Acknowledgements 5 Executive Summary 7 1. Introduction 8 2. City Competitiveness in the Global economy: Megatrends 12 3. City Competitiveness:
and How to Reform 56 Members of the Global Agenda Council on Competitiveness 2012-2014 As leaders look for ways to make their economies more competitive
Yet while some cities are successful in attracting investment and talent, and ensuring prosperity and good public services for their citizens,
or the inability to provide basic services, jobs or housing. The World Economic Forum has been studying competitiveness for over 30 years by focusing on the assessment of the productive potential of countries in The Global Competitiveness Report series.
and Clément Gignac, Chief Economist and Senior vice-president, Industrial Alliance Insurance and Financial services, Canada. Special thanks go to Margareta Drzeniek Hanouz, Head of the Global Competitiveness team,
and Clément Gignac, Senior vice-president and Chief Economist, Industrial Alliance Insurance and Financial services, Canada as well as Council member Orlando Ayala, Chairman of Emerging Markets, Microsoft Corporation, USA, sparked the idea
The final sprint the two weeks before our deadline placed particular demands on his time. My thanks also go to Margareta Drzeniek Hanouz for her excellent work as World Economic Forum coordinator of our Council.
the Economic policy and Research Foundation of Turkey (TEPAV) for the Manisa mini case study; and Amit Kapoor, President and Chief executive officer, India Council on Competitiveness,
they condition the greater operating environment for cities around the world. It is up to cities to take advantage of these megatrends,
as well as to mitigate negative forces such as rising inequality, pressure on natural resources and the environment, and a diminution of trust in public authorities.
Productivity is about the efficient use of available resources that drives economic growth. But productivity has to be maintained sustainable beyond the short term
including (1) institutions,(2) policies and regulation of the business environment,(3) hard connectivity, and (4) soft connectivity.
Windows of opportunity Cities should look out for opportunities, often during a political or economic crisis, to push through the required number of decisive reforms (as Singapore
2. Policies and regulation of the business environment (what to reform) Getting the basics right Stable and prudent macroeconomic policies, efficient and simple taxation, a flexible labour market, openness to trade and foreign
direct investment, simple and transparent domestic business regulation, a safety net that protects the most vulnerable these are the primary lessons for good public policy.
Developing own foreign economic policies Cities should create their own policies on trade foreign direct investment, tourism and attracting foreign talent,
and advance these globally as far as possible (as in Singapore; Dubai; Manisa, Turkey; Hyderabad and Ahmedabad, India;
closing them will require massive investments to avoid barriers to productivity and growth. Urban density is preferable to urban sprawl This includes building tall in city centres,
and the environment. Hong kong SAR and Singapore are great examples of urban density, as is Chicago, USA in recent years.
and Hong kong SAR's mass transit system. 4. Soft connectivity Soft connectivity, the city's social capital, is as important as hard connectivity in the 21st century's knowledge economy
which spurs ideas, entrepreneurship, innovation and growth. Education is the ultimate soft connectivity US cities such as Boston,
Cities should grasp this opportunity, experiment with new rules and put reforms on a fast track.
Yet, many cities are struggling to add on services and infrastructure amid chaotic growth, from the favelas of Brazil to the tugurios of Colombia and the shanty towns of Africa.
such as the Global City Competitiveness Index of the Economist Intelligence Unit, A t. Kearney's Global Cities Index, Citylab's Global Economic Power Index and the Mori Memorial Foundation
and can be useful to city leaders elsewhere. 8 A Report of the Global Agenda Council on Competitiveness 2. City Competitiveness in the Global economy:
David Ricardo, in a letter to his fellow economist Thomas Robert Malthus, spoke of the wealth and poverty of nations the grandest of all questions in political economy.
Jane Jacobs. More than ever, cities are the lifeblood of the global economy. Their competitiveness increasingly determines the wealth and poverty of nations, regions and the world.
For most people, the map of the global economy that comes to mind is of nation states interconnected through flows of trade, capital, people and technology.
An alternative map of the global economy comes to mind: one of cities connected across land borders, seas and oceans through the exchange of goods and services, foreign direct investment, migrant and short-term workers,
and border-hopping technology. Throughout history, the most intensive cross-border economic transactions have been between cities mostly those located on coastlines.
Competition among cities in late medieval and early modern Europe enabled many European regions to catch up with
Such decentralized political competition spawned a commercial revolution and paved the way for subsequent scientific, agricultural and industrial revolutions.
The world economy, spurred by urbanization trends, is shifting south and east, particularly to Asia.
and services going beyond daily necessities. Of these members, 600 million will live in the top 440 cities in the developing world;
and investment that could add $30 trillion annually to the world economy. By 2025, these cities will be home to 235 million upper-middle-class households with an annual income of more than $20,
Cities often boost standards of living by providing job opportunities and access to services. The fact that people keep arriving to the slums of very poor cities indicates that life is perceived to be even worse in rural areas.
will based a city global economy pull up non-urban hinterlands, or will cities become rich enclaves surrounded by marginalized rural areas?
where premium rewards go to the owners of capital and to global talent highly educated and skilled professionals.
Sustainability Sustainability can be defined as long-term economic development compatible with available natural resources and the preservation of the natural environment.
pressures grow on resources and the environment. Per-capita energy consumption worldwide has doubled more than since 1950.
Global demand for energy could increase by up to 50%by 2030. According to the International Energy Agency, energy demand is projected to double in developing Asia by that time,
fuelled by industrial revolutions in China and other parts of the developing world. Despite efforts to develop renewable energy,
At the same time, growing demand for food collides with the lack of new land for agriculture. And, energy and food production are water-intensive,
food and water, given their concentrations of people and economic activity, and are responsible for over half of global greenhouse gas emissions.
It has reduced dramatically transport and communication costs. Coupled with policies to open markets, it has dispersed economic activity around the world,
allowing comparative advantage to help generate positive outcomes; but, at the same time, it has concentrated economic activity in particular locations.
Cities have been the big beneficiaries: they enable firms to reap economies of scale and scope, and bring talented people together not least entrepreneurs to share ideas
and to today's world of satellites, ever more powerful computers, mobile communications and the internet enabling the city to make better use of technology than any other location.
