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The territorial approach is multi-sector and thus very appropriate in local rural and urban settings because, at this level, the sectoral approach cannot be fruitful. When using the territorial approach, it is difficult to separate the discussion of local rural and urban development for many reasons.

For instance, many of the economic activities in urban centres are interrelat- ed with the surrounding rural economy through consumption, production, employment, and financial linkages, and through various types of economic and social service provision. This is equally to say that the expansion of an ur-

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ban economy is very dependent on dynamics occurring in rural areas, while the reverse is also true. In other words, the nature and extent of econom- ic linkages between urban centres, their hinterland, and the wider economy constitute key factors shaping territorial local development dynamics and potential. This means that policies and interventions aimed at developing the territorial economy should take into consideration the existing patterns of interaction between the rural and urban economies and should seek to re- inforce synergetic links and mitigate adverse impacts arising from resource flows and exchanges between both types of locations. The bottom line is that a neglect of the urban aspects of the territorial economy undermines its de- velopment potential (Wandschneider 2004).

For many decades the conception that the urban economy grows at the ex- pense of rural areas has largely dominated and influenced policy and devel- opment thinking. This influence has resulted in policies biased towards ur- ban centres. Nevertheless, since the late 1970s and early 1980s, there has been a re-thinking of the nature and impact of rural–urban linkages, their mutual dependency, and the critical role of town and city networks in the process of territorial economic development (Kammeier 2002; Satterthwaite & Tacoli 2003).

A close examination of the interaction between urban and rural centres may reveal that the development of urban centres is substantially dependent on the growth, and not stagnation, of the surrounding rural economy. This growth comes as a result of an increase in demand for goods and services produced within urban centres and of the expansion of the rural surplus available for processing and/or marketing in these centres. Consequently, an expansion of urban centres cannot in any way disassociate itself from the dynamics of the rural economy. In other words—with the exception of global cities which can survive in another manner—if a local urban centre has a thriving economy, there is reason to believe that the surrounding rural economies are doing well rather than shrinking (Wandschneider 2004). Thus, policy makers and plan- ners have the responsibility to promote the reciprocal relationship of the lo- cal rural and local urban economies, instead of prioritizing the development of one at the expense of the other. They should consider them as co-existing territories.

To enhance effective territorial economic development, there is a need for a shift in focus from very large cities to local urban centres, because the enter- prise sector in these locations tends to rely heavily on the surrounding ru- ral economy both as a supplier of inputs (including labour through seasonal

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migration) and as a market for goods and services. At the same time, town dwellers often engage in farming, while nearby rural residents pursue a whole range of livelihood activities in urban centres. Increased employment oppor- tunities at local urban centres may therefore contribute to curbing long-dis- tance permanent and temporary migration to large city centres, mitigating its undesirable economic and social consequences both locally and in des- tination areas (Wandschneider 2004). In fact, local urban centres not only serve as consumption outlets and local distribution points for farm and non- farm village production, but also act as links for their hinterland to the wider economy through the supply of imported inputs and consumption goods and the export of rural surplus production.

It is important to note, however, that in spite of the fruitful links between lo- cal urban centres and rural areas, the literature (Douglass 1998; Satterthwaite & Tacoli 2003) recognizes this link may be weak and not always beneficial from a poverty reduction viewpoint. For instance, by acting as distribution points for imported goods, these local urban centres may expose local pro- ducers to outside competition, while as financial centres they may divert ru- ral savings to outside areas or simply fail to channel resources to agriculture. Disadvantaged groups in village communities may also benefit little from proximity to local urban centres owing to lack of productive assets, social barriers to participation in economic activity, and lack of access to social and economic service provision at the local urban centres (Wandschneider 2004). This calls for local government intervention to target disadvantaged groups to avoid economic and social inequalities becoming too large.