Developing Non-Urban Areas for Sustainable Development

1. Introduction

Across Sub-Saharan Africa, Asia, and Latin America, development concentrates heavily in capital cities. Research indicates that about two-thirds of the rural population in low-income countries live within two hours of a town, yet development priorities often bypass these areas in favor of primate cities . This pattern produces overcrowding, slums, and environmental stress in capitals while rural areas lose their most productive people to migration.

This paper makes a simple argument: capital-centric development is a policy choice, not an inevitability. Alternative pathways exist. Evidence from multiple countries shows that investing in non-urban areas can reduce poverty, create jobs, and improve lives without requiring mass migration to megacities. The paper focuses on practical lessons for policymakers in developing countries.

2. The Problem: Why Capital-Centric Development Fails

2.1 The Concentration Trap

When a single city dominates a country's economy, several problems emerge:

- Economic inefficiency: Beyond a certain population threshold, congestion costs increasingly offset density benefits
- Social inequity: Rural populations receive poorer services. The rural-urban poverty gap persists across the developing world
- Environmental damage: Long-distance migration increases transport emissions
- Political marginalization: Rural interests receive less attention when power concentrates in capitals

The experience of Amaravati, India's new capital city, illustrates the risks of top-down, capital-centric megaprojects. The financialized logic of the project led to the de-territorialization of agrarian landscapes and ultimately created conditions for loss of popular support .

However, counterexamples exist. Brazil successfully decentralized growth from Rio de Janeiro and São Paulo to multiple regional hubs. India has seen Bangalore, Hyderabad, and Pune rise relative to Mumbai and Delhi. The trap can be broken.

2.2 Why This Pattern Persists

Concentrated development persists because powerful interests benefit from it. Capital-based elites benefit from proximity to decision-makers. International donors concentrate offices and projects in capitals. Private investors follow existing infrastructure. Breaking this pattern requires deliberate policy intervention.

Research on decentralization in Africa by Atisa, Zemrani, and Weiss (2021) finds that despite the theoretical promise of local governance for sustainability, "there are no concrete national initiatives that have been developed to date to promote sustainability within the decentralization framework" . This implementation gap represents both a challenge and an opportunity.

3. What Works: Evidence from Five Countries

3.1 Cambodia: Small Funds, Big Results

Cambodia's Commune Sangkat Fund (CSF) redirected 3% of the national budget to local governments. Using an allocation formula based on population and poverty rates, the program allowed communes to decide their own investment priorities.

Results: The CSF significantly reduced poverty at both initial and subsequent stages. Investment spending based on local information and local representation of preferences was key to the program's impact. The program created substantial capital stock in communes and delivered large returns measured in poverty reduction .

Why it succeeded: Unlike decentralization failures documented elsewhere (such as Indonesia's 1999 laws which kept resource-rich provinces in poverty despite massive redistributions), Cambodia's program combined funding with genuine local decision-making authority and built administrative capacity simultaneously .

Limitations: The study did not test whether CSF resources would have produced even greater poverty reduction if invested in Phnom Penh instead. Results may not scale to countries with different baseline conditions.

Lesson: Even modest fiscal decentralization works when local communities control spending decisions.

3.2 Switzerland: Decentralized Economic Complexity

Switzerland's federal system enables decentralized economic development that generates positive externalities for society and the environment. Two case studies illustrate this:

- Monthey: A small town where productive migrants and embedded multinational companies increased the knowledge and know-how of local SMEs. The successful collaboration of insiders and outsiders accounts for the region's innovation and competitiveness .

- Canton of Solothurn: Succeeded in nurturing globally competitive export-oriented SMEs through the federalist system .

Important Caution: The importance of local social capital makes it hard to replicate such success stories. The success of these inclusive economic ecosystems "may only be understood in the specific geographical, historical and political context" .

Lesson: Federalist systems that empower subnational units can create unexpected hubs of innovation, but local context matters enormously.

3.3 Tanzania: Towns as Natural Migration Destinations

Research from Kagera, Tanzania, using an 18-year panel of individuals, reveals an important behavioural pattern: while city migrants see their welfare increase much more than those moving to towns, many more rural-urban migrants end up in towns.

Why? Distance deterrence largely trumps the attraction of cities' greater wealth. Education mitigates these effects (lesser deterrence from distance, greater attraction from wealth), while poverty reduces the attraction of wealth .

Key finding: About two-thirds of the rural population in low-income countries live within two hours of a town, underscoring the importance of vibrant towns for inclusive development .

Lesson: Towns are not "suboptimal" destinations they are the realistic and natural destinations for most rural-urban migrants. Investing in towns means investing in where people actually go.