The difference today is the phenomenal increase in the speed of communications, with a fourfold growth in total international bandwidth between 2007 and 2011.
whether incremental or disruptive from access to global markets, new opportunities in education and training, improving healthcare, storing
The information and communication technologies (ICT) revolution and the opening of new markets have allowed fragmenting production across borders,
but they are enabled by supporting services, notably financial, telecommunications, transport, logistics and other business services.
GVCS unite exports, imports, foreign direct investment, critical technology and intellectual property in a seamless whole.
having non-discriminatory policies for trade and foreign direct investment; protecting private property rights, including intellectual property;
and maintaining an efficient environment for doing business. The Competitiveness of Cities 11 The same applies to cities.
But they stand to gain disproportionately as GVCS expand, both sectorally from ICT products to other parts of manufacturing, into services,
These are all opportunities for cities to become more deeply involved in GVCS. Megatrend 6:
Technological advances can spur concentration of economic activity, but they also impel decentralization of choices and decision-making.
The internet, mobile communications and social media have empowered vast numbers of individuals across the globe to work,
This creates a window of opportunity for provincial and city governments to reactivate themselves. Decentralized political systems
condition the environment facing cities around the world. Some megatrends, notably urbanization and its clustering effects, are centripetal,
How can they mitigate negative forces such as rising inequality, pressure on natural resources and the environment,
Productivity is the efficiency with which an economy uses available inputs to produce outputs; it determines the rate of return on investments,
which fundamentally drives economic growth. In other words, a more competitive economy is likely to grow faster over time,
and productivity-based competitiveness sets an economy's level of prosperity. Productivity has to be maintained sustainable that is
beyond the short term and in a way that reconciles economic, environmental and social goals. Analysing City Competitiveness:
A Four-Part Taxonomy At first glance, it seems difficult to develop a framework for competitiveness that can be relevant to a breathtakingly broad array of conditions.
The central drivers of productivity feed into sustainable economic growth. Align the criteria with those of the Forum's Global Competitiveness Report:
how social capital is built and how cooperation is encouraged provides a much more nuanced challenge for those wishing to understand how to drive change.
including taking advantage of crises and critical turning points 2. Policies and regulation of the business environment
Macroeconomic policies related to the city's fiscal policies (revenue and expenditure) Business-environment policies and regulations related to markets for goods, services, capital and labour, many of which are captured well in the World bank's Doing Business index.
Foreign economic policies that position a city in the global economy through international trade, finance, foreign direct investment (FDI), foreign workers and tourism, all as part of clusters of economic activity linked to global value chains 3
Hard connectivity is the core physical infrastructure connecting people to energy, water and other services.
Transportation (air, road and rail) Communications Energy Logistics systems (especially those that feed into regional production clusters and global value chains) Hard connectivity seems to have been especially important during the industrial age.
roads and airports. 4. Soft connectivity Soft connectivity is the social capital that makes investments in hard infrastructure and new technology (e g. broadband access) more productive,
and to entrepreneurship, innovation and economic growth, just as they were in cities at the heart of the pre-modern European and Asian miracles.
and through public-private linkages) Education and training systems Innovative ecosystems involving small and medium-sized enterprises (SMES) Entrepreneurial culture Hubs for intellectual property,
Lagos (Nigeria's megacity/commercial capital; and Chicago, with a population of just under 10 million but projected to become a megacity in the next decade.
Smart Targeting of Foreign Direct Investment and the Gig Chattanooga, Tennessee offers a strong example of how a city can leverage a customized innovation and probusiness strategy to rebound from economic decline.
Yet in recent years, the city attracted $4 billion in new foreign investment, revitalized its downtown,
Chattanooga's innovation strategy couples investment in cutting-edge technology, workforce skills and forging next-generation public-private partnerships.
as the steel industry on which it depended was devastated The Competitiveness of Cities 15 in the late 20th century by slowing demand, higher costs and intense competition.
including poor workforce retention, low levels of innovation, a challenging start-up environment and weak coordination among different levels of leadership.
when Pittsburgh was named the most liveable city in the United states by the Economist Intelligence Unit.
Innovation Works, a state-run programme, promoted and supported entrepreneurship. Private-public partnerships like Innovation Works have become a powerful tool not only for directing finance to deserving start-ups and growing companies,
but also in providing channels of communication and cooperation between various economic stakeholders. This sort of effort was combined with the already existing foundations of a skilled workforce
balanced and resilient economy, making Pittsburgh a model for economic, environmental and quality-of-life transformation. Beyond the previously mentioned success in advanced manufacturing,
and business services (hosting two of the 15 largest US law firms); global business (home to 100 or more billion-dollar-plus businesses;
Energy has long been an important part of the city's economy, but that may be becoming less true.
and more to do with a concerted effort to diversify its economy. A number of actions can be credited with causing the city's strong performance.
and economic activities shifted westward. But St louis now finds itself in a very different position than similar cities in the American Midwest through its newfound success as a global biotech hub and top destination for tech start-ups.
and are making large investments into the area (last year, Donald Danforth Plant Science Center and Monsanto announced investments of nearly $500 million to their existing facilities).
The St louis Economic Development Partnership has founded the Helix Biotech Incubator as a way to further strengthen the biotech community.
the Incubator will make St louis an even more attractive location to base a biotech start-up. With the industry offering higher-than-average salaries and drawing young talent from around the globe,
biotech has the potential to cause positive ripples across the city's economy. St louis'new competitiveness has gone not unnoticed.
and smart tax incentives aimed at attracting investment Boeing would be eligible for a $16. 8 million incentive from the state of Missouri).
Thanks to the Arch Grants and other pro-tech incentives, St louis has established a diversified and forward-looking economy against
which other cities can benchmark themselves. Chicagoland: Institutional Coordination for Competitiveness3 With 9. 5 million people, Chicago is the eighth largest city in the world with a GDP of over $500 billion.
and even competed with each other for attracting talent and investment. Despite world-class universities and research labs
The Illinois Science and Technology Coalition focuses on supporting these firms by bringing venture capital to the region.
