The Contribution of Cities to Economic Development: an explanation based on Chinese and Indian cities

The 1990s were a period of structural adjustment in developing countries. Many countries have put order in their finance and rationalized their economic policies. We are currently benefiting from that period, where countries as far apart as China and Ethiopia, or India and Tanzania all had an economic growth of over 6 percent in 2005, much more than the few percent growth we achieved in the Netherlands last year. However, most of this growth came from a limited number of regions and cities in these countries and I will quantify this urban contribution for China and India.1 Not only do I quantify the contribution of cities, but I also want to explain it by doing regression analysis to find the factors contributing to the attractiveness of Chinese and Indian cities as measured by the amount of Foreign Direct Investment (FDI) received.2 Subsequently I want to look at the future. Are the Chinese and Indian cities only booming because of cheap labour, or are they gradually developing into high tech economies, able to generate innovative technology to support their competitiveness? The three topics: the contribution of cities, the explanation of their success and their future competitiveness will lead to some considerations about the importance of reform policies at different levels of government and the role of urban and regional managers in this. The spectacular growth of cities is supported by globalization and puts an end to a dogma which influenced me when I started as a development worker in Africa in 1973: Rural development first (Lipton, 1977).