus Theory and the Spatial 12Structuring of Metropolitan Manila

Ernesto M. Serote

Slum and Squatter Problems inMetropolitan Manila: An Update

• Asteya M. Santiago

About the Contributors

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THE ROLE OF INFRASTRUCTUREIN URBAN, RURAL, AND REGIONAL DEVELOPMeNT:

A Survey of literature

Sophremiano B. Antipolo

INTRODUCTION:SETTING OUT THE ISSUES

It has been argued that the "economizingbehavior" and "economizing setting" are thetwo key elements that are central in theprocess of development. The former refers tothe human factor: the capacity, ability orwillingness to change. while the latter refers tothe physical. socio-cultural and institutionalfactors within which the "economizingbehavior" has to operate. One of the importantcomponents of the "economizing setting" ofurban, rural. and regional development isinfrastructure.

That infrastructure plays an important rolein development is generally well recognized.but the concept is so vaguely understood thatour knowledge of the relationships betweeninfrastructure investment and thp. developmentprocess is at best inferential.

Wharton (1967) argues that without acertain minimum of infrastructure investment,little rural, urban, and regional developmentcan take place. This does not mean, however,that the provision of some package ofinfrastructure will ensure development. But wedo know that, given certain conditions, thedevelopment of particular types of infra-structure will stimulate development, althoughwe may not know precisely what the conditionsare and what the required level is. Directlyproductive activities --such as agriculture,manufacturing and mining .- cannot progressvery far without the support of infrastructurefacilities.

The important issue is not how to resolvethe chicken-egg question or how to determinethe causality between two factors --i.e.,infrastructure and development --but todetermine what kind of infrastructure invest-

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ment policy should be adopted. Answers to thisquestion will be attempted in this paper.Accordingly, this paper will answer thefollowing three (3) basic sets of questions:

1. What is infrastructure?

2. What is the role of infrastructure in spatialdevelopment? More specifically, what isthe relationship between infrastructure andthe socio-economic characteristics ofurban and rural areas and their capacity toattract productive investments?

3. What are the effects or impacts of infra-structure upon urban, rural-agricultural,and regional development?

INFRASTRUCTURE:DEFINITION AND ROLE

Definition

Although there is a large body of literatureon the subject of infrastructure, there has neverbeen any precise definition (Johnson, 1965).Different people have used it in differentcontexts, and there is considerable variation inthe degree of theoretical and empiricalattention given to the various aspects ofinfrastructure. The term "infrastructure" hasbeen used interchangeably with "overheadcapital". The following summary by Wharton(1967) indicates how much variation in implieddefinition and context exists on the use of theconcept of infrastructure.

Lewis (1955) appears to include publicutilities, docks, water supply, andelectricity. Higgins (1959) includestransport, public utilities, schools, andhospitals. Hirschman (1959) lists: lawand order, education, public health,

PHILIPPINE PLANNING JOURNAL Vol. XXIV No. 1 OCtober 1992

transportation, communications, power,water supply, irrigation, drainage.

Hirschman's definition is believed to bemore useful from an analytical standpointbecause it goes beyond the mere listing ofcomponents of social overhead capital. Hedistinguishes between a "wide" definition(includes all those listed above) and a "narrow"definition (limited to transportation and poweronly). Hirschman contends that transportationand power are the "hard core" of the concept ofsocial overhead capital, thus emphasizing theimportance of the two factors as preconditionsfor economic development.

Other definitions of some of thecomponents listed above have been made.Youngson (1964), however, argues that thewhole idea of trying to define social overheadcapital is "nonsense" because the importantissue is not so much whether or not infra-structure can be defined; rather, it is the factthat investment in infrastructure is a sine quanon for development. Youngson's argumentimplies that our concern should not be so muchwith the definition of the concept as withdetermining its relationship with development.However, in order to understand the rela-tionship, one needs an operational definitionthat specifies the parameter of the concept.Since one of the objectives is to determine theextent to which infrastructure plays a role in thedevelopment of rural, urban, and regionaldevelopment in terms of growth and potentialto attract new industries, there is a need todevelop a definition that can denote thedifferent features of infrastructure. One suchdefinition is that developed by StanfordResearch Institute (SRI) in its study of thecosts of urban infrastructure for industry asrelated to city size (SRI, 1968). According tothe SRI study, infrastructure is divided intophysical and social.

Physical infrastructure includes the...facilities directly supporting industrialproduction and distribution: electricpower, road and rail transport,telephone communications, watersupply, and sewerage and industrialwaste disposal. Basic requirements ofhousing, schooling, and hospital andhealth services for urban industrialemployees and their families, together

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with the residential share of refusedisposal, police and fire protectionservices are covered in social infra-structure.

The definition is operational and appro-priate. It is operational in the sense that itdistinguishes between facilities that directlysupport productive activities and those thatprovide indirect support. Such distinctions areimportant in identifying priorities among typesof services that should be provided. Sinceprovision of infrastructure is costly and long-term in its effects, infrastructure investmentpriorities should be set depending uponwhether the national (or regional) objective isto promote only directly productive activities orto provide different types of social services aswell.

Role of Infrastructure in SpatialDevelopment

The role that infrastructure investmentplays in the development of settlements arisesfrom two (2) major factors: (a) infrastructure isa "basis" for urban and rural development; and(b) through the adoption of a strategicinvestment policy, infrastructure can be used toinfluence both the characteristics and growthpatterns of urban and rural areas.

Infrastructure as a Basis for Development

Hirschman (1979) has articulated thatinvestment in infrastructure is a 'basis' for thefunctioning of any type of activity on which anurban area sustains itself. He argues that noprimary, secondary or tertiary activities cantake place without the provision of basicservices, which he refers to as social overheadcapital (SOC). The same point is emphasizedby Wingo (1976). He contends that investmentin infrastructure has an important role in theurbanization process because development ofvarious elements of infrastructure providesurban areas a "uniquely productive environ-ment". The environment creates a favorablecondition not only for attracting privateInvestment in industries and other types ofactivities. but also for recruiting persons withdifferent backgrounds and skills. the conver-gence of which sets in motion the self-sustaining dynamics of urbanization.

Advocates of the balanced growth theorypresent the same notion in a slightly differentperspective when they argue that the right"bundle of investments· must be at the rightplace at the right time if investments are tohave any impact on development. Through the"big push" theory, they illustrate the signifi-cance that a bundle of investments can haveon the development of urban and rural areas(Bahrgava, 1966).

Within the context of the stages ofdevelopment, investment in infrastructure isbelieved to have a catalytic effect, particularlyduring the pre-industrial stage (Rosenstein-Rodan, 1967). Rodan identifies the implicittheory behind investment in infrastructure. Onthe supply side, by creating a minimum level ofsocial overhead capital, directly productiveinvestment can take place. On the demandside, by creating additional employment andincome through investment in the socialoverhead capital activities, effective demand israised in the area since additional workersemployed in the construction of social over-head capital will spend their wages onadditional goods. This increase in effectivedemand should create additional markets in anarea in which, due to the absence of demand,productive investment in industrial establish-ment appeared doomed to failure.

Rosenstein-Rodan's rationalization of theimportance of infrastructure, however, is basedon the basic premise that such an investmentwill create a spontaneous public investment indirectly productive activities. But such anargument may be valid only in the case ofdeveloped countries or regions, where theeconomy depends on outputs from primaryproducts (agriculture and mining), and wheremost potentially rich areas are faced withsevere locational disadvantages and arealmost isolated from the national economy.Investment in infrastructure is a must becauseit is the 'basis' upon which any local resourcescan be developed. It is an absolute prerequisitefor any type of development program.

According to Johnson (1967), the effectsof a lack of infrastructure facilities refer to morethan economic results. He pointed out that thelack of roads is the greatest handicap to aproductive economy, because physical isola-tion means not only an inability to sell productsand to buy necessary consumer goods, but

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The Role of Infrastructure

involves an intellectual separation of the road-less villages from currents of thought andaction in urban areas and from information andideas in those rural areas that are in bettercontact with towns and cities.

Investment in infrastructure, accord-ing to Steele (1971), is an absolute necessityin less developed countries' efforts to moveinto industrialization. Mountjoy (1967) alsoemphasizes this point. He contends thatadvances in manufacturing by means ofsuccessful new promotions and the expansionof existing industry from workshop to factorycharacter will depend essentially upon prior orparallel expansion of infrastructure and utilities.

Infrastructure as a Policy Tool

According to Emmanuel (1973), countriespursuing regional development policies gene-rally use two main instruments to secure policyobjectives. The first refers to the financialincentives (loans, grants, tax reliefs, etc.),which bear directly on the balance sheet offirms. The second includes the development ofinfrastructure in areas in which a specialregional promotion effort is required. Althoughthere is significant interdependence betweenthe two (financial and non-financial incentives),there are substantial differences that resultfrom blending on the level of development of aparticular country. Often, maintaining thebalance between financial and non-financialincentives is the major problem. Thus, in thecase of developed countries, infrastructuremay be comparatively adequate and theproblem may be how to provide firms withother financial incentives to relocate or bring innew industries. On the other hand, in the caseof the less developed countries, the majorproblem is the deficiency of infrastructure, andother financial incentives would have no effectuntil infrastructure deficiencies are remedied.

