1. Introduction and Overview
The pace of urbanization, estimated to be four percent per annum, is highest in Nepal among the countries of South Asia[. This has led to economic growth. The contribution of the urban sector to GDP is increasing fast. Cities compete in attracting investments, however, they are suffering from an acute shortage of infrastructure and services. This has made it difficult to sustain growth, and made cities less competitive resulting in increasing exclusion that manifests itself as increased slum areas. Adjustments take place to sustain competitiveness at the cost of inclusiveness such as access to basic services.
The perspectives on cities have changed over the years. First, cities were considered to be exploitative. The exploitative role of Kathmandu is evident from the fact that most of the foreign investments made in Nepal are captured by Kathmandu. Kathmandu also sets market rates for goods produced nationally favorable to the Kathmandu economy. The generative role of Kathmandu has remained limited due to the influence of the Indian economy [As a result, Kathmandu has not been able to help develop other regions. The services it provides are less affordable compared to what the Indian cities provide. Its generative role did not improve even when the two nations had bitter relations during the late 1980s. Kathmandu needs to create a productive connectivity with the outlying areas of the Kathmandu Valley region. This is a precondition for enhancing its sustainability. Understanding of cities’ distributive role in terms of their relationship with the outlying regions, the way cities appropriate resources and the global economy will help to resolve the issue of equity in sharing the advantages of global collaboration on the global commons.
Urbanization should be based on the judicious and equitable extraction of resources from the outlying regions to create employment and improved social opportunities. The distributive role can be enhanced through providing services broadly, including the population of the associated regions through sustainable transport networks; systematic integration of migrants into the urban economy; regulating access to outside entrepreneurs and investments with cost recovery in environmental services for their sustainable provision. The distributive role of Kathmandu has an immense, potential capacity to absorb population due to its inclusive nature supported by traditional social networks and the traditional culture of sharing poverty. The Kathmandu region is highly competitive with economic drivers such as tourism and handicraft; equipment & machinery; textile, garment & leather; financial intermediary; wholesale & trade; health & social works; government function; and household sector.
Due to globalization and environmental concerns, the distributive role of cities has increased during the recent past. Cities can create enormous wealth at the cost of natural resources of the larger areas outside its boundary. At the same time land values are increasing. Balanced development ensuring inclusiveness of the population of the larger rural urban areas becomes possible only when we enhance the distributive role of the major cities. This spatial dimension of inclusiveness is generally overlooked. The cities’ ability to absorb migrants consistently and sustainably is a prerequisite for inclusive urban development.
Cities can become less inclusive due to increasing income and outside competition especially regarding the purchasing power of the weaker economic sector relating to urban services. An increase in income can create more demand for infrastructure and services. However, there is a growing disparity in access and service levels of basic services as most people have limited access to high standard infrastructure. In poor and smaller cities, where sharing poverty and traditional culture prevail, people have a tendency to unite to provide themselves with necessary urban services. Sharing poverty here means more equitable access to urban goods and services in community spirit, even when the total supply is severely limited.
In this context, it is necessary to understand what went wrong during the transformation of Nepal or Kathmandu to the present economic set up. In Kathmandu there is a marked increase in exclusion as modern standards are being introduced. This was not the case earlier.. Inclusive strategies can not only reduce exclusion but make it possible to avail most services to a broader set of beneficiaries in an affordable way.
Economic growth in Nepal is spatially differentiated with its high correlation with urbanization in different parts of the country. Nepal has been under political transition for more than a decade that has stimulated migration to cities. Yet, there is economic stagnation, with the rate of economic growth below 4% per annum over the last two decades. Urbanization is easily understood and accepted as an inevitable process. However, where the increasing population will be located in the future is not easy to predict. This will depend on economic opportunities that are created through the location of investments in infrastructure and industry as well as policies on trade and transit. Investments, not necessarily in Kathmandu, but in areas with greater growth potential and higher multiplier effects will yield greater return in the long run. Such investments will make urban development more effective and inclusive.
This paper is organized in six parts. Part I is an introduction to urbanization in Nepal. Part II provides an in-depth analysis of the trend of urbanization in Nepal and explains its economic causes and impacts. It discusses spatial, demographic, and economic implications of urbanization. Part III identifies different perspectives and roles of cities. It highlights cities increasing distributive roles and the need to integrate their peripheral areas as well as ensuring equitable access to urban services. Part IV makes an economic analysis of key urban regions including the Kathmandu Valley. It shows how the inclusive nature of its development has contributed to cluster development[. It also deals with the emerging threat to inclusiveness due to increasing deficiency in urban infrastructure. Part V deals with the ways and means of providing infrastructure in a more productive, affordable and inclusive manner. It also shows that planned urbanization of the peripheral regions will enhance inclusiveness. This is followed by a discussion on institutions and fiscal sustainability. The Part VI is a conclusion summarizing the main findings.
