Why Some Crowded Cities Become Prosperous While Others Stay Poor: Lessons from Asia

 When people imagine a booming city, they often picture Hong Kong or Singapore...—tiny territories with little land, no natural resources, and populations packed into limited space. Yet they have become some of the richest urban economies in the world.

On the other side of Asia, Dhaka, Manila, and Mumbai... are also crowded, energetic, and full of ambition. But instead of wealth, they are often associated with slums, poverty, and underdevelopment.

This contrast raises one of the most important questions in urban economics:

👉 Why do some dense cities thrive, while others struggle in poverty?

The Urban Poverty Paradox

Cities are supposed to be engines of growth. They concentrate talent, resources, and opportunities. Economists call this the “agglomeration effect”: when people and businesses cluster together, productivity rises.

But the paradox is clear: many fast-growing cities in the developing world do not become richer. Instead, they produce:

• endless informal housing (slums),

• traffic gridlock,

• weak infrastructure,

• fragile governance,

• and low productivity despite massive populations.

Dhaka today holds over 23 million people, yet contributes relatively little to global trade. Mumbai, with 20+ million residents, has shining skyscrapers next to sprawling slums where over 40% of the population lives in informal housing. Manila faces similar inequality, with nearly 4 million people living in slums despite its role as the Philippines’ capital.

So why does density equal prosperity in Hong Kong and Singapore, but poverty elsewhere?

Why Hong Kong and Singapore... Became Rich

1. Strategic Location and Global Connectivity

   • Both cities positioned themselves as global gateways.

   • Singapore controls one of the busiest ports in the world, sitting at the crossroads of Asia’s shipping lanes.

   • Hong Kong became China’s financial and trading hub, linking East and West for over a century.

2. Rule of Law and Effective Governance

   • Stable institutions, low corruption, and strong property rights created trust for investors.

   • In Singapore, Lee Kuan Yew’s government built an efficient bureaucracy and cracked down on corruption.

   • Hong Kong maintained transparent legal and financial systems under British rule, later serving as a bridge to China’s booming economy.

3. Massive Investment in Human Capital

   • Education, public health, and skills training were national priorities.

   • Singapore transformed its workforce into a globally competitive talent pool, attracting multinational corporations.

   • Both cities embraced English as a global business language, integrating seamlessly into world trade.

4. World-Class Urban Planning

   • Singapore’s Housing Development Board (HDB) ensured nearly every citizen had access to affordable housing—avoiding the slum explosion seen in Dhaka or Manila.

   • Public transport, sanitation, and infrastructure were built ahead of demand, not after collapse.

5. Open Economies

   • Instead of closing themselves off, both cities embraced globalization.

   • Singapore shifted from low-cost manufacturing to finance, biotech, and high-tech industries.

   • Hong Kong became Asia’s finance capital, with deep capital markets and free trade policies.

Why Dhaka, Manila, and Mumbai... Struggle

1. Weak Governance and Corruption

   • In Bangladesh, the Philippines, and India, political instability and entrenched corruption limit effective urban policy.

   • Land use is often chaotic, and infrastructure projects suffer from mismanagement.

2. Uncontrolled Urban Migration

   • Millions move into these cities every year, overwhelming housing and job markets.

   • Without strong public housing programs, informal settlements explode.

3. Insufficient Infrastructure

   • Traffic jams in Manila cost the economy an estimated $70 million a day.

   • Dhaka loses billions annually to poor logistics and power shortages.

   • Mumbai’s drainage and transport systems collapse every monsoon.

4. Low Value-Added Economies

   • Many jobs remain in informal or low-wage sectors (street vending, garment factories, call centers).

   • Unlike Hong Kong or Singapore, these cities never transitioned fully into global financial or high-tech hubs.

5. Inequality and Social Exclusion

   • Wealth concentrates in elites, while the majority live in precarious conditions.

   • Policies often serve business interests but neglect inclusive development.

Cambodia’s Radical Alternative: The Urban Void

While Dhaka, Manila, and Mumbai wrestled with urban poverty, Cambodia took a path unseen elsewhere in the 20th century: forced de-urbanization.

• On April 17, 1975, after capturing Phnom Penh, the Khmer Rouge forcibly evacuated the entire population of the capital—millions of people marched into the countryside.

• Banks, schools, and markets were shut down. Currency itself was abolished.

• The regime believed cities were parasites feeding on the “pure” labor of peasants. Only by eliminating urban life could Cambodia achieve equality and self-sufficiency.

This was not urban poverty. It was urban annihilation.

The Consequences of the Urban Void

The consequences were devastating:

• Economic collapse
  Without cities, Cambodia lost its trade networks, service sector, and skilled workforce. The idea that rural collectives could replace the economic functions of Phnom Penh was a fantasy. Productivity collapsed, agriculture itself declined, and famine spread.

• Human catastrophe
  Intellectuals, professionals, and urbanites were persecuted. Millions died from starvation, disease, and executions. The attempt to destroy the city became an attempt to destroy people.

• Historical regression
  While neighbors advanced, Cambodia regressed decades. By the 1980s, Thailand and Vietnam were industrializing; Singapore was a global hub; China was experimenting with special economic zones. Cambodia, by contrast, had no functioning urban economy left.

The City as an Engine, Not a Parasite

The Khmer Rouge’s ideology treated cities as parasitic. But history proves the opposite: cities are the most productive human invention.

• Agglomeration economies: Firms and people cluster in cities, sharing infrastructure, labor pools, and ideas. This concentration drives innovation and efficiency.

• Scale and specialization: Urban markets are large enough to support diverse industries, from finance to creative economies.

• Connectivity: Ports, airports, and digital hubs in cities connect nations to global trade and knowledge flows.

The Path Forward

The lesson is clear: cities are not the enemy. They are the solution—if managed well.

For developing megacities, the way forward includes:

• Investing in housing (to replace slums with affordable, livable homes).

• Expanding infrastructure (transport, electricity, sanitation, digital networks).

• Strengthening governance (fighting corruption, enforcing land use, ensuring fairness).

• Upgrading economies (moving from low-wage labor to higher value-added industries).

• Inclusive growth (ensuring that development benefits the urban poor, not just elites).

Hong Kong and Singapore prove that even the smallest, most resource-scarce places can become global powerhouses—if governance, planning, and openness align. Dhaka, Manila, and Mumbai remind us that urbanization without management leads to poverty, not prosperity.

And Cambodia shows us the darkest path of all: when a nation destroys its cities, it destroys its future.

The real choice for the developing world is not whether to urbanize—it is how to urbanize. Done right, cities are the beating heart of economic growth. Done wrong, they become sprawling traps of inequality and despair.

Chatle