3.4 Nigeria: Non-Farm Employment Builds Climate Resilience

Non-farm employment in rural areas does more than provide income it also increases adaptive capacity to climate change. Research on smallholder farmers in Southwest Nigeria using cross-sectional data and endogenous treatment effect models found that rural non-farm jobs increase farmers' adaptive capacities .

Participants in non-farm employment would have used fewer climate change adaptation techniques if they had not participated in such work. The study concludes that "efforts to boost rural development must provide more employment opportunities for farmers, particularly during the off-cropping time" .

Lesson: Non-farm employment is not just an economic development tool but a climate adaptation strategy.

3.5 Portugal: Success in Low-Density Regions

Research on a Portuguese region with one of Europe's lowest development rates found that peripheral rural areas are not "condemned to decline." Three local policy experiments succeeded by combining strategic vision with capable local leadership .

Lesson: Even disadvantaged regions can thrive with good local governance.

3.6 What About Failures?

Decentralisation has failed in many contexts. Key obstacles identified in the literature include:

- Indonesia (1999 laws): Laws aimed at empowering regional parliaments kept resource-rich provinces in poverty despite massive redistributions
- Kerala, India: Decentralisation produced incentives for extensive patronage politics rather than breaking down structural inequalities
- Across Africa: There are "no concrete national initiatives that have been developed to date to promote sustainability within the decentralisation framework"

These failures teach that decentralisation requires: (a) anti-capture mechanisms, (b) transparency and accountability, (c) minimum local administrative capacity before funds are devolved, and (d) alignment with sustainability principles.

4. Theory of Change

How do the recommended policies produce outcomes?

Local development funds → Local control over spending → Projects match local priorities → Efficient resource use → Poverty reduction

Secondary city investment → Regional economic hubs → Rural hinterlands access markets → Non-farm job creation → Reduced outmigration

Non-farm employment support → Increased household income → Greater climate adaptation capacity → Farm resilience → Sustainable agriculture

Local governance capacity building → Better service delivery → Improved health/education → Higher productivity → Sustainable growth

The arrows in this chain represent assumptions that must hold. For example: local control requires that local governments are not captured by elites. Matching local priorities requires participatory planning. Efficient resource use requires basic financial management capacity. Each assumption points to a necessary precondition.

5. Policy Recommendations with Indicators and Sequencing

5.1 Create Local Development Funds

Action: Establish funds sending 3-10% of national budget to local governments using objective formulas (population + poverty rates). Allow local decision-making with participatory planning.

Evidence basis: Cambodia's CSF program demonstrated that even 3% of the national budget can create substantial capital stock and deliver large returns in poverty reduction .

Measurable indicator: Reduction in capital city's share of national budget (baseline to target: e.g., 60% to 50% within 5 years)

Sequencing: Pilot in 5-10 communes/districts first. Expand after 2-3 years of evaluation.

5.2 Invest in Secondary Cities

Action: Identify 3-5 secondary cities with growth potential. Invest in transport links to rural hinterlands. Ensure adequate schools, clinics, and utilities.

Evidence basis: Tanzanian data shows about two-thirds of rural populations live within two hours of a town, and distance deterrence makes towns the natural destination for most migrants .

Measurable indicator: Ratio of capital city GDP per capita to secondary city GDP per capita (target: reduction)

Sequencing: Select cities with existing economic activity. Do not build from scratch.

5.3 Support Non-Farm Rural Jobs

Action: Improve digital connectivity for remote work and e-commerce. Provide vocational training aligned with local opportunities (agro-processing, tourism, logistics).

Evidence basis: Nigerian research demonstrates that non-farm employment increases smallholder farmers' adaptive capacity to climate change . Swiss experience shows that SMEs in non-urban areas can become globally competitive .

Measurable indicator: Share of rural employment in non-farm sectors (baseline to target) AND climate adaptation practice adoption rates among non-farm households

Sequencing: Start with one value chain before expanding.

5.4 Strengthen Rural Services

Action: Ensure rural health facilities have staffing and equipment. Maintain rural schools. Improve transport networks to nearby towns.

Measurable indicator: Rural-urban gap in secondary school enrolment (target: reduction)

Sequencing: Prioritise one district per region for intensive service upgrades before national rollout.

5.5 Build Local Governance Capacity

Action: Training programs for local officials. Participatory planning systems. Inter-local cooperation mechanisms.

Evidence basis: Swiss federalism demonstrates how subnational capacity enables decentralized economic development . African research shows that sustainability outcomes require legal structures, mediating factors, and decision-making spheres aligned at local levels .