2. Urbanization
Nepal is the fastest urbanizing country in South Asia. The urban sector contributes two thirds of the national GDP. The national spatial transformation is characterized by a fast growing population and increased density in the Kathmandu Valley with a clustering of economic activities in the Eastern and Central Terai as well as the Western Hills. Nepal’s urbanization, although a recent phenomenon, has been influenced by different factors at different times. There have been frequent changes in policy focus most notably in the priority accorded to spatial integration. The trend of urbanization is presented in Table 1 below.
| Year | Total pop. (Millions) | No. of municipalities | Urban pop. (‘000) | Level of urbanization (%) |
| 1961 | 9.4 | 16 | 339 | 3.6 |
| 1971 | 11.6 | 16 | 462 | 4 |
| 1981 | 15.2 | 23 | 962 | 6.3 |
| 1991 | 18.1 | 33 | 1,629 | 9 |
| 2001 | 23.2 | 58 | 3,228 | 13.9 |
| 2011 | 26.5 | 58 | 4,524 | 17.1 |
The
levels of urbanization given above are based on the official classification of
municipalities. There are urbanized areas in village development committees and
rural areas in the municipalities. This makes it difficult to rationalize the
analysis of urbanization in Nepal. For instance the level of urbanization at
present considering 58 municipalities is 17.1%. This will increase to about 20%
if we include the proposed new 41 municipalities. The definition of an urban
area is a designated municipality and emerging towns.
Figure 1: Map of Nepal showing municipalities and their population in 2011
Table
2 lists the municipalities with
either a population of more than 40,000 or density higher than 20 persons per
ha. There were 30 municipalities with populations greater than 40,000 in 2011.
There are only 14 municipalities with a density greater than 20 persons per ha.
There are only 11 municipalities with a density greater than 20 persons per ha
and population more than 40,000. Out of these, five are in Kathmandu Valley.
The six outside the Valley are Birgunj, Nepalgunj, Pokhara, Janakpur,
Biratnagar and Kalaiya. The greatest economic consequence of such a
classification of municipalities is that within the declared municipal area,
agriculture is not considered an urban function. Therefore land is more exposed
to pressure to urbanize usually without the ability to satisfy the demands for
adequate services necessary to support its ability to contribute to economic
growth. Despite urbanization, rural features persist in most of the
municipalities. Infilling in such areas with urban uses leads to fragmentation
of agricultural land with increased loss of farmland without their conversion
to planned urban areas. This creates more problems in the placing of urban
infrastructure in the future.
Table 2: Municipalities with population > 40,000 or density > 20 persons per ha. (2011)
| No | Municipality | Density (Persons/ ha.) | Population |
| 1 | Kathmandu | 203.6 | 975,453 |
| 2 | Lalitpur | 147.4 | 230,050 |
| 3 | Bhaktapur | 127.9 | 81,748 |
| 4 | Madhyapur | 75.9 | 83,036 |
| 5 | Birgunj | 65.5 | 135,904 |
| 6 | Nepalgunj | 59.0 | 72,503 |
| 7 | Banepa | 44.8 | 24,764 |
| 8 | Pokhara | 48.1 | 255,465 |
| 9 | Kirtipur | 45.6 | 65,602 |
| 10 | Janakpur | 40.5 | 97,776 |
| 11 | Biratnagar | 34.6 | 201,125 |
| 12 | Rajbiraj | 33.2 | 37,738 |
| 13 | Malangwa | 26.8 | 25,102 |
| 14 | Kalaiya | 23.1 | 42,876 |
| 15 | Bharatpur | 143,836 | |
| 16 | Dharan | 116,181 | |
| 17 | Butwal | 118,462 | |
| 18 | Dhangadhi | 101,970 | |
| 19 | Bhimdatta | 104,599 | |
| 20 | Hetauda | 84,671 | |
| 21 | Damak | 75,102 | |
| 22 | Itahari | 74,501 | |
| 23 | Triyuga | 70,000 | |
| 24 | Ghorahi | 62,928 | |
| 25 | Siddharthanagar | 63,483 | |
| 26 | Tulsipur | 51,537 | |
| 27 | Birendranagar | 47,914 | |
| 28 | Lekhnath | 58,816 | |
| 29 | Mechinagar | 57,545 | |
| 30 | Gulariya | 55,747 | |
| 31 | Tikapur | 56,127 | |
| 32 | Ratnanagar | 46,367 | |
| 33 | Byas | 42,899 | |
| Total | 3,761,827 |
There used to be a policy to discourage development of towns at the Nepal – India border in favor of foothill towns during the 1980s. This caused border towns to stagnate. Instead, the foothill towns prospered due to investment in road connectivity and government policy. As a result of the East-West Highway, foothill towns grew and still continued to grow. There has also been an attempt to develop north-south urban corridors. However, the economic forces that resulted from development of the East-West Highway have established linkages between settlements in the east west direction that provided economic opportunities for the migrants from the hill areas.