Different regions are cooperating instead of competing for investment and talent. Creating one connected regional labour market linked to a multimodal transportation network should give a boost to the region's ability to attract investors.
and has won recently awards as an attractive investment destination, as well as for imaginative urban planning. With 2. 4 million people, Medellin contributes 11%of Colombia's GDP
The combination of the metro and cableway represents hard connectivity infrastructure that fosters soft connectivity inclusiveness and involvement, building social capital and trust among low-income communities.
and information and communication technology clusters. The Medellin Innovation District master plan has been developed with Ruta N (the N Route), a compound focused on business and innovation development,
which together create an urban centre that supports the drive towards a knowledge-based society and economy.
This plan addresses top-of-mind concerns like economic growth, government transparency, quality of life, mobility and the environment.
interactive applications and other services to its citizens. Through the connectivity provided by this digital platform,
and improve citizen services, support the growth of small business and promote a connected city that provides better quality of life and new opportunities for its residents.
But Buenos aires still has a long way to go to get its basics right more efficient municipal government, solid public finances, business-friendly regulation and hard connectivity.
Benefiting from massive economic transfers from western Germany and investments in new roads, railroads and an upgraded airport,
From the Command Economy to Knowledge-Intensiveness and Cultural Flair13 Located in the southwestern corner of Poland,
but the city also attracted knowledge-services outsourcing, backoffice operations and manufacturing. Investors appreciated the presence of a skilled population, favourable conditions such as assistance with administrative procedures, availability of land for development and good connectivity to European cities.
Wroclaw also successfully attracted EU funds for investment and the development of the private sector,
with Wroclaw being named the 2016 European Capital of Culture. Investments in transport infrastructure undertaken ahead of the UEFA European Football Championship 2012 helped address one of the city's main challenges.
Wroclaw is connected fairly well with Europe by air, road and rail, compared to other Polish cities.
Entrepreneurship also needs to be encouraged to ensure that R&d efforts continue to be translated into economic growth.
since itself by focusing on culture and investing in a greener economy. Unlike other major cities that chose iconic cultural attractions (Bilbao and the Guggenheim Museum;
The city has reinvented also itself around the preservation of the environment, and received the European Green Capital Award in 2013 for combating climate change, preserving nature,
and for biodiversity, air quality, noise reduction and waste management. Nantes'transport policy and climate plans were especially strong.
This produced a bottom-up set of proposals for the future development of the city, around a more innovative economy;
Foreign Investment Attraction and Success14 Manisa is a city in western Turkey about one hour from the scenic coastal city of Izmir.
A special characteristic of Manisa is its polycentric structure in terms of its population and economics. Only 26%of the city's population lives in the provincial centre.
Manisa's investment climate is a highly competitive one. In 2005, it was named the best European city for foreign investment
taking the crown among 200 European cities. Some of the characteristics that contributed to Manisa's success were its industrial infrastructure (especially energy infrastructure), its relative close proximity to the port of Izmir and its rapid development of a world-class and high-quality business services environment.
Manisa has attracted such major European firms as Bosch and Siemens. While industry leads in Manisa,
Scheduled investments include a major new hospital and a vast Epcot Center for the Islamic world
with its new modern university, hold conferences on major issues of the day, with experts in science, math and letters.
then there is virtually no city in the world that cannot benefit from a rethinking of its vocation in a newly interconnected world of the 21st-century knowledge economy. 22 A Report of the Global Agenda Council on Competitiveness Casablanca, Morocco:
investment and labour force but is also a regional hub for a diverse set of industries.
As Morocco's primary highway, railway, sea and air hub, Casablanca has been propelled in part by the investment in hard connectivity,
or National Office of Railway Services) train stations. One of these, Casa-Voyageurs, will become the first high-speed train station in 2015 with the launch of the TGV linking Tangiers to Casablanca.
and hard infrastructure to create soft-connectivity levers of competitiveness in agriculture, fisheries, manufacturing, construction, tourism, finance, ICT-related services and supporting service industries.
Casablanca has attracted offshoring investments that have created over 30 000 new jobs through the establishment of the 53-hectare Casanearshore, a home to firms specializing in software development, infrastructure management, back-office banking,
business services and personal service industries, including the education sector, which graduates 27,000 students from two public universities, 500 private higher institutes and vocational training centres.
Morocco's economic policies, institutions, commercial relationships and public-private dialogue have contributed to this remarkable outcome.
Rapid rural-urban migration seems to overwhelm the ability to provide health education, water, transportation, energy and other services.
Innovation hubs related to information, communications and technology are also springing up. The growing financial hub mentioned earlier complements the role of Lagos-based firms in
water and sanitation services are higher than in less dense areas. The ability to lift people out of poverty by training
including venture capital. Few places offer the opportunity to make a greater impact on the productivity and competitiveness of more people.
Case studies from India19 Ahmedabad: Capitalizing on Economic Reform The city of Ahmedabad, with just under 6 million people, was ranked by Forbes as one of the fastest-growing cities of the next decade.
Ahmadabad's model of development, entrepreneurial spirit, proactive policies, rising centres of education and specialized industrial parks have made it a preferred location for investment.
The combination of a favourable business environment with a good quality of life makes the city a desirable place for both work and living.
The economy of the city, however, began witnessing challenges after two decades, as the system was highly informal
It shaped the city's economy and boosted the commercial as well as the industrial sector. This enabled the arrival of major domestic and international players who started setting up their bases in and around the city.
According to the Industrial Entrepreneurial Memorandum (IEM), Ahmedabad attracted an investment of $3. 8 billion in industries ranging from petrochemicals and engineering to drugs and pharmaceuticals from 1988 to 2007.
and investments from global giants like Peugeot and Ford, compared to other Indian cities like Aurangabad, Chennai,
Gurgaon and Pune that have had lower levels of investment and where doing business is not as easy.
Other infrastructure services like the transportation system and residential and office space have complemented further the city's success formula.
City planning versus Reality Suggests Scalability Chandigarh offers an important lesson on how city planning and reality bump up against each other,
and was conceived initially to serve as the capital of Punjab. In 1966, it received the unique status of being the capital of two Indian states
Punjab and Haryana, and was declared also a union territory. It has been questioned constantly by critics, who say that it has suffered from a shortsighted vision.
with a relatively pollution-free environment, clean drinking water and regular power supply. The population explosion has started already putting pressure on Chandigarh's limited resources.
Is the deteriorating quality of life also affecting its industrial environment and competitiveness? What actions are being taken towards these challenges?
