The United Nations projects that by 2050, urban areas will swell in size by 2.5 billion people, with 90 percent of that growth occurring in Asia and Africa.

Urbanization presents significant development benefits—boosting innovation, human capital accumulation, and access to opportunities—but it also strains existing physical infrastructure, social services, and public health systems.

To manage the challenges and maximize the benefits of rapid growth, national and municipal governments, civil society, and development partners (among others) must weigh interrelated financial, political, cultural, economic, and technical considerations. For many, the big question is whether cities should build anew in urban peripheries or retrofit and reinvest in urban cores.

At a recent event hosted by the Urban Institute, in partnership with the World Bank, experts considered this question through the lens of one rapidly growing city: Dhaka, Bangladesh, examined in a new World Bank report, Toward Greater Dhaka.

Should cities fix what they already have or start fresh?

Of course, the solution isn’t necessarily binary—cities can do both—but the priorities chosen and the strategies pursued can have far-reaching consequences for access to opportunities, rate and composition of economic growth, strength of social development, and sustainability of land use.

In recent decades, countries like Egypt, India, and China have built or planned new cities outside the congested cores of fast-growing metropolitan areas to better accommodate and channel growth. These new cities often boast modern infrastructure and aspirational themes and are tangible representations of a city’s, government’s, or culture’s vision for the future, and they are inherently wrapped up in the dynamics of the local and national political economy.

The 20th-century development of suburbs in developed countries reflected a similar urge to start over. But starting from scratch has proven insufficient: simply building new cities or suburbs in greenfields doesn’t address overcrowding and underinvestment in urban cores, and it doesn’t guarantee new developments will become sustainable places of prosperity and opportunity.

Retrofitting dense urban cores could yield significant returns, aligning public investments with the market forces that encouraged existing densification and productivity.

From left to right, panelists Charles Cadwell (Urban Institute), Indermit Gill (Duke University), Yue Li (World Bank), and Ammar Malik (Harvard University) at an event hosted by Urban Institute, in partnership with the World Bank.

Yet building outward is often a valid part of a bigger solution, particularly in places that, like Dhaka, are already densely populated and have limited capacity to accommodate further growth in situ. Building outward may require a market-based approach that leverages early public investment in key infrastructure, encouraging growth where it can be accommodated without dictating specific development plans.

Accounting for political economy and equity is critical

Any approach must recognize the unique, and sometimes competing, incentives and preferences of stakeholders: landowners, property developers, local government officials, businesses, and the population expected to live and work in the newly developed land.

These groups may disagree on important issues like control and use of land, distribution of development windfalls, displacement and its ripple effects, and changes to labor market access. Who are the winners and losers of the status quo and the new development plan? How do power dynamics manifest in the urban structure? What role do institutions play, and where are there frictions? How is the political economy interconnected?

Keeping these questions in mind is essential to ensure plans do not simply reward vested interests, using public resources to create new enclaves of the wealthy or, conversely, disconnected slums of the poor.

Pulling off this approach requires government and civil society capacity, aligned incentives among different stakeholders, and sufficient planning foresight and humility. Development partners, like the World Bank, and research organizations, like Urban, can help these parties ask the right questions, apply a framework for projecting growth and weighing options, and inform data-driven planning.