Southeast Asia’s urban centres are facing unprecedented challenges as they attempt to finance the transition to sustainable, resilient, and climate-friendly cities, according to the latest analysis by the Organisation for Economic Co-operation and Development (OECD). The report—“Financing Sustainable Cities in Southeast Asia”—delves into the critical question of how city governments in the rapidly urbanising ASEAN-5 (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) can marshal the investments necessary to achieve their ambitious sustainability agendas. Against a backdrop of rising carbon emissions, increased climate risks, and mounting infrastructure needs, the report’s findings have major implications for cities across the region, including Bangkok, Chiang Mai, and other key Thai urban areas.
Southeast Asia’s urban population is expected to grow at an extraordinary pace over the coming decades, putting increasing pressure on infrastructure, public services, and environmental resources. By 2050, over 65% of the region’s population is projected to live in urban areas, according to United Nations data (UN DESA). This rapid urbanisation has propelled the need for sustainable solutions to tackle issues such as air pollution, wastewater management, affordable housing, public transport, and resilience to extreme weather events—all of which require significant upfront investment and ongoing financial support. The OECD report addresses why sustainable finance has become a make-or-break issue for Southeast Asian cities, and why unlocking the right mix of public and private resources is crucial for the region’s future (OECD report page).
One of the key findings highlighted in the report is the urgent need to improve public finance frameworks in order to enable greater private sector participation in sustainable urban development. Historically, city governments in the ASEAN-5 have relied heavily on national government transfers and traditional municipal revenues such as property taxes and user fees. However, these sources are often insufficient and inflexible, particularly when it comes to the large-scale investments required for green infrastructure, transit systems, and climate adaptation projects. The OECD analysis underscores that only with smarter, more predictable fiscal transfers and strengthened local revenue collection can Southeast Asian cities build creditworthiness and attract outside financial partners.
The report also points out that private investment in urban sustainability remains well below potential. Structural barriers—such as uncertain regulatory environments, limited access to capital markets, and weak project preparation capacity—discourage domestic and international investors from backing long-term city projects. According to an official with the OECD Urban Policy team, “Southeast Asia’s cities are at the frontier of both climate risk and opportunity, but they urgently need reforms in financial management and investment frameworks to truly scale up sustainable urban investment. Without such reforms, cities will struggle to deliver on their climate and development goals.”
For Thailand, the lessons are particularly significant. Bangkok, as the country’s economic hub, faces acute challenges from flooding and air pollution, while fast-growing provincial cities like Khon Kaen and Chiang Mai are dealing with rising housing and transport pressures. Current Thai fiscal structures offer limited autonomy for municipal governments to issue debt or launch public-private partnerships, making it tough to assemble the funding needed for transformative projects. According to a research director at a leading Thai policy institute, “Our cities are already grappling with the impacts of climate change, yet the financing options at the local level remain narrow. The OECD’s call for empowering city governments—both financially and administratively—should be a wake-up call for policymakers.”
The OECD highlights a set of practical pathways for cities to expand their financing options. These include reforming intergovernmental fiscal relations so that cities receive more predictable and performance-linked transfers, enhancing local tax and fee collection systems, and streamlining regulations to make it easier for municipalities to access loans and capital markets. At the same time, the report emphasises the value of innovative financial solutions, such as green bonds, blended finance structures, and guarantees that can reduce the risks for private investors in sustainable urban projects (OECD green bonds overview).
Crucially, the report calls for stronger project development capacity within city governments, pointing out that many viable urban sustainability projects in Southeast Asia fail to secure funding simply because they are not well-prepared or bankable. International organisations and governments could play a bigger role in supporting project preparation facilities and local technical expertise. For Thai cities, partnerships with multilateral lenders, regional development banks, and the private sector could provide the technical and financial lift needed to turn sustainability blueprints into reality.
From a historical perspective, this is not the first time Southeast Asian cities have faced major funding obstacles. Bangkok, for example, has struggled since the 1990s to balance the books for mass transit, drainage, and affordable housing improvements. What sets today’s challenge apart is the urgency of meeting international climate targets under the Paris Agreement and the United Nations Sustainable Development Goals (SDGs). If Southeast Asian cities fail to align their financial systems with long-term sustainability needs, there is a major risk of locking in high-carbon, vulnerable infrastructure for decades to come (IPCC urban climate report).
Looking forward, experts are cautiously optimistic that the tide may be turning. Thailand has shown some recent progress, with Bangkok launching pilot green bond issuances and Chiang Mai participating in international urban resilience programs. However, the scale of need is enormous: the Asian Development Bank estimates that infrastructure investment required in developing Asia (including Southeast Asia) will reach $1.7 trillion annually through 2030 (ADB infrastructure report). Closing this financing gap demands not only innovation in local and regional policy, but a fundamental political commitment to decentralisation and sustainable development.
For Thai readers, the OECD’s report is both a warning and a call to action. Individuals can advocate for more transparent municipal budgeting and stronger involvement of community stakeholders in sustainability planning. At the local level, city officials and business stakeholders are urged to press for reforms that strengthen their ability to access diverse financing sources and tap into the growing global market for sustainable investment. National policymakers, meanwhile, should prioritise changes in fiscal frameworks that give cities the tools they need to create livable, climate-resilient urban environments.
In practical terms, Thai cities need to: (1) build up their financial management capacity; (2) seek targeted international technical and financial support for preparing sustainable urban projects; (3) harness community participation to ensure development reflects local needs; and (4) press for regulatory reforms that open new avenues for public and private sustainable investment. Citizens can play a role by staying informed and engaging with local government planning processes, ensuring that urban development truly benefits both people and the planet.
For more details, readers can consult the full OECD report, available at the organisation’s publications portal (OECD Sustainable Cities Report). The challenges may be formidable, but with collaborative effort, Thailand and Southeast Asia’s cities can lay the financial foundations for a more sustainable future.