The Systems of Secondary Cities: Neglected Drivers of Urbanizing Economies

Much ink has been devoted to the role large cities such as Mumbai, São Paulo and Cairo can play in a country’s economic growth. But not enough attention is being paid to the fastest growing urban areas of all, and the ones most likely to shape our urban future: secondary cities.

These cities, ranging in size from between 150,000 and five million, are becoming increasingly important for global development. Some 75 per cent of the world’s population lives urban settlements of less than 500,000 people.

Despite their growing role, countries often ignore the productive role that secondary cities can play in a balanced national system of cities.

As a result, many secondary cities are facing numerous development challenges – including creating jobs, attracting investment for needed infrastructure, and diversifying or revitalising their economies – with far fewer options than their larger counterparts.

The problem will likely get worse as secondary cities, especially in African countries, are expected to double or even triple in population over the next 15 to 25 years. This means large infrastructure and service shortfalls, few opportunities for economic growth, and rising urban poverty.

Tapping the economic potential of secondary cities

A balanced system of cities with strong secondary cities offers tremendous potential for regional and national economic development.  Countries with a strong system of secondary cities – that are not dominated by a single megacity – tend to have lower levels of regional development disparities, higher levels of national productivity, and greater income per capita. South Africa and the United States are two good examples.

With a more efficient system of secondary cities, many poor cities and rural regions could double or even triple their GDP. Small and medium-sized cities can facilitate the localised production, transportation, and transfer of goods and services throughout a country.

They can also enable other substantial economic benefits, including: industry agglomeration, localised supply chains and networks, a diverse economic and employment base, and a broad housing mix.

For secondary cities to become successful in engaging trade and fostering local economic development, they must learn how to be more competitive. There is no question that the central government has an important role in making this happen.

National governments can encourage competition between cities and assist them in enhancing their governance efficiency and business competitiveness. Decentralisation helps as well; the more autonomy secondary cities have, the more competitive, dynamic, and self-sufficient they are likely to be.

National policies are also critical. Countries that implement urbanisation policies to improve the development of the national system of cities tend to be much more successful in managing urbanisation, city development, and ensuring equity between cities than countries that allocate a disproportionate amount of their public resources to the development of one or two large cities.

Finally, cities need to be able to unlock latent capital to attract investment and create sustainable employment. This requires significant policy reforms at the central government level which can give secondary cities the opportunity and power to capitalise and leverage assets to ensure local land, property, and financial markets function more efficiently, effectively and profitably.