Forming cluster economies that enhance the ability to create jobs is central to urbanization. However, “natural resource endowments do not provide a satisfactory explanation for concentration.” (Joshi 1985: 57) With the growth of productive activities, Kathmandu has become crowded, beyond its infrastructure capacity. After a certain stage of agglomeration, there can be economic growth with clusters of mutually supportive economic activities. The emerging economy can gain the economic power to legitimize a growing disparity in access to basic services unless there is an explicit policy that promotes access to services. Institutional development and market forces can sustain investment in cluster development with the support of the government. However market forces may not be either desirable when viewed from the perspective of being environment-friendly nor promote social inclusiveness in terms of service delivery Growing disparity of access to and acute deficiency in infrastructure are thus the key adverse impacts of urbanization. The emerging threat to long-time inclusiveness within Kathmandu needs to be addressed through deconcentration of activities from Kathmandu to other potential urban regions.
Nepal is divided into five development regions, each with three eco-regions (mountain, hills and terai) making a total of 15 sub-regions also known as planning regions. (Joshi 2009) The regional distribution of population and urban population in 2011 are presented in Table 3 and Table 4. The total population of the mountain region has increased to 1.8 million accounting for little more than 6% of the total population of the country. The area of Nepal is 51,817 sq. km. It is sparsely populated with 34.3 persons per sq. km. Although the mountain regions have resources, they are not ideal places for human settlements. However, people may go there for recreation or harnessing resources, since they are endowed with bio-resources with good potential for eco-tourism.
Table 3: Regional Distribution of Population 2011
| Region | Mtn. | Hill | Terai | Total |
| Far Western | 463,345 | 862,215 | 1,226,957 | 2,552,517 |
| Mid-Western | 388,713 | 1,687,497 | 1,470,472 | 3,546,682 |
| Western | 19,990 | 2,811,135 | 2,095,640 | 4,926,765 |
| Central | 517,655 | 4,431,813 | 4,707,517 | 9,656,985 |
| Eastern | 392,089 | 1,601,347 | 3,818,119 | 5,811,555 |
| Total | 1,781,792 | 11,394,007 | 13,318,705 | 26,494,504 |
Table 4: Regional Distribution of Urban Population 2011
| Region | Mtn. | Hill | Terai | Total |
| Far Western | 0 | 66,176 | 267,696 | 333,872 |
| Mid-Western | 0 | 74,132 | 248,342 | 322,4744 |
| Western | 0 | 519,430 | 245,411 | 764,841 |
| Central | 23,337 | 1,689,176 | 560,313 | 2,272,826 |
| Eastern | 26,658 | 119,196 | 683,953 | 829,807 |
| Total | 49,995 | 2,468,110 | 2,005,715 | 7,426,090 |
The share of urbanization in all the regions except the central hill and terai areas, and eastern and mid-western terai has decreased during the period 2001 – 2011. This is evident from Table 5 and Table 6.
Table 5: Regional Distribution of Urban Population 2011 in percentage
| Region | Mtn. | Hill | Terai | Total |
| Far Western | 0 | !Syntax Error, 2588701.46 | 5.71 | 7.38 |
| Mid-Western | 0 | 1.864 | 5.49 | 7.13 |
| Western | 0 | 11.48 | 5.42 | 16.91 |
| Central | 0.52 | 37.34 | 12.38 | 50.244 |
| Eastern | 0.59 | 2.623 | 15.12 | 18.34 |
| Total | 1.11 | 54.56 | 44.12 | 99.79 |
Table 6: Regional Distribution of Urban Population 2001 in percentage
| Region | Mtn. | Hill | Terai | Total |
| Far Western | 0 | 1.82 | 5.79 | 7.61 |
| Mid-Western | 0 | 1.57 | 5.60 | 7.17 |
| Western | 0 | 10.63 | 5.50 | 16.13 |
| Central | 0.68 | 36.30 | 12.76 | 49.74 |
| Eastern | 0.68 | 2.85 | 15.82 | 19.35 |
| Total | 1.36 | 53.17 | 45.47 | 100.00 |
The share of the urban population in the Central Hill area has increased from 36.3% to 37.5%. This shows the rising primacy of the Kathmandu Valley towns. Despite the policy of deemphasizing the development of Kathmandu, it emerged as a growth pole in the SAARC Region even as early as 1990. (Joshi 1997) After that, concentration continued unabated mainly due to the political transitions that Nepal is still going through. Kathmandu has severe deficits in infrastructure. However, it has succeeded in changing its comparative advantages into competitive advantages based on clusters of economic activities; for example tourism related activities. Because of this, its population is increasing at a faster rate. Its potential to create jobs is already established. Economic activities flourished due to the rise of industry clusters and reduction in business transaction costs.