The opening of Rajiv Gandhi Chandigarh Technology Park in 2005 was expected to act as a milestone in IT and ITENABLED services,
Chandigarh can build on its unique architecture and good environment, but needs to move beyond its limited economic sectors and create stronger public-private civil society mechanisms for the next phase of its development.
and saw the opening of digital service centres offering many IT-enabled government services to citizens.
Hyderabad's contribution to India's net export of IT and IT-enabled services was 15,
Major investments have been made to expand the technological infrastructure. HITEC City, a major technology township that provides integrated infrastructural facilities of office space
Hyderabad has diversified also its economic profile into the growth sectors of transportation, storage, communications and construction,
where Hyderabad will serve as the capital of both for 10 years. Top IT firms in the city are unfazed by the political changes,
also known as Star City, is the capital of Hunan Province and a comprehensive transport hub in southern China.
It is also a highly forested city that places a high degree of importance on the natural environment.
For example, by the city's own assessment, few large enterprises exist, industrial clusters are absent,
encourage entrepreneurship and create new jobs in order to improve the lives of its citizens and continue on its path to becoming a highly desirable global tourist destination.
and has many universities that perhaps can provide a valuable foundation in building a new innovation environment.
improving the investment environment, attracting foreign investment and producing advanced technologies. In the next phase, Zhuhai focused on high-tech industries with intensive technologies and high added value.
Today, in its third phase, Zhuhai seeks to make additional progress on environmental sustainability and to become a model city of scientific development.
Transparent and efficient government services: Online service centres connecting communities and villages were developed to make it easier for citizens,
enterprises and non-governmental organizations to get things done in the virtual space. Implementation of the strategy of innovation-driven development:
and Technologies of Zhuhai Special Economic zone. 26 A Report of the Global Agenda Council on Competitiveness An internationalized business environment:
Zhuhai implemented reform of its commercial registration system and enterprise investment management system. Low unemployment:
These new linkages will open up expanded economic opportunities for Zhuhai. For example, driving from Zhuhai to Hong kong SAR will take 30 minutes once the bridge is completed.
Carefully Targeted Investment Attraction Penang, the Pearl of the Orient, is located in the northwest of peninsular Malaysia
Again by policy design, this supply chain localizes by innovatively pushing control tower services such as subcontracting management and design coordination, deployable across multiple industries.
positioning itself strategically by targeted use of its investment-attraction strategy while pursuing diversification. Cebu, Philippines:
boasts industry and services sectors that are 36.4%and 55.8%,respectively, of the region's economy.
Agriculture accounts for only 7. 8%.Metro Cebu departed long ago from being a predominantly agrarian economy to one that is mostly driven by business process outsourcing (BPO), tourism and real estate. As of 2013,
and foreign visitors collectively are the fastest-growing contributors to the local economy. Cebu is now getting more attention as a gateway to the south.
fuelling higher tax revenues and wise investment infrastructure, and resulting in more investment and improved human services, has yet to be established.
Taking a leaf out of the experiences of its Asian neighbours, perhaps Cebu needs to come up with a proper master plan to manage its growth sustainably
and protect the momentum that it has strived hard to attain. The Competitiveness of Cities 27 Busan, Republic of korea:
As global competition continues to pressure companies into relocating to lower-cost destinations from the Republic of korea to China,
and took charge of human capital development so that the city could equip itself for yet another dimension of its development building its creative sector. 28 A Report of the Global Agenda Council on Competitiveness 5. The Small Basket:
and will remain overwhelmingly a phenomenon of emerging economies; and second, an emphasis on second-tier cities rather than national or commercial capitals in order to get a better sense of emerging issues for city competitiveness.
Important insights from these case studies are the interactions of different parts of the taxonomy as they apply in each city.
a previously successful city in the 20th-century industrial economy that fell into deep decline, but is now attempting a turnaround Bilbao (Spain) high-income;
However, it was Dubai's ability to create an environment of free trade, a global meeting place for exhibitions and trade shows,
and West that enabled the city to build an economy beyond hydrocarbon, and to attract inhabitants from all over the world.
The Competitiveness of Cities 29 Regulations Globalization has brought many opportunities to emerging markets yet uncertainties have increased also as international corporations searched for global centres where they could do business with the lowest-possible risk.
and legal system developed sufficiently to encourage global and local enterprises to do business within its jurisdiction.
planned to be 10 times the size of Dubai International airport (itself one of the largest and fastest-growing airports in the world), all in a free zone environment.
Moreover, 100%capital and profit repatriation is allowed, and there are no restrictions on foreign currencies. On-site personnel accommodation, storage facilities and advanced infrastructure are available.
To reduce the initial investment required for companies and to minimize risks, a special centre is available in the Dubai Internet City, for example,
and explore opportunities without major upfront investments. Many free zone cities exist throughout the UAE, but Dubai has the largest number,
various regulatory authorities exist within Dubai to ensure transparency and open competition in the key sectors within its free trade philosophy.
The Dubai Financial services Authority (DFSA) is the independent regulator of all financial and ancillary services conducted through the Dubai International Financial City (DIFC), a purpose-built free zone in Dubai.
although the values at times have seemed to create overvaluations and reversals, notably after the recent global economic downturn of 2008.
and organizing investments into development projects, and managing them with a corporate mindset. Established in 2004 to consolidate Dubai's major infrastructure and investment projects,
and owned by the government, Dubai Holding was structured in 2009 under four vertical divisions: property, business parks, hospitality and investments.
Special institutions such as the Dubai World trade center and the Dubai Chamber of commerce were established. The city became a global meeting place
In addition, Dubai has become a regional financial capital assisted by the Dubai International Financial City (DIFC), one of the most prominent free zones and home to many international institutions.
and provided an environment in which nationals and residents can have a good lifestyle while living in Dubai.
environment; and respect for religion. While some element of the code may limit certain individual Western-style freedoms,
On the technology side, Dubai e-government capabilities cover more than 500 services. A public-private-partnership initiative was launched in March 2014 to implement a smart city strategy featuring six key pillars and 100 initiatives on transport, communications, infrastructure, electricity, economic services
and urban planning. Under the strategy, 1, 000 government services will go smart within a period of three years, integrating smartphone applications in many aspects of city life.
