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Asia must rethink its cities to make the most of urbanization

Detailed maps, better transport and affordable homes are vital for growth

| China

Cities have always played a central role in economic development by bringing workers and entrepreneurs together, spurring innovation and sharing resources such as infrastructure more efficiently.

This should be good news for developing Asia: by 2050, the U.N. projects there will be 3 billion people living in the region's towns and cities, almost two-thirds of the continent's population. This is up from 1.8 billion, or about half the population, in 2017.

Unfortunately, while the region's cities are sure to increase in size, they may fail to fulfill their potential as engines of growth and job creation as governments underinvest in urban infrastructure, provide insufficient affordable housing and offer unsynchronized spatial and economic planning. Policymakers must start to address this.

First, they must achieve a more accurate and granular understanding of how their countries are urbanizing. New data sources are needed because official statistics often fail to capture the true urban footprint of cities. For example, some rely on municipal boundaries drawn decades ago.

Satellite imagery shows clearly that developing Asia's cities are expanding without regard to those boundaries, forming what we call natural cities. The Asian Development Bank's study Fostering Growth and Inclusion in Asia's Cities tracked almost 1,460 natural cities across developing Asia, with many of them in China (680), India (320) and Indonesia (93).

What we also saw was that cities are merging to form integrated urban agglomerations: 476 natural cities that were separate in 1992 had linked up to form 124 city clusters by 2016. The largest was the Shanghai-centered city cluster, home to 91.5 million people and encompassing a total of 53 natural cites, including Nanjing and Hangzhou, in the Yangtze River Delta area.

This means urban planning cannot simply stop at the city limits. Efficient transport networks that extend from neighborhoods to workplaces prevent fragmentation of a city's labor market.

Similarly, as cities cluster, decisions on where to place vital infrastructure, such as water treatment and solid waste facilities, transport hubs, green spaces and industrial parks, require coordinated decision-making among local government units.

However, companies operating in city clusters are now significantly more likely than those in stand-alone cities to complain about infrastructure and regulatory bottlenecks.

Second, policymakers must think of cities as labor markets. To be sure, cities are much more than places of work, however they cannot thrive unless they function well for both enterprises and workers.

This requires that travel within the city or city cluster is fast and cheap; that businesses and households can easily relocate from one part of a city to another; and that real estate is affordable.

Asian cities need to do a lot on these fronts. Tests using Google Maps in 278 natural cities show considerable congestion during peak travel times in many large cities, such as Metro Manila in the Philippines, Dhaka in Bangladesh and Bengaluru in India.

Moreover, in 199 of the cities a full quarter of the surveyed trips could not be made by public transport at all, while for the other three quarters, travel by public transport including walking to and from the transport hub was three times longer than by car.

This clearly shows that Asian cities must invest much more in efficient public transport if businesses are to attract workers and flourish. The transport system must combine trains, buses, taxis, ride-sharing and less formal services like jeepneys and autorickshaws -- while regulating them well -- to improve mobility.

Affordable homes are also critical to attract workers, keep them as their skills and families grow and then allow them to easily shift to other jobs. However, our analysis showed that that home prices are well beyond the means of median-income households in more than 90% of cities.

What is needed to tackle that is a combination of demand-side and supply-side policies, including reassessment of land use regulations that might be inadvertently restricting the supply of real estate.

Finally, growth requires vibrancy in all types of cities. Cities are connected to one another, and to the rural hinterland, through flows of goods, services and people. Robust and balanced national economic growth depends also on mid-sized cities and even market towns that specialize in distributing agricultural produce.

This requires investment in efficient intercity transport. Given competing demands on public funding, large cities should draw more on private sector funding. Such cities have an edge in attracting private investment because the agglomeration economies they generate promise high returns to those who choose to locate there.

Allocations of public funds must follow the people. Many medium-sized cities in the region with populations of 1 million to 5 million and some smaller cities with populations of half a million still attract migrants. Public investment should support that.

Asia's steady urbanization represents an unprecedented chance for the region to ensure robust long-term growth and the creation of good jobs. Policymakers must not let the opportunity slip through their hands by neglecting their cities.

Rana Hasan is a director in the Economic Research and Regional Cooperation Department of the Asian Development Bank.

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