Proper Urbanization Can Yield Economic Benefits for Pakistan

December 5, 2015

LAHORE, December 5, 2015 – Urbanization provides Pakistan with the potential to transform its economy to join the ranks of richer nations, but the country, like others in South Asia, has so far struggled to make the most of that opportunity, says a new World Bank report.

Leveraging Urbanization in South Asia: Managing Spatial Transformation for Prosperity and Livability was presented at the third Pakistan Urban Forum. Difficulty in dealing with the pressures that increased urban populations put on infrastructure, basic services, land, housing and the environment has fostered what the report calls “messy and hidden” urbanization in Pakistan and throughout the region.  This, in turn, has helped to constrain Pakistan’s full realization of the prosperity and livability benefits of urbanization.

“Properly managed urbanization can enhance both the prosperity and livability of cities,” says, Peter Ellis, Lead Urban Economist at the World Bank. “This is certainly the case for Pakistan, which is the most urbanized large country in South Asia and derives so much of its economic growth from cities.”

Estimates indicate that cities generate up to 78 percent of Pakistan’s gross domestic product and the government’s Vision 2025 places a premium on urban job growth. Planning ahead for urban growth can help create vibrant and productive cities that fuel the country’s growth, but that will require dealing with the problems posed by the country’s messy and hidden urbanization to date.

Messy urbanization in Pakistan is reflected in the existence of low-density sprawl and the fact that cities are growing outward beyond administrative boundaries, creating challenges for planning, transportation and the provision of public services.  It also reflected in the widespread existence of poverty and slums.  In Pakistan in 2010, about one in eight urban dwellers lived below the national poverty line and an estimated 46.6 percent of the urban population lived in slums.

Hidden urbanization, the report said, stems from official national statistics understating the share of the population living in areas with urban traits. Officially, 36 percent of Pakistanis lived in urban settlements in 2010 but the World Bank estimates that the actual share of the population living in areas with urban characteristics may be as high as 55 percent. Acknowledging the true extent of urban areas can help to facilitate better planning and metropolitan management.

Failure to address these problems can make cities less livable. Pakistan faced an urban housing shortage of approximately 4.4 million units in 2010. The 2015 livability index of the Economist Intelligence Unit ranked Karachi 135th out of 140 cities; Dhaka was the only major city in South Asia with a lower ranking.

Since the turn of the century, Pakistan has seen a net decline in multi-city agglomerations – defined as continuously lit belts of urbanization containing two or more cities with a population each in excess of 100,000 – as the formation of new agglomerations was outpaced by the merging of existing ones. The Lahore agglomeration, for example, expanded to absorb those of Chiniot, Gujranwala, Gujrat, Lalamusa and Sialkot. In fact, the Lahore agglomeration meets its Delhi equivalent to form one continuously lit belt with an estimated population of 73.4 million, slightly less than the population of Turkey.

“Taking steps to help Pakistan’s cities to realize their potential is critical as the country’s urban population is expected to increase by approximately 40 million people to an estimated 118 million by 2030,” says Patchamuthu Ilangovan, World Bank Country Director for Pakistan. “The concentration of economic activity that accompanies such agglomerations improves productivity and spurs job creation – if the pressures posed by urbanization are properly addressed.”

To better tap into the economic potential that urbanization offers, the World Bank report said policymakers in Pakistan and the rest of South Asia should consider actions at two levels – the institutional level and the policy level. At the institutional level, Pakistan would benefit from improvements in the ways in which towns and cities are governed and financed. Specifically, the report said reform is required to address three fundamental urban governance deficits – in empowerment, resources and accountability:

·         Intergovernmental fiscal relations must be improved to address empowerment.

·         Practical ways must be identified to increase the resources available to local governments to allow them to perform their mandated functions.

·         Mechanisms must be strengthened to hold local governments accountable for their actions.

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

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