Dyckman and Irvine (1973) believe thatinvestment in infrastructure is one of theimportant measures that can serve to coor-dinate national, regional, and local policies andthus help to develop well-integrated nationalurban systems. Richardson (1972) shares thesame idea and maintains that decisions on thelocation of infrastructure might be regarded asthe unifying theme in the coordination of the

PHILIPPINE PLANNING JOURNAL Vol. XXIV NO.1 October 1992

national and urban policy. Richardson,however, notes that since infrastructuredecisions are taken at different levels ofgovernment, successful realization of thenational urban goals depends on thecompatibility of the regional and national goals.

urban areas, measured in terms of numberof industries in each urban area andpotential industrial absorptive capacity,and (iii) development of infrastructurefacilities.

Since the bulk of the infrastructureinvestment is publicly undertaken, the potentialfor accommodating investment to public policyis high and, thus, investment in infrastructure isstill a potent force as a policy instrument(Salama, 1974).

EFFECT I IMPACT OFINFRASTRUCTURE:A SURVEY OF EVIDENCE

Effects on Urban Spatial Development

Although it is accepted that investment ininfrastructure is a 'basis' for the functioning ofany type of activity and is also an importantpolicy instrument for managing the develop-ment of urban areas, there is, as yet,uncertainty on the extent to which it determinesthe growth and characteristics of the urbanareas, on one hand, and the location ofindustries, on the other. This section attemptsto examine whether any such relationshipexists.

Using regression and correlation analysismodels, Wubneh (1976) tested and confirmedthe following hypotheses:

• There is a positive relationship betweeninfrastructure, market size and industriallocation. A corollary hypothesis to this is:The potential industrial absorptive capacityof an urban area is positively associatedwith the availability of its infrastructureservices.

• The size and socio-economic characte-ristics of urban areas are positively relatedto the investment in infrastructure facilities.

• There is a significant positive correlationamong (i) spatial organization, measuredin terms of inter-urban traffic flow todetermine interaction, (ii) development of

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Wubneh's findings indicate that marketand infrastructure are positively associatedwith the locational pattern of industries andalso that infrastructure is positively related tothe potential industrial absorptive capacity ofurban areas. The regression equations give areasonably adequate statistical explanation ofthe spatial variation of industries. The patternof location of industries is basically an outcomeof a cumulative result of locational decisionsundertaken by firms over a long period of time.The significant relationship between market,infrastructure and distribution patterns ofindustries reflects the importance of thesefactors (infrastructure and market) ininfluencing the locational decisions of firms. Acorollary to this analysis is the significance ofthe complementarity of infrastructure facilities.The availability of water, power, or roads alonemay not make a significant difference. It is thepresence of a combination of the variouselements of infrastructure that makes adifference in attracting industries or generatingdevelopment in a region.

The testing of the hypothesis on the sizeand characteristics of urban areas shows theexisting differences in the type of infrastructurefacilities between large and small urbanareas. Physical infrastructure is positivelyassociated with the size and socio-economiccharacteristics of the large urban areas.Physical infrastructure is an important factorin supporting productive activities directly and,thus, the large urban areas that have thephysical infrastructure advantages maintain afavorable climate for attracting new industries.On the other hand, the small and medium-sized urban areas, although they haverelatively 'better' educational and healthservices (social infrastructure) as a result oftheir being important administrative centers,lack: (a) physical infrastructure to directlysupport productive activities; and (b) theeconomic dynamism to initiate growth.Therefore, their potential to attract industriesis limited.

The abovementioned findings imply that ifsmall and medium-size cities are to playa rolein attracting more productive activities, thenphysical, alongside social infrastructure mustbe provided. In sum, it is necessary to point outthat the dimension of space should beconsidered as one of the factors that deter-mines the web of interrelationships amongeconomic activities. Particularly in the lessdeveloped countries, such considerations aresignificant because, as Johnson (1967) puts it,it is the poor and often faulty spatial structuringthat has strangled the development efforts ofmost developing countries.

Effects on Agricultural Output andInvestment

In a study by Binswanger et al. (1989), anattempt was made to determine the impact ofinfrastructure and financial institutions onagricultural output and investment. The studysought to quantify the interrelationshipsamong the investment decisions of govern-ment, financial institutions and farmers andtheir effects on agricultural investments andoutput.

Using econometric techniques, the studydefined the dependent variables to include thefollowing:

• Aggregate Crop Output - the index of 20major crops

• Agricultural Investments - represented byprivate investments in draft animals, milkanimals, small stock (sheep and goats),tractors, and irrigation pumps.

The independent variables included:

• Government Infrastructure - consisting ofprimary schools, government irrigation,rural electrification, regulated ruralmarkets, and total road length. (Note:Regulated rural markets do not include allrural markets but only those wheregovernment provides market infrastruc-ture and regulates all trade via asupervised auction system).

• Financial Institutions - represented only bythe rural branches of commercial banks.

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The Role of Infrastructure

(This limitation stems from the absence ofdata on other forms of rural financialintermediaries).

The salient findings of Binswanger's studyare outlined below:

• Impact of Financial Institutions. For thefirst time, Binswanger's research presentsresults on the effects of the expansion offinancial intermediation of agriculturalinvestments and output. It was found thatthe expansion of the commercial banksinto the rural areas had a considerableeffect on fertilizer consumption and onfixed private investment. It also affectsagricultural output by 1.4 percent. Theeffects of bank expansion upon thedependent variables are noted as follows:It increased fertilizer demand by 22percent, investment levels in tractors by 18percent, and investment in pumps andmilk animals by 46 percent. Its effect uponaggregate crop output was 2 percent.

• Impact on Infrastructure. In addition toestimating the impact of banks, the studyalso showed that commercial banks preferto locate in well-watered (irrigated) areaswhere agricultural risks are relatively lowand avoid areas characterized by highrisks of drought and floods. Moreover,bank expansion is greatly facilitated bygovernment investments in roads andregulated markets, which enhance liquiditypositions of farmers and reduce tran-saction costs of both banks and farmers.As bank expansion raises investmentsandoutput, better geographic coverage ofthe banking system can, in favorableenvironments, help offset the effects ofhigher interest rates.

The analysis of government's ownadditional investment in irrigation suggestspositive and statistically significant impactupon bank expansion, private investment,and aggregate crop output.

• Improved Road Investment. This has beenshown to enhance agricultural output withan elasticity of about 0.25 (i.e., it increasesagricultural output by 25%). The studyfound that, on the average, improved roadinvestment directly contributed 8 percentto the growth of agricultural output and 10

PHILIPPINE PLANNING JOURNAL Vol. XXIV NO.1 October 1992

percent to the growth of fertilizer use. Itwas also established that improved roadinvestment contributed to bank expansion.

• Electrification has a clear impact oninvestment in fixed capital, especially onpumps where it contributed an increase of30 percent to investment levels. Via theseinvestments, electrification increased out-put by 2 percent.

• Primary Education has added 7 percent tocrop output. This is considered largeas it was found to be statistically signifi-cant. This has come about primarily via anearly 30 percent increment to fertili-zerdemand.

Effects on Agricultural and RegionalDevelopment

Wanmali's (1988) study entitled: "Provisionand Use of Rural Infrastructure in the Growthof the Regional Economy" was placed withinthe growing field of interest in rural infra-structure and its impact on agriculturaldevelopment in the Third World. At the outset,Wanmali argued against the usual definition ofinfrastructure to mean just "hard infrastructure"(i.e., roads, telecommunications, electrification,and irrigation). He contended that this definitiontended to provide only a partial picture. Hestressed "that there are other elements ofinfrastructure that are equally important suchas the national, regional, and local governmentagencies involved in development planningand administration. He called this "institutionalinfrastructure".

Wanmali pointed out that various servicessuch as transport (bus and trucks), finance(credit and banking), animal husbandry, andinput distribution (seeds, fertilizers, pesticides,and agricultural and rural produce) are alsonecessary for the development of agriculture.He called these the "soft infrastructure". Thedistribution systems of these services havestrong economic as well as spatial featuresand depending upon their patterns ofavailability, these can improve or hinder accessto the rural population and. the prospects foragricultural development.

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He also noted that previous research atthe International Food'Policy ResearchInstitute (IFPR) in Washington, D.C. has shownthat investment in hard infrastructure such asirrigation systems and roads, when coupledwith simultaneous investment in soft infra-structure of the type mentioned earlier, hasfacilitated an effective use of irrigation forintensive agricultural development which, inturn, has led to a rapid increase in regionalgrowth.

Wanmali pointed out that infrastructureand people are located in towns and villages.Accessibility to them can vary depending uponwhere any specific settlement is located in awider settlement system. Towns are seen asproviding better access than villages. Thus,locating services properly over a region be-comes a crucial factor in improving theiraccessibility to the farming population. Makingthese available in distant towns is not of muchhelp locally. There are further properties ofaccess which are worth noting. In thegeographic studies on spatial impact of deve-lopment, it is recognized that in any develop-ment effort, there exists decay some distanceaway from the center and towards the peri-phery. The analysis of such center-peripheryrelationships, particularly involving infra-structure and people is, in fact, becoming acenterpiece in all current literature on regionalplanning in the Third World.