In 2014 Dubai Courts launched an interactive electronic system for case management in the commercial court of first instance,
Risks and Challenges While the opportunity in Dubai is clear, the city faces risks caused by several factors,
such as the pace of growth, a possible real estate bubble and dependence on Gulf-oilbased economies.
The pace of growth may also affect the environment and social fabric; however, measures such as the code of conduct are being taken to limit this effect.
and sending shockwaves of concern across the international investment community. Dubai is The Competitiveness of Cities 31 recovering from that situation,
and the government-affiliated enterprises will come due between 2014 and 2016. The heated situation in the middle East region may also cause some indirect risks on Dubai,
however, will face competition from other cities in the region, and from the continual economic headwinds that will buffet its many industries.
Global cities are where truly global services cluster. But Singapore differs from other global cities in that it is a city, a state and an island all in one.
Annual inflation is 2. 4%.Singapore has no natural resources to speak of. It is globalized the most economy of significant size in the world.
Trade in goods and services is about 400%of GDP. Foreign multinational enterprises (MNES) have nearly $600 billion of investment stock in Singapore,
while Singaporean MNES have about $370 billion of investment stock abroad. But Singapore was poor only two generations ago.
Its GDP per capita was just over $500 at independence in 1965. As Lee kuan yew, the founder of modern Singapore, says,
the Singapore story is of a leap from Third world to First. The city state has taken maximum advantage of the global economy at every stage of its modern development
from the 1960s to the present. Extended Background Founded by Stamford Raffles in 1819, Singapore was a British colony until 1959.
the global economy is its lifeblood it disciplines the city's institutions and policies like nothing else,
and the economy suffered. That changed when Lee kuan yew took power, and especially when Singapore became fully independent in 1965 after a brief union with Malaysia.
Higher-value and knowledge-intensive goods and services (electronics, pharmaceuticals and life sciences, financial and other services) Phase 4 (late 1990s to the present:
the global city high-end services (niche financial services such as wealth management and offshore finance, other business services, casinos and integrated resorts, commodities trading, education
Singapore and Hong kong SAR now the services hubs for Asia Previous stages of growth saw relatively egalitarian income distribution,
as was the case in other East-Asian miracle economies. But the latest phase has seen highly unequal growth.
the exit from Malaysia and impending withdrawal of British military bases to overhaul economic policies, including opening the door fully to multinational corporations (MNCS) at a time
And there are institutionalized performance benchmarks in the public sector. The rule of law is strong on commercial matters:
In the economy, the state's reach extends far, through government-linked companies (GLCS), sovereign wealth funds (Temasek, the holding company for GLCS;
the Government Investment Corporation), and other government funds (notably the Central Provident Fund, which pools Singaporeans'mandatory savings into healthcare, pensions, housing and other accounts).
The government-linked corporate sector is extremely powerful in domestic capital, land and labour markets. This has crowded probably out domestic private-sector development.
it conspicuously lacks a venture-capital start-up culture. 2. Policies and regulation of the business environment
(what to reform) Singapore is arguably best-in-class in getting the basics right on economic policy.
a stable exchange rate and low inflation. This encourages high levels of savings and investment. Personal and corporate income taxes are low,
and the tax code is simple, with few exemptions. Government spending is less than 20%of GDP.
Singapore is fully open to foreign investment and has no restrictions on capital flows. And, it is now highly open in service sectors.
and spurs growth in all sorts of ancillary services. Getting these basics right translates into top-of-the-world rankings.
2nd in the World Economic Forum's Global Competitiveness Index, 2nd in the Globalization Index (in terms of attractiveness for foreign trade and investment), 5th in the World bank's Logistics Performance Index
The Competitiveness of Cities 33 and as services become increasingly entwined. But it is questionable how much manufacturing will be left in Singapore by the 2020s,
and whether industrial-policy support is worth the opportunity cost in terms of claims on available land, labour and capital.
A weak domestic private sector is the Achilles heel of the economy. Small and medium-sized enterprises (SMES) account for half of GDP and the bulk of employment.
About half are owned foreign, but most locally-owned SMES are small (rather than medium-sized)
and have low productivity. Over decades, government promotion of MNCS on the one side, and GLCS on the other, has squeezed them in the middle.
Without major reform of the public sector's involvement in the economy it is questionable whether the domestic private sector will ever be vibrant and innovative.
But the government's overall record puts it in good stead to tackle at least some of these policy challenges though it is unlikely to structurally alter the role of the public sector in the economy. 3. Hard connectivity Singapore has a strong, consistent emphasis on core physical infrastructure.
and opens up opportunities for LNG-related businesses. 4. Soft connectivity Singapore puts strong emphasis on education and skills.
especially for maths and science. The focus was on primary and secondary education during the years of catchup growth.
labour and capital. Twenty-first-century globalization also brings wider inequality, especially for a small, highly open economy,
and even more so for a global city. At the same time, Singaporeans are now overwhelmingly in the middle class and have rising expectations.
and sometimes chafe at the constant pressure to adapt to the demands of a global city.
Rather, the logic of the global city calls for more competition and genuine economic freedom.
That is a far better way to improve sluggish productivity than government micro-interventions in the economy.
and less on being a direct player or micromanager in the economy. Lessons for other cities The Singapore story has manifold lessons for other cities.
and crippling the provision of vital city services at the very time they were needed most.
Increased levels of direct investment in the city, and a campaign to rebuild and redevelop Detroit,
The city's combination of unprecedented challenges with unique opportunities provides a useful and closely watched test case for post-industrial cities throughout the world with extensive private-and public-sector legacy costs.
Causes of the decline include deindustrialization, depopulation, lack of political leadership in making timely economic decisions and, finally, the recent economic downturn.
this dislocation continues to influence the region's economy. Depopulation: Racial tensions flared in the 1960s
The collapse of the US national housing market in 2008 and the weakness of the national economy hit Detroit especially hard, further eroding property values and increasing unemployment,
viewed as long overdue and an opportunity for redevelopment. Explaining Competitiveness: Applying the Four-Part Taxonomy 1. Institutions (how to reform) Leadership:
The city's bankruptcy plan of adjustment also is considering a $148 million investment to replace its antiquated administrative infrastructure,
The benefit of Detroit's bankruptcy (governed by federal law) has been to force a process with a defined timetable onto the many stakeholders in the city's fiscal condition.
