The world's population is expected to rise by 2 billion to close to 8 billion over the next 25 years with the majority of these people living in cities in low-income countries, according to a UN report.
'The State of the World's Cities' predicts that number of slum dwellers will double to nearly two billion by 2030 and that nearly five billion people will live in cities by 2030.
However, only 28 million of the increase in the urban population will be in high-income countries.
The UN agency warned that globalisation was leading to relocation of manufacturing off-shore to developing economies. The report says that the "socio-economic consequences of globalisation weaken access to basic infrastructure and housing and fuel the creation of and expansion of slums".
This rapid rise in slum dwellings and poverty is likely to lead to flourishing extremism, the UN agency said.
The report urges governments to invest in slums and work on solutions to the simmering problems
Ms Tibaijuka said world trade rules needed to take more account of the needs of the poor, and called for tight regulation of privatised companies providing basic services like water or refuse collection.
The 'State of the World's Cities' report also attacks the argument that unfettered trade is a certain route to wider developing-world prosperity. The truth, it warns, is of a "race to the bottom" as companies shift capital and jobs across borders seeking cheaper labour.
This phenomena is not confined to developing or third world cities. The report notes that previously productive US industrial cities like Detroit, Chicago, New York and San Francisco have lost large shares of their employment base.
Ms Tibaijuka called for firm controls on private companies. "We need the private sector ... (but) privatisation without regulatory capacity is corruption. If you privatise where there is no regulation, either you don't know what you are doing or there are ulterior motives," she said.
UN -Habitat director Ms Anna Tibaijuka said: "The poor are not terrorists, but the hopelessness in which people find themselves can create conducive conditions for criminals to manipulate the situation. The risks are that we see more (cultural) differences; we are bound to see more extremism because of desperation".