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Abstract
The paper views urbanization as a driver of economic growth as well as poverty alleviation in Nepal. Nepal has natural resource advantage; but this is not fully used due to lack of market coordination and low productivity. The only way to raise and sustain economic growth is to enhance the competitiveness of cities using their comparative advantages. Nepal has not been able to make use of such advantages due to infrastructure deficit and institutional constraints. Cities are suffering from acute shortage of infrastructure and services. This has limited their competitiveness; and hindered the economic transition of the country. There is a lack of inclusiveness in service delivery as evidenced by poor services in slum areas. It has become difficult to sustain the inclusive nature of traditional towns. There is an increasing exclusion of the poor from service delivery. There is a lack of a holistic approach to positioning cities as engines of economic growth, business incubation, and skills enhancement. Urban infrastructure is not adequate to sustain the growth impulses, which has led to the erosion of competitiveness of cities. There are problems related to fiscal sustainability. Failure to mobilize the private sector has slowed down economic growth. The purpose of the paper is to address such issues and challenges of managing urbanization in Nepal. It aims to explore ways and means of transforming Nepal’s economy through increased investments in the lead activities of her urban regions that have comparative advantages.
The paper will begin with an analysis of the trend of urbanization in Nepal and explain its economic causes and implications. The pace of urbanization is highest in Nepal among the countries of South Asia. Urbanization in Nepal has led to economic growth. There is a high correlation between the two. It has helped to reduce poverty. The contribution of the urban sector to GDP is increasing fast. However, the access of the poor to services has decreased over the years. The paper will discusses the inclusive nature of traditional towns of Nepal and explore the economic causes of increasing exclusion. It will explore the implications of urbanization on the increasing trend of exclusion in service delivery. It will discuss the impacts of global economy and exposure to outside culture on livability. It will assess the extent of exclusion of slum areas and poorer people in the urbanization process. It will explore ways and means of halting the trend of increasing disparity with regional imbalances and formation of slums and squatters. Due to constraints in connectivity and power shortage, it has become difficult to use the linkage opportunities and growth impulses. The sudden openness after the change of 1990 and the growing remittance led to increase in dependency on outside economies. This led to import-intensive activities, real estate development, and housing at the cost of basic industries that enhance economic resilience. As a result, cities’ competitiveness has decreased. The paper will investigate how infrastructure can be better planned to sustain growth impulses making cities economically more competitive. It will deal with how to make cities more competitive in attracting investments. It will discuss the products of urban planning efforts and show how these can be made more useful in sustaining economic development through the delivery of infrastructure and services for housing and business. The growing economic role of the cities with the use of their comparative advantages has been threatened by the growing infrastructure deficits. Recognizing this, the paper will deal with how to make investments in infrastructure more result-oriented. It will show how infrastructure should be managed to enable cities to attract investments.
The paper will identify urban regions of Nepal. It will then explore the causes of failure to utilize their comparative advantages for development. In order to use the opportunities created by urbanization, it is necessary to invest in their lead activities. It will assess the impact of planning efforts on shaping the urbanization. Urbanizing rural areas in a planned way is the shortest way to urban growth and to sustain national productivity. It will try to show how to foster and sustain the growth of Nepal’s urban regions and enhance their competitiveness in ensuring sustainable development. It will suggest strategies to increase their competitiveness. It will work on how to make a breakthrough in creating more resilient and more self-reliant urban economies. This will be directed towards making economic transformation through the creation of export base. Finally, the paper will make an analysis of institutional set-up. It will deal with the required changes in institution related to governance and financing. It will suggest strategies for improving fiscal sustainability.

ABSTRACT
The pace of urbanization 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. They are suffering from acute shortage of infrastructure and services. This has made it difficult to sustain the growth impulses, which have made cities less competitive with increasing exclusion. Adjustments take place to sustain competitiveness at the cost of inclusiveness.
