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Philippine cities provide the highest levels of service and living standards in the country. Much of what happens to the country in terms of production and employment, income and consumption, and access to basic services and amenities will continue to be determined by the performance of its urban system. Overall, however, the Philippines is characterized by its lack of urban competitiveness. Although its urban areas account for an overwhelming majority of national economic growth, they have also been underperforming relative to their potentials and other cities in East Asia. In particular, the urban system is plagued by high transaction costs and production inefficiencies; lack of infrastructure and service facilities; inability to attract significant amounts of investments; outmigration of talent; diminishing competitiveness of its primary international gateway and service center (Metro Manila); lack of financial resources; high poverty incidence; deteriorating urban environment; and weak governance. Addressing these problems is not easy or simple. Invariably, however, it is rooted in (1) improving the competitiveness of the urban system, (2) addressing urban poverty and (3) housing problems, (4) building sustainable communities, and (5) improving governance specifically, strengthening the role of local governments in managing the environment and in ensuring the sustainability of communities.