einstitute.worldbank.org improving city competitiveness city management and business climate april...
TRANSCRIPT
einstitute.worldbank.org
Improving City Competitiveness City Management and Business Climate
April 12, 2012 | 10:00 AM EST
Speaker: Stanley Nollen
Professor, Georgetown University
McDonough School of Business
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What Do City Leaders Want for Their Residents?
Employment Quality of life
Income
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How Can City Leaders Get These Outcomes?o Attract investment
We focus on foreign direct investment in emerging market economies
- developed country economies behave somewhat differently
- similar arguments apply for domestic investment
We acknowledge potential downsides of foreign investment but do not discuss them here
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What Motivates Business to Make Investments Abroad?
o Reduce costs and build an export platform
o Serve the domestic market
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To Achieve These Objectives, Business Managers’ Decisions Depend on
o Input supply conditions: prices, productivity, complementary inputs, clusters
o Markets: size and functioning
o Business/Investment climate: infrastructure, institutions, government, competitive landscape
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What Experience Tells Us – 1How Managers Make Foreign Direct Investment Decisions and Decide to Locate Production Abroad
o Wage rate for labor is not the best indicator of attractiveness- do low wages mean low skill?
- do low wages mean low productivity?
- unit cost of production is what matters
(wage ● labor input) / output
o Bigger and faster growing markets are important for all investment decisions, even those whose purpose is exporting
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What Experience Tells Us – 1 (continued)How Managers Make Foreign Direct Investment Decisions and Decide to Locate Production Abroad
o Clusters are important- other firms in the same
industry or from the same country
- informal networks for knowledge-sharing
- expanded labor pool
- better supply chain for inputs and distribution
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What Experience Tells Us - 2How Managers Make Foreign Direct Investment Decisions and Decide to Locate Production Abroad
o Infrastructure is critical-what it is (roads, rails, ports, power, telecom, water) depends on
the industry
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o Government makes a difference- government policies (e.g., SEZs, industrial
parks)
- governance quality – services provided
- regulation that is reasonable but not burdensome
- financial incentives are not very effective
- local government matters as well as central government
What Experience Tells Us – 2 (continued)How Managers Make Foreign Direct Investment Decisions and Decide to Locate Production Abroad
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Which Are the Most Competitive Cities …
Rank City
In China
1 Hangzhou
2 Shanghai
3 Guangzhou
4 Shenzhen
5 Chongqiang
Rank City
In Emerging Market Economies1 Singapore
2 Hong Kong
3 Seoul
4 Taipei
5 Shanghai
Rank City
Worldwide
1 London
2 New York
3 Tokyo
4 Chicago
5 Paris
Sources: China: Dollar et al 2003; Emerging Market Economies and Worldwide: Mastercard 2008
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Which Are the Most Competitive Cities in China? It Depends on
> Who Evaluates> Criteria Used
CityRank
(Dollar Overall)
Rank(Mastercard Emerging Markets)
Rank (Mastercard Worldwide)
Hangzhou 1 10 too low to show
Shanghai 2 1 1
Guangzhou 5 3 too low to show
Shenzhen 4 3 3
Chongqiang 6 12 5
Sources: China: Dollar et al 2003; Emerging Market Economies and Worldwide: Mastercard 2008
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Which Countries Have the Best Business Climate?
RankTop 10
RankTop Emerging Market Economies
1 Singapore 1 Singapore
2 New Zealand 2 Hong Kong
3 Hong Kong 3 Georgia
4 United States 4 Thailand
5 United Kingdom 5 Saudi Arabia
6 Denmark 6 Mauritius
7 Ireland 7 Korea (South)
8 Canada 8 Bahrain
9 Australia 9 Malaysia
10 Norway 10 South Africa
Source: World Bank, Doing Business 2009
China is 14th among emerging market economies, 89th worldwide
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Lessons LearnedWhat City Leaders Can Do to Improve Their City’s Competitiveness
o A city’s competitiveness does not depend only on the country in which it is
-City leaders have scope to make a difference
o There is no single list of features that a city needs to be competitive
- industries’ needs differ, so city strengths can differ- one city’s competitive strengths need not emulate another's- no city meets all the criteria for competitiveness … but
o The short list of what is always important generally includes- good government
- Infrastructure
- Human capital
- Functioning of markets and institutions