Inter-regional disparity can be reduced when we have clusters in different regions in a balanced way. Intra-regional and city level disparity will be reduced through cluster development that promotes mixed land use. What Hirschman wrote in 1958 is relevant: “There can be little doubt that an economy to lift itself to higher income levels, must and will first develop within itself one or several regional centers of economic strength. The need for the emergence of ‘growth points’ or ‘growth poles’ in the course of the development process means that international and interregional inequality of growth is an inevitable concomitant and condition of growth itself” Now we have to deal with clusters based on collaborative advantages to avoid and minimize the exploitation aspects embodied in the concept of “growth poles/points”. Clusters are potentially positive aspects of the Nepalese economy especially strategically located across the nation to benefit from the comparative advantage each possesses. However, there is no correlation between national or local investment and spatial policies. And investments continue to flow into the central region unabated.
The role of India as an important actor in shaping the Nepalese market cannot be understated. The general perception among planners is that urban development will decline as one moves away from the Nepal-India border. The future of border towns largely depends on what India will do. As it is difficult to predict the Indian response to border development, so it is difficult to predict urbanization trends of Nepal’s border towns in terms of their role in the national economy. The border towns developed when the Indian economy had functional linkages with them since they supplied raw materials. But the Nepali government did not want that sort of dependency on India so policy and investment was oriented towards foothill towns. Now, when relations improved, India was not interested in taking border towns along with it resulting in estrangement and declining economies. For a city like Biratnagar, the estimated annual increase of 4,000 people can be absorbed at a very low standard as squatters on the ample available land being converted to urban areas. The issue is how Biratnagar can better manage the process so that communities can be incrementally improved.
Bilateral relations are not based on regional economic efficiency. Collaborative efforts are not significant. Different parts of the country are urbanizing in different ways. It is necessary to identify the drivers of urbanization in different urbanized regions. Further urbanization in some of the urbanized areas such as Biratnagar and Birgunj can be induced only through the creation of employment opportunities. On the contrary, some foothill towns, though less urbanized presently, will urbanize more rapidly as they have a potential to create jobs. Nepal’s experience has shown that it is not easy to implement neither regional development strategies of the 1970s nor the more recent concept of urban economic regions. The development of a growth corridor will depend on the economic linkages between economic centers in the corridor. Linkages, however, are not the case. Cities with less population are growing faster on their own. For instance, Itahari is growing more rapidly compared to Biratnagar. It is necessary to link Itahari with Biratnagar but Biratnagar’s outreach is not visible. The case of Nepalgunj is no better.
The level of urbanization in all the mountain regions, and mid western and far western development regions is low. Their GDP’s are also low. These regions represent isolated economies not integrated with the national economy. It is necessary to reach these rural regions through the creation of small centers that will help build linkages in the future by bringing their products to the market economy. Their products seldom are duly paid for. These regions not only require the provision of basic services but also markets and demand for their products. For such regions, linkage centers are recommended, which will help them to urbanize in a planned way. We may recommend policies for urbanizing rural regions; but it will be difficult to implement them as it is not likely that such policies can be backed by sufficient investments. Instead of thinking about remote regions, the policy of deliberate urbanization should accord priority to peri-urban areas first, that will harness rural-urban linkage potentials for the inclusive development of the region as a whole. It makes little sense in trying to form corridors out of isolated economies when the urbanization of the rural regions surrounding a city is being ignored.
Integration of peripheral areas with the concept of growing city regions can help to harness the potentials of urbanization, support inclusiveness and make local economies stronger. Corridors, especially when they are too long, are more difficult to maintain as viable economic entities compared to extended city regions and their peripheries. This shows that city regions should be supported to grow to make the corridors function well. It is not the competitiveness of an individual city but the degree of collaborative efforts among cities in proximity that increases the regional and national competitiveness.
The more urbanized regions of the country are Central Hills (Kathmandu region) and Central Terai with Kathmandu – Hetauda – Bharatpur – Birgunj – Janakpur as the potential corridor and the Eastern Terai with Biratnagar – Itahari – Dharan as the potential corridor. Similarly, Western Terai and Western Hill are other urbanized regions with Bhairahawa – Butwal – Pokhara as the potential corridor. These five regions accounted for 76.8% of the urban population in 2011. This figure was 75.8% in 2001. If the proposed 41 municipalities are also considered, the figure will still increase.
Figure 2: Map of Nepal Showing City Regions and Economic Corridors
People have limited choices and options. This author considers that the disparity is increasing and that there is low efficiency in government spending. This means other urban regions although presumed to function as economic centers do not get the necessary investment.