Urbanization has helped a key role in reducing poverty in Nepal. The inclusiveness of cities has helped to make it sustainable in the past. However, the opportunities created by it are not used for making cities more inclusive. One of its challenges at present is growing exclusion. There is a lack of inclusiveness in service delivery as evidenced by the poor level of urban services and ever-growing slum areas. The paper deals with urbanization process in Nepal and analyzes the trend. It views inclusive development as a necessary condition for managing the provision of urban services. It explores the causes of the increasing trend of exclusion in service delivery. It highlights the distributive role of the cities and tries to show how the poor and peripheral regions are mainstreamed into the national development process.
The paper deals with the emerging issues of inclusive development in the context of rapid urbanization in Nepal. It highlights the inclusive element of urban development as an integral part of the larger urbanization process. It explores the characteristics of an inclusive city. It highlights the potentials of an inclusive city in making development more sustainable. It works on the relationship between inclusiveness and city clusters. It shows how inclusive nature of urban development helped the growth of the Kathmandu Valley in the past. It also shows how this can be replicated in the shaping of new urban centres and in the renewal of traditional towns.
Cities were never found to show any diseconomies of scale, as they became able to contain and sustain the growing disparity in a political way. In the wake of global competition, the costs in terms of human sufferings of rapid urban growth are generally ignored. The notion of competitiveness is a potent one. Its adverse impacts on the poor will be reduced through inclusiveness. Cities should rely on their collaborative advantages in order to sustain their competitiveness. The towns in the foothills and the terai could be encouraged to form city clusters and growth corridors to enhance inclusive urban growth. The paper suggests for the inclusive development of the Biratnagar corridor based on trans-boundary collaboration.
The paper aims to explore ways and means of transforming Nepal’s economy through increased investments in the lead activities of urban regions with comparative advantages that promote inclusiveness. It deals with the ways and means of halting the trend of increasing disparity with regional imbalances and formation of slums and squatters. It explores the causes of increasing exclusion. It shows how the participation of the people in service delivery will reduce this. In order to use the opportunities created by urbanization, it is necessary to invest in lead activities with high forward and backward linkages. The paper works on how to make a breakthrough in creating more resilient and more self-reliant urban economies. Future costs of urbanization are likely to increase at a rapid rate because of depletion of resources. The paper examines the fiscal deficit of municipalities; and suggests strategies for reducing it. There are problems related to fiscal sustainability due to exclusion. The situation will improve as more and more people get integrated into the process of service delivery. For this, it is necessary to support cities’ to build inclusiveness into their investment agenda. The paper tries to identify what investments would make them more inclusive. It deals with the changes in governance and financing required for enhancing inclusiveness. It deals with how investments should be planned for inclusive service delivery and fiscal sustainability of cities.
The government has not been able to appreciate the sustainability role of cities. The paper underscores the need for raising awareness; draws inferences from the way cities respond to state actions; and examines the role of the government in making cities more inclusive. It finally drives at policy-making for the promotion of such cities through a two-pronged strategy. The first is managing the cluster economy of Kathmandu in the light of increasing exclusion and the need for deconcentration. The second is the promotion of inclusive city clusters along the viable corridors.

This book is concerned with housing and urban development in Nepal. Nepal is urbanizing fast. The level of urbanization was only 3.6% in 1971. It is, at present, about 17%. During the period, the total population increased from 11.6 million to about 26.5 millions.
The urban sector contributes significantly to national development. Not only that the contribution of the sector to the national GDP is high, most activities take place in urban areas. It is but natural that problems of coordination are nowhere as acute as in the urban areas. Urbanization has influenced human life in many ways not only in urban areas but also in the rural regions of the world. To-day almost all the aspects of development respond to new demands that it has urged.
After the mid 1980s, there had been many positive changes as regards to housing and urban development in Nepal. Enormous investments were made in the sector. Savings are mobilized through housing finance and infrastructure investments. There is an adequate increase in human resources engaged in urban development. Local resource base has been widened. People have become more aware and empowered. The absolute poverty level in urban areas has dropped significantly. More of the financial resources have been drawn to urban centers. There has been a growing realization of the need for decentralized government action. People are empowered as they become engaged in community action on the provision of urban services. This has also urged political changes. It is becoming more difficult to provide infrastructure d services to the growing population. Housing conditions, in both rural and urban areas, have deteriorated. As a result, poverty has increased; and living environment has not improved.
