Cities can be productive and liveable places but poor public services, weak infrastructure, and institutional and legal obstacles to private investment have in many cases undermined their performance.

In this brief we analyse the potential of cities in the developing world and the interventions required to achieve this potential. This brief is particularly useful for policymakers when formulating urban plans and considering new infrastructure systems.

Key messages

  1. Cities in the developing world can be both productive and liveable places.

    The fundamental advantage of cities is that of scale – the concentration of people enables economic and social interactions to occur more frequently and effectively. This creates the potential for cities to be productive and to offer inhabitants a decent quality of life.

  2. To achieve cities’ potential, policymakers must address key issues including land, transport, public finance and regulation.

    Making the city work requires investments in residential, commercial and industrial structures, as well as infrastructure. These must be supported by a combination of effectively functioning land markets, appropriate regulation, good public services, and adequate public finance.

  3. The implications of failure are deeply felt and long run.

    Harnessing the unprecedented growth in urbanisation over the coming generation will require smart policy and hard work. However, in many cases policy failures have undermined city development.

Today, for the first time in history, more than 50% of the world’s population live in towns and cities. The urban population of the world has grown rapidly from 746 million in 1950 to 3.9 billion in 2014. It is expected to surpass 6 billion by 2045. A further 2.5 billion people will live in cities by 2050 and close to 90% of this expected growth will take place in developing countries, particularly in South Asia and Africa.

Urban growth occurs because of the economic advantage of cities. This derives from the benefits of scale – the economic and social advantages of being in large centres of activity where lots of interactions take place. However, reaping these benefits requires large public and private investments and a high level of policy engagement. Public investments are needed to build the infrastructure – transport, water and sanitation, power – and the public services that support urban living. Residential investment is needed to offer dwellings that are of good enough quality, and that enable their inhabitants to access centres of employment. Investment in commercial and industrial activity is needed to create jobs for a rapidly expanding labour force.

Many cities are failing to generate sufficient investment and the consequences are apparent; poor living conditions for many inhabitants and high levels of informality in both housing and employment. Poor infrastructure and poor housing make a city a less attractive place for business to invest, retarding the job creation that is urgently needed. The challenge for policy is to create the environment which harnesses the potential of cities as places to work and to live. This brief explores the sources of this potential, and asks: What does it take to deliver productivity and liveability?