The salient findings of Wanmali's study aresummarized below:

1) Input Demand Regression. Regressionmodels were developed to help explain theeffects of agricultural infrastructure anddistance upon the patterns of fertilizer andcredit use.

The dependent variable was measured interms of: (a) quantity of N-P-L fertilizerused, and (b) the amount of creditreceived for farming purposes. Fourindependent variables were included,namely: (a) proportion of cultivated areaunder high yielding varieties (HYV);(b) total cultivated area; (c) index ofagricultural infrastructure use; and,(d) distance.

From the estimated regression coeffi-cients, it was found that:

• the proportion of HYV had strongimpact on the quantity of fertilizerused. The coefficients were positiveand significant. However, thesevariables did not have a signifi-cant relationship with the amount ofcredit received;

• the total cultivated area was a criticalfactor in determining both fertilizerand credit received;

• the index of agricultural infrastructurewas significant only for the use of N-fertilizer and credit demand;

• as expected, an increase in thedistance to credit facilities had anegative effect on the amount ofcredit used.

In order to capture the pure effect ofaccess to rural infrastructure on householddemand for fertilizer, it was assumed thatall households in the study region haveaccess to rural infrastructure similar to themost developed areas. In this case, thestudy indicated that the householddemand for N-fertilizer would increase byalmost 260 percent in the study region.

2) Gross Output Value and Gross RevenueRegression. It was also hypothesized thatagricultural infrastructure will have animpact on the gross output value for thefarm. The independent variables included:total cultivated area, proportion of culti-vated area under HYV, proportion ofcultivated area that is irrigated, quantitiesof N-P-K fertilizer used, and index ofagricultural infrastructure.

The regression coefficients indicate that ofall the independent variables, only theproportion of area that was irrigated had asignificant impact on the gross outputvalue.

One final regression model was runrelating gross revenue per unit area withonly one independent variable - the index

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The Role of Infrastructure

of agricultural infrastructure. Theestimated regression coefficient waspositive and significant, indicating that ifthe overall use pattern for agro-servicesimproved, gross revenue per unit area forthe farmers would increase.

The aforecited results of the analysis implythe significant role of accessibility in thehousehold use of services. It was alsoseen that the extent of output of, or returnfrom agriculture is influenced by access toa package of infrastructure servicesrelated to agriculture which were definedearlier as "soft infrastructure".

Effect on Rural Development

A study by Ahmed and Hossain (1988)entitled "Infrastructure and Development of theRural Economy of Bangladesh" focuses onrural roads as the centerpiece of infrastructure.To this was added a number of elementslike institutional facilities of markets, educa-tional services, financial services, etc. Thestudy shows immense bearing of rural infra-structure on rural development in the contextof Bangladesh and the developing countries.

The study generates a comprehensivepicture of the effects of development of ruralinfrastructure on product and factor markets,social development, agricultural production,household income, consumption pattern andsavings and investment propensities in ruralhouseholds.

The findings are summarized below:

• Effects on Rural Markets and SocialDevelopment. Development of infra-structure was found to have a positiveeffect on marketing of agriculturalproducts. Households in developedvillages obtain a larger proportion of theirbasic food needs from the market. About34 percent of rice consumed by thesample households in developed villageswere purchased compared to 29 percentfor underdeveloped villages. The signifi-cantly positive relationship of marketing ofpaddy rice with infrastructure developmentwas also confirmed by the regressionanalysis.

PHILIPPINE PLANNING JOURNAL Vol. XXIV NO.1 OCtober 1992

Institutionai credit was observed to coveronly a small fraction of rural households(14%) and credit requirements (25%); non-institutional sources are still the dominantconduits for rural credit. While access toinstitutional credit is relatively biased infavor of large landowning groups,borrowers from landless and smalllandowning classes dominate non-institutional credit. The interest rates innon-institutional markets are about 10times higher than institutional markets.However, with infrastructure deve-lopment, it was found that accessto institutional credit improved almostseven-fold, but mainly for landowninghouseholds. But infrastructure deve-lopment was found to transformnon-institutional supply systems fromone dominated by both moneylenderand"friends/relatives· to a system composedlargely of moneylenders. Growth ofmercantile practices in the credit market ishastened by infrastructure development.The analysis of the utilization of insti-tutional credit reveals a few facets ofdemand for rural credit. Most institutionalcredits are used for supplementary work-ing capital in business and currentinputs in agriculture. The demand forcredit to finance working capital inbusiness is sharply enhanced by infra-structure development.

In terms of social development, infra-structure was not found to have a sig-nificant impact on literacy, which wasaffected more by the size of the land-holding of the household. The deve-lopment of infrastructure, however,had a significant impact on conditionsof health and acceptance of familyplanning practices. Adoption of familyplanning practices in developed areaswas more than twice the rate in under-developed villages.

Effects on Agricultural Production.Infrastructure affects agricultural produc-tion through prices, diffusion of technologyand the use of inputs. A multivariateregression technique was used to isolatethe effect of infrastructure on thesevariables, after taking into account theeffect of other exogenous factors. It was

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found that the price of the major output,paddy rice, did not differ much across thevillage at different levels of infrastructure,but the price of fertilizer was 14 percentlower and that of labor was 12 percenthigher in villages with developed infra-structure facilities.

The differences in the adoption of the newtechnology and prices were incorporatedin the input demand functions to estimatethe effect on the use of fertilizer and labor.The results suggest little impact on the useof labor, but 92 percent more use offertilizer in the developed villages. Theestimate of the production function sug-gests that the above effects on inputdemand would increase production in thedeveloped villages in the range of 7 to 18percent. In addition, the developed villagesproduced about 24 percent more than theunderdeveloped villages due to more effi-cient use of the inputs. The analysissuggests the positive crop productioneffect of infrastructure in the range of 31 to42 percent.

Effects on Employment. Infrastructureaffects the labor market basically throughchanging the composition of employment.The development of infrastructuregenerates opportunities for non-farmemployment where labor is less arduous,and productivity is higher. Households,which have necessary capital and skills,substitute agricultural labor for non-agricultural, creating more opportunitiesfor wage employment in agriculture for theremaining households. The shift of laborfrom agriculture increases the productivityof labor, while the shift from self-employment to wage employmentincreases the duration of employmentfor the poor, who have been forcedto take up very low productiveself-employment in non-agricultural acti-vities. The increase in the demand forhired labor puts an upward pressure onthe wage rate and hence increases thewage earnings for the same amount oflabor. Thus, the development of infra-structure does not substantially affecttotal employment but the changes inthe composition of employment which it

induces, lead to an increase in laborproductivity and wage rate and thereforetotal wage earnings.

• Effects on Household Income and Poverty.The analysis of income from cropproduction, livestock and fisheries, wages,and business and industries indicates thatinfrastructure development contributestremendously to increase householdincome. Income from crop productionincreased by 24 percent and income fromlivestock and fisheries increased by about78 percent due to infrastructure develop-ment. Wage income almost doubled. Whatis more significant was the distribution ofincome arising from infrastructure develop-ment. Income of landless and smallfarmers increased more from crops,wages, livestock and fisheries, than theincome of large landowners.

The implication of the development of ruralinfrastructure for alleviation of poverty is,by far, the most revealing result. Theconventional view that development ofrural infrastructure is likely to aggravatepoverty was found to be baseless.Contrary to this view, the results indicatesubstantial impact of infrastructure deve-loprnent on rural poverty alleviationthrough increased agricultural and wageincome for landless and small landowninghouseholds. The conventional view suffersfrom the inability to see the linkage effectsof rural infrastructure that indirectlyinfluence income generating activities ofthe poor in the society.

• Effects on Consumption Pattern. Thestudy brought out a number of veryimportant implications of infrastructuredevelopment on household expenditure.This was done through the estimation ofdetailed commodity-wide income con-sumption relations between developedand underdeveloped villages. The mecha-nism of inter-industry linkage andimplication of consumption expenditureswere highlighted. It appears that infra-structure development leads to a reduc-tion in the share of food expenditure and

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The Role of Infrastructure

increases the share of non-food expen-diture. The average share of food was74.5 percent in the developed householdsand 80.9 percent in the infrastructureunderdeveloped group.

The substantial difference in the marginalpropensities of consumption betweenhouseholds located in developed andunderdeveloped areas imply that infra-structure development induces largerincreases in demand for non-cereal foodand non-food consumer goods andservices. The effects on the overall inter-industry production, employment andincome linkages are bound to be substan-tial. This is likely to be so becauseinfrastructure development enhancesincome from various sources. Thisincome, when spent on a larger proportionof non-cereal food, non-food, and ser-vices, generates additional employ-ment and income in the economyduring the subsequent rounds of acti-vities. Infrastructure development clearlydiminishes the propensity of consumptionof cereals and thereby changes the struc-ture of demand suitable for a diver-sified agriculture.

