ASEAN cities could face urbanisation challenges as number of middle-class households set to quadruple by 2030

Photo: Jolene Yeo

According to a new report released on October 5 by the Economist Intelligence Unit (EUI), the ASEAN boasts the sixth-largest economy in the world, yet cities continue to face challenges associated with urbanisation management. The Economist Intelligence Unit forecasts that the bloc’s economy will expand by 5% a year by 2020. Moreover, the largest 50 cities in ASEAN will continue to drive an overwhelming share of the bloc’s economic development in the coming decades, with some cities punching well above their weight

Hong Kong, 5 October 2016 – A new report released today by The Economist Intelligence Unit (The EIU) finds that fast paced urbanisation and strong growth prospects in the Association of South-East Asian Nations (ASEAN) region will quadruple its urban middle-class households (earning over US$10,000 per year) from 38 million in 2015 to 161 million by 2030 (see Figure 1). However, urban population growth will continue to exert pressure on already-stretched infrastructure and services in the region’s cities.

Figure 1. ASEAN urban middle class: households earning US$10,000 or above annually   image002

Miguel Chanco, Lead ASEAN Analyst at The Economist Intelligence Unit said, “With a combined GDP of US$2.4trn, ASEAN boasts the sixth-largest economy in the world. The EIU forecasts that the region’s growing economic integration, aided by ASEAN-led initiatives, will pay off to see it expand by 5% a year on average over the next five years, despite the challenging global environment.”

The largest 50 cities in ASEAN will continue to drive an overwhelming share of the bloc’s economic development in the coming decades. The EIU projects that the combined population of four major Malaysian cities – Kuala Lumpur, Penang, Johor Bahru and Ipoh – will account for 40% of the country’s population, but will contribute 66% to national personal disposable income by 2030. Nevertheless, despite their relatively high population growth rates, the report forecasts that cities in Thailand will suffer from a significant contraction in the labour force, surpassed only by cities in Japan and Germany.

Roxana Slavcheva, Cities Economist at The Economist Intelligence Unit said, “The rapid urbanisation we have seen in ASEAN in recent decades has created the potential for enormous economic gains. These gains can only be realised, however, if city governments learn to manage their rapidly growing urban centres effectively and efficiently – and thankfully, there are many examples set by other cities in the region to learn from.”

A considerable number of rural migrants into the cities struggle to realise their dreams of a better life, contributing to rising income inequality in these urban centres. Last year only 2% of households in Jakarta earned more than US$75,000, while nearly half took home less than US$10,000. Moreover, about one-third of Manila’s inhabitants consider themselves to be poor – well above the actual rate of national poverty, at roughly 25%.

The growth in the urban middle class is expected to open up opportunities as demand for discretionary goods and services will increase. However, it will also put an increasingly enormous strain on already-stretched infrastructure and lead to a much higher demand for essential services.

The local authorities in ASEAN cities will continue to grapple with urbanisation management challenges, which they must address in order to create more liveable and more competitive centres of sustained growth. There are four principles of effective urban governance that ASEAN member states should apply: modern and transparent urban management practices, sufficient and reliable funding sources, long-term yet adaptable city master plans and the establishment of clear policies on major issues each city faces.

To learn more about The EIU’s views on ASEAN Cities, download the full report at: