Developing countries need to harness urbanization to achieve the MDGs: IMF-World Bank report

Developing countries need to harness urbanization to achieve the MDGs: IMF-World Bank report

Washington, April 17, 2013

Urbanization helps pull people out of poverty and advances progress towards the Millennium Development Goals (MDGs), but, if not managed well, can also lead to burgeoning growth of slums, pollution, and crime, says the Global Monitoring Report (GMR) 2013, released today by the World Bank and International Monetary Fund (IMF).

Urbanization has been a major force behind poverty reduction and progress towards other MDGs. With over 80 percent of global goods and services produced in cities, countries with relatively higher levels of urbanization, such as China, and many others in East Asia and Latin America, have played a major role in lowering extreme poverty worldwide. In contrast, the two least urbanized regions, South Asia and Sub-Saharan Africa, have significantly higher rates of poverty and continue to lag behind on most MDGs.

GMR 2013: Rural-Urban Dynamics and the Millennium Development Goals starkly compare the well-being in the countryside versus the city. Urban infant mortality rates range from 8-9 percentage points lower than the rural rates in Latin America and Central Asia; to 10-16 percentage points in the Middle East and North Africa, South Asia, and Sub-Saharan Africa and highest in East Asia (21 percentage points).

ECA is a prime example of a region that is highly urbanized and has been successful in reducing the share of the population below $1.25 a day from 2% in 1990 to 0.7% in 2010. 3 million people lived in extreme poverty in the region in 2010.  From a comparative perspective, ECA had less extreme poverty than other regions.

In 2008, the extreme poverty rate was 1.2% in rural and 0.2% in urban areas.  People and poverty in ECA are located along a spatial spectrum with sparsely populated rural areas and dense urban areas at the ends and smaller towns in-between.

In Albania 42% of the population is urban but it resides almost entirely in extra small, small and medium size towns. The share of the poor in urban areas is 31%, and nearly all of the poor reside in similar size towns.

Though extreme poverty has declined rapidly in many countries, the World Bank estimates that by 2015 there will be 970 million people living on $1.25 a day. Therefore, continued concerted efforts to get extreme poverty as close to zero as possible are needed.

“Emerging market and developing countries are growing robustly notwithstanding slow growth in advanced economies. Sustaining this growth – by continuing to maintain prudent macro policies and strengthening the capacity to manage risks, including through a rebuilding of depleted policy buffers – is key to continued progress in poverty reduction as we approach 2015,” said Hugh Bredenkamp, Deputy Director of the IMF’s Strategy, Policy and Review Department.

Rural poverty rates far exceed those of urban areas across all regions of the world. The report further finds that rural women are hurt the most by poor infrastructure, because they perform most of the domestic chores and often walk long distances to have access to clean water, and lower levels of education attainment.

Although tackling rural development challenges will not be easy, it can be done with complementary rural-urban development policies and actions by governments to facilitate a healthy move toward cities without short-changing rural areas, says the report.

“Urbanization does matter. However, in order to harness the economic and social benefits of urbanization, policy-makers must plan for efficient land-use, match population densities with the required needs for transport, housing and other infrastructure, and arrange the financing needed for such urban development programs,” said Jos Verbeek, Lead Economist at the World Bank and lead author of the GMR. /ibna/