The study also found that infrastructuredevelopment increases the speed ofdiffusion of agricultural technology, re-duces the cost of marketing and improvesthe operation of the product market. Thepositive influence of these changes impliesa greater degree of supply response ininfrastructure developed areas.

• Effects on Savings-Investment Behavior. Itwas estimated that the average savingsrate was 14 percent, which was slightlyhigher in developed than in under-developed areas. Gross investment perhousehold was about 14 percent larger indeveloped than underdeveloped villages.The effect of infrastructure was directthrough its effect on income and viaincome to savings. Estimates of marginalpropensity of savings varied from 34 to 40percent.

PHiLIPPINE PLANNING JOURNAL Vol. XXIV No.1 October 1992

CONCLUSIONS AND POLICYRECOMMENDATIONS

The review of empirical evidence inthe preceding sections clearly pointed outthat, indeed, infrastructure has a role inspatial development through its capacity toprovide a 'basis' to attract industries.Policy makers should note, however, thatthe relationship between infrastructure andspatial development is not unidirectional;rather, it is reciprocal. Without some basicinfrastructure services, no meaningful de-velopment can take place. On the otherhand, the availability of infrastructurealone does not guarantee development; aregion or spatial planning unit must havethe potential for development and thesupply of infrastructure should be in res-ponse to effective demand for it. In otherwords, unless the lack of infrastructure is asignificant obstacle, the remedy of thedeficiency will not bring about the desiredchanges.

Infrastructure is a "bundle of services"and, as such, policies should stresscomplimentarity in infrastructure projectpackaging. Empirical analysis reveals thatthe supply of infrastructure has to be on acollective rather than individual basis:availability of water, power, or roads alonewill not make a dent in stimulating rural,urban, and regional development. Theremust be a "big push" that attempts to providea combination of services and at the sametime maintain the tenuous balance betweeninfrastructure needs and development.

The testing of hypothesis on the sizeand characteristics of urban areas revealsthat physical infrastructure (such as roads,electricity, etc.) is positively related to thesize of urban areas. Physical infrastructureis an important factor in supporting productiveactivities directly and, therefore, the largeurban areas that have physical infrastructureadvantages maintain a favorable climate forattracting industries. The policy implicationhere is that in order to promote widespreaddevelopment; small and intermediate citiesthat are potential centers for growth anddevelopment must be strengthened byproviding the right package of infrastructureinvestments.

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Econometric studies on the impact ofinfrastructure and financial institutions onagricultural output and investment revealthat government expenditure on physicalinfrastructure influences the private productionand investment decisions in agriculture and,therefore, are considered essential ingredientsof increased agricultural productivity. Govern-ment investments (both physical and human)can directly increase agricultural output byshifting the production frontier as in the case ofirrigation. Government investment also in-creases the rate of return to private agriculturalinvestment and, thereby, leads to greaterinvestment and output. Policy makers must,therefore, recognize that by increasing theviability and profitability of financial inter-mediaries, infrastructure can facilitate theemergence and growth of financial institutionsthat increase access to working and invest-ment capital or reduce the costs of borrowingfor longer-term investment.

Other econometric studies have demon-strated the important role of access in thehousehold use of services. It was also seenthat the extent of, or return from agriculture isinfluenced by access to a package ofinfrastructure services related to agriculture.

The study on infrastructure and rural deve-lopment has established that infrastructuredevelopment (especially roads) has the follow-ing favorable effects: (a) positive effect onmarketing agricultural products; (b) improvedaccess to institutional credit; (c) positive impacton agricultural production; and, (d) reduction inthe share of food expenditures and increase inthe share of non-food expenditures which havesubstantial effect on the overall inter-industryproduction, employment, and income linkages,i.e., infrastructure development enhancesincome from various sources and this income,when spent in larger proportions on non-cereal,non-food items and services, will generateadditional employment and income in theeconomy during the subsequent rounds ofactivities.

Indeed, physical, social, and institutionalinfrastructure are indispensable instruments inurban, rural-agricultural, and regional develop-ment, and easing infrastructure bottlenecks willenhance rural-urban, as well as, farm and non-farm linkages.

REFERENCES

Ahmed, Raissuddin and Hossain Mahabub(1988) Infrastructure and theDevelopment of the Rural Economy ofBangladesh. Washington, DC, USA:International Food Policy ResearchInstitute (IFPRI).

Bahrgava,. Ravindra (1966) "BalancedThought and Economic Growth" in Econo-mic Growth and Cultural Change. Vol. 14,NO.2.

Binswager, Hans et al. (1989) "How Infra-structure and Financial Institutions AffectAgricultural Outputs and Investment",Working Paper No. 163, Washington, DC,USA: The World Bank.

Dyckman, John and J. Irvine (1973). "UsingInvestment Criteria to Guide Urbanization."Paper presented at the Ninth Anniversaryof the Brazilian Bank, Rio de Janeiro,August 1973.

Err.manuel, E. (1973) Issues in RegionalPolicies, Paris: Organization of EconomicCooperation and Development (OECD).

Higgi:'ls, Benjamin (1959) Economic Develop-ment. Norton, New York, New York, USA.

Hirschman, Albert (1979) The Strategy ofEconomic Development. New Haven. CT.USA: Yale University Press.

Johnson, Edgar (1965) Market Towns andSpatial Development. New Delhi: NationalCouncil of Applied Economic Research.

Lewis, Arthur (1955) The Theory of EconomicGrowth. NeVIl York, New York, USA: Allenand Unwin.

Mountjoy, Alan (1967) Industrialization andUnderdeveloped Countries. New Delhi:Applied Economic Research.

Richardson, Harry (1972) "Optimality in CitySize, System of Cities and Urban Policy:The Skeptics View" in Urban Studies.Volume 9, February 1972.

11

The Role of Infrastructure

Rosentein-Rodan, Paul (1969) "How toIndustrialize an Underdeveloped Area" inRegional Economic Planning Techniquesof Analysis for Less Developed Areas.Edited by Walter Isard and J. Cumberland.New York: Praeger.

Salama, Ovida (1974) Planning and HumanValues. Cambridge, Massachusetts, USA:Apt and Associates.

Stanford Research Institute (1968) Costs ofUrban Infrastructure for Industry asRelated to City Size in DevelopingCountries. Menlo Park, CA, USA: StanfordResearch Institute.

Steele, David (1971) "Regional Planning andInfrastructure Investment Based onExperiences from TUrkey" in Urban Studies.VolumeS.

Wanmali, Sudhir (1988) Provision and Use ofRural Infrastructure in the Growth of theRegional Economy. Washington, DC,USA: International Food Policy ResearchInstitute.

Wharton, Clifton (1967) "The Infrastructure forAgricultural Growth" in AgriculturalDevelopment and Economic Growth.Edited by H.M. Southworth and B.Johnson. Cornell University Press,Ithaca, New York, USA.

Wingo, London (1969) "Latin AmericanUrbanization: Plan or Process?" inShaping an Urbanization Future. Edited byBemard Frieden and W. Nash. Cambridge,MA, USA: The MIT Press.

Wubneh, Mulatu (1976) "Spatial Dynamics andInfrastructure Investment: An Analysis ofthe Effects of Infrastructure on theDevelopment of Urban Areas". DoctoralThesis, Florida State University.

Youngson, A.J. (1967) Overhead Capital: AStudy in Development Economics,Edinburgh University Press.

THE URBAN LAND NEXUS THEORY AND THE SPATIAL STRUCTURINGOF METROPOLITAN MANILA1

Ernesto M. Serote

INTRODUCTION

The aim of this paper is to tryout aWestern model on a Third World material,specifically, to apply the urban land nexustheory in the analysis of urban development inthe Philippines. The implicit assumption is thatalthough Western and Third World societiesare different, there remain in the lattercontinuitiesof Western cultural elementsowingto past colonial experience and present neo-colonial relationships. Due to this contactbetween colonized and colonizing cultures inThird World societies, the latter societies arenecessarilymore complex than the former. Tounderstand them more fully therefore requiresthe use of more complicated models than whatare currentlyavailable in the literature.

The basic assumption of this paper is thatexisting theories of urban development,particularlythose which are based on Westernsocieties, can only partly explain the urbandevelopmentprocess in Third World countries.The value of this study lies in its being able toidentify not only those phenomena in ThirdWorld urban development which Westernmodelscan apprehendbut also those that theycannot explain. The latter are more importantin that they serve as material for the ela-borationof a new model that is more evocativeof, and responsive to the historical specifitiesand cultural diversitiesof Third World societies.The formulation of a new model reflective ofrealities in Third World urban development isan ongoingproject of this writer.

The urban land nexus theory was pickedout from a field of several others as theconceptual and analytical framework for thisstudy. Attributed to Allen J. Scott and his

associate Choukrey T. Roweis (Dear andScott, eds. 1981, 123-157), the urban landnexus theory belongs to the body of theoriesof, or rather, to a peculiar perspective intheorizing on urban development associatedwith the historical materialists. The choice ofScott's urban land nexus theory is by nomeans an indication of its qualitative standingamong other theories. It is simply due to theexplicit spatial focus of this theory whichstrongly appeals to a land use planner like thewriter.