This previously absent sense of urgency has brought new stakeholders, most notably the local philanthropic community,
The plan identifies several focal areas for economic growth, including entrepreneurship, small-business development and policy reform,
and also provides place-based neighbourhood development strategies. 2. Policies and regulation (what to reform) Public-sector pensions and benefits:
a complex system of county and local authorities has produced over time a business tax environment that fosters confusion,
as well as internal political and economic competition for investment within the region. Consolidation and coordination of tax authorities,
would contribute substantially to a more efficient, business-friendly environment. Permitting: Historically, business permitting in Detroit has been characterized by uncertainty at best,
Detroit's competitiveness in the industrial age was based in part on its location and investment in infrastructure for low-cost industrial transportation.
and increased capacity of the logistics sector represents an important and feasible opportunity for job and wealth creation,
Education is at once Detroit's greatest opportunity and greatest challenge. Effective secondaryeducation systems and the promise of post-secondary education at one of the state's top public universities (University of michigan, Michigan State university and Wayne State university) are critical components of the city's ability to attract
and retain talent for the region. However, Detroit's public schools have failed successive generations of Detroiters,
are giving initial assurance that all Detroit students will receive an opportunity for post-secondary education without financial barriers.
Innovation and entrepreneurship: Prior to 2012, few programmes to foster entrepreneurship and innovation existed in Detroit.
Now, such programmes are a staple of Detroit's economic development scene, having produced programmes to assist businesses at every stage of the start-up process.
and to build upon both the thriving entrepreneurship community in Ann arbor at the University of michigan and the strong information technology cluster in the region,
Summary, Challenges, Prospects These challenges and opportunities point to the key measure by which all economic development efforts can ultimately be evaluated,
Such attraction will depend on its ability to appeal to an inbound population that sees Detroit as a destination of opportunity, for quality of employment and education,
significant opportunities abound in Detroit. The advent of new leadership at the state and city level committed to rebuilding Detroit;
and leverage these opportunities will drive and likely determine Detroit's success or failure over the next decade.
Many businesses and policy-makers are determined now to diversify the region's economy as they simultaneously celebrate the automotive sector's rebound.
and healthcare for retired workers) has wrought a devastating price on Detroit's workforce, government, businesses and financial stakeholders.
Involve stakeholders in effective planning: Detroit has suffered from a lack of coordinated, creative and longterm planning.
The value of effective planning efforts derives from their inclusion of all the city's stakeholders and their accessibility to all citizens,
who desire and deserve a prosperous economy, high-performing schools and a vibrant community life.
and (b) Inward at the service of its citizens, companies and local stakeholders. The mission statement was synthesized as follows:
Modernize and internationalize the country and its economy at the service of well-being. The strategy included the four-part taxonomy:
and society the opportunity to build a successful path for approaching all of the reforms needed. 2
through a unique mindset of conceiving a service economy, avoiding manufacturing and asking governments to stop applying industrial policies.
Cluster its economy: breaking classic swaps and interrelating companies, technological centres, universities, financial institutions and governments for competitiveness, with more than 2,
000 leaders working steadily around a dozen clusters in the process Internationalize its economy: attracting foreign investment
and complementary companies to enhance the cluster development initiatives; promoting expansion abroad and setting new instruments to support companies in penetrating new markets;
due to the lack of public and private investment during the period of dictatorship The Competitiveness of Cities 39 Euskadi-Europe‘93, initiated before the creation of the internal market (1987-1993);
inequality and emergency social isolation 2010 Infrastructure (1996-2001) Program, reinforcing the previous budget initiatives and advancing development options Sustainable investments over 30 years Innovation
manufacturing and business, going into healthcare (companies, industries, the educational system, services, government). E-government CORAME: Rationalization and modernization of public administrations at all levels, trying to create an entrepreneurial culture and attitude in all public servants and the government's actions.
Social capital is permanently reinforced towards an appropriation goal in order to commit people to build their own future.
Social capital: Broad social innovation programmes with ad hoc tools for innovative partnerships in the country (Innobasque) to create
The desired international connectivity, the economic modernization and its global commitment, the attraction of talent and generation of a competitive economy are the priority services of citizens themselves and of Basque society.
to an outward economy with the comparative advantage that traditional manufacturing industries provided. Successful times decline into a deep common crisis. Similar approaches may exist to overcome such a crisis,
New demands, new needs, new agents and new aims will come. And, ad hoc evolved strategies must be implemented at any time.
and vibrant city has taken advantage of opportunities to build a knowledge-based economy relevant to high-value international supply chains,
Nuevo León has historically been one of the most dynamic economies in Mexico, partly due to the geographical advantage of being 200 km south of the US border (Texas). Its location,
After WORLD WAR II, Mexico implemented a closed-economy model in which fiscal and capital incentives were provided to promote
and, employment opportunities, education and health services attracted a large population to these growing cities. The economic downturns that affected the growth of Mexico's GDP in the early 1980s were an incentive for the main industries in Monterrey to enter international markets.
The economic liberalization era of the 1990s steered companies towards a vision of internationalization and global investment.
In order to play a relevant role in the emerging global knowledge-based economy, the economic and social transformation of the city became a main priority.
The world economic crisis of 2008 and the presence of criminal drug-related groups in the country affected the economic and social activities in Monterrey.
Even after being named the safest city in Latin america by América Economía magazine in 2005, Monterrey was spared not from organized crime and the resulting effects of insecurity in the country (2010-2012).
A culture of productive work, personal accountability and social responsibility A dynamic entrepreneurial ecosystem that promotes the pursuit of new opportunities, innovation and growth A history of strong private and public leaders
private and public institutions have promoted cooperation, education, economic growth and social cohesion. This explains Monterrey's strong structural competitiveness and resilience.
In an effort to promote Monterrey's transformation into a knowledgebased economy three projects have been launched in the last 20 years,
its objective was to create a city with a high quality of life based on the competitiveness of its business sector and its immersion in high-technology services.
Nevertheless, in recent years other cities have performed better on business environment indicators. The Doing Business in Mexico 2014 subnational report ranks Monterrey 16th nationally (see the Table.
