Urbanization offers Sri Lanka Major Economic Opportunity, World Bank says

September 29, 2015

Colombo, September 29, 2015 – South Asian countries, including Sri Lanka, can benefit from urbanization as a major opportunity to transform their economies and join the ranks of richer nations, according to a World Bank report.

Difficulty in dealing with the pressures that urban populations put on infrastructure, basic services, land, housing, and the environment have fostered what the report calls “messy and hidden” urbanization in South Asia.  This, in turn, has contributed in constraining the region’s full realization of the prosperity and livability benefits of urbanization.

According to the report’s findings, Sri Lanka has performed well relative to other countries in the region.  Its urbanization has been less “messy” insofar that only a relatively small proportion of the urban population lives in slums and it has largely eradicated extreme urban poverty.  Nevertheless, between 1999 and 2010, Sri Lanka was the country in the region with the fastest expansion of urban area, as measured using nighttime lights data, relative to urban population. The rapid expansion of urban area relative to urban population reflects the sprawl and ribbon development that are characteristic of Sri Lanka’s urban development.

“If managed well, urbanization can lead to sustainable growth by increasing productivity, allowing innovation and new ideas to emerge,” said Ede Ijjasz-Vasquez, Senior Director, Social, Urban, Rural and Resilience Global Practice, World Bank.

“Better cities can help reduce vulnerability to poverty, improve living conditions, and create the environment for more and better paying jobs,” Ijjasz added in releasing the Leveraging Urbanization in South Asia: Managing Spatial Transformation for Prosperity and Livability report.

Annette Dixon, Vice President for the South Asia Region of the World Bank, said policymakers in the region face a choice: Continue with the same policies or undertake reforms to tap into the tremendous unrealized potential of South Asia’s cities.

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

Since 2000, the report found, South Asia has made good strides in achieving greater prosperity with the increase in productivity linked with the growth of the region’s towns and cities. In Sri Lanka, this progress has also been linked with a decline in the share of the urban population living below the national poverty line from 7.9 percent in 2002 to 2.1 percent in 2013.  Furthermore, unlike many other countries in the region, the contribution made by manufacturing to Sri Lanka’s GDP continued to grow between 2000 and 2010.

Still, South Asia’s share of the global economy remains strikingly low relative to its share of the world’s urban population, and, in general, urbanization in the region remains underleveraged. The share of the region’s population officially classified as living in urban settlements increased only marginally from 27.4 percent in 2000 to 30.9 percent in 2011. In Sri Lanka’s case, the share of the population officially classified as living in urban areas actually fell slightly between 2000 and 2010.  These official statistics, however, miss considerable “hidden” urbanization.  As much as one-third of Sri Lanka’s population may be living in areas that, while not officially classified as urban, nevertheless possess strong urban characteristics.  Analysis of night-time lights data in the report also reveals a more general growth of multi-city agglomerations – continuously lit belts of urbanization containing two or more sizeable cities – across South Asia from 37 in 1999 to 45 in 2010.  In Sri Lanka, ribbon development radiates out from Colombo along major transport arteries to link it with both Kandy and Galle/Matara, revealing a dynamic urbanization process.

“According to a recent diagnostic a large share of Sri Lanka’s national population that is vulnerable to poverty live in close proximity to the belt of urbanization that links Kandy, Colombo, and Galle.  Large numbers of vulnerable are also found in and around the major urban centers in the north and east of the country,” said Francoise Clottes, World Bank Country Director for Sri Lanka and the Maldives.

“Sri Lanka has been experiencing a dynamic spatial transformation process driven by the Kandy-Colombo-Galle urbanization belt as well as localized single-city agglomerations in the eastern and northern parts of the country, mainly around Trincomalee, Batticaloa-Akkaraipattu, and Jaffna,” Clottes added, capturing findings of the recent diagnostic exercise.

The Kandy-Colombo-Galle urbanization belt generates more than 80 percent of national output and is the area that possesses the highest economic potential in the country. Although poverty rates are higher in eastern and northern parts of the country, the majority of both the population that lives below the national poverty line and the vulnerable “bottom 40 percent” of the population live adjacent to the Kandy-Colombo-Galle urbanization belt — nearly 50 percent and 75 percent of these populations live within 30 km and 60 km of this urbanization belt respectively. This spatial transformation process has profound implications for both economic growth and alleviating poverty and vulnerability. Key challenges are how to manage the growth of the Kandy-Colombo-Galle region, in particular, the Metropolitan Colombo Region, and how to enhance connectivity of other single-city agglomerations with the Kandy-Colombo-Galle region so as realize their potential for economic growth and poverty alleviation.

To better tap into the economic potential that urbanization offers, the report recommends actions at two levels – the institutional level and the policy level.  At the institutional level, the region would benefit from improvements in the ways in which towns and cities are governed and financed. Specifically, the report identified three areas where reform could address fundamental deficits – in empowerment, resources, and accountability:

·         Improving intergovernmental fiscal relations to address empowerment.

·         Identifying practical ways to increase the resources available to local governments to allow them to perform their mandated functions.

·         Strengthening mechanisms to hold local governments accountable for their actions.

While a necessary pre-condition for meaningful progress, these reforms by themselves will not, according to the report, suffice.  To bring about lasting improvements in both prosperity and livability, policy changes could also improve the ways in which cities are connected and planned, the working of land and housing markets, and cities’ resilience to natural disasters and the effects of climate change. 

For more information on the report go to:

About the World Bank Group

The World Bank Group plays a key role in the global effort to end extreme poverty and boost shared prosperity. It consists of five institutions: the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Working together in more than 100 countries, these institutions provide financing, advice, and other solutions that enable countries to address the most urgent challenges of development. 

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