The paper contains five major parts. Itstarts with an exposition of the theory itself.The second and third parts report on theapplication of the theory in analyzing thespatial structuring of Metropolitan Manila.These are followed by a critique of the theoryand evaluation of its applicability in theparticular case of Metropolitan Manila. Thepaper concludes with a beginning: the start ofexplorations into the need for, and the possibleconfiguration of a new model that will aid inunderstanding fully the urban developmentprocesses in Third World societies. In amanner of speaking, the whole exerciserepresents that stage in a fishing expeditionwhere one is just putting out to sea rather thancomingashore with the catch.

THE URBAN LAND NEXUS THEORY

The urban land use nexus theory is adescriptive model that seeks to explain thephenomenon of contemporary urban landdevelopment which is characterized by twocontrasting processes: the process ofspontaneous urbanization and the process ofdeliberate urban intervention (Roweis and

1 This article is an abridged version of the author's dissertation which he sUbm~tted to the Unive':Sity of SU:>se~,England in partial fulfillment of the requirements for the degree of Master of Arts In Urban and Regional StudieS In1988.

12

Scott in Dear and Scott, eds. 1981; Scott,1980). It is abstract phenomenon that ma-terializes in the form of land with structural andinfrastructural artifacts built over it by humanlabor and used in various ways. It is, moreover,a phenomenon that is socially produced in acomplex dynamic that is reducible to twoprincipal phases: 1) private firms and house-holds which develop, exchange, and utilizeurban land in accordance with their own privatemotives and benefit-cost calculations, and 2)the State which provides elaborate networks ofmaterial infrastructures that underpin the gene-ral processes of production and reproduction inaccordance with political calculations andsocial costs and benefits. The combined out-come of the activities and interactions betweenthese two phases in the urban land develop-ment process is the urban land nexus as a'finished used value' or a 'composite system ofdifferentiallocational advantages' (Scott, 1980,136).

The urban land nexus then, is the com-bined effect of the aggregate actions of manyindividual firms and households and thepolitical intervention of the State. Historicallyand analytically, according to Scott, privateactions take precedence over State interven-tion. But every intervention measure taken bythe State creates new dislocations and invitesa new round of private actions necessary toadjust to the changed configuration of differen-tial locational advantages which, in turn,create a new set of dysfunctions that justifyState intervention, and so on.

Analytically, the urban land nexus consistsof three elements or 'moments' as Scott callsthem, namely, the private component, the pub-lic component, and the private-public interface.

1) The private component. In a capitalistsociety, the structuring of the urban landnexus can be explained in terms of theconstant search for profits by capital aswell as the insistent desire of labor to livein environments that enhance reproductionand sustain the exchange value of laborpower. This requires, on one hand, effi-cient, fully serviced production space andon the other hand, a secure residentialspace for the reproduction of labor power.These requirements are often in conflictwith each other. In the process of

13

Urban Land Nexus Theory

satisfying these requirements through theappropriation, exchange, and utilization ofurban lands, certain irrationalities and dis-locations inevitably rise, despite claims tothe contrary by neo-classical equilibriumtheorists.

Neoclassical equilibrium theorists claimthat the urban land market is an autore-gulating mechanism, an efficient allocatorof land units among competing users, amaximizer of collective benefits, and arational sorter and arranger of land uses.Scott takes exception to these assertions.He observes that although land is private-ly appropriated, exchanged, and utilized, itis not produced nor consumed in discretepackages like any other consumer item.This means that the intrinsic use value ofurban land, namely, the differential loca-tional advantages that it has acquired,cannot be attributed to individual capi-talists alone but to State or collectiveaction as well (Roweis and Scott, in Dearand Scott, eds. 1981,142-143). Moreover,although the private component dominatesthe urban land development process, theoutcomes of its actions are beyond its fullcontrol. They are 'replete with locationalinter-dependencies that consistently evadethe integrative logic of the market' (Scott,1980, 139). The paradox of privatelydominated urban land development is thatin the process of private appropria-tion, exchange, and utilization of urbanland to satisfy the basic foundations ofviable capitalism -- namely, an efficientproduction space and a pleasant con-sumption space - those very foundationstend to be undermined. Scott concludesthat it is only with the intervention of theState that the capitalist city is held backfrom chaos and disarray.

2) The public component. The rationale forState intervention in the urban land nexusderives from the 'self-destructive logic ofcapitalist society as it mediated throughurban space' (Scott, 1980, 170). Throughthe instruments of urban planning such asland use zoning, building and subdivisionregulations, health and environmentallaws, new towns development, urban re-newal, public transport and utilities provi-

PHILIPPINEPLANNINGJOURNAL Vol. XXIV No. 1 October 1992

sion, and the like, the State seeks tomitigate the deleterious social effects andfailures arising from the contradictorybehavior of private firms and householdsin urban space. By these instruments, theState also seeks to steer urban societytowards collectively rational choices con-sistent with the capitalist social and pro-l2em relations.

The last phrase underscored is importantin that it defines the limitations and con-straints to what urban planning in acapitalist society can really accomplish.According to Scott, the State does nothave the mandate to reform fundamentalsocial and property relations in capitalistsociety within which it is embedded. In likemanner, urban planning, which is a mereinstrument of the State, can effect urbanchange and reforrTt only to the degree thatit serves the very purpose of capitalismand is able to break the inner contradic-tions of capitalist urbanization without,however, changing the social formationsthat cause those contradictions. By this,Scott rejects the idealist view of the Stateas some kind of superman who acts as anindefatigable watchman and keeper of thepublic interest and who can be relied uponat all times to set things right wheneverbreakdowns or failures occur. Scott pointsout the reality in practice that whereascollective intervention in the urban landnexus is preceded by some specific dis-sonance, breakdown or market failure, notall dissonance, breakdown or market fai-lure is automatically followed by collectiveinformation. Scott asserts that the Statewill intervene only when the irrationalitiesand dislocations of the urban land nexusbegin to undermine the viability of capi-talist society as a whole, and, in particular,the functional effectiveness of commodityproduction and the reproduction of laborpower in urban space (Scott, 1980; 171).

Herein lies the paradox of urban planningas a mode of State intervention in theurban land nexus. In its desire to resolveurban problems, the State seeks policiesthat promise maximum effectiveness butat the same time ensure minimum disrup-tion of existing social and property rela-tions. These policies are, of necessity,

14

reactive and merely palliative in nature,treating only the symptoms and neglectingthe basic causes of urban predicaments. Itis preciselybecause of these limitationsonits power that the State often becomespart of the problem rather than a solution.

3) The I2rivate-l2ublic interface. The dynamicsof the contradictory yet mutually inter-dependent imperatives of the private andpublic componentsare what Scott calls the'double dialectic' of the urban land nexus.It pushes the urban land nexus forward inan evolutionary spiral that manifests itselfin the changing form and character of theurban space. Scott describes the private-public dialectic as it moves through timethus:

The urban land nexus is...reproducedthrough time in a complex process involv-ing successions of mutually dependent,but eternally problematical, private andpublic decisions. Private action gives riseto a persistent tendency to dislocation andconflict in the urban land nexus. The Stateunceasingly attempts to rectify this situa-tion while itself producing further turbu-lence in the urban land nexus by shiftingaround the whole system of differentiallocational advantages (and concomitantlyaltering the expectations and rewards thatdifferent classes, strata and social frac-tions seek to procure from urban life). Thisthen sparks off further spontaneous read-justments in the configuration of the urbanspace (Scott, 1980, 173).

STRUCTURING OF THE PRODUCTIONSPACE

Using the urban land nexus theory as theanalytical framework, we seek to explain thespatial structuring of Metropolitan Manila. Thefollowingquestions will underlie the discussion:

1) What social classes are involved inurban land development in the Philip-pines? What problems arise out ofthe activities and land use decisionsof these different social classes?

2) How does the State react to the dys-functions and dislocationsarising from

decisions by the different social class-es in the urban land nexus? What arethe constraints to the power of theState in dealing with land-contingenturban problems? What problems andissues are likewise created by Stateintervention in the urban land deve-lopment process?

Analysis of the production space focuseson the pattern of distribution of manufacturing,office and commercial establishments over themetropolitan area. The concentration of manu-facturing industries in the Manila metropolitanarea did not happen until after the SecondWorld War, although the advantages of Manilaas a preferred industrial location over otherurban centers of the country had been in placesince the Spanish regime. As the primate cityof the Philippines, Manila shares with itscounterparts in the Southeast Asian region thevery conditions that contribute to primacy.Reed (1972) cites five of these characteristics,namely: 1) Their natural locational advantageof tidewater sites where transportation systemsserving extensive agricultural hinterlands couldbe readily linked to international maritime net-works; 2) Their preeminent role as administra-tive centers within the framework of their res-pective colonial powers; 3) The great diversityof their economic functions, housing the headoffices of banks, shipping firms, insurancecompanies and other commercial agencies ofWestern countries as well as serving as ware-housing and processing· centers for goodsshipped to and from Europe; 4) Their markedethnic diversity; and, 5) Their role as the fore-most beacons of Western education andculture in their respective hinterlands.

