View from Asia: Future growth will come from beyond the megacities

There are numerous city classifications. The World Bank defines city tiers in terms of population size. Tier-one, metropolitan city, has more than 1 million people. Tier-two, large city, has between 500,000 and 1 million people. Tier-three, medium city, has between 100,000 and 500,000 people. Tier-four, small city, has fewer than 100,000 people.

The UN Economic and Social Commission for Asia and the Pacific charts the rise of secondary emerging cities in the Asian region, and predicts that urban growth in Asia-Pacific will be this century’s most important demographic trend. Half of Asia-Pacific’s urban population lives in cities with fewer than 1 million people.

Cities with fewer than 5 million people will account for the largest share of urban growth in the region’s developing countries. This includes 135 cities in China alone, and 40 in India.

Unescap maintains that the development of these cities will shape Asia’s urban future, but their potential is mostly untapped. Many have found success with effective branding, lower land costs, leveraging on their proximity to consumers and low-cost labour markets, developing high value-added and fast-growing industries, developing infrastructure projects that connect to larger cities, developing networks and partnerships with other cities and the private sector, and developing diversified and integrated growth strategies, such as strategic investment plans to attract business, industries and a highly skilled workforce.

These cities face increasing competition for investment and placemaking. Other challenges are economic (weak links to new markets, providing bankable projects that are attractive to investors), social (rapid social change and conflict), infrastructural/environmental (deficits) and political (weak fiscal base, dependence on allocations, information deficits).

The World Bank reports that competitive cities foster their rapid economic growth through four categories of intervention: institutions and regulations; infrastructure and land; skills and innovation; and enterprise support and finance. How these tier-two cities compete in the future will depend largely on their management of these interventions – and whether cities in the next tier down catch up in their development.

Lawrence Yeo is founder and principal consultant of AsiaBIZ Strategy, a Singapore-based management consulting firm providing Asia market research, business strategy development and export/FDI promotion services.