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External Assistance for Urban Development: A Scoping Study for Further Research

Homi Kharas, Laurence Chandy, and Joshua Hermias


The World Development Report 2009: Reshaping Economic Geography (World Bank, 2008) describes an estimated billion slum dwellers prevailing in the developing world’s cities—a reminder that cities are central to efforts in tackling poverty. The pervasive effects of poverty, illiteracy and mortality in urban slums have long been recognized (World Bank, 1979). However, the ongoing process of urbanization has put this reality into sharper focus; the share of the world’s poor inhabiting urban areas is expected to reach 50 percent by 2030 (Ravallion et al., 2007). United Nations Millennium Development Goal (MDG) 7 responds to this problem by calling for “Cities Without Slums,” and setting a target “by 2020, to have achieved a significant improvement in the lives of 100 million slum dwellers.” Yet the latest evidence suggests there are 100 million more slum dwellers than in 1990 as rapid urbanization offsets modest progress in improving the lives of those already in cities.

The World Development Report also identifies cities as being vital to economic growth. Cities are recognized for their capacity to provide scale economies, efficiencies in logistics and in the provision of public services, dense labor markets that foster training and skills acquisition, innovation and creativity, diversification of production, lower environmental footprint through densification, and ultimately greater freedom for the individuals who inhabit them. But cities do not provide these benefits automatically, or for free. City management is a complex undertaking of institutional development and governance, planning, partnerships and consultations with the myriad stakeholders within cities, and considerable amounts of financing. When this management is found wanting, the many benefits of cities are never fulfilled. Indeed cities may have an equal capacity to generate social problems as social benefits. Analysis of developing country cities indicates that neither policy frameworks nor infrastructural investments have kept up with urban growth, that the wrong choices with long-term consequences are being made, that lessons from city development are being ignored, and that as a result, cities are developing with problems ranging from corruption to a degraded environment (Cities Alliance, 2006).

That cities can rightfully claim to provide a nexus between poverty and economic growth suggests that the urban development agenda would be a natural draw for the international development community. There is certainly widespread agreement about the need for action. There is advocacy on the modalities through which assistance can be made—namely via policy support and investments. There are a number of international organizations dedicated solely to promoting urban development. Yet to the contrary, there is a sense that urban development is losing priority for donors, that funding is declining, strategies are not acted upon, and that new approaches are needed (International Housing Coalition, 2008).

This paper reviews what has been happening with external assistance for urban development. First, the paper documents the stagnation in the share of aid going into urban projects and programs. It then documents what has been learned from experiences in urban aid and how strategies have evolved.

Next, the paper places urban development in the broader context of changes in the global aid architecture. It suggests that trends to improve aid effectiveness—a poverty focus, an aversion to risk, local ownership and managing for results—have tended to move in a different direction from the realities and constraints of urban interventions, making it harder for advocates of urban development to make their case heard. Donors who are trying to discipline their activities by applying broad principles of effective aid are likely to be put off supporting urban development by these apparent inconsistencies.

The opportunity for the urban sector appears to lie in its rich experiences with partnerships. The paper analyzes partnerships between donors and other stakeholders in urban interventions and suggests there could be considerable learning for the urban sector from past successes and failures. It puts forward an analytical framework to allow a comparison of different partnership approaches.

Lastly, the paper concludes with areas for research that need to be explored if urban development is to gain greater prominence in the international donor community.


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