The impacts of urbanization on growth and equality, and on urban and rural poverty, are well documented, but do not discuss alternative models of urbanization. While the relationship between urbanization and growth (and poverty reduction in general) is often well established, less is discussed about the forms and causes of newly emerging urban poverty and exclusion, and how they differ for different city sizes. This paper analyzes the potential for poverty reduction with balanced regional urbanization through the development of second-tier cities and secondary towns in the Southeast Asia. It discusses the spatial growth patterns that have an impact on sustainable development and urban–rural poverty links.