Post-independence industrial developmentis usually divided into three phases (Pernia etat, 1983): the import-substitution phase (1948-1960), the transition phase or period of decon-trol (1961-1968), and the regional awarenessperiod (1970s onwards). The spatial impact ofthese three phases can be summarized asfollows: a high concentration of industrial activi-ty in the National Capital Region (NCR) duringthe import-substitution phase; a slackening ofindustrial activity in the NCR with a corres-ponding expansion in the metropolitan peri-phery during the transition phase; and anindustrial decentralization during the regionalawareness period.

15

Urban Land Nexus Theory

The concentration of manufacturing in theNCR during the first phase can be attributed tothe type of industries that were developed andthe built-in locational advantage of Manila. Thevery rationale behind import substitution is toproduce local goods of comparable quality withimported ones. Naturally, this calls for theadoption of capital-intensive technology andhence, the importation of capital goods andraw materials and the use of skilled manpower.These requirements favor location in Manilabecause of the presence of the internationalport and allied services like financial andinsurance firms, easy access to the nationalgovernment bureaucracy, and the availability ofhigh-level technical manpower.

The transition phase saw a spill over ofmanufacturing to the metropolitan periphery(Central Luzon to the north and SouthernTagalog to the south). The a priori explanationfor this trend was that the cost of land andbusiness taxes in the NCR were escalating,and that the diseconomies of central citylocation, like general deterioration in the envi-ronment. were starting to be felt. A possibleexplanation could also be the technologicalchanges in the manufacturing process whichseek low-density horizontal lay-outs andhence, require more land expansion (Scott1980, Chapter 6). However, no studies alongthis line have yet been undertaken.

During the 1970s onwards the share ofactivity of the Frontier Regi()ns, such asnorthern Mindanao, (Figure 1) has grown.There is also a corresponding slowing down ofthis activity in the NCR On the whole, MetroManila still holds the lead in over-all industrialactivity, but this does not tell us anything abouthow the production space is structuredwithin the metropolis. We shall now look intothe pattern of distribution of industry within themetropolitan area.

1) Industrial· land use in Metropolitan Manila.Areas of high industrial concentrationinclude: the port area and along the PasigRiver in the city of Manila; at the con-fluence of major radial and orbital high-ways in the cities of Caloocan and Quezonand the towns of Malabon and Valenzuela;along the main radial road to the south inthe towns of Makati, Paraiiaque, Taguig,and Muntinlupa; and along both sides of

PHILIPPINE PLANNING JOURNAL Vol. XXIV No. 1 October 1992

•1. Doc:ot2. CqaYaD3. CenCI'll Luzoo4. MecroM.aniIa4-A. Soutbenl TIP10IS. IIicoI6. WCIlCnl Viayaa7. CeaCl'll Vilaya8. Eu&cm Viayaa9. WCIlCnl WiDdanIO

10. Northcm AlindanlO11. Southem Mincbnao12. CenuaJ WiDd.anao

, t l\JtiIII ,.

Q:J••~.

SCALE 1:2,000,000

LEGEND:

•CENTRAL INDUSTRIAL REGIONNCR ,CENTRAL LUZlJN,SOUTHERN TAGALOG

llll888lI TRADIT IONAL AGRICUTURAL REGION_ ILOCOS, SICOL, VISAYAS

~ FRONTIER REGION~ eAGAYAN VALLEY, MINDANAO

Figure 1

THE 13 ADMINISTRATIVE REGIONS OF THE PHILIPPINESAND ITS BROAD INDUSTRIAL REGIONS

(Source: Pernia, et.a/. 1983)

16

the Pasig River and its major tributary, theMarikina River, occupying portions of thetowns of Pasig, Mandaluyong, andMarikina (Figure 2).

According to Luna's study (PhilippineGeographical Journal Vol.8 Nos.3 and 4),most of the manufacturing firms that wereestablished prior to 1945 and between1945 and 1955 were located in the metro-politan core city of Manila. Within the cityof Manila, the locational pattern observedby Luna showed a concentration of large(500 or more workers) and medium-size(50-499 workers) industries near the portarea and along the Pasig River. Thesefactories were for the processing of bulkyraw materials such as steel, concreteproducts, lumber, plywood and veneerproducts, as well as for the assembly ofimported parts like motor vehicles andthose using imported heavy machinery likeprinting presses. Another pattern that Lunaobserved was the clustering of small-size firms in or around the traditionalcommercial district of Quiapo. These firms,like clothing and apparel manufacturing,jewelry and furniture making, shoe fac-tories and other craft leather, catered tothe local market. According to Luna, thesefirms were attached to these sites in theCBO because of the almost unlimitedavailability of cheap labor from the nearbyslums of Tondo.

The suburban drift of manufacturing, Lunacontinues, took place from 1955 onwards.This he attributes to four factors whichhave made Manila an increasingly unde-sirable location: 1) inadequate spacefor expansion; 2) traffic congestion; 3)increasing land and property values andtaxes; and, 4) restricted operations ofnoxious industries (Luna, 1964, 64-65).Luna also took cognizance of the emer-gence at about the same period of theplanned industrial estates developed bythe large estate developers (See the nextsection for a detailed description of theactivities of these developers.).

One or more significant finding of Luna isthat large firms tended to seek suburbanlocations more than the small ones did. Heattributes this to the fact that large firms

17

Urban Land Nexus Theory

can afford to relocate their manufacturingplants in the more spacious suburbs butretain their sales and display offices in theCBO. Small firms do not have the capa-bility for such spatial division of labor.

It is clear from the observed clusteringpattern that the locational decision of largefirms was influenced by the availability offacilities for bulk transport and access tothe ports of Manila. Firms locating by theriverside benefit from cheap transport bybarge up and down the Pasig River with itsmouth right on the north harbor (for inter-island transport) and the south harbor (forocean-going voyage). An additional fringebenefit of riverfront location is the free useof cooling water from the river which alsoreceives their industrial wastes. Firms thatdo not enjoy the 'luxury' of riverside loca-tion, such as those in private industrialestates, nevertheless have easy access tothe ports via high-capacity arterial roadsand the Philippine National Railways thatconverge in the ports of Manila.

This locational pattern observed from asmall-scale view is, however, deceptive.The truth is that there are hundreds ofother industries scattered all over theplace, many of them interspersed withresidential areas (Figure 3). This will bedescribed in conjunction with the con-sumption space in subsequent sections.

2) Office and commercial land uses. Thetertiary or service sector of the urbaneconomy is a major user of urban land andtakes up a sizeable portion of the pro-duction space. Compared to industrial landuse, it is more land-efficient because it iscapable of high-intensity utilization. Thehigh-rise buildings that pierce MetroManila's skyline are invariably occupied byoffices, hotels, banks, and corporate head-quarters of large businesses. Retail estab-lishments are also an important compo-nent of the tertiary sector of the productionspace.

The pattern of concentration of commer-cial and service activities in Metro Manilatakes two forms: nodal and linear (Figure4). It may be recalled in another article(Serote, 1991) that each town established

PHILIPPINE PLANNING JOURNAL Vol. XXIV No. 1 October 1992

MANUFACTURING ESTABLISHMENTS

GREATER MANILA 1960

SCALE ,. K.LOIKTERSo • • ,~,! ! ! iI!!!!!!!!!!I

Esr:.eLlSHED

0 b£'OtitE '900

0 '900 -'93SA I". -I~""

! + 1942 _194'

-L •,... -tUO

Figure 2

A LARGE-8CALE VIEW REVEALS HUNDREDS OF INDUSTRIESDISPERSED AU OVERTHEMETROPOUTAN AREA

(Source: TW. Luna, Jr.: PGJ Vol. 8 Nos. 3 & 4, 1964)

18

Utban Land Nexus Theory

LAGUNA DE BAY

LEGEND:• EXISTING PRI!OOMINATELY INDUSTRIAL AREAS

lID :~:A~~~ INDUSTRIAL AREAS ASSUMED• LOCATION OF INDuSTRies INTERVrEWI'O

Ii FIRMS WITH TREATMENT P~N® RIVER SAMP~INe STATION... NWSA WATER PUMP STATION

t!l POWER STATION

~ 9 ' 1 , 1ClI,r , 'MIUS

o Io

MANILA BAY

Figure3

MAJORCONCENTRAnON OF INDUSTRIES IN METROPOLITAN MANILA

(Source: Philippine Planning Journal Vol. " No.2)

19

PHILIPPINE PLANNING JOURNAL Vol. XXIV NO.1 October 1992

LAGUNA DE BAY

5 •,, .2_ COIl\lERClAL MUS ..,II

_ nT/....no C_RCIAL ARIAI 2000

_ IWOR ARnRW. __ IXISTN....70__ =:'~=~"'_O OR

@ ..AJOR II'METS • SHOPPING C[NT'EAS

o I 2o

LEGEND

MAN/LA BAY

Figure 4

LOCATIONAL PATTERN OF COMMERCIAL AND SERVICE ACTIVITIESIN METROPOLITAN MANILA

(Sault!: Philippine Planning Journal Vol. II No.2)

20

by the Spaniards had an urban center(poblacion) and rural hinterlands (barrios).The poblacion serves, among others, asthe service center of the town. Becauseeach component town and city of Metro-politan Manila started as a Spanish town -except Quezon City, which was created asthe new national capital in 1939 - eachone has a poblacion that still serves itsoriginal function as the central businessdistrict (CBO) for its hinterlands, even afterthe incorporation of Metro Manila in 1975.

