Urban economic development is about making cities more attractive, fostering investment, reducing environmental impact, indirectly creating jobs and generating tax revenue that can be used to finance local government services. Sustainable growth, new media, creativity and innovation are the cornerstones of modern urban economic development and shape the image of cities.

Today, many cities face considerable competition in attracting business. If a city is seen as a desirable location to do business, it attracts new investment and start-ups, which can bring a new innovative force to the entire urban region.

Structural change and declining populations in Germany and other industrialised countries further exacerbate the competition between cities. The first signs of shortages of skilled workers are already apparent. With the migration of jobs and people, regional disparities in economic power and tax revenues are also widening.

By contrast, rural-urban migration and swelling population numbers are the challenges facing most cities in developing countries and emerging economies. However, these trends also offer potential. The booming informal sector is particularly important in this context. It provides work for well over half of all self-employed and employed people. The informal sector can offer new arrivals an entry point into economic life and a livelihood, and can be the first rung on the economic ladder - this applies both to individuals and to entire districts of cities.

In recent years a very wide range of economic development concepts and instruments have emerged. The focus is on promoting sustainable economic growth which combines social, environmental and economic considerations. The main entry points for economic development are promoting start-ups, supporting existing small and medium-sized enterprises (SMEs) (support for SMEs, fostering innovation) and attracting new businesses to the area (business development).

In terms of approach, these instruments vary little, whether they are used in developing countries, emerging economies or industrialised nations. However, there are big differences in organisational and technological terms.

In developing countries and poorer urban regions, there is generally a focus on establishing and systematising coherent economic development. The German-Namibian programme Partnership for economic growth, for instance, works at a number of levels. On the basis of new and regularly gathered economic data, dialogue forums are organised with the government and the private sector, so as to improve the framework for local economic development through the national development plan. At local level, in 13 cities and regions businesses and city governments work together to develop and implement appropriate strategies. The capacities of business associations and providers of business services are also developed to enable them to offer SMEs better advice and infrastructure services, and to give SMEs easier access to capital by offering new financial products.

More economically developed urban centres often focus on sensitising important players to new trends and market opportunities. The green urban economy approach, for instance, aims to foster regional economic activity and green value chains.