Economic transformation of the nation has been slow as it has failed to create cities that attract industries and investments. Kathmandu’s economy is presently growing fast. However, failure to consider infrastructure as an input to its productive sectors will make it difficult to sustain the growth. The growth of high-rise apartment buildings without due consideration to the provision of off-site infrastructure and their environmental impacts have aggravated the problem of transport and other services. The low competitiveness of cities has caused stagnation. There is a tendency for sectors as well as cities to compete among themselves instead of engaging in collaborative efforts and functional specialization. Inclusive cities are likely to be more competitive because cities with high number of low-skilled, poorly educated, marginalized populations are at a competitive disadvantage and problems of squalor, poverty, pollution and communicable diseases deter private investment and economic expansion. Inclusiveness should be enhanced through collaboration among sectors, people, and spaces.
The corridor formed by the foothill towns requires investment. On the other hand, the north south corridor will help to widen the east west corridor. If connectivity is the key concern, the junctions of north-south and east-west roads will be the focus of city regions in general terms. Expansion of city regions and widening of corridors joining city regions will help to enhance the competitiveness of cities.
Despite its strategic location and potentials, Biratnagar is stagnating at present and the impact of Kathmandu’s economic activities is little. However Biratnagar is identified as a major regional economic center. Its economy is planned to be transformed with the implementation of projects like the expansion of the airport, ring road construction, a Special Economic Zone, a dry port, and an Integrated Check Point and Railway, among others. It is likely to have a boost up in the public sector as well. Trans-boundary collaborative efforts will help to unlock its potentials.
1. Inclusiveness
A distinctive feature of ancient towns in Nepal is their social cohesiveness. In the past, there was little economic segregation; the rich and the poor were integrated within the spatial and social systems. Their inclusiveness was due to the fact that they were intertwined with the prevailing ways of life. The experience of such towns is relevant to any city in the world and can be used to enhance their inclusiveness.
There is an increased threat to inclusiveness due to the breakdown of traditional relationships such as the extended family and clan relations. The key question is: How can the threat to inclusiveness be avoided without not having to sacrifice modern development? How are policies developed and implemented in an inclusive manner so that the benefits of economic growth of our cities meet the needs of the majority of the population. The concept of the inclusive city is linked with sustainability. The best way to deal with this issue is to make investments that include pro-poor activities to mobilizing the poor. If policies channel the supportive investments towards this end, the conventional ways of providing infrastructure and services can be revised and avoid the spiraling price escalation of infrastructure and services in poor cities. Preparing inclusive, commercially viable projects may improve Nepal’s limited access to the global economy.
People can organize themselves to create a community; a neighborhood. They share their joys and woes in it. They fulfill their needs through it. They participate in the community activities. They serve their community according to their interest and ability. All, irrespective of their age, sex, and creed, can work to create a better environment to work and live in. A city is composed of many neighborhoods. A sustainable city can be built out of its inclusive communities.
Inclusiveness can energize and regenerate a community; and help create pleasing environments that add value to cities. Cities can provide residents with opportunities and choices not only to survive but also to reach their full potential. Employment is key to improvements in the quality of life and access to urban services and amenities. The local economy should be able to manage disparity and provide opportunities for its citizens.
Nepal’s traditional towns are becoming less inclusive over time as they modernize. There is an erosion of cultural and religious values as well as a shift to unsustainable ways of living such as high-rise apartment building at places where there is acute shortage of employment, services and chaotic transport systems that have threatened urban life in many ways. Inappropriate location of high rise building has resulted in unsustainable living. Such developments are largely underutilized despite the government’s support. To combat the problem of sprawling, intensive development in selected nodes through land pooling projects preferably with high-rise apartments within it should be promoted. Currently, the exposure of ancient towns to outside economies has not only made them less inclusive but also weakened their economy. However, if carried out through sustainable, inclusive policies that need not be the case for the opportunities created in tourism, value-added small business development and industry compatible to the historic context.
Cities face increasing and diverse sets of problems relating to different groups such as the youth, senior citizens, and disabled people and so on. Their needs and problems are naturally different. As inclusiveness depends on the ability to avoid the exclusion of any group, awareness on population programs will help to enhance it. The need for a current information base is crucial to sound urban management. It is necessary to satisfy the needs of different age-groups of the population. Nepal needs to create policies and programs that reflect the perspectives of different groups of people. “For what most people see and often want in cities is not what planners, decision makers and elite groups see and want. It varies for children, for workers, for immigrants for people of different ages, incomes, occupations, and cultural backgrounds.” (Rodwin 1981: 13)
The movement of people from one place to another for various purposes is increasing and facilitated by the relative ease of travel. Internal migration may impact the place of origin due to the loss of its economically active group of people and the transfer of assets. While opportunities to work abroad and send remittances back are increasing, it also has a price to pay in terms of the family and the conditions in which foreign labor lives. While there is the need to expand opportunities in the place of origin, making it more inclusive, the capacity of cities to absorb migrants and the natural increase of current residents needs to be enhanced. Skill development and training programs are to be encouraged. It takes time for new immigrants to be integrated into a new place. This makes it necessary to dig deeper as to what happens to the receiving space and the space that is losing population.
