Dialogue 3: Future Urban Economy and Finance

The classical view on the role of the cities in economic development is that when firms and people locate near one another in cities, agglomeration economies occur. They benefit from density and resulting connectivity, thus increasing the productivity of economic activity. In the last decades, the role of cities as consumption centres have also been explored, and important debates have centred around the growth of cities in Africa without industrialization, and thus not contributing to increasing productivity. The question arises on how urbanization can best be harnessed for productive growth?

The global view on financing of developments in low- and medium income countries is changing; the focus is shifting from dispersed grants to supporting major investment in key infrastructure in developing countries, as manifested by China’s Road and Belt, EU Global Gateway, and US/G7 B3W. This shift inevitably raises a question of the role of cities and their development in the necessary structural transformation underpinned by territorial dimensions of development.

Investments in infrastructure and services require revenues to return the capital costs, support maintenance and operation, and accumulate new capital for further expansions and improvement. Here, the question of fiscal devolution in countries that have little local capacity and a weak tax base due to poverty and low income comes into the picture. In the handling of the COVID-19 crisis, it transpired that those countries which managed to mobilize better coordinated efforts in various sectors and levels of governance succeeded in resolving emergent issues faster and with better impact. Hence, another important dimension arises in achieving coherence of national, sub-national and external finance to support investment in infrastructure and urban development.

How can national policies link urbanization with structural transformation and coordinate national, sub-national and external financing for more coherent investment in urban development

Panel One

• How can urbanization serve as a vehicle for economic development of a country? How to make sure that investment in urban infrastructure and services underpin economic transformation?
• Can linking investment in urban development, based on sound territorial planning and objectives of structural transformation, lead to more synergies of investment in various sectors of economy? How can governance and spatial and investment planning go beyond their jurisdictional boundaries? Can we think of innovative approaches to territorial governance that improve horizontal and vertical coordination for sustainable urban development?    

Panel Two

• How can developing countries better coordinate investment opportunities and public revenues to finance sustainable urban development at national and sub-national levels.
• How can external finance be more effectively leveraged in cities of the Global South  - particularly small and intermediary cities.