Southeast Asia is experiencing rapid economic growth and urbanization. Today, more than 40 per cent of its population lives in urban areas. Decentralization policies have shifted responsibilities from national to local governments, while privatization policies have shifted the burden of delivering public services from the public to the private sector. Such policies are expected to increase the efficient functioning of urban areas and support further economic growth. Experiences in Southeast Asia show that many local governments lack human and financial resources to perform their new functions adequately, or become committed to supporting the private sector at the expense of the interests of vulnerable groups like the urban poor and of future generations. The article argues that reliance on the market for urban development and public services delivery requires strong local governments adhering to principles of good urban governance, to ensure not only productive but also inclusive and sustainable urban development.
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