Kathmandu Valley has numerous sites of great archaeological, historic and religious values. Culture is a major asset in both crowded historic towns and isolated villages with people living in close harmony with nature. Their cultural charm is found in the form of diverse festivals around the year. The monuments are a part of the people’s daily life. Indigenous people can perpetuate their culture and help integrate their culture into their changing cultural and built environment.. The local people along with their aspirations and energies extend the life of their ecosystem with culture. On one hand, it is necessary to transform the traditional ways making them more sustainable. On the other hand, it is necessary to adapt sustainable modern alternatives to local conditions. Such measures will help to find sustainable ways of providing services and ensure sustainability of building and urban design. In order to enhance access and mobility, viable public transit system should be developed. Safe, functional and green connections will help to restore the public realm and make them more inclusive.
Heritage sites and well-maintained and usable open space are virtually the only urban places where people of different income level have equal access. Although the historic towns of Kathmandu Valley are good examples of an inclusive cities, there is an increasing threat. Some of the factors that sustain their inclusiveness may be summarized as follows:
- Traditions with strong resistance to change;
- Cohesive and all-inclusive design;
- Encouragements for pedestrians;
- Culture of sharing poverty;
- Sharing of urban space with opportunities for mixing together due to cultural and religious activities throughout the year; and
- Changes with ability to destroy the inherent character of the settlements have so far not thrived.
The role of the government must change from a doer to a facilitator and support the community to develop their inclusiveness. It should understand that modern changes will be resisted in the absence of adaptation measures; and all sorts of conflicts of interest will make development more costly and unsustainable.
2. City Clusters and Inclusiveness
Clusters can be either spontaneously induced or be planned development. They may emerge as a result of investments in infrastructure, a government decision, a new technology, the existence of research and development (R&D) centers and universities, or a chance happening. Early commercial success leads to the entry of other players keen to be part of the successful actions. Nothing succeeds like success. When municipalities become productive, others will extend their hands for increasing the competitiveness of the cities. A successful cluster can keep on increasing, as revenue streams finance more commercial activities and infrastructure. For instance, the cluster economy of Kathmandu has been developed in partnership with government. It represents an impressive body of knowledge that can be used very effectively to stimulate and support local economic development. Cluster initiatives are generally aimed at nurturing collaborative instincts and trust, and building a critical mass of relevant companies to achieve better outcomes than would otherwise be possible.
Kathmandu characterizes the emergence and evolution of functional clusters. The birth of a cluster can often be traced to historical cultural sites and the availability of raw materials, specific knowledge in R&D organizations, or traditional know-how; the specific or sophisticated needs of a group of geographically concentrated customers or companies; or the location of companies or entrepreneurs carrying out some important new technological innovations. The first stage in cluster development may involve new company spin-offs, leading to a geographic concentration of other competitor companies at a similar stage of development. Once a critical agglomeration of firms has been established, external economies are created in a cumulative process. The first indication of emerging external economies is the creation of a set of specialized suppliers and service companies. The growing exclusiveness can have adverse impacts on its economy.
The growth of the cluster often creates a demand for nonmarket services and the formation of new organizations that serve several companies in the growing cluster. The development of external economies increases the visibility, prestige, and attractiveness of the cluster, but, in the case of Kathmandu, signs of diseconomies in a sector-wise way are already visible. It has become necessary to relocate some of the activities to the outlying areas. A byproduct of relocation is the provision of infrastructure that supports new urban growth and economic development. This investment can also help alleviate poverty. Competition between various industries can bid up prices of materials and factors of production — land, labor, and capital. The labor supply is affected due to strong labor unions. Services and amenities become more costly due to over congestion so that more taxes are imposed. (Joshi 1985: 56) However, clusters can be remarkably resilient as long as businesses and governments cooperate to rejuvenate and transform the cluster. Cities become more competitive as they learn to share infrastructure and public services; access to natural resources; and skills and social capital. To appreciate the development potential of city clusters, it is important to go beyond the size of cities (as measured by population) and consider their relative economic function, power, and influence in national, urban, and regional development.
Rural-urban linkages should be utilized to make the whole region more competitive. For example, competition between industries bid up the prices of capital and labor in Kathmandu. It becomes necessary to think at scale and develop the region as a whole based on synergy. The comparative advantage of the core depends on its access to the resources of the region as a whole. Its market can be defined by the purchasing power of the region as a whole. The growth of Kathmandu region has not helped the rest of the country. It is the receiver of raw materials. It does not foster the development of lead sectors in the economy with high multiplier effects and high forward and backward linkages. The forward linkage of tourism for instance could be limited to better relations with other countries that may not lead to more investments. The backward linkage is substantial as it will urge more investments in infrastructure. However, if these could have been used by other business and household sectors it would have been better.
