Urbanisation and growth

Eric Sidgwick and Hiroshi Izaki

Today, Cambodia’s urban areas generate 50 per cent of gross domestic product (GDP) and are home to more than 20 per cent of the total population of almost 15 million. By 2030, Cambodia’s urban population is expected to double, while the urban share of the national economy is estimated to rise to 70 per cent. Phnom Penh, a city of 1.5 million people, and other major urban centres will experience rapid growth and migration of people in search of a better life.

This increasing urbanisation brings with it several consequences – both positive and negative – that influence economic and social development.

If properly managed, urbanisation can enhance economic benefits driven by rising productivity, fluid labour markets and greater market access. In addition to providing a home to the country’s job-seeking youth and growing middle class, cities can become hubs for businesses, industries and transportation and gateways for a growing number of tourists.

In particular, as agricultural commercialisation takes hold, in contrast to subsistence and smallholder activities, intensified urban-rural linkages will provide a catalyst for higher rural and urban incomes.

Connectivity between rural communities and urban growth centres along economic corridors will increase and rural communities will benefit from improved access to markets and social services. Urban infrastructure such as transport and basic utilities will be strained with the pressure of more users unless investments are made to expand these networks. As the country approaches middle-income country status, an increasing number of people and enterprises will locate in urban centres accompanied by increased assets and economic activities.

For example, vehicle ownership in Phnom Penh is projected to rise dramatically to 37 per cent by 2030, from 18 per cent in 2012. Vehicle flows in Phnom Penh today are already below the comfortable 15-20km/h during peak hours.

Without good public transport – fast, responsive and reaching all corners of the city – traffic volume will far exceed existing road capacity and vehicle flows will become much slower.

Ensuring adequate water supply is critical, especially for secondary cities and smaller towns where lack of water is constraining the productivity, economic efficiency and environmental sustainability of development.

Likewise, urban power supply is over-priced and unreliable, thus constraining both domestic and foreign investments.

Greater migration to towns and cities, as well as increased business investments, create increased demand for land, pushing up land prices. A shortage of livable housing, especially for the urban poor, will result in more slums and a growing gap between the rich and poor.

The absence of mechanisms to regulate and manage household and industrial waste will cause environmental deterioration and health risks.

Climate change also affects urban areas with increased flooding and other environmental impacts.

Although policymakers are making improvements on a sector-by-sector basis, managing the urbanisation process correctly over the next five years crucially affects Cambodia’s development and growth.

Experiences from neighbouring countries show that delayed actions in addressing urban issues will result in huge economic and social costs.

The fundamental question, therefore, is how to harness urbanisation for socio-economic development.

An urban strategy must address the country’s overall urban development, linking urban and rural communities and promoting competitiveness, inclusiveness and sustained growth.

To transform the country from a predominantly rural to an urban economy, integrated urban planning and better management of both urban infrastructure and land use are required.

To ensure seamless provision of urban services, city managers must consider cost recovery for waste collection, water provision and other basic services. The sustainability of such service provisions depends heavily on proper management and adequate fee collection.

Municipal authorities need to build technical capacity and enforcement powers to better plan and manage urbanisation and urban issues, including the provision and maintenance of the necessary infrastructure.

This will need to be supported by effective urban governance.

Sufficient financing is vital – to expand infrastructure, utilities and environmental management. Public-private partnerships have strong potential in these areas.

In Phnom Penh, waste collection and waste treatment are already managed by private concessionaires and public transportation will soon be provided by private companies.

Much work is required to tackle the multifaceted issues of urbanisation: public transportation systems should be introduced (most urgently in Phnom Penh); access of urban population to safe water and sanitation should be accelerated; and flood incidents need be addressed.

Also, improvements in the availability and reliability of power supply, solid waste collection and environmental management, along with the ability to plan and execute public investment programs, are urgently needed to ensure sustainable urban development.

In the recently-announced government strategy for the next five years, the Rectangular Strategy Phase III, urban development is recognised as a priority.

The Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA) are active in assisting the government in the urban sector and stand ready to help harness urbanisation for sustainable growth.


About the authors: Eric Sidgwick is the Country Director of the Asian Development Bank. Hiroshi Izaki is the Chief Representative for Cambodia of Japan International Cooperation Agency.

Note: This article originally appeared in the Phnom Penh Post on November 27, 2013