Economic Gravity: The Rise of Asian Cities’ Powerhouses 

Jakarta’s new status as the world’s largest city underscores the fact that the urban century has firmly arrived in Southeast Asia. According to a recent United Nations report, the Indonesian capital now has nearly 42 million residents in its metropolitan area, placing it ahead of Dhaka and Tokyo in the global city rankings.

Being larger does not necessarily mean being more productive; still, the news about Jakarta is not just symbolic — it indicates a long-term trend of growing urban centres in Asia that serve as production markets. Metropolises in China are global manufacturing leaders and will eventually become consumption economies. Regional hubs in Japan and South Korea have extensive production networks, and cities in East Asia, Southeast Asia, and South Asia all boast strong manufacturing and service hubs.

The last three decades have transformed the region’s urban landscape. The percentage of Southeast Asians living in cities has nearly doubled. By 2035, most of the region’s population is expected to live in urban areas. These cities now account for the majority of the country’s GDP. Jakarta, Manila, and Bangkok alone make up more than a third of their respective countries’ economic output.

Singapore remains the most advanced city-economy in the region. The island-city is a hub for finance, logistics, and knowledge-intensive industries. But other cities are gaining momentum. Ho Chi Minh City is rapidly cementing its role in electronics and software services, while Penang has evolved to incorporate a sophisticated semiconductor manufacturing ecosystem. Bangkok continues to attract regional headquarters and design-related production. Each of these metropolitan regions is becoming not just a local centre of growth, but a node in Southeast Asia’s broader production network. 

Cities are critical. Early in the 2000s, management guru Kenichi Ohmae said that regional economies are increasingly the scale at which global production takes place. For example, the Batam–Bintan–Karimun (BBK) triangle keeps growing, supporting cross-border manufacturing between Indonesia and Singapore by combining low-cost labour with high-end logistics and financial services. Although it faces some challenges, Batam leads the triangle with global investment commitments reaching US$10.5 billion. 

The Johor-Singapore Special Economic Zone (JS-SEZ) is a strategic economic partnership between Malaysia and Singapore that provides integrated energy, urban planning, and services. It has already attracted US$5.5 billion in investments since its inception. 

Similarly, the greater Kuala Lumpur and Penang region anchors Malaysia’s role in electronics and precision engineering. These agglomerations thrive because they are long-term, with roots dating back to the early 1970s. They also combine physical connectivity with skilled labour pools and reliable utilities — conditions that make them indispensable nodes in global value chains. 

China’s Greater Bay Area (GBA) — which includes Guangzhou and Shenzhen and is the world’s largest production hub — demonstrates the benefits of integrated production ecosystems. It is so complex and big that there is no comparison to other regional hubs; however, the development of global supply chains shows that proximity remains important for positioning regional and global value chains, and regional production ecosystems matter.

By combining urban planning and urban economics to provide cities with infrastructure, better governance, connectivity, and investment in human capital, the region’s cities will become the workshops of the world and laboratories of innovation.

While ASEAN member states have recognised the role of connectivity and urbanisation, most national strategies still treat cities as administrative units rather than economic actors. City authorities and planners employ urban planning to manage issues such as zoning, social services, and housing. Economists play a crucial role in building urban economies with high-quality physical infrastructure, transportation, connectivity, and energy systems. Alain Bertaud, a recognised urban economist, has argued that planners and economists must work together if countries want to have productive cities. 

To unlock cities’ full potential, several policy priorities stand out. First, urban planning should be integrated into ASEAN urbanisation agendas, particularly in logistics, digital infrastructure, and industrial clustering. Coordinated planning with local and central governments can reduce duplication, enhance inter-city trade corridors, and create synergies across borders.

Second, city-level capacity for industrial policy and investment promotion must be enhanced. Many Southeast Asian municipalities lack the institutional tools and technical expertise to effectively engage investors or develop place-based strategies. Building these skills would enable cities to tailor policies to their comparative advantages — whether in electronics, agritech, creative industries, or logistics. 

Third, fostering skills development tied to urban industry needs is crucial. Vocational training and partnerships between local universities and industry clusters can ensure a continuous pipeline of qualified workers. This not only enhances productivity but also broadens the social benefits of economic growth. Regional cooperation platforms, such as ASEAN’s Committee on Sustainable Urbanisation, could serve as venues for sharing best practices in managing congestion, affordable housing, environmental compliance, and supply-chain oversight. These issues directly influence investor confidence and urban productivity but are often tackled in isolation. 

As Asian cities deepen their integration into global value chains, their roles will become increasingly central. Urban areas are where the region’s economic, social, and environmental challenges converge. If managed strategically, large human settlements like Jakarta may unlock urban dynamism to drive sustained productivity growth and regional competitiveness. This is the task pending for cities in middle-income countries in the Asia Pacific to advance from being merely big to being productive. 

By combining urban planning and urban economics to provide cities with infrastructure, better governance, connectivity, and investment in human capital, the region’s cities will become the workshops of the world and laboratories of innovation. Jakarta’s new-found status is a wake-up call for a better future. 

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