The purpose of the book is twofold. The first is to present the existing situation of housing and urban development and to analyze the trend of urbanization. It makes an analytical review of the experiences and efforts made since 1976. After dealing with the problems and issues, it attempts to suggest strategies to facilitate housing and urban development in the country. The second is concerned with the process of implementation. It works on governance; and shows why we ought to pursue a participatory process of development. It tries to link governance with the provision of housing and urban services in Nepal.
The concept of housing should be comprehensive. People migrate to towns and cities for jobs and income. As they earn, they build their houses in towns and cities. Housing process initiated by the people influences the development of human settlements markedly. Towns and cities are created, shaped, and molded by their actions.
When people are engaged in the production of goods and services, there are more jobs, production, and economic growth. With the increasing cost of the provision of services, poverty will be more linked to these in the coming days. The cost of service provision will also increase as natural resources get used up. People should be encouraged to invest in their settlements and use their resources, talents, and skills. It should be realized that the cost of getting services through other means is costly and will be still more costly in the future.
Chapter I gives a general profile of Nepal and deals with the increasing importance of human settlements development. Housing process helps the development of towns and cities. With the increase in the level of services, settlements should be developed as viable economic entities. Recognizing its role in rural and national development, urban development is getting more and more attention.
Chapter II is concerned with urbanization in Nepal. It provides the distribution of urban population over the nation; and presents the trend to the year 2021. It explores the relationship between urbanization and development. It deals with the linkages between urban and rural areas.
The next chapter puts forward the concept of housing and housing process. The changes since 1976 are also presented with a view to evaluate the progress made in the sector. It depicts the existing situation of housing in Nepal. It makes a general assessment of the existing level of urban services. It also shows that, despite many positive changes, living and working environment in urban areas has not improved. Housing is being considered more as economic goods to be produced and traded.
Chapter IV gives a review of urban policies and programs. It discusses the problems and issues of urban development. It works on the goals and objectives of urban development. Urban policies and strategies are viewed at two levels: the urban level and the supra urban level. Even though the pace of urbanization is rapid, Nepal is still predominantly rural. Urban areas by definition are more developed and hence more capable of exploiting the benefits of urbanization. The spatial dimension of an urban strategy has a direct bearing on the formation of a viable national urban system. To reach the rural areas, one has to pass through a system of urban settlements. Cities should provide services to their hinterland and the resources should be used in a sustainable way. It is necessary to develop city regions.
Chapter V deals with housing strategies and different options of housing delivery. The importance of standards and norms is discussed and criteria for setting these are analyzed. The key components of housing are land, finance, building materials and construction technology. Organized housing and land development, upgrading and owner-builder housing are the major options of housing delivery. The large proportion of the population in our cities can be called slum dwellers; the worst manifestation of urban poverty, deprivation, and exclusion in the modern world. The chapter also deals with urban upgrading and regeneration. Chapter VI deals with land as a key element of housing. It gives different perspectives on land and discusses different land development strategies. Chapter VII deals with technology and building materials as important building blocks. For housing and urban development, technology is critical. Nepal has a good potential to develop local resources for housing. However, the progress is slow; and much needs to be achieved in terms of building materials and construction technology. On one hand, it is necessary to transform the traditional ways to make them more sustainable. On the other hand, it is necessary to adapt modern alternatives to local conditions. Chapter VIII deals with housing finance and analyzes the problems of urban financing. Housing and urban development policies are presently not backed by investment commitments; and financing mechanisms are not clear. In order to get more resources, it is necessary to enhance the returns to investments and contribute to poverty alleviation. Based on the returns that would be generated, future investments become available. Infrastructure costs need to be recovered to make their production self-financing. Resources need to be drawn from the market for the construction and maintenance of infrastructure. When the costs of these can be recouped through the use of the infrastructure, sustainable funding will become possible. The people at large have found it increasingly difficult to meet their housing needs. The widening gap between the investment required and the affordability of the target group is the major problem. The ever-increasing land prices, inadequate housing loans, and poor cost recovery on urban investments are the major problems in the provision of housing and urban services. It is necessary to enhance fiscal sustainability.