With regards to the rapidly urbanizing areas, it is necessary now to realize that the concept of growth corridors is not the efficient option. To make this self-financing, it is necessary to create city regions at different points of the corridor. By increasing the area of the city region, it may become possible to finance corridor development. An economic base and its resilience can be enhanced through the development of agro-processing industries and the development of export zones in border towns; which requires developing towns in the corridor as city regions with the integration of their surrounding rural areas. Agro-processing industries in city regions will help enhance livelihood opportunities in the rural regions and more people can be retained there. Cities in the terai can export their agri-products to the hills and can provide processing and packaging services for the hill raw products. Similarly trekking and eco-tourism will generate some income in the rural areas. Handicrafts are another potential sector for enhancing competitiveness. Potentially urbanized areas like Pokhara should focus on strengthening and expanding the city region. It is a fast growing important economic center with the potential to reinforce the Bhairahawa – Butwal – Pokhara corridor. Otherwise, the national urban policy to create urban economic regions will be as futile as creating regional development centers in the 1970s.
Inclusiveness helps to harness comparative advantages to make cities competitive. Nepal has the comparative advantage in terms of hydro-power, but it has not been able to utilize it, and power shortage is the major bottleneck for industrial transformation. Different factors that determine the competitiveness of cities are related with the demands of the global economy and are hence tied up with the integration of Nepal’s economy with the same. Enabling markets towards universal access to services with a view to minimizing the evils of urbanization should be the goal.
3. Infrastructure and Inclusive Service Delivery
The failure to manage urbanization in dense urban areas has led to what might be called collective and inclusive poverty. Dirt roads, polluted rivers, garbage dumping in public places, and traffic congestion with air and noise pollution affect the entire population. However, poverty in the poorer locations is alarming; and the poor are most affected due to environmental deterioration. As conventional ways have proved to be not effective in meeting the infrastructure needs of growing regions and cities, traditional ways such as water supply through wells, water spouts etc., agricultural use of solid wastes or energy from traditional sources, can co-exist and fill in the gaps. The blending of the two should be based on combined sustainability. It is not necessarily good for a society in transition to modern ways of living, although it may be inevitable.
Savings on transport costs are certainly one positive result of location. Mixed land use helps to impact the poor’s access to affordable, higher density shelter options that would result. It is more efficient to provide services in a dense and compact area. This used to be the beauty in the design of the medieval towns. Urban sprawl has not only destroyed valuable agricultural land but it has also made the provision of services costly and inadequate. The price of public transport is not affordable to many resulting in poor people walking long hours for work and for getting access to essential services.
Every region of the nation is urbanizing in its own way. In the process, opportunities are created but they are not shared equally. Research should be undertaken to relate service delivery with affordable standards and access as well as pricing policies. It should be directed towards increasing competitiveness in the supply of infrastructure and services and ensuring equitable pricing and fiscal policies. It should deal with issues of cost sharing through a rigorous study of innovative approaches like land pooling. For an analysis of fiscal sustainability, how investments are planned and made need to be studied. Ways of monitoring the costs of urbanization should be devised in order to recover costs. Various tools of impact analysis with a focus on the role of participatory planning should be used to increase affordability and reduce exclusion. It should devise tools to identify feasible projects and ways of financing them.
One consequence of economic development can be efficiency. Productivity can increase at the expense of labor so fast that there is less labor required; and the rich with little effort can manage lots of assets and the production system. As a result, the number of poor has increased and wages have declined. This has eroded inclusiveness.
4. Fiscal Sustainability of Municipalities and Institutions
There is an acute shortage of infrastructure and municipalities are not in a position to finance even basic infrastructure and service projects. The local resource base is still weak; although attempts were made to improve fiscal sustainability of the municipalities, they are seldom related to enhance their economic performance. Fiscal sustainability can be achieved only through reconciling the productive capacity of cities with planned urbanization. The long-term source of urban financing depends on the ability of local government to capture the wealth created through urbanization. It will not be easy for Nepalese cities to attain fiscal sustainability without inclusive service delivery because the overall affordability to pay is not adequate and there is a general lack of willingness to pay more for better services. A large number of the urban poor are engaged in the provision of services which makes cities more affordable to the more fortunate ones. Had there been no informal sector, prices of essential goods would become less affordable.
Due to poor management, there is a problem of local government fiscal sustainability. Cost recovery of most investments in infrastructure is rather poor. Under the patronage of government, cities try to maximize revenue collection within their allowable yet limited sources.