The traditional regional CBO is the Quiapodistrict in the city of Manila. Now there arealternative CBOs, which were establishedby the large real estate developers, name-ly: the Araneta Center in Cubao, QuezonCity; Greenhills in San Juan; and theMakati Commercial Complex. A fourthcenter north of Manila, which is not deve-loped by any single developer, is theMonumento Area in Caloocan City. Allthese centers lie along the orbital roadEpifanio delos Santos Avenue or EOSA.Because of the shortage of parking spacein the Quiapo CBO, this traditional centerhas lost much of its patronage among car-owning shoppers.

The other pattern exhibited by the servicesector is linear, following the main tho-roughfares. Commercial uses can locatealong high-capacity, high-speed majorroads in Metro Manila where the mostcommon mode of mass transit is thejeepney. The jeepney is a product ofFilipino ingenuity. Small and highly ma-neuverable, this unique mode of urbantransport can be stopped at almost anypoint along the road making every streetfrontage equally accessible. At the sametime, jeepneys render Metro Manila'straffic an utter chaos.

The service sector is also highly dis-persed. Many tertiary activities are ambu-lant and mobile or otherwise interspersedwith residential areas. These are the acti-vities, which earlier research had calledthe informal sector or perhaps they formpart of what Santos calls the lower circuitof the urban economy (Santos, 1979).These activities may actually form part of alarger economic system, 'rent capitalism:

21

Urban Land Nexus Theory

the existence of which in the urban econo-my was detected by Fegan (1981). Thispoint will be picked up by another section.

3. Private capitalists. So far we have seenthe spatial and location patterns as evi-dences of the decisions and actions ofcapitalists. But who are these capitalists?

It appears from the spatial pattern ofindustrial location that there are two typesof capitalists in operation in the Philip-pines. One type consists of the largeindustrialists who also own the largefinancial, commercial and service estab-lishments. They are very small in number.Ooherty (n.d.) has identified only 89 indi-viduals and families who own or controlthe 47 groups that in turn control all largebusinesses in the country. As investors,they are said to be conservative and arewell represented in Congress so that theyare able to direct the course of Philippineindustrialization policy toward import-subs-titution and a well-protected market. Hidingunder the banner of economic nationalism,they have continually thwarted attempts bycontending groups to adopt an open mar-ket policy and export-oriented strategy(Snow, 1983; Estanislao, 1986; Villegas,1986). Their claim to nationalism, howev-er, is belied by the fact that they arenothing more than 'assemblers and re-packers' of American and Europeanbrands (Constantino and Constantino,1978, 230). An import-substitution stra-tegy, as earlier discussed, favored the useof imported capital equipment and rawmaterials. It is easy to see therefore, thatthese large industries tended to locate inareas accessible to the ports.

The other type of capitalists are membersof the urban middle class. These are thesalaried bureaucrats and self-employedprofessionals who also run small busi-nesses and industries. These small capi-talists do not really have much choiceabout where to locate their businesses.Because land rent can eat up a conside-rable portion of their capital investments,they save on land rent by using their ownresidential premises as production spaceas well. These are often unreported andundetected and therefore not subject to

PHILIPPINE PLANNING JOURNAL Vol. XXIV No.1 October 1992

regulation by the State. This writer hasstrong suspicions that these capitalists,who are normally classified under the nowwell-worn term 'informal sector: are in factpart of 'rent capitalism'.

4. Private capital and the State. We haveseen that private capital responds to theState industrialization policy of import-substitution by concentrating their invest-ments in Metro Manila. The location offirms within the metropolitan area, how-ever, was not subject to governmentregulation prior to the 1970s. Consequent-ly, private firms sought sites according totheir own perception of what makes forprofitable location. Riverside locationsturned out to be the early favorite becauseof the opportunities the river offered forcheap bulk transport. free cooling water,and as receiver of industrial wastes. Themost serious problem that riverside loca-tion has brought about is heavy pollutionof the Pasig River and its tributaries,including the inland lake, Laguna de Bay.The extent of pollution of the river isdescribed by Uichanco (1971, 84) thus:

Recent surveys have shown thatPasig River is a dead or dyingriver... The surface of its murkywater glistens with oil spills dis-charged by boats and industrialplants. The river is constantlycharged with a rich load oforganic and chemical pollutantsfrom dwellings and hundreds offactories flanking either bank.The effect of this mess hasbegun to be felt not only inGreater Manila area but alsofarther up, on Laguna de Bay...

To this problem the State has respondedwith the creation of the National Water andAir Pollution Control Commission in the1960s to monitor pollution levels andinstitute corrective measures. The Com-mission was staffed with highly competenttechnicians and scientists but its vastcoverage and limited budget had pre-vented it from performing its task effec-tively (Uichanco, 1971, 88). In 1973, aPresidential directive banning altogetherthe establishment of new industries or

22

expansion of existing ones within a radiusof 50 kilometers from the Manila City Hallcame into effect. The impact of this direc-tive on pollution levels or on the location ofindustries has not yet been empiricallyassessed.

Another locational pattern of the produc-tion space we noted is associated with theprivate large-estate developments. Themaster plans of these developers includedthe provision of industrial estates or thecreation of huge commercial complexes.The location of these industrial estatesand commercial centers is invariably alongmajor thoroughfares. To this extent it canbe said that even large-scale developersrespond to initial infrastructure invest-ments by the government. The most per-ceptible problem arising from this private-public interface is the traffic congestion inMetro Manila's streets. With river transportdiminishing in importance, industrial cargonow has to be conveyed by truck betweenthe industrial estates and the ports, there-by clogging up the streets with heavy utilityvehicles. Furthermore, the huge commer-cial complexes attract tremendous vo-lumes of traffic every day. Again, the Stateresponds to this problem by a combinationof experimental traffic managementschemes such as truck bans on certainhours of the day and construction oftransport infrastructures like overpass-underpass complexes and the newelevated light rail transit. But the traffic ofMetro Manila remains the most talked-about and intractable problem.

Not the least among the causes of MetroManila's knotty traffic problem are the ac-tivities of the unregulated self-provisioninghouseholds. Self-provisioning householdstend to undertake production activitieswithin residential areas. Often these pro-duction activities spill over into the side-walks and street curbs obstructing traffic.For example, small-scale garages underor in front of residential houses are oftenfound appropriating their street frontage astheir workshops. Also, the linear pattern ofcommercial concentration is largely theeffect of self-provisioning. Householdsfronting major streets usually convert partof their home lots into commercial or

industrial space ostensibly to save on theland rent they would otherwise pay in theestablished industrial estates of commer-cial centers. They do not have to worryabout access by their clients because thejeepney, which is itself a bane to trafficenforcers, will convey them there withoutfail.

There are many more examples of self-provisioning activities with varying impactson urban land utilization. But it is in thisaspect of private action where no Stateintervention seems to occur or where itdoes, it is hardly appropriate or adequate.

Thus, we have seen that public sectorinitiates development especially in thematter of providing infrastructures, utilities,and services. The State is also seen asthe initiator of industrial policy but onesector of private capital has had a stronghand in the formulation and perpetuationof such policy. There is every reason tobelieve that under new circumstances,other sectors would be in a position toredirect policy their own way. The policyhaving been laid, private capital respondsto it, but the spatial impact of this private-public interface can better be appreciatedat the regional rather than the urban scale.

Regarding regulation of industrial locationwithin the urban area, however, the Statehas not been successful because of toomuch centralization of political power.Local govemments, under whose jurisdic-tion urban planning is supposed to lie, aregenerallypowerless.

STRUCTURING OF THECONSUMPTION SPACE

In this section, only one componentof theconsumption space will be discussed- hous-ing. Residential use is the largest single cate-gory of land use embracingperhaps 80 percentof the total built-up area of the metropolis(Figure5).

Much of the city of Manila was developedby pioneering American developers. They alsostarted the trend toward suburban expansion.The demand for suburban residences initially

23

Urban Land Nexus Theory

came from the elite who were beginning to findtheir Manila quarters too crowded. In the early1930s, the first high-income subdivision in thesuburbs was built in an area called 'NewManila,' formerly part of San Juan town butnow part of Quezon City. The location wasquite a distance from the urban edge at thetime. In this enclave far removed from thecrowding and noise of the central city, thepoliticians, business leaders, landed elite fromthe provinces, and the foreigners then residingin Manilatook residencein eleganceand style.

The post-war decades saw a massiveinflux of new migrants from the provinces.Reconstruction of Manila necessarily involvedresubdividing the original lots into smaller par-cels to accommodate the new arrivals. Thishas given added impetusto suburbanization.