A lack of investment in public transportation systems has created a complex, vicious circle that favours the few. According to the ITDP (Mexico), only 5%of the 2012 federal funds for Nuevo León were used for public transportation solutions,
This represents 11%of the national private investment in real estate for that year. Nuevo León is a border state with the United states (Texas). It is an ideal location for business serving the strong USMEXICAN trade relationship,
the state of Nuevo León reported four key sectors that drive the economy: construction, automotive, machinery and equipment,
medical equipment, medical services, information technologies, logistics, research services and aerospace. An economic cluster strategy has been developed
mechatronics, nanotechnology, health, automotive, aerospace, agriculture and food, biotechnology, appliances, information and communication technologies, and sustainable housing.
a growing understanding that the city needs to productively engage in the global knowledge-based economy,
Will Monterrey develop the capabilities to productively engage in the innovation and knowledge-based economy of the world?
not only on how a city in a developing country can build a dynamic and vibrant economy,
The city is located in one of the most active areas of the Chinese economy, the Yangtze river Delta region.
a) Pre-reform investments (1973-1976: Before the reform and open-policy changes, the State Council Leading Group for Port Construction determined the construction of Ningbo's new port in July 1973. b) Take off period (1978-1992:
China established a socialist market economic system. Ningbo began a comprehensive transformation for the socialist market economy,
i e. the integrated framework for public service and social governance, the government and stakeholders have set up a good cooperative public-private partnership.
develop and enhance competitiveness. 2. Policies and regulation of the business environment (what to reform) Innovation policies To implement its innovation-driven strategy,
such as industry accelerators to speed up a new generation of information technology and creative design services, great project amplifiers to promote the new and high-tech industry clusters,
and start-up incubators to cultivate high-tech enterprise. Financial policy Since 2010, Ningbo has sought to build
which has become one of the most preferred cities in China for overseas talent, entrepreneurship and innovation.
Foreign economic policy With its long historical tradition of foreign trade, Ningbo has now become one of the most developed foreign trade cities in China.
Ningbo is also one of the most active cities in China in terms of use of foreign capital.
Like other cities in China, Ningbo's story of success happened in the transition period of China, from planned economy to market economy.
The second is the role of foreign investment; foreign capital brings not only capital, but also the technology, management and the market.
The third is flexible policy. Ningbo's provincial authority makes it possible to report directly to the central government rather than through the province.
Industrial, homogeneous competition is very intense. Many enterprises are in a low position on the value chain,
and their capabilities in R&d, design and marketing are very weak. Industrial structure still needs to be adjusted to that featured by highly value-added and knowledgebased industries.
With the development of the Chinese market economic system, markets will play an even more decisive role in the future.
one of the fastest-growing states in India and one that The Economist described as the Guangdong of India.
approximately 270 km north of Mumbai, India's commercial capital. It was, in fact, the most important port city of western India well into the late 1600s, benefiting from the silting of the harbour in Cambay, another important port in the region.
has seen its fortunes revive sharply since the opening up of the Indian economy in 1991,
creating an environment of fear and panic. A large part of the population migrated out of the city from fear.
Nonetheless, India was just emerging from its cocoon as a protected economy, with the economic reforms of 1991 exposing it not only to trade and investment flows,
but also to the unforgiving glare of global media. That a country announcing its arrival on the world stage could see an 0. 11 0. 11 0. 11 0. 09 0. 17 0. 22 0. 28 0. 47
Earlier, all problems had to be sorted out in a city hall environment, whereas the new delegation of powers ensured that citizens could get easier and more local redress of their problems.
with lateral communication now possible instead of going up and down a hierarchy. Though many silos were eliminated to enable greater cooperation,
Steps were taken to ensure smooth communication between senior officials, especially between elected and unelected city officials.
and has had an enormous, positive impact on the economy as well. In the two years after the turnaround began,
as well as the commercial/political capital of Gujarat, Ahmedabad/Gandhinagar, and the road networks between them are decent.
especially as it attempts to migrate up the services value chain. Despite all these negatives, Surat still represents a great story of how a once-important city in a very poor country used a crisis to its advantage to orchestrate a leadershipdriven turnaround
This requires massive investments, especially in emergingmarket cities. Promote urban density, including building tall in city centres,
Look out for windows of opportunity often during a political or economic crisis to push through a critical mass of decisive reforms.
Policies and regulation of the business environment Get the basics right, i e. stable and prudent macroeconomic policies, efficient and simple taxation, a flexible labour market, openness to trade and foreign direct investment, simple and transparent domestic business regulation.
Keep policy simple for producers consumers and citizens. Develop own foreign economic policies on trade, foreign direct investment,
tourism and attracting global talent, and go global as far as possible. Be spatially neutral at the national level don't discriminate against cities.
Hard connectivity (core physical infrastructure) Have a mix of planning and organic growth--they are complements, not substitutes.
Relatively modest oil revenues were invested wisely to diversify the economy. His son, Sheikh Mohammed, enlarged this vision
Pragmatism, business-friendliness and can-do policy entrepreneurship these are their hallmarks. But negative examples show what to avoid.
because the logic of a sophisticated global city demands more independent institutions with checks and balances, transparency and accountability.
be it, for example, at the national macroeconomic (monetary, fiscal and financial) or foreign economic (external trade, foreign direct investment and migration) level.
Windows of Opportunity: Taking Advantage of Crises and Creating Turning points The timing of reforms is often critical.
and presenting a window of opportunity to push through a critical mass of large reforms. That establishes a bridgehead to further,
but this was the opportunity to appoint S. R. Rao as the city's chief executive.
With its back currently against the wall, Detroit has a once-ina-generation opportunity perhaps the last to turn itself around.
Will Detroit really take advantage of this opportunity? 2. Policies and Regulation of the Business Environment (What to Reform) Getting the Basics Right:
Simplicity, Transparency, Predictability Getting the basics right is the primary lesson for good public policy for a regulatory environment that maximizes competitiveness.
Once again, this applies to cities as well as nations. But what does this lesson mean? The focus is on three aspects of economic policy:
fiscal policy, regulations for doing business, and foreign economic policy. From the 1960s to the present, Singapore has provided some of the best examples of getting the basics right.
Stable and prudent macroeconomic policies, efficient and simple taxation, a flexible labour market, openness to trade and foreign direct investment, simple and transparent domestic business regulation, a safety
net that protects the most vulnerable these are all parts of a longstanding policy mix.