Revenue collection is not tied up with development initiatives. They seem to have apparently reached a saturation point within the given institutional environment. The meager amount collected is also shared with different tiers of government. As a result, due to serious flaws in the provision of services, productivity is not increasing. This anomaly has resulted in irregularities. The grants from the government come to the municipality in a bureaucratic way. In this context, the only way available to access basic services is to form partnership between stakeholders in urbanizing appropriate areas and share the benefits in a business-like manner. This will help enhance the fiscal sustainability of municipalities. They should be empowered to form partnerships not only with economic sectors but also with other spatial units forming collaborative efforts to launch projects that urbanize areas in a planned way generating more resources. It is wrong to presume that further urbanization in the complex urban areas will generate more resources to the desirable extent that will enhance fiscal sustainability. The overall competitiveness of the nation is at stake. The local resource base needs to be widened and deepened to ensure fiscal sustainability. Instead of creating opportunities for sustainable development and financing, tax is collected wherever possible without bothering about the future earnings. The policy is not based on sustainable earnings and the ability to pay tax.
Fiscal sustainability can be enhanced though inclusive urban development that broadens the basic service fee base of low-income users. Cities survive because of the services of the weaker section. The cost of servicing the city increases with exclusion. If people engage themselves in the provision of services as part of a service delivery system, these services will remain within the affordable reach of the people at large.
5. Conclusion
The analysis of urbanization in Nepal has shown that most parts of the country are rural with a very low level of urbanization. Only 11 municipalities out of 58 had a population of more than 40,000 and a density greater than 20 persons per ha according to the census of 2011. About one fifth of the national area has four fifths of the urban population. A large percentage of municipal land is under agricultural use. This has led to the premature conversion of farmland into urban uses. The competitiveness of agro-based activities has been affected. Provision of infrastructure has been less cost-effective.
Urbanization in different parts of Nepal differs widely. It is not easy to urbanize the vast rural areas, through a balanced development with sustainable use of environmental resources, in the near future due to political uncertainties resulting in the lack of viable urban development policies. These will have to be developed as rural regions for the time being. Out of the 15 planning regions, the most urbanized ones are Central Hill, Eastern and Central Terai and Western Hill. This has been influenced by changing resource conditions, access to infrastructure, and frequent changes in policy through the long transition phase to democracy and the difficult relationship with India. Urbanization in Nepal will largely depend on policy, investment and market forces with the trend of further concentration in these regions. Small city regions could be developed but sufficient investments are not foreseeable for corridor development.
Urban areas of Nepal have distinct comparative advantages in cultural tourism, services, crafts, and agro-processing, but they have not been able to turn them into competitive advantages. Lack of effective planning, limited city marketing techniques, and inadequate infrastructure are major constraints for urban growth and competitiveness.
Nepal needs to foster the sustainable growth of its urban regions, promote the development of urban regions, promote urbanizing rural regions and enhance the competitiveness of strategic urban clusters in lead activities including tourism, agro-processing and handicraft – to unleash urban-based growth and shape the spatial transformation in a sustainable way. There is overemphasis on linking regions having no economic connections with a number of so-called urban economic centers. Their influences on the surrounding areas where linkage opportunities exist are undermined.
For regions not integrated into the urban network, inputs for industries of city regions are drawn from them and their markets for their products are also their regions. Urbanization of rural regions should be facilitated not through the creation of bigger centers but through the promotion of small linkage centers. Such regions may not be able to retain either their economic base or their population as competitiveness is a relative term and all the regions cannot be equally competitive. The comparative advantage of each could provide direction to investment and inclusiveness.
Cities can form a national urban system based on an integrated economy. Such a system can unlock not yet integrated resources through the formation of market linkages with isolated economies. Cities are encouraged to expand their regions and form collaborative and thicker corridors that integrate more space into an integrated economy. Expansion of city regions and widening of corridors joining city regions will help to enhance the competitiveness of cities. This will enhance inclusiveness as most of the population can be integrated with economic development. Collaborative efforts among cities in proximity are the key to competiveness. It is sustained through the formation of clusters shown by the growth of Kathmandu region. Border towns have stagnated as clusters could not be formed and investment was denied.
To conclude, Nepal should adopt a two-pronged strategy. The first is managing the cluster economy of Kathmandu Valley through appropriate deconcentration in the light of increasing exclusion. The second strategy is inclusive city cluster or corridor development, especially, the inclusive development of the Biratnagar corridor based on trans-boundary collaboration.
References:
Joshi, Jibgar. 1985. Regional Strategy for Development: A Case Study of Nepal. Kathmandu: T. U. Press.
_______. 1997. Planning for Sustainable Development: Urban management in Nepal and South Asia. Kathmandu: Lajmina Joshi.
Rodwin, Lloyd. 1981. Cities and City Planning. New York: Plenum Press.