The strong economic growth in Asia over the past 3 decades stems from various sources. Several Asian economies improved their macroeconomic policies, successfully implemented export-oriented development strategies, and quickly integrated into international markets. Since the 2000s, Asian economies have been successful in joining regional and global production networks and in building up Asia as a global manufacturing hub. Economic growth was also stimulated by urbanization. At the beginning of the 1990s, only about a third of Asians lived in urban areas.

This number has now increased to about half. The mechanism behind this strong increase is rather simple. Demand for cheap labor in urban areas outstripped the supply and triggered a massive movement of labor from rural areas to urban centers. As productivity in the manufacturing and services sectors in urban centers was usually higher than in agriculture, Asia’s urbanization fueled the region’s economic growth. In addition, the development of industrial clusters in cities proved to be economically very efficient, especially in industries where transportation costs, outsourcing, and spillover effects play an important role. At the same time, urbanization has been self-reinforcing. Wages in urban areas were typically higher compared with rural areas, as were the standards of living Asia’s fast urbanization, however, has not been without problems. Urban areas typically suffer from environmental degradation, high levels of pollution, and traffic congestion. Access to adequate and affordable housing has become one of the most immediate challenges for urban dwellers.