The provision of housing is literallyeverybody's business, what with about 85percent of all households nationwide providingfor their own housing (NEDA, 1986, 242). InMetropolitan Manila. the proportion of self-provisioning households may be smaller thanthe national figure because it is here thatreal estate developers of all types, sizes andmotivations operateand proliferate.

We now turn our attention to the activitiesof these developers. For want of a moreappropriate system of categorization we shalluse the formal-informal dichotomy, looselydefined, to describe the activities of privateland developersin Metro Manila.

1. Formal sector developers. The formalsector accounts for a larger land area butsmaller output because of the applicationof planning standards, subdivision andbuilding regulations, and observance ofzoning and environmental standards.

Belonging to this sector are the big land-owners that converted into real estatedevelopment corporations, an assortmentof speCUlative builders and realtors, andprivate institutions.

These large developers sold serviced lot&but retained control and enforcementpowers over building standards throughdeed restrictions and covenants. They

PHILIPPINE PLANNING JOURNAL Vol. XXIV NO.1 October 1992

allocated commercial areas and leasedthem to big establishments which in turnbuilt their own structures according tostipulated design and height standards.These commercial areas have now be-come the alternative regional CBDs(discussed in the previous section). Theyalso provided industrial estates which theyleased to firms that built their own plants.The type of industries that were allowed tolocate in these private industrial estateswas restricted to non-pollutive ones.Recreational facilities for the well-off likegolf courses, polo fields, and race coursescomplemented the elitist character of theirland development.

Makati: An Illustration

Speculative developers and real estatebrokers are another segment·of the forma!development sector that have emergedrecently. Often in combination with banks,insurance firms and commercial housesdiversifying their investment portfolios,these developers purchase and consoli-date vacant lots in inner-city areas, rebuildcommercial buildings in city centers, andacquire and subdivide greenfield sites.Their target clientele are the middle tolower-middle income families. Residentialdevelopments they undertake are varied.One type involves development of green-field sites wherein the buyers build theirown houses, subject to government

As an illustrative example, we take a snapshot of the richest, most modern town in the countrytoday which was developed by the Zobel-Ayala family, the town of Makati. This Spanishindustrialist family had the foresight to buy up large areas of swampy wasteland by the southernborder of Manila long before the pressure of suburban expansion was felt. When the right timecame, they transformed the area into a modern town that is the pride of the country today.

The Ayalas first subdivided the low-lying areas and sold them to low income families. Theyreserved the higher ground with an area of more than 800 hectares for building the new city. The25-year master plan was prepared and strictly implemented. The primary purpose of the Makatidevelopment was to attract affluent families, foreign capitalists, business tycoons. and industrialtitans to reside there.

In 1948, the groundwork was laid for the most stylish subdivision in the country they namedForbes Park. after a former American Governor-General of the Philippines. Initial response wasreportedly cold and lots had to be sold at a loss. But the Ayala planners persisted in their belief thatif they could only attract some influential and wealthy families, the rest would follow in no time.True enough, after Forbes Park lots had been sold out, droves of the fashionable rich wanted toreside in Makati. To accommodate their demand, eight more exclusive subdivisions had to beopened in quick succession within a period of ten years or so.

To lure the business community further, the Makati developers allocated a strip along the mainthoroughfare, Ayala Avenue, for the construction of office tower blocks. The Ayala Corporationsbuilt a sample high-rise structure and soon large corporations were trying to outdo one another inputting up their own tower blocks. Then the developers opened a large commercial complex and anindustrial estate for non-pollutive industries. Because the residential lots have all been sold out andthe demand for residential space continues to rise, some commercial areas have been convertedinto high rise condominiems. Now, to businessmen, foreign legations, and just about anyone whocan afford the cost, Makati is the place to be.

24

regulations. Another type is mass cons-truction of house-and-lot packages forresale to owner-occupiers. Still anothertype is the construction of high-rise condo-miniums in inner-city areas for sale orlease to young professionals and busi-nessmen.

Private speculative developers are also inthe business of providing commercialspaces at a scale smaller than those of thelarge developers. They redevelop citycenter blocks or develop free-standingretail complexes in the suburbs. They donot develop industrial estates. As a rulethey do not provide public open spaces,but present subdivision regulations (Presi-dential Decree 957) require that amenityor open space is a built-in feature of thesubdivision plan.

Non-governmental institutions also under-take limited land development. Manyreligious orders have retained part of theirlandholdings which they now utilize forexpansion of their schools, seminaries,orphanages, and similar charitable institu-tions. Some charitable organizations alsoundertake low-cost housing developmentsfor the urban poor usually in the urbanfringe areas where cheap land may still befound.

2. Informal sector developers. Infor-mal housing comes in the form of owner-built dwellings over owned or leased landfor own use or for rent to other house-holds; housing constructed by numeroussmall landowners and unregistered con-tractors; and makeshift accommodation ofsquatters.

Self-provided housing on small owned orrented lots through in-filling of vacantareas outside of the formal subdivisionsconstitute a considerable portion of theconsumption space in the city. A typicalsmall lot owner probably acquired his lotthrough years of hard work and forcedsavings. The lot is rather small but bigenough for a two- or three- bedroomhouse for a family of six members. Build-ing construction is incremental, spreadover a period of years. A component ortwo is added or replaced each year de-pending on the family's savings. Borrowing

25

Urban Land Nexus Theory

is seldom resorted to because most ofthem are not qualified to take out loansfrom government or private financialschemes. Building standards and subdi-vision regulations are often violated. Thesize and shape of the house are cons-tantly changing according to the owner'sflight of fancy or availability of funds.

To such type of homeowners, the home isnot just for residential purposes. It can bea production space as well. Some familymembers are probably employed else-where but the family is engaged in somekind of production activity just the same -a variety store, an automobile repair shop,and countless other pursuits performed inthe home that bring in additional familyincome - all ostensibly without the know-ledge of, or regulation by the State.

A good example of this family enterprise isobserved in Manila's university belt. In anarea of about three to five square kilo-meters in Sampaloc district, nearly adozen colleges and universities with acombined student population of close tohalf a million are huddled together incompact inner-city campuses. Becausetheir premises are so small, none of theseuniversities run facilities for student ac-commodation. Student housing is providedby the surrounding residents. Due to theenormous demand for bed space, nearlyevery household in the area shares roomswith students. To maximize their tax-freeearnings, the landlords often scrimp onnecessary investments like better lightingand ventilation or more sanitary facilities.This situation has been going on for yearsand yet the pitiful plight of student roomershas not caught the attention of the autho-rities.

The other type of informal sector housingis the squatter settlement (see Figure 5).The manner of construction of squatterhousing is similar to that of owner-provided housing. It is done incrementally,although the materials used are relativelycheap due to the ever-present possibilityof demolition. The production activitiesconducted in a squatters home are alsosimilar to those in owner-built homes, de-pending on the amount of space available.

PHILIPPINE PLANNING JOURNAL Vol. XXIV NO.1 October 1992

MANILA BAY

Ir-) /

:y-~t:':"':"'-

. ~---.--.-.0.......-

LAGUNA DE" BAY

o I 2 5 4 ~ & I 8KM.o Z 3 aMlLE5

LEGEND

.... .. RE~DENT'''L AREA-t968\ ,

(!;'" _5U80'V'5'''''9 BE'NO DEVELDPEO/.1 t IN/968>, (/ ~.. _ SQUATTER CONCENtRATlCNS-I'"~'-~

Figure 5

RESIDENTIAL AREAS IN METROPOLITAN MANILA, 1968

(Source: Philippine Planning Journal Vol. II No.2)

26

The building of squatter settlements takesat least two patterns. One type involvesindividual families erecting their ownshacks on any available land - newlyreclaimed land, dried up river beds, privatevacant lots. idle government property. cor-ners of public parks. river banks, and evenmiddle islands of wide streets. The otherpattern involves bigger groups of familiesinvading public lands or private lands ofundetermined ownership and subdividingand renting them out among themselvesand to other squatter families. The settlersare later organized under the leadership ofthe 'developers,' first, for the purpose offighting off any attempts to eject them ordriVing away any other daimants. Then,having stabilized their occupation, theypush for legitimization of their daim bygovernmentauthorities.

The locational preference of squatters isnot much dictated by proximity to theproduction areas, as by the availability ofopen space to occupy. Because theirmeans of livelihood allows them to beambulant and mobile. their place ofresidence becomesof little consequence.

3. Government housing programs. Althoughhousing has largely been the concern ofthe private sector, the Philippine govern-ment has of late been increasing itsparticipation in housing provision. Consi-dering the magnitude of the housing needand the usually selective target clientele ofprivate developers. the State can really illafford to do less.

The central planning agency of thegovernment. the National Economic andDevelopment Authority (NEDA), estimatesthe housing need in Metro Manila to bearound 576,000 dwelling units represent-ing 17 percent of total housing need up tothe year 19~2 (NEDA. 1986.245). Out ofthis housing need the government hastargeted to provide less than two-fifths(38.9%) and expects the private sector toprovide 55 percent for the period 1987