One of the main takeaways from the Singapore story is that getting the basics right is fundamentally about simplicity.
keeping corporate taxes low, attracting foreign direct investment and upgrading infrastructure. This has enabled the cities to escape postindustrial decline
Chattanooga in automobile manufacturing and internetbased start-ups, Pittsburgh in advanced materials, St louis in high-tech industries and Oklahoma city in energy-related manufacturing and services.
and poor healthcare, education, water and transport services. 52 A Report of the Global Agenda Council on Competitiveness Foreign Economic policy:
Being as open as possible to and integrating with the world--through trade, finance, foreign direct investment,
External openness has been critical to Singapore's success in every phase of its post-independence development from attracting MNC-investment for cheap-labour assembly operations to higher-value electronics production
diversification into pharmaceuticals, assorted services and high-value niche manufacturing, and now to becoming a global-city-hub for finance, regional HQ operations for MNCS, education and other services.
Also standing out is Dubai, which is subject to the UAE's relatively low federal restrictions on imports and inward investment.
But it has created a sort of mini Singapore with its free zones. The latter have duty-free treatment, up to 100%foreign ownership, no foreign-exchange restrictions, full repatriation of capital and profits, zero corporate and income tax,
simple licensing procedures and ready-made infrastructure. Note that 95%of Dubai's population is foreign.
The sample of case studies contains several other cities that have excelled in attracting foreign direct investment (e g.
Manisa to diversity its economy. Ahmedabad and Hyderabad have done so in automobile manufacturing and IT services, respectively.
Ningbo has exploited its history (as a trading port with widespread overseas links) and location (in the Yangtze river Delta,
and to diversify into services. The other three Chinese cities covered Zhuhai, Changsha and Guilin face a similar challenge.
This demands a decisive shift to the market, to use the language of the Chinese Communist party's third plenum in November 2013 privatizing stateowned enterprises
Cities need their own foreign economic policies they should not simply leave them to national governments.
As a city state, Singapore (like Hong kong SAR) is exceptional in conducting its own foreign economic policies;
one of the world's leading urban economists, argues strongly for urban density. Concentrated building in city centres is good for business and innovation, for the arts and culture,
the government is the leading shareholder but management is autonomous. While government provides the land for the MTR to develop subway stations and track,
which pays for its transport services and makes an additional profit. This is being used as a model;
in fact, the HK MTR now runs subway systems in other cities, including London and Beijing.
Busan has made a huge investment in its port and port logistics, and is now a transhipment hub and magnet for global shipping companies.
Many city competitiveness metrics include hard-connectivity data on transport, communications and energy. This helps to understand how hard connectivity leads to productivity and to a city's insertion into global value chains.
Vital for Cities in the 21st-Century Knowledge Economy In the industrial age, the hard connectivity of canals, ports, roads, railroads, cold chains, transport hubs
but in the knowledge economy of the 21st century, soft connectivity is equally so. As the city's social capital, soft connectivity refers to the knowledge,
connections and relationships that enable people to be productive and cities to prosper. Even more broadly, it concerns the characteristics of an open society:
This is the seedbed for ideas, entrepreneurship, innovation and growth. But often, the line gets blurred between hard and soft connectivity.
In Chattanooga, a visionary energy company decided to make incremental investments to provide abundant bandwidth and fast internet connection to households.
Curitiba and Medellin provided hard-infrastructure investments for inclusive transport systems that, in turn, supplied readier access to job locations for low-income communities.
although several engineering companies and at least one innovation incubator call this suburb of Los angeles home.
Through Digital Infrastructure and Connectedness Soft connectivity also refers to an environment of connectedness for citizens and entrepreneurs.
get access to services and feel connected to their communities. In addition, it concerns the ability of entrepreneurs to connect with each other and to a wider innovative system.
populations live in an environment of mobile communications and cloud computing. Computing is turning ubiquitous, and digital experiences span devices.
And, they should think of every citizen as a potential dual user of city services people who use technology for their work but also use it intensively in their personal lives.
The city case studies provide plenty of examples of applying new technology to city services. For example, Bilbao was among the first European cities to develop a smart city concept.
Buenos aires has launched its ciudad moderna (modern city) plan to use technology to improve government services for the public and for SMES,
For Liveable Cities Vancouver (Canada) is renowned for having created a wonderful urban environment in a naturally beautiful setting with its narrow, tall buildings and abundant green space.
in order to maximize green space in a dense urban environment with limited available land. Curitiba an example of planned liveability, is cited often as having the highest quality of life in Brazil,
regulating the business environment, delivering public services and municipal decision-making. The third observation is differentiated a one:
should look out for windows of opportunity to advance a critical mass of decisive reforms; and should get the basics of policy right on public finances, globalization and regulation of the business environment.
Hard connectivity and elements of soft connectivity, especially education, skills and using new technology, are important.
when the opportunity arises. As history and the recent track record shows, when reform at the national level is difficult or impossible,
Paul Romer, Professor of Economics at NYU, is thinking along these lines with his vision of charter cities.
Visiting Associate professor, Lee kuan yew School of Public Policy, National University of Singapore, Singapore Vice-Chairs Clément Gignac, Chief Economist and Senior vice-president, Industrial Alliance Insurance
, Regional Economist, African Development Bank, Côte d'ivoire Janamitra Devan, Independent Adviser, Strategy and Leadership, USA Gao Changlin
and a Member of the Global Agenda Council on Competitiveness. 4. This case study was written by Jose Antonio Torre Medina, Undersecretary for Competitiveness and Business Regulation, Ministry of Economy of Mexico (2011),
, EGADE Business school, Tecnológico de Monterrey, Mexico. 6. Centro de Investigación y Docencia Económicas (Economics Research and Teaching Center.
This case study was written by Margareta Drzeniek Hanouz, Director and Lead Economist, Global Competitiveness and Benchmarking Network, World Economic Forum. 14.
This case study was prepared by the Economic policy Research Foundation of Turkey (TEPAV. 16. This case study was written by Kevin X. Murphy. 17.
Incorporated as a not-for-profit foundation in 1971 and headquartered in Geneva, Switzerland, the Forum is independent,
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