Measurable indicator: Local government performance score (existing assessment tools available in many countries)

Sequencing: This is a precondition for other reforms. Do not devolve funds before minimum capacity exists.

5.6 Address Political Obstacles

Action: Transparent funding formulas (reducing discretion for patronage). Civil society budget monitoring. Independent evaluation. Build rural political constituencies.

Evidence basis: Research on decentralisation failures (Indonesia, Kerala) shows that without anti-capture mechanisms, local funds can be captured by elites or used for patronage .

Measurable indicator: Share of national parliament from rural constituencies OR adoption of rural caucus legislation

Sequencing: Begin with transparency measures (low political cost). Build rural political power gradually.

6. Implementation Sequencing: A Realistic Pathway

Most developing countries cannot implement all six recommendations simultaneously. Suggested sequence:

Phase 1 (Years 1-3): Foundation

- Assess local governance capacity in 5-10 pilot areas (Recommendation 5.5)
- Build capacity where weak
- Establish transparent funding formulas (5.6)

Phase 2 (Years 3-6): Pilots

- Launch local development fund pilots (5.1) in areas with adequate capacity
- Select 2-3 secondary cities for investment (5.2) based on existing economic activity and population proximity (see Tanzania evidence on distance deterrence )
- Begin one non-farm job value chain pilot (5.3)

Phase 3 (Years 6-10): Expansion

- Expand local funds to all areas meeting capacity thresholds
- Roll out rural service improvements (5.4) based on pilot lessons
- Institutionalize transparency mechanisms (5.6)

This phased approach recognises that premature decentralisation can fail, as seen in Indonesia, Kerala, and across much of Africa .

7. Limitations and Cautions

The evidence presented has important limitations that policymakers should recognise:

Context specificity: Swiss success depends on local social capital and federalist traditions that "makes it hard to replicate such success stories" . Cambodia's success occurred in a specific post-conflict context.

Historical cases may not generalise: The Swiss model reflects centuries of federalist development.

The paper presents selected successful cases with acknowledged failures: Decentralisation has failed in Indonesia, parts of India, and across much of Africa . Readers should examine these failures to understand conditions for success.

Trade-offs exist: Decentralised development may increase per capita infrastructure costs. It may require significant capacity-building investment before returns materialise.

Implementation gaps remain: Despite Agenda 21 and the 2030 Agenda emphasizing local government's role in sustainability, "there are no concrete national initiatives that have been developed to date" across Africa .

8. Conclusion

The concentration of development in capital cities is not inevitable. Cambodia, Switzerland, Tanzania (as documented in migration pattern research), Nigeria (for non-farm employment benefits), and Portugal demonstrate alternative pathways. However, decentralization failures show that conditions matter: local capacity, anti-capture mechanisms, and transparency are prerequisites.

For countries currently experiencing capital-centric development, three actions matter most:

1. Redirect 3-10% of the budget to local-controlled funds, but only after assessing local capacity
2. Invest in secondary cities as regional hubs, recognising that towns are where most rural-urban migrants actually go
3. Support non-farm rural jobs, which also builds climate resilience

The alternative—continuing to allow development to concentrate ever more intensely in primate cities—is neither economically efficient nor socially sustainable. Balanced territorial development is not charity for rural areas. It is smart economics for entire nations.

But policymakers must be realistic: decentralisation is politically difficult, technically demanding, and easily captured. Start small. Measure everything. Expand only what works.

References

Aerni, P. (2021). Decentralized Economic Complexity in Switzerland and Its Contribution to Inclusive and Sustainable Change. Sustainability, 13(8), 4181.

Atisa, G., Zemrani, A., & Weiss, M. (2021). Decentralized governments: local empowerment and sustainable development challenges in Africa. Environment, Development and Sustainability, 23(3), 3349-3367.

Danso-Abbeam, G., et al. (2021). Climate change adaptation strategies by smallholder farmers in Nigeria: does non-farm employment play any role? Heliyon, 7(6), e07162.

De Weerdt, J., Christiaensen, L., & Kanbur, R. (2021). When Distance Drives Destination, Towns Can Stimulate Development. IZA Discussion Paper No. 14157.

De Weerdt, J., & Kanbur, R. (2021). When Distance Drives Destination, Towns Can Stimulate Development. World Bank e-Library.

Gawande, K., Kobb, D. P., & Ny Boret. (2021). Can decentralization lower poverty? Cambodia's Commune and Sangkat Fund. World Development, 146, 105548.

Krishna, S. (2021). Fiscal Decentralisation in India: An Outcome Mapping of State Finance Commissions. Springer.

Morrow, E. (2021). Synoptic Infrastructures. Banister Fletcher Series: Speculations and Mismeasures, Paris.