Challenges of urbanization
Unless proactively managed, rapid urban population growth may pose a demographic challenge
as cities struggle to provide jobs, infrastructure and services, and housing. Infrastructure and
service delivery are already undermined in many cities by growing urban extents and by stretched
municipal budgets, while formal labor markets fail to match the supply of and demand for jobs,
which causes the labor force for additional search cost. Likewise, according to Abdullah (2009),
one billion people is expected to live in slums from 2011 to 2030.
The challenge of urbanization arises when it fails to meet the demands of growing numbers of
urban residents in access to jobs, infrastructure and services, and housing. Moreover, unplanned
urban settlement and more informal economic activities (i.e. employment in informal selfemployment)
has disastrous consequence in the economy. It has the following consequences:
1. Migration
2. Difficulty to provide adequate infrastructure and services.
3. Poor quality and often overcrowded living conditions are the major housing challenges experienced by urban households.
4. Increasing urban poverty
5. Municipal finances are inadequate to fund urban development.
6. Expansion of informal business activities
Despite these challenges, New economic and market development strategies are emerging rapidly
as a direct result of urban population growth and innovation, particularly in green building,
renewable energy, alternative fuels, information and communications technologies, and advanced
material production. Besides, urban regions gather together a critical mass of people with highly
specialized and advanced skills who know how to engage in particular productive activities.