More than half of the developing world’s urban population lives in small and medium urban centres. These centres also play an important role for rural households and rural producers and enterprises. Are policy-makers ignoring the contribution small market towns and administrative centres can make to local economic development and to poverty reduction?

Research by the International Institute for Environment and Development (IIED) examines recent evidence on how small and intermediate urban centres can support prosperous and diverse local economies. Emerging interconnections between local governance, regional development and poverty are highlighted. The authors stress the need for more energetic support of the links between rural non-farm employment and agricultural production and the importance of governance for the reduction of urban and rural poverty.

Across much of the developing world, the ability of small and medium farmers to respond to demands from urban consumers is limited by poor access to natural resources, credit, labour and inputs, and lack of transport infrastructure and storage facilities. In these circumstances, local markets are limited to low-level transactions. More equitable land distribution and strong backward and forward links between agriculture, industry and services can promote dynamic regional economic development and help to reduce poverty.

The report notes that:

• The assumption that more and more people will crowd into mega-cities is being disproved.
• There is a widespread underestimation of the proportion of the population living in small urban centres – major differences in how governments define urban centres limit the validity of international comparisons and generalisations.
• National statistical services produce little useful information for local planning – the increasing use of national sample surveys primarily serves national, not local, decisions.
• Grave deficiencies in water and sanitation provision in small towns go un-addressed by governments, which often fail to recognise the differences between rural and urban contexts.
• Liberalisation is allowing cheap imports to undermine local production of manufactured goods, especially those produced by small enterprises using traditional or limited technology.

The authors are encouraged by the growing recognition of the importance of interactions between rural and urban households, enterprises and economies but warn that:

• Anti-poverty policies aiming to link peripheral regions to global networks must stop ignoring the political dimension.
• Analysis of how the strategy of clustering can fuel local economic development should acknowledge the incorporation of local economic activities in national, regional or global value chains – often controlled by large organisations in the capital city or abroad.
• As long as issues of social and spatial polarisation – linked to economic reform, restructuring and the internationalisation of trade and production – are not addressed, regional economic growth policies cannot contribute to equitable development.
• Donors and international agencies must work to develop coherence between the local processes needed to reduce poverty and the development targets, national poverty reduction strategies and the global context of liberalisation of trade and production.
• Small and micro-enterprises will not be able to compete with exports and identify local opportunities unless they are helped to access markets and provided with capital, basic education, technical knowledge, improved transport and institutional support.
• Potential for decentralisation to contribute to efficient and accountable development cannot be realised without genuine local decision-making power, budgetary control and participation in local governance.

Not only do small and intermediate urban centres support prosperous and diverse local economies, they also support rural non-farm employment and agricultural production. Further, they widen the role of ‘good governance’ in reducing urban and rural poverty.  This vital role must not be neglected by policy-makers.

Source(s):
‘The urban part of rural development: the role of small and intermediate urban centres in rural and regional development and poverty reduction’ International Institute for Environment and Development, by David Satterthwaite and Cecilia Tacoli May 2003 Full document.

Funded by: DFID and Danish Ministry of Foreign Affairs (Danida)

id21 Research Highlight: 16 August 2004

Further Information:
David Satterthwaite and Cecilia Tacoli
International Institute for Environment and Development (IIED)
3 Endsleigh Street
London WCIH ODD
UK

Tel: +44 20 7388 2117
Fax: +44 20 7388 2826
Contact the contributor: david@iied.org

Contact the contributor: cecilia.tacoli@iied.org

International Institute for Environment and Development (IIED), UK

Other related links:
'Mind the gap! Bridging the rural-urban divide' insights 41

See id21's links page on the rural-urban divide

'Safe as houses? Securing urban land tenure and property rights' insights 48

See id21's links page on land tenure and property rights