Wealth in Asia

World Bank: South Asia needs to fix cities to get rich

Dhiraj Singh | Bloomberg | Getty Images

South Asia's failure to plan effectively for mass urbanization is preventing a region with nearly two billion people from joining the ranks of richer nations, according to a new World Bank report.

South Asia's estimated urban population expanded by 130 million people in the first ten years of the 21st century is projected to increase by nearly 250 million in 2030.

The region initially benefited from increased urbanization, with greater prosperity and increased productivity; gross domestic product (GDP) per capita growth increased nearly 56 percent from 2000 to 2012. And the number of people living below the absolute poverty line fell, with fewer than one in three living under the $1.25-a-day benchmark by 2010.

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But, the World Bank report notes, South Asia - made up of Afghanistan, Bangladesh, Bhutan, Nepal, India, the Maldives, Pakistan and Sri Lanka - produced just 8 percent of global GDP in 2011, despite having roughly 14 percent of the world's urban population. By contrast, East Asia - China, Hong Kong, Japan, Mongolia, North and South Korea and Taiwan - fared much better, producing 29 percent of GDP, and with 32 percent of the urban population, in the same period.

"A big reason South Asia is not fully realizing the potential of its cities for prosperity and livability is that its urbanization has been messy and hidden," noted Peter Ellis, an urban economist with the World Bank's Social, Urban, Rural and Resilience Global Practice.

Cities are often unable to cope with the rapid pace of rural-urban migration, which puts pressure on already limited resources including land, housing, infrastructure and basic services.

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As a result, urban dwellers end up living in slums or other informal settlements "characterized by poor construction (of houses), insecure tenure, and under-serviced housing plots," according to the report. As many as 130 million people currently live in these circumstances across South Asia.

This has long-term implications on areas ranging from health to female labor participation to infant mortality. For example, the poorest urban dwellers in Bangladesh, India, Nepal and Pakistan have higher rates of under-five mortality than in rural areas.

The low living standards in South Asia's cities show up in other surveys, however. The Economist Intelligence Unit's (EIU) livability index, which ranks cities based on stability, healthcare, culture and environment, education, and infrastructure, this year put the six major South Asian cities in the lower rungs of its list of 140 global destinations - New Delhi ranked the highest at 110.

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Annette Dixon, vice president for South Asia at the World Bank, said policymakers in the region had two choices: stick with the current insufficient policies or undertake new initiatives to better manage urban populations.

"It is essential to move forward," she said. "It won't be easy, but with the right policies and investments, South Asia's cities can be much more livable and prosperous."

In order to improve urban-dwellers' lives, and thus lift productivity, the World Bank recommends actions both at an institutional level and policy level. The study noted that South Asia needed reforms that would provide local governments with adequate resources to handle rapid urbanization.

Complementing this, it said policies were needed at a national level to improve ways cities were planned and connected.