The government makes policies but is not committed to their implementation. Irrespective of what the government does, changes do take place and policies must be responsive to changes. In view of these, chapter IX tries to analyze the implementation process. Implementation analysis will help to identify the problems and issues relating to the management of urban services. It is necessary to understand how the process is being implemented to make any sort of intervention. It should be linked with the formulation of policies in order to make them clear and consistent. Understanding of the policies and their evaluation in terms of the realization of goals and results are essential since development takes place because of several conflicting forces. It is necessary to make goals and polices explicit and clear. Some of the policies are not intended to be implemented. It is not easy to ensure coordination as many actors are managing the process of urban development. It is necessary to mobilize resources owned by all for urban development. It should influence other policies for ensuring sustainable provision of goods and services in a fair manner. After making an implementation analysis, the chapter deals with some institutional requirements.
Chapter X gives a historical perspective and a review on efforts towards decentralization. It deals with strategies for deepening it. The need to link it with local empowerment is highlighted. It is concerned with strategies for strengthening local government action.
The implementation of policies, plans, and programs rests on governance. The subject matter of chapter XI is urban governance. It deals with the changing role of government. The role of the national government is changing rather fast. It is necessary to emphasize on local governance. Instead of controlling, good governance depends on influencing the actors that their actions become compatible with agreed goals. The concept of good governance needs to be linked with effective delivery of services. It is necessary to strengthen the local base. The goal of decentralization should be to improve people’s participation. It should promote inclusive development and ensure access of all to services. Institution evolves through the working of key players, the government, business, and the civil society. It must deal with the people and their organizations. It suggests strategies for enhancing participation and privatization as well as partnership building.. Cities should work closely with urban planning agencies. Cities develop from a multiplicity of large and small initiatives and investments. There is an increased sharing of power between national and city government. With this, cities have to guide, support and encourage families, community organizations, and private sector to contribute to housing and urban development. It is essential that all the territorial controls within their areas should be exercised either by them or with their consent. They should be encouraged to produce and sell services and recover costs. To sustain the business of urban goods and services, it is necessary to satisfy the service takers; and this is not happening. By providing services, we have to make our cities more competitive. Most investments are made in real estate for making returns in a short period. The challenge is how to use the limited resources in more productive ways. Urban financing mechanisms need to be improved for the sustainable provision of infrastructure and services with adequate cost recovery. Self-financing schemes such as land readjustment projects should be promoted. As a public good, infrastructure is most needed; and in most cases provides more benefits to the society compared to others. This is why the private sector needs to be attracted more to investing in infrastructure. Chapter XII is the concluding chapter with a summary drawing the main points of the book.

Urbanization is a major determinant of economic growth in Nepal. Howeveer it has increased inequality, particularly in terms of access to urban goods and services. Most people are coping with differnt types of pressures due to urbanization to get access to essential services while a few are consuming the bulk of the urban goods and services. This is the major challenge of sustainable development in Nepal and the new urban agenda should address this issue.
Just a few years ago, I have mentioned in my book “Managing Environment and Cities for Sustainable Development” that the balancing of the three elements of sustaiable development – growth, equity and environment, is specific to the stage of development of a particular country and a poor country cannot afford to contribute to equity or environment much. The principle of CBDR also shows that the richer nations who are more responsibe in depleting the Planet’s resource should have mroe responsibility. If urbanization makes some people more fortunate, they should be encouraged to contribute to social capital. The implementation of this requires governance with an objective towards inclusion and an commitment to realize the costs of the consumption of environmental resources. Urban legislaton should be construed towards this end to make urbanization and the new urban agenda work for inclusive sustainable growth,