Major cities in Asia need to upgrade their function as labor markets to further boost economic growth, according to experts from the Asian Development Bank (ADB).
This was part of an Asian Development Blog by a team from ADB’s Economic Research and Regional Cooperation Department composed of Glenita Amoranto, Liming Chen and Eugenia Co Go.
The authors said this means better transportation and urban planning are needed in cities, which could bring down costs of working and living in big cities.
“While Asian cities differ in terms of the kinds and severity of challenges they face, a guiding principle is that they need to function well as labor markets,” they said.
“In practice, this requires that within-city travel is fast and cheap, firms and households have the flexibility to relocate from one part of a city to another, and real estate is affordable,” they added.
Data showed that big cities, such as those in India, Indonesia, Pakistan and the Philippines already pay workers 7 percent to as much as 20 percent more compared to smaller cities elsewhere in the country.
The authors said the wage advantage of big cities is observed across the wage profiles. This means low- and high-skilled workers and firms are more productive in big cities.
Further, big cities in India, Indonesia, Pakistan and the Philippines have the largest employment shares in the manufacturing sector, ranging from 12 percent to 27 percent.
“However, the link between urbanization and economic dynamism is not automatic, especially in developing countries. The speed with which urbanization unfolded in the region has often meant a lack of coordinated plan for urban expansion,” the authors said.
With this, big cities suffer from insufficient infrastructure, which lead to congestion and a large informal sector where access to basic services is difficult.
The authors said inadequate transportation and decent housing will prevent workers from finding rewarding jobs.
Further, they noted that poor governance, such as excessively inflexible land-use regulations can obstruct firms’ business operations.
“Insufficient infrastructure and local business regulations are among the biggest obstacles to businesses in developing countries in Asia, especially in smaller cities,” the authors said.
Last year, this newspaper noted that while Metro Manila accounted for a significant share of gross domestic product, the Family Income and Expenditure Survey results showed three districts of the NCR posting increases in poverty.
Other districts that saw increases were the first district, which is the City of Manila, and the fourth district, which is composed of Las Piñas, Makati, Muntinlupa, Parañaque, Pasay, Pateros and Taguig.
The first district saw poverty increase by 0.91 percentage points to 5.7 percent in in the first half of 2018 from 4.8 percent in the same period of 2015. The fourth district, meanwhile, saw poverty increase by 0.13 percentage points to 3.9 percent from 3.8 percent.
Only the second district of Metro Manila (composed of the cities of Mandaluyong, Marikina, Pasig, Quezon and San Juan) posted a decrease in poverty. Data showed District 2 saw poverty decrease to 3.5 percent in the first half of 2018 from 3.9 percent the same period in 2015.
By Cai Ordinario
